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BOSTON 1784 FUNDS
Money Market Funds:
Boston 1784 Tax-Free Money Market Fund
Boston 1784 U.S. Treasury Money Market Fund
Boston 1784 Institutional U.S. Treasury Money Market Fund
Boston 1784 Prime Money Market Fund
Boston 1784 Institutional Prime Money Market Fund
Bond Funds:
Boston 1784 Short-Term Income Fund
Boston 1784 Income Fund
Boston 1784 U.S. Government Medium-Term Income Fund
Tax-Exempt Income Funds:
Boston 1784 Tax-Exempt Medium-Term Income Fund
Boston 1784 Connecticut Tax-Exempt Income Fund
Boston 1784 Florida Tax-Exempt Income Fund
Boston 1784 Massachusetts Tax-Exempt Income Fund
Boston 1784 Rhode Island Tax-Exempt Income Fund
Stock Funds:
Boston 1784 Asset Allocation Fund
Boston 1784 Growth and Income Fund
Boston 1784 Growth Fund
Boston 1784 International Equity Fund
2 Oliver Street
Boston, Massachusetts 02109
March 8, 2000
Dear Shareholder:
On behalf of the Board of Trustees of Boston 1784 Funds ("1784"), we are
pleased to invite you to a special meeting of shareholders of the 1784 funds
named above (each a "1784 Fund") to be held at 10:00 a.m. (Eastern time) on
April 28, 2000 at the offices of 1784's administrator, SEI Investments Mutual
Fund Services, 1 Freedom Valley Drive, Oaks, Pennsylvania (the "Special
Meeting"). At the Special Meeting, you will be asked to approve a proposed
Agreement and Plan of Reorganization, dated as of February 4, 2000 (the
"Reorganization Agreement"), by and between 1784 and The Galaxy Fund ("Galaxy"),
which contemplates the reorganization of your 1784 Fund into a corresponding
fund of Galaxy (each a "Galaxy Fund").
BACKGROUND. As you may recall, BankBoston Corporation and Fleet Financial
Group, Inc. recently merged with each other to form Fleet Boston Financial
Corporation ("Fleet Boston"). As a result of the consolidation, both Fleet
National Bank (the new name of BankBoston, N.A.), the investment adviser to all
of the 1784 Funds, and Fleet Investment Advisors Inc. ("Fleet Advisors"), the
investment adviser to each of the Galaxy Funds, are indirect, wholly owned
subsidiaries of Fleet Boston. Fleet Boston has decided to consolidate its mutual
fund investment advisory operations.
At the upcoming Special Meeting, you will be asked to approve the
reorganization of your 1784 Fund into a corresponding Galaxy Fund (the
"Reorganization"). If shareholder approval is obtained, your 1784 Fund will be
reorganized into the corresponding Galaxy Fund in May 2000, when your shares in
the 1784 Fund will be exchanged for shares of equal value of a corresponding
Galaxy Fund.
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1784'S BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT YOU VOTE TO APPROVE THE
PROPOSED REORGANIZATION.
In considering these matters, you should note:
- - THE SAME OR SIMILAR OBJECTIVES AND POLICIES
Ten of the 1784 Funds are proposed to be reorganized into existing Galaxy
Funds, each of which has investment policies and objectives that are, in
general, similar to those of its corresponding 1784 Fund. Seven of the 1784
Funds are proposed to be reorganized into newly organized shell Galaxy Funds
that have been specifically created for the purpose of the Reorganization. Each
of these newly organized shell Galaxy Funds will continue the investment
policies and objectives of the 1784 Fund being reorganized into it.
- - SAME VALUE OF SHARES
The Galaxy Fund shares you receive in the Reorganization will have the same
total dollar value as the total dollar value of the 1784 Fund shares that you
held immediately prior to the Reorganization. THE EXCHANGE OF 1784 FUND SHARES
FOR GALAXY FUND SHARES WILL BE TAX-FREE UNDER FEDERAL TAX LAWS, AND NO FRONT-END
OR CONTINGENT DEFERRED SALES LOADS WILL BE CHARGED AS A RESULT OF THE EXCHANGE.
- - REASONS FOR THE REORGANIZATION
The proposed Reorganization is expected to offer 1784 Fund shareholders,
among other things:
(i) the opportunity to become part of a larger and more diverse family of more
than thirty mutual funds. Many 1784 Fund shareholders will be able to exchange
their shares among most or all of those funds.
(ii) the opportunity to invest in larger funds which can use their increased
asset size to achieve greater portfolio diversification, engage in block trading
and other investment transactions on potentially more advantageous terms, and
spread relatively fixed costs, such as legal fees, over a larger asset base.
(iii) the opportunity to invest in a family of funds that has demonstrated
ability to attract new investors. Successful marketing and resulting fund
growth, in turn, afford investors the benefits of portfolio diversification and
economies of scale.
(iv) the opportunity to invest in a family of funds managed by an investment
adviser that has extensive investment management resources and research
capabilities; and
(v) additional shareholder services such as consolidated tax reporting and
problem tracking and resolution services.
The Trustees also considered the future prospects of the 1784 Funds if the
Reorganization was not effected and 1784's continuing viability using a no-load
distribution channel.
To see how the Reorganization will affect your 1784 Fund, please carefully
review the enclosed materials where you will find information on the expenses,
investment policies and services relating to the corresponding Galaxy Funds.
The formal Notice of Special Meeting, a Combined Proxy Statement/Prospectus
and a Proxy Ballot are enclosed. If you own shares in more than one of the 1784
Funds named above, more than one Proxy Ballot accompanies these materials.
Please be sure to vote and return each Proxy Ballot.
Whether or not you plan to attend the Special Meeting, you may vote by proxy
in any of the following ways:
1. Internet--Instructions for casting your vote via the internet can be
found in the enclosed proxy voting materials. The required control number
is printed on your enclosed proxy card. If this
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feature is used, you are giving authorization for another person to
execute your proxy and there is no need to mail the proxy card.
2. Telephone--Instructions for casting your vote via telephone can be found
in the enclosed proxy voting materials. The toll-free 800 number and
required control number are printed on your enclosed proxy card. If this
feature is used, you are giving authorization for another person to
execute your proxy and there is no need to mail the proxy card.
3. By mail--If you vote by mail, please indicate your voting instructions
on the enclosed proxy card, date and sign the card, and return it in the
envelope provided, which is addressed for your convenience and needs no
postage if mailed in the United States.
Please return your Proxy Ballot(s) or follow the instructions in the
enclosed materials to vote on-line or by telephone so that your vote will be
counted.
YOUR VOTE IS IMPORTANT TO US REGARDLESS OF THE NUMBER OF SHARES THAT YOU
OWN. PLEASE VOTE BY RETURNING YOUR PROXY BALLOT(S) TODAY, IN THE ENCLOSED
POSTAGE-PAID ENVELOPE. YOU ALSO MAY VOTE YOUR PROXY BY A TOLL-FREE PHONE CALL OR
BY VOTING ON-LINE, AS INDICATED IN THE ENCLOSED MATERIALS.
The proposed Reorganization and the reasons for the 1784 Board of Trustees'
unanimous recommendation are discussed in detail in the enclosed materials,
which you should read carefully. If you have any questions about the
Reorganization, please do not hesitate to contact 1784 toll free at
1-800-BKB-1784.
We look forward to your attendance at the Special Meeting or receiving your
Proxy Ballot(s) or your on-line or telephone instructions so that your shares
may be voted at the Special Meeting.
Sincerely,
Robert A. Nesher
President and Chief Executive Officer
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THE GALAXY FUND
MARCH 8, 2000
QUESTIONS & ANSWERS
FOR SHAREHOLDERS OF BOSTON 1784 FUNDS:
The following questions and answers provide an overview of the proposal to
reorganize your portfolio of Boston 1784 Funds ("1784") into a corresponding
portfolio offered by The Galaxy Fund ("Galaxy"). We also encourage you to read
the full text of the combined proxy statement/prospectus (the "Proxy/
Prospectus") that follows.
Q: WHAT ARE 1784 SHAREHOLDERS BEING ASKED TO VOTE UPON?
A: 1784 shareholders are being asked to consider and approve a proposal to
reorganize each of the portfolios offered by 1784 (each, a "1784 Fund") into a
corresponding portfolio within the Galaxy family of mutual funds (each, a
"Galaxy Fund").
Q: WHY HAS THE REORGANIZATION OF THE 1784 FUNDS INTO CORRESPONDING GALAXY FUNDS
BEEN RECOMMENDED?
A: The Board of Trustees of 1784 and the Board of Trustees of Galaxy have each
determined that the reorganization of each of the 1784 Funds into its respective
corresponding Galaxy Fund is in the best interests of the respective
shareholders of each such fund. Among the benefits for 1784 Fund shareholders
considered by the 1784 Board of Trustees were: access to a broader array of
mutual funds, the potential for individual Galaxy Funds to achieve greater
portfolio diversification and engage in investment transactions on potentially
more advantageous terms; spreading relatively fixed costs, such as legal fees,
over a larger asset base; the demonstrated ability of Galaxy to attract new
investors; Fleet Investment Advisors Inc.'s ("Fleet Advisors") extensive
investment management resources and research capabilities; and access to
additional shareholder services such as consolidated tax reporting and problem
tracking and resolution services. The Trustees also considered the future
prospects of the 1784 Funds if the Reorganization was not effected and the
continuing viability of the 1784 Funds using a no-load distribution channel.
Q: WHAT IS THE ANTICIPATED TIMING OF THE REORGANIZATION?
A: The meeting of shareholders to consider the proposal is scheduled to occur on
April 28, 2000. If all necessary approvals are obtained, the proposed
reorganization will likely take place in May 2000.
Q: WHO WILL RECEIVE THE PROXY/PROSPECTUS MATERIAL?
A: The Proxy/Prospectus has been mailed to all persons and entities that held
shares of record in a 1784 Fund on February 29, 2000. Please note that in some
cases record ownership of and/or voting authority over 1784 Fund shares may
reside with a fiduciary or other agent. In these cases, the fiduciary or other
agent may receive the combined Proxy/Prospectus.
Q: HOW ARE THE 1784 FUNDS PROPOSED TO BE REORGANIZED?
A: As you may know, 1784 consists of seventeen separate mutual funds. The
proposed agreement and plan of reorganization for these funds, approved by the
1784 Board of Trustees, contemplates the reorganization of ten of these 1784
Funds into ten existing Galaxy Funds having similar investment objectives and
policies. The remaining seven 1784 Funds will be reorganized into shell Galaxy
Funds that are being created to continue the current operations of these 1784
Funds. The investment objectives and strategies of each of these shell
portfolios will be substantially the same as those of its corresponding 1784
Fund. Under the proposed agreement and plan of reorganization, each 1784 Fund
will be reorganized into the Galaxy Fund listed directly opposite such 1784 Fund
in the table below:
<TABLE>
<S> <C>
BOSTON 1784 FUND GALAXY FUND
Tax-Free Money Market Fund Tax-Exempt Fund
U.S. Treasury Money Market Fund U.S. Treasury Fund
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Institutional U.S. Treasury Money Market Fund Institutional Treasury Money Market Fund
(shell portfolio)
Prime Money Market Fund Money Market Fund
Institutional Prime Money Market Fund Institutional Money Market Fund (shell
portfolio)
Short-Term Income Fund Short-Term Bond Fund
Income Fund High Quality Bond Fund
U.S. Government Medium-Term Income Fund Intermediate Government Income Fund
Tax-Exempt Medium-Term Income Fund Intermediate Tax-Exempt Bond Fund (shell
portfolio)
Connecticut Tax-Exempt Income Fund Connecticut Intermediate Municipal Bond Fund
(shell portfolio)
Florida Tax-Exempt Income Fund Florida Municipal Bond Fund (shell portfolio)
Massachusetts Tax-Exempt Income Fund Massachusetts Intermediate Municipal Bond
Fund (shell portfolio)
Rhode Island Tax-Exempt Income Fund Rhode Island Municipal Bond Fund
Asset Allocation Fund Asset Allocation Fund
Growth and Income Fund Growth and Income Fund
Growth Fund Growth Fund II (shell portfolio)
International Equity Fund International Equity Fund
</TABLE>
Please refer to Tables III(A) and III(B) of the accompanying
Proxy/Prospectus for information regarding the specific classes of shares of the
1784 Funds and Galaxy Funds involved in the Reorganization.
Q: WHICH CLASS OF SHARES OF THE GALAXY FUNDS WILL I RECEIVE IN THE
REORGANIZATION?
A: Each shareholder of the 1784 Funds currently owns the same, single class of
shares. By contrast, certain Galaxy Funds offer multiple classes of shares to
investors. The various classes of Galaxy Fund shares all represent interests in
the same portfolio of securities owned by the Galaxy Fund, but have different
expenses and characteristics (such as shareholder servicing arrangements) that
are intended to meet the needs of different types of investors. In general,
eligibility to purchase a particular class of Galaxy Fund shares turns on
whether the investor is characterized as an "institutional investor" or a
"retail investor."
As part of the reorganization, all shareholders of the Boston 1784
Institutional U.S. Treasury Money Market Fund, Boston 1784 Institutional Prime
Money Market Fund and Boston 1784 Florida Tax-Exempt Income Fund will receive a
single class of shares ("Shares") of the corresponding Galaxy Fund. Shareholders
of all other 1784 Funds will receive either "Trust Shares" or "BKB Shares,"
depending on how the shareholders acquired their 1784 Fund shares. Shareholders
who purchased their shares through an investment management, trust, custody, or
other agency relationship with BankBoston, N.A. (now known as Fleet National
Bank) (each an "Institutional Shareholder" and collectively, "Institutional
Shareholders") will receive Trust Shares of the corresponding Galaxy Fund. All
other shareholders (each a "Retail Shareholder" and collectively "Retail
Shareholders") will receive BKB Shares of the corresponding Galaxy Fund. As
discussed below, your proxy card will identify whether your 1784 Fund Shares
will be exchanged for Trust Shares or BKB Shares in the reorganization. In
considering the consequences of the reorganization if you are a Retail
Shareholder, you should note that BKB Shares of the Galaxy Funds will convert to
"Retail A Shares" of the Galaxy Funds one year after the reorganization,
provided that the Galaxy Board
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of Trustees determines that converting the shares is in the best interests of
the Retail Shareholders holding BKB Shares. You should also note that the
expense ratios of a substantial majority of the Galaxy Funds which offer Galaxy
Fund Retail A Shares are higher than the expense ratios of both the BKB Shares
to be received in the reorganization and the corresponding 1784 Fund shares
currently held by the Retail Shareholders. For more information see "Fee
Tables."
Q: WHY WILL BKB SHARES CONVERT TO RETAIL A SHARES?
A: As Retail Shareholders, persons holding BKB shares will receive enhanced
shareholder services such as consolidated tax reporting and problem tracking and
resolution services. The expenses of providing those services to Galaxy Fund
shareholders ordinarily are defrayed through a shareholder servicing fee imposed
on Galaxy Fund Retail A Shares. In connection with the reorganization, Fleet
Advisors has agreed to create the class of BKB Shares. Depending upon the Galaxy
Fund, some or all of the fees that could be imposed under the shareholder
servicing plan for BKB Shares of the Fund are subject to a waiver. The purpose
of the waiver is to allow Retail Shareholders to evaluate those services for a
period without an increase in their current expense ratio as a result of the
shareholder servicing fee, although four of the Galaxy Funds that offer BKB
Shares will have higher expense ratios than their corresponding 1784 Funds
notwithstanding the fee waiver. The conversion of the BKB Shares ends the fee
waiver and imposes upon Retail Shareholders the same expenses borne by similarly
situated shareholders of the Galaxy Funds. Fleet Advisors has committed to waive
shareholder servicing fees as needed to ensure that until the later of one year
from the date of the reorganization or such time as the Galaxy Board of Trustees
votes on the conversion of the BKB Shares to Retail A Shares, the Galaxy Funds
total operating expense ratios will not exceed the pro forma after waiver
expense ratios in Table I-B of the Combined Proxy Statement/Prospectus below.
Before the conversion can be accomplished, the Board of Trustees of the Galaxy
Fund must determine that the conversion of BKB Shares to Retail A Shares is in
the best interests of Retail Shareholders.
Q: HOW WILL 1784 FUND SHARES BE VOTED AND HOW WILL I KNOW WHAT TYPE OF SHARES I
HOLD?
A: For each Fund for which BKB Shares will be created, votes cast by
Institutional Shareholders and Retail Shareholders will be counted separately,
and a 1784 Fund will not be reorganized unless both the Institutional
Shareholders and the Retail Shareholders separately as a class approve the
reorganization. Shareholders of those 1784 Funds that will reorganize into a
Galaxy Fund that offers only a single class of shares (the Boston 1784
Institutional U.S. Treasury Money Market Fund, the Boston 1784 Institutional
Prime Money Market Fund, and the Boston 1784 Florida Tax-Exempt Income Fund)
will vote as a single group of shareholders for each 1784 Fund on the
reorganization proposal.
Your proxy card will designate (where applicable) whether your 1784 Fund
shares will be exchanged for Trust Shares (meaning that you are an Institutional
Shareholder) or BKB Shares (meaning that you are a Retail Shareholder). No
designation will be made on the proxy card for shareholders of the Boston 1784
Institutional U.S. Treasury Money Market Fund, Boston 1784 Institutional Prime
Money Market Fund, and Boston 1784 Florida Tax-Exempt Income Fund.
Q: WHAT ARE THE COSTS AND FEDERAL TAX IMPLICATIONS TO SHAREHOLDERS IN CONNECTION
WITH THE PROPOSED REORGANIZATION?
A: In general, the costs of the reorganization will not be borne by 1784 Fund
shareholders. No sales charge will be imposed on the shares of the Galaxy Funds
issued to you in the reorganization, which means that the aggregate value of the
Galaxy Fund shares issued to you will be equal to the aggregate value of the
1784 Fund shares that you own immediately prior to the reorganization. In
addition, the exchange of 1784 Fund shares for Galaxy Fund shares will be
tax-free under federal tax laws. However, the sale of securities by a 1784 Fund,
prior to the reorganization, whether in the ordinary course of business or in
anticipation of the reorganization, could increase the amount of the taxable
capital gains distribution made prior to the reorganization. See "The
Reorganization--Federal Income Tax Considerations" for additional information.
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BOSTON 1784 FUNDS
Money Market Funds:
Boston 1784 Tax-Free Money Market Fund
Boston 1784 U.S. Treasury Money Market Fund
Boston 1784 Institutional U.S. Treasury Money Market Fund
Boston 1784 Prime Money Market Fund
Boston 1784 Institutional Prime Money Market Fund
Bond Funds:
Boston 1784 Short-Term Income Fund
Boston 1784 Income Fund
Boston 1784 U.S. Government Medium-Term Income Fund
Tax-Exempt Income Funds:
Boston 1784 Tax-Exempt Medium-Term Income Fund
Boston 1784 Connecticut Tax-Exempt Income Fund
Boston 1784 Florida Tax-Exempt Income Fund
Boston 1784 Massachusetts Tax-Exempt Income Fund
Boston 1784 Rhode Island Tax-Exempt Income Fund
Stock Funds:
Boston 1784 Asset Allocation Fund
Boston 1784 Growth and Income Fund
Boston 1784 Growth Fund
Boston 1784 International Equity Fund
2 Oliver Street
Boston, Massachusetts 02109
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 28, 2000
To Shareholders of the Boston 1784 Funds:
NOTICE IS GIVEN THAT a special meeting of the shareholders (the "Special
Meeting") of the Boston 1784 Funds named above (each a "1784 Fund" and together,
the "1784 Funds"), each of which is a separate series of Boston 1784 Funds
("1784"), will be held at 10:00 a.m. (Eastern time), on April 28, 2000, at the
offices of 1784's administrator, SEI Investments Mutual Fund Services, 1 Freedom
Valley Drive, Oaks, Pennsylvania, for the purpose of considering and voting
upon:
ITEM 1. A proposal to approve the Agreement and Plan of Reorganization,
which provides for and contemplates: (1) the transfer of substantially all
of the assets and liabilities of each 1784 Fund to a corresponding
investment portfolio of The Galaxy Fund in exchange for shares of the
designated classes of the corresponding Galaxy Fund of equal value; (2) the
distribution of the shares to the shareholders of the 1784 Funds in
liquidation of each of the 1784 Funds; and (3) the deregistration under the
Investment Company Act of 1940, as amended, and the termination under state
law of 1784.
ITEM 2. Such other business as may properly come before the Special Meeting
or any adjournment(s).
Item 1 is described in the attached Combined Proxy Statement/Prospectus.
YOUR TRUSTEES UNANIMOUSLY RECOMMEND THAT YOU VOTE IN FAVOR OF THE PROPOSAL.
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Shareholders of record as of the close of business on February 29, 2000 are
entitled to notice of, and to vote at, the Special Meeting or any adjournment(s)
thereof.
YOU ARE REQUESTED TO MARK, DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE EACH ACCOMPANYING PROXY BALLOT(S) THAT IS BEING SOLICITED BY THE 1784
BOARD OF TRUSTEES. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE SPECIAL MEETING.
YOU ALSO MAY RETURN PROXIES BY: 1) TOUCHTONE VOTING OR 2) VOTING ON-LINE.
PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY SUBMITTING TO
1784 A WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENTLY EXECUTED PROXY OR BY
ATTENDING THE SPECIAL MEETING AND VOTING IN PERSON.
By Order of the Board of Trustees,
Robert A. Nesher
President
WE NEED YOUR PROXY VOTE IMMEDIATELY. YOU MAY THINK THAT YOUR VOTE IS NOT
IMPORTANT, BUT IT IS VITAL. BY LAW, THE SPECIAL MEETING WILL HAVE TO BE
ADJOURNED WITHOUT CONDUCTING ANY BUSINESS IF LESS THAN A MAJORITY OF THE SHARES
ELIGIBLE TO VOTE ARE REPRESENTED. IN THAT EVENT, 1784 WOULD CONTINUE TO SOLICIT
VOTES FOR A CERTAIN PERIOD OF TIME IN AN ATTEMPT TO ACHIEVE A QUORUM. YOUR VOTE
COULD BE CRITICAL IN ALLOWING 1784 TO HOLD THE SPECIAL MEETING AS SCHEDULED, SO
PLEASE RETURN YOUR PROXY BALLOT(S) IMMEDIATELY OR VOTE ON-LINE OR BY TELEPHONE.
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COMBINED PROXY STATEMENT/PROSPECTUS
MARCH 8, 2000
BOSTON 1784 FUNDS
2 OLIVER STREET
BOSTON, MASSACHUSETTS 02109
1-800-342-5734
THE GALAXY FUND
4400 COMPUTER DRIVE
WESTBOROUGH, MASSACHUSETTS 01581-5108
1-877-289-4252
This combined proxy statement/prospectus ("Proxy/Prospectus") is being sent
to shareholders of the Boston 1784 Tax-Free Money Market Fund, Boston 1784 U.S.
Treasury Money Market Fund, Boston 1784 Institutional U.S. Treasury Money Market
Fund, Boston 1784 Prime Money Market Fund, Boston 1784 Institutional Prime Money
Market Fund, Boston 1784 Short-Term Income Fund, Boston 1784 Income Fund, Boston
1784 U.S. Government Medium-Term Income Fund, Boston 1784 Tax-Exempt Medium-Term
Income Fund, Boston 1784 Connecticut Tax-Exempt Income Fund, Boston 1784 Florida
Tax-Exempt Income Fund, Boston 1784 Massachusetts Tax-Exempt Income Fund, Boston
1784 Rhode Island Tax-Exempt Income Fund, Boston 1784 Asset Allocation Fund,
Boston 1784 Growth and Income Fund, Boston 1784 Growth Fund and Boston 1784
International Equity Fund (each a "1784 Fund" and collectively the "1784
Funds"). The Board of Trustees of Boston 1784 Funds ("1784") has called a
Special Meeting of Shareholders (the "Special Meeting") at the offices of 1784's
administrator, SEI Investments Mutual Fund Services, 1 Freedom Valley Drive,
Oaks, Pennsylvania on April 28, 2000 at 10:00 a.m. Eastern time.
At the Special Meeting, shareholders will be asked:
- To approve a proposed Agreement and Plan of Reorganization dated as of
February 4, 2000 (the "Reorganization Agreement"), by and between 1784 and
The Galaxy Fund ("Galaxy"), which provides for and contemplates (a) the
transfer of substantially all of the assets and liabilities of each 1784
Fund to a corresponding investment portfolio of Galaxy (each a "Galaxy
Fund" and collectively, the "Galaxy Funds") in exchange for the shares of
designated classes of the corresponding Galaxy Fund of equal value;
(b) the distribution of the shares of designated classes of the
corresponding Galaxy Fund to shareholders of each 1784 Fund in liquidation
of each of the 1784 Funds; and (c) the deregistration under the Investment
Company Act of 1940, as amended (the "1940 Act"), and termination under
state law, of 1784.
The Reorganization Agreement, the form of which is attached as Appendix I,
provides for the transfer of assets and liabilities of each 1784 Fund to a
corresponding Galaxy Fund in exchange for BKB Shares, Trust Shares or Shares of
the corresponding Galaxy Fund of equal value. 1784 and Galaxy are both
registered open-end management investment companies (mutual funds). As a result
of the reorganization, shareholders of the 1784 Funds will become shareholders
of the Galaxy Funds (the 1784 Funds and Galaxy Funds are sometimes referred to
as "Funds").
The transactions contemplated by the Reorganization Agreement are referred
to collectively as the "Reorganization."
Each shareholder of the 1784 Funds currently owns the same, single class of
shares. By contrast, certain Galaxy Funds offer multiple classes of shares to
investors. The various classes of Galaxy Fund shares all represent interests in
the same portfolio of securities owned by the Galaxy Fund, but have different
characteristics (such as fees and shareholder servicing arrangements) that are
intended to meet the needs of different types of investors. In general,
eligibility to purchase a particular class of Galaxy Fund shares turns on
whether the investor is characterized as an "institutional investor" or a
"retail investor."
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As part of the Reorganization, all shareholders of the Boston 1784
Institutional U.S. Treasury Money Market Fund, Boston 1784 Institutional Prime
Money Market Fund and Boston 1784 Florida Tax-Exempt Income Fund will receive a
single class of shares ("Shares") of the corresponding Galaxy Fund. Shareholders
of all other 1784 Funds will receive either "Trust Shares" or "BKB Shares,"
depending on how the shareholders acquired their 1784 Fund shares. Shareholders
who purchased their shares through an investment management, trust, custody, or
other agency relationship with BankBoston, N.A. (now known as Fleet National
Bank) (each an "Institutional Shareholder" and collectively, "Institutional
Shareholders") will receive Trust Shares of the corresponding Galaxy Fund. All
other shareholders (each a "Retail Shareholder" and collectively "Retail
Shareholders") will receive BKB Shares of the corresponding Galaxy Fund. In
considering the consequences of the Reorganization if you are a Retail
Shareholder, you should note that BKB Shares of the Galaxy Funds will convert to
"Retail A Shares" of the Galaxy Funds one year after the Reorganization,
provided that the Galaxy Board of Trustees determines that converting the shares
is in the best interests of the Retail Shareholders holding BKB Shares. You
should also note that the expense ratios for a substantial majority of the
Galaxy Funds which offer Retail A Shares are higher than the expense ratios of
both the BKB Shares to be received in the Reorganization and the corresponding
1784 Fund shares currently held by the Retail Shareholders. For more information
see "Fee Tables."
If the Reorganization Agreement is approved and the transactions
contemplated thereby are consummated, 1784 will transfer substantially all of
its assets and liabilities, deregister as a registered investment company and
terminate under Massachusetts law.
This Proxy/Prospectus sets forth concisely the information that a 1784 Fund
shareholder should know before voting, and should be retained for future
reference. It is both 1784's proxy statement for the Special Meeting and a
prospectus for the Galaxy Money Market Fund, Galaxy U.S. Treasury Fund, Galaxy
Tax-Exempt Fund, Galaxy Short-Term Bond Fund, Galaxy Intermediate Government
Income Fund, Galaxy High Quality Bond Fund, Galaxy Rhode Island Municipal Bond
Fund, Galaxy Asset Allocation Fund, Galaxy Growth and Income Fund, and the
Galaxy International Equity Fund (the "Operating Galaxy Funds"). It is not a
prospectus for the Galaxy Institutional Treasury Money Market Fund, Galaxy
Institutional Money Market Fund, Galaxy Intermediate Tax-Exempt Bond Fund,
Galaxy Connecticut Intermediate Municipal Bond Fund, Galaxy Florida Municipal
Bond Fund, Galaxy Massachusetts Intermediate Municipal Bond Fund and Galaxy
Growth Fund II (the "Shell Galaxy Funds") because these funds were created to
continue the business of their corresponding 1784 Funds. Each of the Shell
Galaxy Funds will have substantially the same investment objectives, policies
and restrictions as its respective corresponding 1784 Fund.
Additional information is set forth in the Statement of Additional
Information relating to this Proxy/ Prospectus and in the prospectus dated
October 1, 1999, as supplemented, for the 1784 Funds, which is incorporated
herein by reference. Each of these documents is on file with the Securities and
Exchange Commission (the "SEC"), and is available without charge by calling or
writing 1784 at the telephone number or address stated above. The information
contained in the Operating Galaxy Funds' current prospectuses for the designated
share classes, dated February 29, 2000, also is incorporated by reference into
this Proxy/Prospectus. In addition, a current prospectus for the designated
share classes of the Operating Galaxy Funds accompanies this Proxy/Prospectus.
The Annual Report for the year ended October 31, 1999 and the Semi-Annual Report
for the period ended April 30, 1999 for the Operating Galaxy Funds are available
without charge by calling or writing Galaxy at the telephone number or address
stated above. Each of these documents is also available on the SEC's website at
www.sec.gov.
This Proxy/Prospectus is expected to be first sent to shareholders on or
about March 15, 2000.
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THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
SHARES OF 1784 AND GALAXY ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED
OR ENDORSED BY BANKBOSTON, N.A. (NOW KNOWN AS FLEET NATIONAL BANK), FLEET
INVESTMENT ADVISORS, INC. OR ANY OF THEIR AFFILIATES OR ANY OTHER BANK. SUCH
SHARES ARE NOT INSURED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. MUTUAL
FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL. THE DISTRIBUTOR OF 1784 IS SEI INVESTMENTS DISTRIBUTION CO. THE
DISTRIBUTOR OF GALAXY IS PROVIDENT DISTRIBUTORS, INC.
MONEY MARKET FUNDS SEEK TO MAINTAIN A NET ASSET VALUE OF $1.00 PER SHARE. AN
INVESTMENT IN A MONEY MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT A MONEY MARKET FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
FEE TABLES.................................................. 4
Table I-A................................................. 5
Table I-B................................................. 7
SUMMARY..................................................... 9
Proposed Reorganization................................... 9
Overview Of The Funds..................................... 10
Table II................................................ 12
Federal Income Tax Consequences........................... 13
1784 and Galaxy Board Consideration....................... 13
Principal Risk Factors.................................... 13
Voting Information........................................ 18
THE REORGANIZATION.......................................... 19
Reasons for the Reorganization............................ 19
Description of the Reorganization Agreement............... 19
Table III(A)............................................ 20
Table III(B)............................................ 22
1784 Board Consideration.................................. 24
Capitalization............................................ 24
Table IV................................................ 25
Federal Income Tax Considerations......................... 32
COMPARISON OF 1784 FUNDS AND GALAXY FUNDS................... 34
Investment Objectives and Policies........................ 34
Reorganizing Money Market Funds........................... 34
Reorganizing Bond Funds................................... 34
Reorganizing Equity Funds................................. 34
Investment Advisory Services.............................. 35
Table V................................................. 36
Other Service Providers for the 1784 Funds and the Galaxy
Funds................................................... 37
Sales Load and Distribution Arrangements for 1784 Funds... 38
Sales Load and Shareholder Servicing Arrangements for
Galaxy.................................................. 38
Shareholder Servicing Arrangements........................ 40
Administration Agreements................................. 40
Shareholder Transactions and Policies..................... 41
Fees and Expenses......................................... 41
Performance............................................... 41
Share Structure........................................... 41
Comparison of Trust Structure............................. 42
VOTING MATTERS.............................................. 43
General Information....................................... 43
Shareholder and Board Approvals........................... 45
Principal Shareholders.................................... 45
Table VI(A)............................................. 46
Table VI(B)............................................. 52
Quorum.................................................... 55
Annual Meetings and Shareholder Meetings.................. 56
ADDITIONAL INFORMATION ABOUT GALAXY......................... 56
ADDITIONAL INFORMATION ABOUT 1784........................... 56
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
FINANCIAL STATEMENTS........................................ 56
OTHER BUSINESS.............................................. 57
SHAREHOLDER INQUIRIES....................................... 57
</TABLE>
<TABLE>
<S> <C> <C> <C>
APPENDICES I FORM OF AGREEMENT AND PLAN OF REORGANIZATION................ I-1
II EXPENSE SUMMARIES OF THE 1784 FUNDS AND CORRESPONDING GALAXY
FUNDS....................................................... II-1
III INVESTMENT OBJECTIVES, LIMITATIONS AND CERTAIN SIGNIFICANT
INVESTMENT POLICIES OF THE REORGANIZING 1784 FUNDS AND
CORRESPONDING GALAXY FUNDS.................................. III-1
IV SHAREHOLDER TRANSACTIONS AND SERVICES OF THE GALAXY FUNDS
AND THE CORRESPONDING 1784 FUNDS............................ IV-1
V PERFORMANCE COMPARISONS OF THE OPERATING GALAXY FUNDS AND
THEIR CORRESPONDING 1784 FUNDS.............................. V-1
VI MANAGEMENT DISCUSSION OF GALAXY FUND PERFORMANCE............ VI-1
</TABLE>
ii
<PAGE>
FEE TABLES
Each shareholder of the 1784 Funds currently owns the same, single class of
shares. By contrast, certain Galaxy Funds offer multiple classes of shares to
investors. The various classes of Galaxy Fund shares all represent interests in
the same portfolio of securities owned by the Galaxy Fund, but have different
characteristics (such as fees and shareholder servicing arrangements) that are
intended to meet the needs of different types of investors. In general,
eligibility to purchase a particular class of Galaxy Fund shares turns on
whether the investor is characterized as an "institutional investor" or a
"retail investor."
As part of the Reorganization, all shareholders of the Boston 1784
Institutional U.S. Treasury Money Market Fund, Boston 1784 Institutional Prime
Money Market Fund and Boston 1784 Florida Tax-Exempt Income Fund will receive
Shares of the corresponding Galaxy Fund. Shareholders of all other 1784 Funds
will receive either "Trust Shares" or "BKB Shares," depending on how the
shareholders acquired their 1784 Fund shares. Institutional Shareholders will
receive Trust Shares of the corresponding Galaxy Fund. Retail Shareholders will
receive BKB Shares of the corresponding Galaxy Fund. In considering the
consequences of the Reorganization if you are a Retail Shareholder, you should
note that BKB Shares of the Galaxy Funds will convert to "Retail A Shares" of
the Galaxy Funds one year after the Reorganization, provided that the Galaxy
Board of Trustees determines that converting the shares is in the best interests
of the Retail Shareholders holding BKB Shares.
The following table shows which of the following Galaxy Funds and classes
are projected to experience higher, lower or the same annualized per share total
operating expense ratios as their Corresponding 1784 Funds, after fee waivers,
based upon the fee arrangements and commitments that will be in place upon
consummation of the Reorganization. Three of the fourteen corresponding Galaxy
Funds which offer Trust Shares, four of the fourteen corresponding Galaxy Funds
which offer BKB Shares, and eleven of the fourteen corresponding Galaxy Funds
which offer Retail A Shares have total operating expense ratios (after fee
waivers) which are higher than the 1784 Fund Shares. Fleet Investment Advisors,
Inc. ("Fleet") has committed to waive shareholder servicing fees as needed to
ensure that until the later of one year from the date of the Reorganization or
such time as the Galaxy Board of Trustees votes on the conversion of the BKB
Shares to Retail A Shares, the Galaxy Funds, total operating expense ratios will
not exceed the PRO FORMA after waiver expense ratios in Table I-B. These fee
waivers may be terminated at any time for any or all of the Galaxy Funds after
the first anniversary of the date that the 1784 Fund is reorganized into its
corresponding Galaxy Fund.
4
<PAGE>
TABLE I-A
<TABLE>
<CAPTION>
HIGHER EXPENSES LOWER EXPENSES SAME EXPENSES
THAN THE THAN THE AS THE
CORRESPONDING CORRESPONDING CORRESPONDING
FUND AND CLASS 1784 FUND 1784 FUND 1784 FUND
- --------------------------------------------------- --------------- -------------- -------------
<S> <C> <C> <C>
Galaxy Tax Exempt Fund
Trust Shares..................................... X
BKB Shares....................................... X
Retail A Shares.................................. X
- -----------------------------------------------------------------------------------------------------
Galaxy U.S. Treasury Fund
Trust Shares..................................... X
BKB Shares....................................... X
Retail A Shares.................................. X
- -----------------------------------------------------------------------------------------------------
Galaxy Institutional Treasury Money Market Fund
Shares........................................... X
- -----------------------------------------------------------------------------------------------------
Galaxy Money Market Fund
Trust Shares..................................... X
BKB Shares....................................... X
Retail A Shares.................................. X
- -----------------------------------------------------------------------------------------------------
Galaxy Institutional Money Market Fund
Shares........................................... X
- -----------------------------------------------------------------------------------------------------
Galaxy Short-Term Bond Fund
Trust Shares..................................... X
BKB Shares....................................... X
Retail A Shares.................................. X
- -----------------------------------------------------------------------------------------------------
Galaxy High Quality Bond Fund
Trust Shares..................................... X
BKB Shares....................................... X
Retail A Shares.................................. X
- -----------------------------------------------------------------------------------------------------
Galaxy Intermediate Government Income Fund
Trust Shares..................................... X
BKB Shares....................................... X
Retail A Shares.................................. X
- -----------------------------------------------------------------------------------------------------
Galaxy Intermediate Tax-Exempt Bond Fund
Trust Shares..................................... X
BKB Shares....................................... X
Retail A Shares.................................. X
- -----------------------------------------------------------------------------------------------------
Galaxy Connecticut Intermediate Municipal Bond Fund
Trust Shares..................................... X
BKB Shares....................................... X
Retail A Shares.................................. X
- -----------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
HIGHER EXPENSES LOWER EXPENSES SAME EXPENSES
THAN THE THAN THE AS THE
CORRESPONDING CORRESPONDING CORRESPONDING
FUND AND CLASS 1784 FUND 1784 FUND 1784 FUND
- --------------------------------------------------- --------------- -------------- -------------
<S> <C> <C> <C>
Galaxy Florida Municipal Bond Fund
Shares........................................... X
- -----------------------------------------------------------------------------------------------------
Galaxy Massachusetts Intermediate Municipal Bond
Fund
Trust Shares..................................... X
BKB Shares....................................... X
Retail A Shares.................................. X
- -----------------------------------------------------------------------------------------------------
Galaxy Rhode Island Municipal Bond Fund
Trust Shares..................................... X
BKB Shares....................................... X
Retail A Shares.................................. X
- -----------------------------------------------------------------------------------------------------
Galaxy Asset Allocation Fund
Trust Shares..................................... X
BKB Shares....................................... X
Retail A Shares.................................. X
- -----------------------------------------------------------------------------------------------------
Galaxy Growth and Income Fund
Trust Shares..................................... X
BKB Shares....................................... X
Retail A Shares.................................. X
- -----------------------------------------------------------------------------------------------------
Galaxy Growth Fund II
Trust Shares..................................... X
BKB Shares....................................... X
Retail A Shares.................................. X
- -----------------------------------------------------------------------------------------------------
Galaxy International Equity Fund
Trust Shares..................................... X
BKB Shares....................................... X
Retail A Shares.................................. X
- -----------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
TABLE I-B
The following table shows (i) the current annualized total expense ratio as
of October 31, 1999 of each of the 1784 Funds, after fee waivers; (ii) the
annualized total expense ratio of each of the Operating Galaxy Funds, after fee
waivers, restated to reflect the expenses each Fund expects to incur during the
current fiscal year; and (iii) the PRO FORMA annualized total expense ratio of
the Shell Galaxy Funds or the combined portfolios consisting of a 1784 Fund and
its corresponding Galaxy Fund, as the case may be, after fee waivers, as of
October 31, 1999, based upon the fee arrangements and commitments that will be
in place upon consummation of the Reorganization of the 1784 Funds into
corresponding Galaxy Funds.
TOTAL EXPENSE INFORMATION
<TABLE>
<CAPTION>
PRO FORMA
TOTAL TOTAL TOTAL
OPERATING OPERATING OPERATING
EXPENSES CORRESPONDING EXPENSES COMBINED FUND/ EXPENSES
1784 FUND/ AFTER GALAXY FUND/ AFTER SHARE CLASS AFTER
SHARE CLASS WAIVERS SHARE CLASS WAIVERS POST-REORGANIZATION WAIVERS
- ------------------------ --------- ------------------------ --------- ------------------------ ----------
<S> <C> <C> <C> <C> <C>
MONEY MARKET FUNDS:
BOSTON 1784 TAX-FREE
MONEY MARKET FUND GALAXY TAX-EXEMPT FUND GALAXY TAX-EXEMPT FUND
Shares 0.51% Trust Shares 0.52% Trust Shares 0.47%
BKB Shares n/a BKB Shares 0.52%
Retail A Shares 0.64% Retail A Shares 0.59%
- ----------------------------------------------------------------------------------------------------------------
BOSTON 1784 U.S.
TREASURY
MONEY MARKET FUND GALAXY U.S. TREASURY GALAXY U.S. TREASURY
Shares 0.65% FUND FUND
Trust Shares 0.51% Trust Shares 0.48%
BKB Shares n/a BKB Shares 0.63%
Retail A Shares 0.65% Retail A Shares 0.63%
- ----------------------------------------------------------------------------------------------------------------
BOSTON 1784
INSTITUTIONAL U.S. GALAXY INSTITUTIONAL GALAXY INSTITUTIONAL
TREASURY TREASURY MONEY MARKET TREASURY MONEY MARKET
MONEY MARKET FUND FUND (SHELL) FUND (SHELL)
Shares 0.31% Shares n/a Shares 0.26%
- ----------------------------------------------------------------------------------------------------------------
BOSTON 1784 PRIME GALAXY MONEY MARKET FUND GALAXY MONEY MARKET FUND
MONEY MARKET FUND Trust Shares 0.47% Trust Shares 0.47%
Shares 0.65% BKB Shares n/a BKB Shares 0.63%
Retail A Shares 0.64% Retail A Shares 0.63%
- ----------------------------------------------------------------------------------------------------------------
BOSTON 1784 GALAXY INSTITUTIONAL GALAXY INSTITUTIONAL
INSTITUTIONAL PRIME MONEY MARKET FUND MONEY MARKET FUND
MONEY MARKET FUND (SHELL) (SHELL)
Shares 0.30% Shares n/a Shares 0.28%
- ----------------------------------------------------------------------------------------------------------------
BOND FUNDS:
BOSTON 1784 SHORT-TERM GALAXY SHORT-TERM BOND GALAXY SHORT-TERM BOND
INCOME FUND FUND FUND
Shares 0.64% Trust Shares 0.86% Trust Shares 0.79%
BKB Shares n/a BKB Shares 0.78%
Retail A Shares 1.10% Retail A Shares 0.95%
- ----------------------------------------------------------------------------------------------------------------
GALAXY HIGH QUALITY BOND GALAXY HIGH QUALITY BOND
BOSTON 1784 INCOME FUND FUND FUND
Shares 0.80% Trust Shares 0.85% Trust Shares 0.74%
BKB Shares n/a BKB Shares 0.80%
Retail A Shares 1.00% Retail A Shares 0.96%
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA
TOTAL TOTAL TOTAL
OPERATING OPERATING OPERATING
EXPENSES CORRESPONDING EXPENSES COMBINED FUND/ EXPENSES
1784 FUND/ AFTER GALAXY FUND/ AFTER SHARE CLASS AFTER
SHARE CLASS WAIVERS SHARE CLASS WAIVERS POST-REORGANIZATION WAIVERS
- ------------------------ --------- ------------------------ --------- ------------------------ ----------
<S> <C> <C> <C> <C> <C>
BOSTON 1784 U.S.
GOVERNMENT MEDIUM-TERM GALAXY INTERMEDIATE GALAXY INTERMEDIATE
INCOME FUND GOVERNMENT INCOME FUND GOVERNMENT INCOME FUND
Shares 0.80% Trust Shares 0.71% Trust Shares 0.68%
BKB Shares n/a BKB Shares 0.80%
Retail A Shares 0.96% Retail A Shares 0.93%
- ----------------------------------------------------------------------------------------------------------------
TAX-EXEMPT INCOME FUNDS:
BOSTON 1784 TAX-EXEMPT
MEDIUM-TERM INCOME FUND GALAXY INTERMEDIATE TAX- GALAXY INTERMEDIATE TAX-
Shares 0.80% EXEMPT BOND FUND (SHELL) EXEMPT BOND FUND (SHELL)
Trust Shares n/a Trust Shares 0.76%
BKB Shares n/a BKB Shares 0.80%
Retail A Shares n/a Retail A Shares 0.93%
- ----------------------------------------------------------------------------------------------------------------
GALAXY CONNECTICUT GALAXY CONNECTICUT
BOSTON 1784 CONNECTICUT INTERMEDIATE MUNICIPAL INTERMEDIATE MUNICIPAL
TAX-EXEMPT INCOME FUND BOND FUND (SHELL) BOND FUND (SHELL)
Shares 0.80% Trust Shares n/a Trust Shares 0.78%
BKB Shares n/a BKB Shares 0.80%
Retail A Shares n/a Retail A Shares 0.95%
- ----------------------------------------------------------------------------------------------------------------
BOSTON 1784 FLORIDA TAX- GALAXY FLORIDA MUNICIPAL GALAXY FLORIDA MUNICIPAL
EXEMPT INCOME FUND BOND FUND (SHELL) BOND FUND (SHELL)
Shares 0.80% Shares n/a Shares 0.80%
- ----------------------------------------------------------------------------------------------------------------
BOSTON 1784 GALAXY MASSACHUSETTS GALAXY MASSACHUSETTS
MASSACHUSETTS TAX-EXEMPT INTERMEDIATE MUNICIPAL INTERMEDIATE MUNICIPAL
INCOME FUND BOND FUND (SHELL) BOND FUND (SHELL)
Shares 0.80% Trust Shares n/a Trust Shares 0.78%
BKB Shares n/a BKB Shares 0.80%
Retail A Shares n/a Retail A Shares 0.95%
- ----------------------------------------------------------------------------------------------------------------
BOSTON 1784 RHODE ISLAND GALAXY RHODE ISLAND GALAXY RHODE ISLAND
TAX-EXEMPT INCOME FUND MUNICIPAL BOND FUND MUNICIPAL BOND FUND
Shares 0.80% Trust Shares n/a Trust Shares 0.72%
BKB Shares n/a BKB Shares 0.74%
Retail A Shares 0.77% Retail A Shares 0.74%
- ----------------------------------------------------------------------------------------------------------------
STOCK FUNDS:
BOSTON 1784 ASSET GALAXY ASSET ALLOCATION GALAXY ASSET ALLOCATION
ALLOCATION FUND FUND FUND
Shares 0.96% Trust Shares 1.11% Trust Shares 1.11%
BKB Shares n/a BKB Shares 0.96%
Retail A Shares 1.30% Retail A Shares 1.29%
- ----------------------------------------------------------------------------------------------------------------
BOSTON 1784 GROWTH AND GALAXY GROWTH AND INCOME GALAXY GROWTH AND INCOME
INCOME FUND FUND FUND
Shares 0.89% Trust Shares 1.06% Trust Shares 0.96%
BKB Shares n/a BKB Shares 0.92%
Retail A Shares 1.28% Retail A Shares 1.28%
- ----------------------------------------------------------------------------------------------------------------
BOSTON 1784 GROWTH FUND GALAXY GROWTH FUND II GALAXY GROWTH FUND II
Shares 0.93% (SHELL) (SHELL)
Trust Shares n/a Trust Shares 0.90%
KB Shares n/a BKB Shares 0.94%
Retail A Shares n/a Retail A Shares 1.24%
- ----------------------------------------------------------------------------------------------------------------
BOSTON 1784 GALAXY INTERNATIONAL GALAXY INTERNATIONAL
INTERNATIONAL EQUITY EQUITY FUND EQUITY FUND
FUND Trust Shares 0.91% Trust Shares 0.85%
Shares 1.20% BKB Shares n/a BKB Shares 1.10%
Retail A Shares 1.39% Retail A Shares 1.35%
</TABLE>
Detailed PRO FORMA expense information for each proposed reorganization is
included in Appendix II.
8
<PAGE>
SUMMARY
The following is a summary of certain information relating to the proposed
Reorganization between Galaxy and 1784. More complete information is contained
elsewhere in this Proxy/Prospectus, the Prospectuses and Statements of
Additional Information of Galaxy and 1784, and the Appendices attached hereto.
PROPOSED REORGANIZATION. The Reorganization Agreement provides for and
contemplates: (1) the transfer of substantially all of the assets and
liabilities of each 1784 Fund to a corresponding investment portfolio offered by
Galaxy (each, a "Corresponding Galaxy Fund"), in exchange for shares of the
designated classes of such Corresponding Galaxy Fund of equal value (such shares
of the designated classes of such Corresponding Galaxy Fund, the "Galaxy Fund
Shares"); (2) the distribution of the Galaxy Fund Shares to the shareholders of
the 1784 Funds in liquidation of each of the 1784 Funds; and (3) the
deregistration under the 1940 Act and the termination under state law of 1784.
It is anticipated that the Reorganization will take place in two stages, with
ten of the 1784 Funds first transferring their respective assets and liabilities
to ten corresponding Operating Galaxy Funds with similar objectives and policies
in exchange for the Galaxy Fund Shares issued by such corresponding Operating
Galaxy Funds, and a week later the remaining seven 1784 Funds then transferring
their assets and liabilities to seven Shell Galaxy Funds for the purpose of
acquiring the assets and liabilities, and then continuing the business, of such
1784 Fund, in exchange for the Galaxy Fund Shares issued by such corresponding
Galaxy Shell Funds. The liquidation of each 1784 Fund, and the distribution of
the Galaxy Fund Shares to the respective shareholders of such 1784 Fund, shall
occur immediately after the receipt by such 1784 Fund of all of the Galaxy Fund
Shares to be received by such 1784 Fund in the Reorganization. The
Reorganization is subject to a number of conditions, including approval by both
the Institutional and Retail shareholders of each 1784 Fund.
As a result of the proposed Reorganization, each 1784 Fund shareholder will
become a shareholder of its Corresponding Galaxy Fund and will hold, immediately
after the Reorganization, Galaxy Fund Shares in such Corresponding Galaxy Fund
having a total dollar value equal to the total dollar value of the shares such
shareholder held in the 1784 Fund immediately prior to the effectiveness of the
Reorganization. The exchange of shares in the Reorganization will be tax-free
under federal tax laws and shareholders of the Galaxy Funds and the 1784 Funds
will not pay any sales charge as a result of the exchange of the shares in the
Reorganization. Shareholders of the Boston 1784 Institutional U.S. Treasury
Money Market Fund, Boston 1784 Institutional Prime Money Market Fund and Boston
1784 Florida Tax-Exempt Income Fund will receive Shares of their Corresponding
Galaxy Fund. Retail Shareholders of the other 1784 Funds will receive BKB Shares
of the Corresponding Galaxy Fund. Institutional Shareholders of the other 1784
Funds will receive Trust Shares of the Corresponding Galaxy Fund. The
Reorganization is expected to occur in May, 2000 or such later date as may be
determined pursuant to the Reorganization Agreement. For more information about
the Reorganization and the Reorganization Agreement, see the Section below
entitled "The Reorganization-Description of the Reorganization Agreement."
9
<PAGE>
OVERVIEW OF THE FUNDS.
COMPARISON OF INVESTMENT OBJECTIVES
<TABLE>
<CAPTION>
1784 FUND CORRESPONDING GALAXY FUND
--------- -------------------------
<S> <C>
TAX-FREE MONEY MARKET FUND: TAX-EXEMPT FUND:
Seeks to preserve the principal value of a Seeks as high a level of current interest
shareholder's investment and maintain a high income exempt from federal income tax as is
degree of liquidity while providing current consistent with stability of principal.
income that is exempt from federal income
tax.
- --------------------------------------------------------------------------------------------
U.S. TREASURY MONEY MARKET FUND: U.S. TREASURY FUND:
Seeks to preserve the principal value of a Seeks current income with liquidity and
shareholder's investment and maintain a high stability of principal.
degree of liquidity while providing current
income.
- --------------------------------------------------------------------------------------------
PRIME MONEY MARKET FUND: MONEY MARKET FUND:
Seeks to preserve the principal value of a Seeks as high a level of current income as is
shareholder's investment and maintain a high consistent with liquidity and stability of
degree of liquidity while providing current principal.
income.
- --------------------------------------------------------------------------------------------
SHORT-TERM INCOME FUND: SHORT-TERM BOND FUND:
Seeks to provide investors with maximum Seeks a high level of current income
current income, and, as a secondary goal, to consistent with preservation of capital.
preserve investors' capital.
- --------------------------------------------------------------------------------------------
INCOME FUND: HIGH QUALITY BOND FUND:
Seeks to provide investors with maximum Seeks a high level of current income
current income, and, as a secondary goal, to consistent with prudent risk of capital.
preserve investors' capital.
- --------------------------------------------------------------------------------------------
U.S. GOVERNMENT MEDIUM-TERM INCOME FUND: INTERMEDIATE GOVERNMENT INCOME FUND:
Seeks to provide investors with current Seeks the highest level of current income
income consistent with preservation of consistent with prudent risk of capital.
capital.
- --------------------------------------------------------------------------------------------
RHODE ISLAND TAX-EXEMPT INCOME FUND: RHODE ISLAND MUNICIPAL BOND FUND:
Seeks to provide investors with current Seeks as high a level of current interest
income exempt from federal income tax and income exempt from federal income tax and, to
Rhode Island personal income and business the extent possible, from Rhode Island
corporation taxes, with a secondary goal of personal income tax, as is consistent with
preserving capital. relative stability of principal.
- --------------------------------------------------------------------------------------------
ASSET ALLOCATION FUND: ASSET ALLOCATION FUND:
Seeks to provide investors with a favorable Seeks a high total return by providing both a
total rate of return through current income current level of income that is greater than
and capital appreciation consistent with that provided by the popular stock market
preservation of capital, derived from averages, as well as long-term growth in the
investing in fixed income and equity value of the Fund's assets.
securities.
- --------------------------------------------------------------------------------------------
GROWTH AND INCOME FUND: GROWTH AND INCOME FUND:
Seeks to provide investors with long-term Seeks to provide a relatively high total
growth of capital with a secondary goal of return through long-term capital appreciation
income. and current income.
- --------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
1784 FUND CORRESPONDING GALAXY FUND
--------- -------------------------
<S> <C>
INTERNATIONAL EQUITY FUND: INTERNATIONAL EQUITY FUND:
Seeks to provide investors with long-term Seeks long-term capital appreciation.
growth of capital. Dividend income, if any,
is incidental to this goal.
- --------------------------------------------------------------------------------------------
</TABLE>
The investment objective, policies and restrictions of the (i) Boston 1784
Institutional U.S. Treasury Money Market Fund, (ii) Boston 1784 Institutional
Prime Money Market Fund, (iii) Boston 1784 Tax-Exempt Medium-Term Income Fund,
(iv) Boston 1784 Connecticut Tax-Exempt Income Fund, (v) Boston 1784 Florida
Tax-Exempt Income Fund, (vi) Boston 1784 Massachusetts Tax-Exempt Income Fund
and (vii) Boston 1784 Growth Fund (collectively, the "Continuing 1784 Funds")
are substantially the same as those of their Corresponding Galaxy Funds, because
the Galaxy Shell Funds have each been organized solely in connection with this
Reorganization to acquire the assets and continue the business of its
corresponding Continuing 1784 Fund.
The investment objectives, policies and restrictions of each of the other
1784 Funds (collectively, the "Reorganizing 1784 Funds") are, in general,
similar to those of its Corresponding Galaxy Fund. However, there are certain
differences between the investment policies and restrictions of the Reorganizing
1784 Funds and their Corresponding Galaxy Funds. For additional information, see
"Comparison of 1784 Funds and Galaxy Funds--Investment Objectives and Policies"
and Appendix III.
Fleet currently serves or will serve as the investment adviser to each of
the Galaxy Funds. Oechsle International Advisors, LLC ("Oechsle") currently
serves as investment sub-adviser to the Galaxy International Equity Fund.
BankBoston (now known as Fleet National Bank) currently serves as the investment
adviser to the 1784 Funds, and Oechsle currently serves as co-investment adviser
to the Boston 1784 International Equity Fund. Prior to February 7, 2000,
Kleinwort Benson Investment Management Americas Inc. ("Kleinwort") served as
co-investment adviser with BankBoston to the Boston 1784 International Equity
Fund.
11
<PAGE>
TABLE II
The following table summarizes whether the contractual advisory fee rate of
a Galaxy Fund (on a pro forma basis, after giving effect to the Reorganization)
is higher, lower or the same as its corresponding 1784 Fund by showing the
differential between the Galaxy Fund (on a pro forma basis, after giving effect
to the Reorganization) and 1784 Fund contractual fee rate.
<TABLE>
<CAPTION>
DIFFERENTIAL BETWEEN GALAXY AND 1784
FUND CONTRACTUAL ADVISORY FEE RATE
- ---- ------------------------------------
<S> <C>
Galaxy Tax-Exempt Fund Same contractual fee rate
Galaxy U.S. Treasury Fund 0.02% lower
Galaxy Institutional Treasury Money Market Fund Same contractual fee rate
Galaxy Money Market Fund Same contractual fee rate
Galaxy Institutional Money Market Fund Same contractual fee rate
Galaxy Short-Term Bond Fund 0.25% higher
Galaxy High Quality Bond Fund 0.01% higher
Galaxy Intermediate Government Income Fund 0.01% higher
Galaxy Intermediate Tax-Exempt Bond Fund 0.01% higher
Galaxy Connecticut Intermediate Municipal Bond Fund 0.01% higher
Galaxy Florida Municipal Bond Fund 0.01% higher
Galaxy Massachusetts Intermediate Municipal Bond Fund 0.01% higher
Galaxy Rhode Island Municipal Bond Fund 0.01% higher
Galaxy Asset Allocation Fund 0.01% higher
Galaxy Growth and Income Fund 0.01% higher
Galaxy Growth Fund II 0.01% higher
Galaxy International Equity Fund 0.13% lower
</TABLE>
For more information on advisory fee rates, see "Comparison of 1784 Funds
and Galaxy Funds--Investment Advisory Services--Table V."
Advisory fees, however, are only one type of fee and expense paid by mutual
funds. As noted previously in "Fee Tables--Table I(A) and Table I(B)," three of
the fourteen Corresponding Galaxy Funds which offer Trust Shares, four of the
fourteen Corresponding Galaxy Funds which offer BKB Shares, and eleven of the
fourteen Corresponding Galaxy Funds which offer Retail A Shares have total
operating expense ratios (after fee waivers) which are higher than the 1784 Fund
Shares. For a more detailed summary of fees and expenses, see Appendix II.
The 1784 Funds and Galaxy Funds have different administrators, distributors,
transfer agents and other service providers. For a detailed description of the
management of the Galaxy Funds, including Fleet and Oechsle and other service
providers to the Galaxy Funds, see "Comparison of 1784 Funds and Galaxy
Funds--Investment Advisory Services" and the Galaxy Fund prospectus which
accompanies this Proxy/ Prospectus.
The purchase, redemption, dividend and other policies and procedures of the
1784 Funds and their Corresponding Galaxy Funds are generally similar. There
are, however, some differences. For example, 1784 provides check-writing
privileges on shares of the Boston 1784 Short-Term Income Fund, while Galaxy
does not provide check-writing privileges for its Corresponding Galaxy Fund (the
Galaxy Short-Term Bond Fund).
The 1784 Funds and the Corresponding Galaxy Funds also offer generally
similar exchange privileges. For more information, see "Comparison of 1784 Funds
and Galaxy Funds--Shareholder Transactions and Policies," "Comparison of 1784
Funds and Galaxy Funds--Share Structure" and Appendix IV to this
Proxy/Prospectus.
12
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES. The exchange of shares in the
Reorganization is not expected to result in the recognition, for federal income
tax purposes, of gain or loss by the 1784 Funds, the Galaxy Funds or their
respective shareholders. The sale of securities by the 1784 Funds prior to the
Reorganization, whether in the ordinary course of business or in anticipation of
the Reorganization, could increase the amount of the taxable capital gains
distribution made prior to the Reorganization. See "The Reorganization-Federal
Income Tax Considerations" for additional information.
1784 AND GALAXY BOARD CONSIDERATION. During its deliberations, 1784's Board
of Trustees (with the advice and assistance of its counsel) reviewed, among
other things: (1) the potential effect of the Reorganization on the shareholders
of the 1784 Funds; (2) the capabilities, practices and resources of Fleet and
the Galaxy Funds' other service providers; (3) the investment advisory and other
fees paid by the Galaxy Funds, and the historical and projected expense ratios
of the Galaxy Funds as compared with those of the 1784 Funds and industry peer
groups; (4) the investment objectives, policies and limitations of the Galaxy
Funds and their relative compatibility with those of the 1784 Funds; (5) the
historical investment performance records of the 1784 Funds and the Galaxy
Funds, relative to each other and to peer groups; (6) the shareholder services
offered by Galaxy; (7) the terms and conditions of the Reorganization Agreement;
(8) the anticipated tax consequences of the Reorganization for the respective
1784 Funds and their shareholders; and (9) the number of investment portfolio
options that would be available to shareholders after the Reorganization. The
1784 Board also considered Fleet's belief that the Reorganization would
eliminate certain duplicative shareholder costs and market overlap, facilitate
consolidation of Fleet's managerial resources and enhance generally operational
efficiencies and focus with respect to the mutual funds advised by Fleet. The
1784 Board also considered the viability of the 1784 Funds absent approval of
the proposed Reorganization, including alternatives to Reorganization. For
additional information, see "The Reorganization--1784 Board Consideration."
Based upon their evaluation of the information presented to them, and in
light of their fiduciary duties under federal and state law, the Board of
Trustees of 1784, including all of the non-interested members of the Board,
determined that participation in the Reorganization, as contemplated by the
Reorganization Agreement, was in the best interests of the shareholders of each
1784 Fund and that the interests of the existing shareholders of each 1784 Fund
will not be diluted as a result of the Reorganization.
THE 1784 BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF EACH
1784 FUND APPROVE THE REORGANIZATION AGREEMENT.
After considering the relevant factors, the Galaxy Board of Trustees
similarly found that participation in the Reorganization is in the best
interests of the Galaxy Funds and that the interests of the shareholders of the
Galaxy Funds will not be diluted as a result of the Reorganization.
PRINCIPAL RISK FACTORS. Because each of the Galaxy Shell Funds is being
created to acquire the assets, and then continue the business, of its
corresponding Continuing 1784 Fund, an investment in a Galaxy Shell Fund
involves risks that are substantially the same as those of investing in its
corresponding Continuing 1784 Fund. The investment objectives, policies and
restrictions of each Operating Galaxy Fund, are, in general, similar to those of
its corresponding Reorganizing 1784 Fund. Accordingly, an investment in an
Operating Galaxy Fund involves risks that are similar to those of investing in
its corresponding Reorganizing 1784 Fund. The principal risks applicable to the
1784 Funds and the Galaxy Funds are described in the table below. The 1784 Funds
and Galaxy Funds are classified in the following groups:
"1784 Money Market Funds" means, collectively, the Boston 1784 Tax-Free
Money Market Fund, Boston 1784 U.S. Treasury Money Market Fund, Boston 1784
Institutional U.S. Treasury Money Market Fund, Boston 1784 Prime Money Market
Fund and Boston 1784 Institutional Prime Money Market Fund.
"Galaxy Money Market Funds" means, collectively, the Corresponding Galaxy
Funds of the 1784 Money Market Funds.
13
<PAGE>
"1784 Bond Funds" means, collectively, the Boston 1784 Short-Term Income
Fund Boston 1784 Income Fund and Boston 1784 U.S. Government Medium-Term Income
Fund.
"Galaxy Bond Funds" means, collectively, the Corresponding Galaxy Funds of
the 1784 Bond Funds.
"1784 Tax-Exempt Income Funds" means, collectively, the Boston 1784
Tax-Exempt Medium-Term Income Fund, Boston 1784 Connecticut Tax-Exempt Income
Fund, Boston 1784 Florida Tax-Exempt Income Fund, Boston 1784 Massachusetts
Tax-Exempt Income Fund and Boston 1784 Rhode Island Tax-Exempt Income Fund.
"Galaxy Tax-Exempt Income Funds" means, collectively, the Corresponding
Galaxy Funds of the 1784 Tax-Exempt Funds.
"1784 Stock Funds" means, collectively, the Boston 1784 Asset Allocation
Fund, Boston 1784 Growth and Income Fund, Boston 1784 Growth Fund and Boston
1784 International Equity Fund.
"Galaxy Stock Funds" means, collectively, the Corresponding Galaxy Funds of
the 1784 Stock Funds.
<TABLE>
<CAPTION>
PRINCIPAL RISK FUNDS SUBJECT TO RISK
- -------------- ------------------------------
<S> <C>
SELECTION OF INVESTMENTS--The investment adviser evaluates All 1784 Funds
the risks and rewards presented by all securities
purchased by the Fund and how they advance the Fund's All Galaxy Funds
investment objective. It's possible, however, that these
evaluations will prove to be inaccurate.
- --------------------------------------------------------------------------------------------
MARKET RISK--All mutual funds are affected by changes in the All 1784 Funds
economy and swings in investment markets. These can occur
within or outside the U.S. or worldwide, and may affect All Galaxy Funds
only particular companies or industries.
- --------------------------------------------------------------------------------------------
UNINSURED INVESTMENT RISK--An investment in a Fund is not a All 1784 Funds
deposit of BankBoston or Fleet and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or All Galaxy Funds
any other governmental agency.
- --------------------------------------------------------------------------------------------
TEMPORARY DEFENSIVE POSITIONS--Under unusual market All 1784 Funds
conditions, a Fund may hold uninvested cash (which will
not earn any income) and invest without limit in money All Galaxy Funds
market instruments, including short-term U.S. Government
securities. This strategy could prevent a Fund from
achieving its investment objective.
- --------------------------------------------------------------------------------------------
INTEREST RATE RISK--In general, bond prices rise when All 1784 Funds
interest rates fall and fall when interest rates rise.
Longer term bonds and zero coupon bonds are usually more Galaxy Money Market, Bond,
sensitive to interest rate changes than shorter term Tax-Exempt Income and Asset
bonds. Generally, the longer the average maturity of the Allocation Funds
bonds in a Fund, the more the Fund's share price will
fluctuate in response to interest rate changes. Changes in
interest rates will also affect the amount of income a
Fund receives. A decline in interest rates may lead to a
decline in the Fund's income.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL RISK FUNDS SUBJECT TO RISK
- -------------- ------------------------------
<S> <C>
CREDIT RISK--The value of debt securities depends on the 1784 Bond, Tax-Exempt Income
ability of issuers to make principal and interest and Stock Funds
payments. If an issuer can't meet its payment obligations
or if its credit rating is lowered, the value of its debt Galaxy Money Market, Bond,
securities may fall. Tax-Exempt Income and Asset
Allocation Funds
- --------------------------------------------------------------------------------------------
VOLATILITY RISK--The value of your investment in a Fund will 1784 Bond, Tax-Exempt Income
go up and down with the value of the investments which the and Stock Funds
Fund holds. The Fund's investments may not perform as well
as other investments, even in times of rising markets. You Galaxy Bond, Tax-Exempt Income
may lose money if you invest in these Funds. and Stock Funds
- --------------------------------------------------------------------------------------------
MONEY MARKET RISKS--There's no guarantee that a money market 1784 Money Market Funds
fund will be able to preserve the value of your investment
at $1.00 per share and it is possible to lose money by Galaxy Money Market Funds
investing in a Fund. The yield paid by the Fund will vary
with changes in short-term interest rates. It is possible
that a major change in interest rates or a default on a
security or a repurchase agreement held by a Fund could
cause the value of your investment or the performance of
the Fund to decline.
- --------------------------------------------------------------------------------------------
ZERO COUPON SECURITIES--The Funds may invest in zero coupon 1784 Money Market and Bond
securities or Separately Traded Interest and Principal Funds
Securities, which are the separately traded interest and
principal component parts of government debt obligations. Galaxy Bond Funds
The interest-only component is extremely sensitive to the
rate of principal payments on the underlying obligation.
The market value of the principal-only component generally
is unusually volatile in response to changes in interest
rates.
- --------------------------------------------------------------------------------------------
PREPAYMENT/EXTENSION RISK--Changes in interest rates may 1784 Bond, Tax-Exempt Income
cause certain debt securities held by the Fund, and Stock Funds
particularly asset-backed and mortgage-backed securities,
to be paid off much sooner or later than expected, which Galaxy Bond, Tax-Exempt Income
could adversely affect the Fund's value. and Asset Allocation Funds
- --------------------------------------------------------------------------------------------
FOREIGN INVESTMENTS--Foreign investments may be riskier than 1784 Bond and Stock Funds
U.S. investments because of factors such as foreign
government restrictions, changes in currency exchange Galaxy Short-Term Bond, Growth
rates, incomplete financial information about the issuers II and International Equity
of securities, and political or economic instability. Funds
Foreign securities may be more volatile and less liquid
than U.S. securities.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL RISK FUNDS SUBJECT TO RISK
- -------------- ------------------------------
<S> <C>
MORTGAGE-BACKED SECURITIES--A Fund will receive payments on 1784 Bond Funds
its mortgage-backed securities that are part interest and
part return of principal. These payments may vary based on Galaxy Bond Funds
the rate at which homeowners pay off their loans. When a
homeowner makes a prepayment, the Fund receives a larger
portion of its principal investment back, which means that
there will be a decrease in monthly interest payments.
Some mortgage-backed securities may have structures that
make their reaction to interest rates and other factors
difficult to predict, making their prices very volatile.
Mortgage-backed securities are particularly exposed to
prepayment and extension risk and it may be very difficult
for a Fund to predict accurately the maturity of the
securities it holds.
- --------------------------------------------------------------------------------------------
FREQUENT TRADING--A Fund may trade its investments 1784 Bond, Tax-Exempt Income
frequently in trying to achieve its investment goal. This and Stock Funds
usually increases the chance that the Fund will pay
investors short-term capital gains. These gains are Galaxy Bond and Asset
taxable at higher rates than long-term capital gains. Allocation Funds
Frequent trading could also mean higher brokerage
commissions and other transaction costs, which could
reduce the Fund's returns.
- --------------------------------------------------------------------------------------------
LACK OF DIVERSIFICATION--If a Fund is not diversified, then 1784 Tax-Exempt Income Funds
it may invest a large percentage of its assets in a small (other than Boston 1784 Tax-
number of issuers. As a result, a change in the value of Exempt Medium-Term Income
any one investment held by a Fund may affect the overall Fund)
value of a Fund more than it would affect a diversified
fund which holds more investments. Galaxy Tax-Exempt Income Funds
(other than Galaxy
Intermediate Tax-Exempt Bond
Fund)
- --------------------------------------------------------------------------------------------
MUNICIPAL MARKET RISK--There are special factors which may 1784 Tax-Exempt Income Funds
affect the value of municipal securities and, as a result,
a Fund's share price. These factors include the Galaxy Tax-Exempt Income Funds
possibility that interest on municipal securities held by
a Fund could be declared taxable, political or legislative
changes, and uncertainties related to the rights of
investors in the securities.
- --------------------------------------------------------------------------------------------
SINGLE STATE RISK--Because a Fund invests primarily in a Boston 1784 Connecticut Tax-
particular state's securities, it is likely to be Exempt Income Fund, Boston
especially susceptible to economic, political and 1784 Florida Tax-Exempt Income
regulatory events that affect that state. Fund, Boston 1784
Massachusetts Tax-Exempt
Income Fund and Boston 1784
Rhode Island Tax-Exempt Income
Fund.
Each Corresponding Galaxy Fund
to the above-listed Funds.
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL RISK FUNDS SUBJECT TO RISK
- -------------- ------------------------------
<S> <C>
WHEN-ISSUED SECURITIES--A Fund may enter into agreements to 1784 Tax-Exempt Income Funds
purchase debt securities before the securities have been
issued. The Fund takes a risk that the market value of Galaxy Tax-Exempt Income Funds
these securities will decline before the securities are
delivered to the Fund.
- --------------------------------------------------------------------------------------------
HEDGING--Certain Funds may invest in derivatives such as 1784 Tax-Exempt Income Funds
options, futures and options and forward contracts on (futures and options on
foreign currencies, to hedge against market risk or the futures only) Boston 1784
currency risk of its foreign investments. There's no International Equity Fund
guarantee hedging will always work. It can also prevent (foreign currency hedging
the Fund from making a gain if markets move in the transactions)
opposite direction to the hedge.
Galaxy International Equity
Fund
- --------------------------------------------------------------------------------------------
STOCK MARKET RISK--Changes in the U.S. or foreign economies 1784 Stock Funds
can cause the value of stocks and other investments held
by the Fund to rise or fall. Stock prices may decline over Galaxy Stock Funds
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.
- --------------------------------------------------------------------------------------------
EMERGING MARKETS--The risks associated with foreign 1784 Stock Funds
investments are heightened when investing in emerging
markets. The governments and economies of emerging market Galaxy International Equity
countries feature greater instability than those of more Fund
developed countries. Such investments tend to fluctuate in
price more widely and to be less liquid than other foreign
investments.
- --------------------------------------------------------------------------------------------
CURRENCY EXCHANGE--Although a Fund usually makes investments 1784 Stock Funds
that are sold in foreign currencies, it values its
holdings in U.S. dollars. If the U.S. dollar rises Galaxy International Equity
compared to a foreign currency, the Fund loses on the Fund
currency exchange.
- --------------------------------------------------------------------------------------------
CONVERTIBLE SECURITIES--Securities that can be converted 1784 Stock Funds
into common stock, such as certain debt securities and
preferred stock, are subject to the usual risks associated Galaxy Growth Fund II
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.
- --------------------------------------------------------------------------------------------
SMALLER COMPANIES--The securities of smaller companies may 1784 Stock Funds
have more risks than those of larger companies--they may
be more susceptible to market downturns and their prices
may be more volatile.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL RISK FUNDS SUBJECT TO RISK
- -------------- ------------------------------
<S> <C>
COUNTRY RISK--A Fund may invest 25% or more of its assets in Galaxy International Equity
the securities of companies located in one country. When Fund
the Fund invests a high percentage of its assets in a
particular country, the Fund will be especially
susceptible to factors affecting that country.
- --------------------------------------------------------------------------------------------
PORTFOLIO COMPOSITION--The level of risk could increase if a Galaxy Asset Allocation Fund
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.
</TABLE>
VOTING INFORMATION. 1784's Board of Trustees is furnishing this
Proxy/Prospectus in connection with the solicitation of proxies. Only
shareholders of record at the close of business on February 29, 2000 will be
entitled to vote at the Special Meeting. Shares represented by a properly
executed proxy will be voted in accordance with the instructions thereon. If no
instruction is made, the named proxies will vote in favor of each proposal set
forth in the Notice of Meeting. Proxies may be revoked at any time before they
are exercised by submitting to 1784 a written notice of revocation or a
subsequently executed proxy or by attending the Special Meeting and voting in
person. For additional information, see "Voting Matters."
18
<PAGE>
THE REORGANIZATION
REASONS FOR THE REORGANIZATION. Significant features of the Reorganization
are summarized below. This summary is qualified in its entirety by reference to
the Reorganization Agreement, the form of which is attached as Appendix I.
The proposed Reorganization is expected to benefit 1784 Fund shareholders
by, among other things:
(i) Offering shareholders the opportunity to become part of a larger and
more diverse family of more than thirty mutual funds. Many 1784 Fund
shareholders will be able to exchange their shares among most or all of
those funds.
(ii) Offering shareholders the opportunity to invest in larger Funds
which can use their increased asset size to achieve greater portfolio
diversification, engage in block trading and other investment transactions
on potentially more advantageous terms, and spread relatively fixed costs,
such as legal fees, over a larger asset base.
(iii) Offering shareholders the opportunity to invest in a family of
funds that has demonstrated ability to attract new investors. Successful
marketing and resulting fund growth, in turn, afford investors the benefits
of portfolio diversification and economies of scale.
(iv) Offering shareholders the opportunity to invest in a family of
funds managed by an investment adviser that has extensive investment
management resources and research capabilities; and
(v) Providing additional shareholder services such as consolidated tax
reporting and problem tracking and resolution services.
The Trustees also considered the future prospects of the 1784 Funds if
the Reorganization was not effected and 1784's continuing viability using a
no-load distribution channel.
DESCRIPTION OF THE REORGANIZATION AGREEMENT. There are seventeen
separate 1784 Funds. The Reorganization Agreement provides that
substantially all of the assets and liabilities of each of the ten
Reorganizing 1784 Funds identified in column 1 on Table III(A) below will be
transferred to, and acquired by, one of the ten Operating Galaxy Funds
identified in column 2 on Table III(A) below, in exchange for full and
fractional shares issued by such Operating Galaxy Fund. The Reorganization
Agreement further provides that substantially all of the assets and
liabilities of each of the Continuing 1784 Funds identified in column 1 on
Table III(B) below will be transferred to, and acquired by, one of the
newly-organized Shell Galaxy Funds identified in column 2 on Table
III(B) below, in exchange for full and fractional shares issued by such
Galaxy Shell Funds. In the tables, opposite the name of each 1784 Fund is
the name of the Corresponding Galaxy Fund to which such 1784 Fund will
transfer substantially all of its assets and liabilities and that will issue
shares to such 1784 Fund in consideration of such transfer. The Boston 1784
Institutional U.S. Treasury Money Market Fund, Boston 1784 Institutional
Prime Money Market Fund and Boston 1784 Florida Tax-Exempt Income Fund shall
receive Shares of its Corresponding Galaxy Fund. Each 1784 Fund, other than
the Boston 1784 Institutional U.S. Treasury Money Market Fund, Boston 1784
Institutional Prime Money Market Fund and Boston 1784 Florida Tax-Exempt
Income Fund, shall receive BKB Shares and Trust Shares issued by its
Corresponding Galaxy Fund. Retail Shareholders of a 1784 Fund shall receive
BKB Shares of such Corresponding Galaxy Fund. BKB Shares will convert into
Retail A Shares of the respective Galaxy Fund on the first anniversary of
the date such 1784 Fund reorganized into its Corresponding Galaxy Fund
provided that the Galaxy Board of Trustees has determined that such
conversion is in the best interests of BKB shareholders. Institutional
Shareholders of a 1784 Fund shall receive Trust Shares of such Corresponding
Galaxy Fund. The Galaxy Fund Shares issued by each Galaxy Fund to its
Corresponding 1784 Fund will have the same aggregate dollar value as the
aggregate dollar value of the shares of such 1784 Fund immediately prior to
the effective time of the Reorganization with respect to such fund.
19
<PAGE>
TABLE III(A)
<TABLE>
<CAPTION>
COLUMN 1 COLUMN 2
- -------- --------
1784 REORGANIZING FUND OPERATING GALAXY FUND AND SHARE CLASS
- ---------------------- -------------------------------------
<S> <C>
BOSTON 1784 TAX-FREE MONEY MARKET FUND GALAXY TAX-EXEMPT FUND
Shares (purchased through an investment Trust Shares
management, trust, custody or other agency
relationship with BankBoston, N.A./
Fleet National Bank)
Shares (purchased other than through an BKB Shares
investment management, trust, custody or
other agency relationship with BankBoston,
N.A./ Fleet National Bank)
- --------------------------------------------------------------------------------------------
BOSTON 1784 U.S. TREASURY MONEY MARKET FUND GALAXY U.S. TREASURY FUND
Shares (purchased through an investment Trust Shares
management, trust, custody or other agency
relationship with BankBoston, N.A./
Fleet National Bank)
Shares (purchased other than through an BKB Shares
investment management, trust, custody or
other agency relationship with BankBoston,
N.A./ Fleet National Bank)
- --------------------------------------------------------------------------------------------
BOSTON 1784 PRIME MONEY MARKET FUND GALAXY MONEY MARKET FUND
Shares (purchased through an investment Trust Shares
management, trust, custody or other agency
relationship with BankBoston, N.A./
Fleet National Bank)
Shares (purchased other than through an BKB Shares
investment management, trust, custody or
other agency relationship with BankBoston,
N.A./ Fleet National Bank)
- --------------------------------------------------------------------------------------------
BOSTON 1784 SHORT-TERM INCOME FUND GALAXY SHORT-TERM BOND FUND
Shares (purchased through an investment Trust Shares
management, trust, custody or other agency
relationship with BankBoston, N.A./
Fleet National Bank)
Shares (purchased other than through an BKB Shares
investment management, trust, custody or
other agency relationship with BankBoston,
N.A./ Fleet National Bank)
- --------------------------------------------------------------------------------------------
BOSTON 1784 INCOME FUND GALAXY HIGH QUALITY BOND FUND
Shares (purchased through an investment Trust Shares
management, trust, custody or other agency
relationship with BankBoston, N.A./
Fleet National Bank)
Shares (purchased other than through an BKB Shares
investment management, trust, custody or
other agency relationship with BankBoston,
N.A./ Fleet National Bank)
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
COLUMN 1 COLUMN 2
- -------- --------
1784 REORGANIZING FUND OPERATING GALAXY FUND AND SHARE CLASS
- ---------------------- -------------------------------------
<S> <C>
BOSTON 1784 U.S. GOVERNMENT MEDIUM-TERM GALAXY INTERMEDIATE GOVERNMENT INCOME FUND
INCOME FUND
Shares (purchased through an investment Trust Shares
management, trust, custody or other agency
relationship with BankBoston, N.A./
Fleet National Bank)
Shares (purchased other than through an BKB Shares
investment management, trust, custody or
other agency relationship with BankBoston,
N.A./ Fleet National Bank)
- --------------------------------------------------------------------------------------------
BOSTON 1784 RHODE ISLAND TAX-EXEMPT INCOME GALAXY RHODE ISLAND MUNICIPAL BOND FUND
FUND
Shares (purchased through an investment Trust Shares
management, trust, custody or other agency
relationship with BankBoston, N.A./
Fleet National Bank)
Shares (purchased other than through an BKB Shares
investment management, trust, custody or
other agency relationship with BankBoston,
N.A./ Fleet National Bank)
- --------------------------------------------------------------------------------------------
BOSTON 1784 ASSET ALLOCATION FUND GALAXY ASSET ALLOCATION FUND
Shares (purchased through an investment Trust Shares
management, trust, custody or other agency
relationship with BankBoston, N.A./
Fleet National Bank)
Shares (purchased other than through an BKB Shares
investment management, trust, custody or
other agency relationship with BankBoston,
N.A./ Fleet National Bank)
- --------------------------------------------------------------------------------------------
BOSTON 1784 GROWTH AND INCOME FUND GALAXY GROWTH AND INCOME FUND
Shares (purchased through an investment Trust Shares
management, trust, custody or other agency
relationship with BankBoston, N.A./
Fleet National Bank)
Shares (purchased other than through an BKB Shares
investment management, trust, custody or
other agency relationship with BankBoston,
N.A./ Fleet National Bank)
- --------------------------------------------------------------------------------------------
BOSTON 1784 INTERNATIONAL EQUITY FUND GALAXY INTERNATIONAL EQUITY FUND
Shares (purchased through an investment Trust Shares
management, trust, custody or other agency
relationship with BankBoston, N.A./
Fleet National Bank)
Shares (purchased other than through an BKB Shares
investment management, trust, custody or
other agency relationship with BankBoston,
N.A./ Fleet National Bank)
</TABLE>
21
<PAGE>
TABLE III(B)
<TABLE>
<CAPTION>
COLUMN 1 COLUMN 2
- -------- --------
<S> <C>
CONTINUING 1784 FUND SHELL GALAXY FUND AND SHARE CLASS
BOSTON 1784 INSTITUTIONAL U.S. TREASURY MONEY GALAXY INSTITUTIONAL TREASURY MONEY MARKET
MARKET FUND FUND
Shares Shares
- --------------------------------------------------------------------------------------------
BOSTON 1784 INSTITUTIONAL PRIME MONEY MARKET GALAXY INSTITUTIONAL MONEY MARKET FUND
FUND
Shares Shares
- --------------------------------------------------------------------------------------------
BOSTON 1784 TAX-EXEMPT MEDIUM-TERM INCOME GALAXY INTERMEDIATE TAX-EXEMPT BOND FUND
FUND
Shares (purchased through an investment Trust Shares
management, trust, custody or other agency
relationship with BankBoston, N.A./Fleet
National Bank)
Shares (purchased other than through an BKB Shares
investment management, trust, custody or
other agency relationship with BankBoston,
N.A./ Fleet National Bank)
- --------------------------------------------------------------------------------------------
BOSTON 1784 CONNECTICUT TAX-EXEMPT INCOME GALAXY CONNECTICUT INTERMEDIATE MUNICIPAL
FUND BOND FUND
Shares (purchased through an investment Trust Shares
management, trust, custody or other agency
relationship with BankBoston, N.A./Fleet
National Bank)
Shares (purchased other than through an BKB Shares
investment management, trust, custody or
other agency relationship with BankBoston,
N.A./ Fleet National Bank)
- --------------------------------------------------------------------------------------------
BOSTON 1784 FLORIDA TAX-EXEMPT INCOME FUND GALAXY FLORIDA MUNICIPAL BOND FUND
Shares Shares
- --------------------------------------------------------------------------------------------
BOSTON 1784 MASSACHUSETTS TAX-EXEMPT INCOME GALAXY MASSACHUSETTS INTERMEDIATE MUNICIPAL
FUND BOND FUND
Shares (purchased through an investment Trust Shares
management, trust, custody or other agency
relationship with BankBoston, N.A./Fleet
National Bank)
Shares (purchased other than through an BKB Shares
investment management, trust, custody or
other agency relationship with BankBoston,
N.A./ Fleet National Bank)
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
COLUMN 1 COLUMN 2
- -------- --------
<S> <C>
BOSTON 1784 GROWTH FUND GALAXY GROWTH FUND II
Shares (purchased through an investment Trust Shares
management, trust, custody or other agency
relationship with BankBoston, N.A./Fleet
National Bank)
Shares (purchased other than through an BKB Shares
investment management, trust, custody or
other agency relationship with BankBoston,
N.A./ Fleet National Bank)
</TABLE>
Immediately after the effective time of the Reorganization, each 1784 Fund
will distribute to its shareholders the Galaxy Fund Shares received by such 1784
Fund in the Reorganization. Each shareholder of record of a particular 1784 Fund
at the effective time of the Reorganization will receive shares of its
Corresponding Galaxy Fund with the same aggregate dollar value of the shares
such shareholder held in such 1784 Fund prior to the effective time of the
Reorganization. Each shareholder of record of the Boston 1784 Institutional
Prime Money Market Fund, Boston 1784 Institutional U.S. Treasury Money Market
Fund and Boston 1784 Florida Tax-Exempt Income Fund will receive Shares of its
Corresponding Galaxy Fund. Shareholders of record of all the other 1784 Funds
will either receive BKB Shares or Trust Shares of the Corresponding Galaxy Fund
as provided in the following sentences. To the extent such record holder is a
Retail Shareholder, such record holder shall receive BKB Shares of such Galaxy
Fund. BKB Shares will convert into Retail A Shares of the respective Galaxy Fund
on the first anniversary of the date such 1784 Fund reorganized into its
Corresponding Galaxy Fund provided that the Galaxy Board of Trustees has
determined that such conversion is in the best interests of BKB shareholders. To
the extent such recordholder is an Institutional Shareholder, such recordholder
will receive Trust Shares of such Galaxy Fund. Moreover, each 1784 Fund
shareholder of record will receive any unpaid dividends or distributions
declared before the effective time of the Reorganization with respect to a 1784
Fund.
Galaxy will establish an account for each former shareholder of the 1784
Funds that will reflect the number and class of Galaxy Fund Shares distributed
to that shareholder. The Galaxy Fund Shares issued in the Reorganization will be
in uncertificated form.
The Reorganization is subject to a number of conditions, including approval
by the Institutional Shareholders and the Retail Shareholders of the
Reorganization Agreement and the related matters described in this
Proxy/Prospectus; the receipt of certain legal opinions described in the
Reorganization Agreement (which include an opinion of Galaxy's counsel addressed
to 1784 indicating that the Galaxy Fund Shares issued in the Reorganization will
be validly issued, fully paid and non-assessable); the receipt of certain
certificates from the parties concerning the continuing accuracy of the
representations and warranties in the Reorganization Agreement, the receipt of
any necessary exemptive relief or no-action assurances requested from the SEC or
its staff with respect to Section 17(a) of the 1940 Act; and the parties'
performance in all material respects of their respective covenants and
undertakings as described in the Reorganization Agreement.
The Reorganization Agreement provides that in the event the Reorganization
Agreement is approved with respect to less than all of the 1784 Funds, the
failure of a 1784 Fund to consummate the transactions contemplated by the
Reorganization Agreement shall not affect the consummation or validity of the
Reorganization with respect to any other 1784 Funds.
The Reorganization Agreement provides that Fleet has agreed to pay all
expenses associated with the Reorganization. The Reorganization Agreement also
provides, among other things, that the Reorganization may be terminated at any
time upon the mutual consent of both 1784 and Galaxy, or by either Galaxy or
1784 under certain conditions; and that officers of Galaxy and of 1784 may amend
the Reorganization Agreement as authorized by their respective Boards of
Trustees.
23
<PAGE>
1784 BOARD CONSIDERATION. At a meeting held on December 15, 1999, the 1784
Board of Trustees was advised that BankBoston and Fleet were considering
recommending a consolidation of 1784 with Galaxy. The 1784 Board then met again
on January 19, 2000 and February 4, 2000 to consider the Reorganization proposal
offered by management of Galaxy, Fleet and its affiliates. In preparation for
each meeting, each of the Trustees on the 1784 Board were provided with detailed
information about the Reorganization, Galaxy and Fleet. These materials
summarized the principal terms and conditions of the Reorganization, including
the intention that the Reorganization be consummated on a tax-free basis for
each 1784 Fund and its respective shareholders. In addition, the 1784 Trustees
received comparative information about the 1784 Funds and their respective
Corresponding Galaxy Funds, including information concerning, but not limited
to, the following matters: (1) the investment objectives and policies of such
Galaxy Funds; (2) advisory, distribution and other servicing arrangements of
such Galaxy Funds; (3) fund expenses (with and without giving effect to current
expense limitations), including expenses relative to peer groups and
(4) performance of such Galaxy Funds relative to peer groups. The 1784 Board
also was provided with information about Fleet and its investment advisory
organizations, including information regarding those individuals or teams of
individuals with responsibility for managing each Galaxy Fund.
The 1784 Board of Trustees unanimously approved the Reorganization on
February 4, 2000.
During its deliberations, 1784's Board of Trustees (with the advice and
assistance of its counsel) reviewed, among other things: (1) the potential
effect of the Reorganization on the shareholders of the 1784 Funds; (2) the
capabilities, practices and resources of Fleet and the other service providers
used by Galaxy; (3) the investment advisory and other fees paid by the Galaxy
Funds, and the historical and projected expense ratios of the Galaxy Funds as
compared with those of the 1784 Funds and industry peer groups; (4) the
investment objectives, policies and limitations of the Galaxy Funds and their
relative compatibility with those of the 1784 Funds; (5) the historical
investment performance records of the 1784 Funds and the Galaxy Funds, relative
to each other and relative to peer groups; (6) the shareholder services offered
by Galaxy; (7) the terms and conditions of the Reorganization Agreement;
(8) the anticipated tax consequences of the Reorganization for the respective
1784 Funds and their shareholders; and (9) the number of investment portfolio
options that would be available to shareholders after the Reorganization. The
1784 Board also considered Fleet's belief that the Reorganization would
eliminate certain duplicative shareholder costs and market overlap, facilitate
consolidation of Fleet's managerial resources and enhance generally operational
efficiencies and focus with respect to the mutual funds advised by Fleet. The
1784 Board also considered the viability of the 1784 Funds absent approval of
the proposed Reorganization, including alternatives to the Reorganization.
After consideration of the foregoing and other factors, the 1784 Trustees
unanimously determined that the Reorganization is in the best interest of the
shareholders of each 1784 Fund, and that the interests of the existing
shareholders of each 1784 Fund will not be diluted as a result of such
Reorganization.
CAPITALIZATION. The following table sets forth, as of October 31, 1999:
(1) the capitalization of each of the 1784 Funds; (2) the capitalization of each
of their Corresponding Galaxy Funds; and (3) the pro forma capitalization of
each of the Corresponding Galaxy Funds as adjusted to give effect to the
Reorganization. The capitalization of each 1784 Fund and its Corresponding
Galaxy Fund is likely to be different at the Closing as a result of daily share
purchase and redemption activity in the 1784 Funds and Galaxy Funds as well as
the effects of the other ongoing operations of the respective Funds prior to the
closing of the Reorganization.
The Galaxy Institutional Treasury Money Market Fund, Galaxy Institutional
Money Market Fund, Galaxy Intermediate Tax-Exempt Bond Fund, Galaxy Connecticut
Intermediate Municipal Bond Fund, Galaxy Florida Municipal Bond Fund, Galaxy
Massachusetts Intermediate Municipal Bond Fund and Galaxy Growth Fund II have
not yet commenced operations but will do so at the time the Reorganization
occurs.
24
<PAGE>
TABLE IV
CAPITALIZATION (AS OF OCTOBER 31, 1999)
1. The table below reflects the capitalization as of October 31, 1999
(Galaxy's fiscal year end) and PRO FORMA capitalization information for the
combination of the Boston 1784 Tax-Free Money Market Fund with the Galaxy
Tax-Exempt Fund.
<TABLE>
<CAPTION>
TOTAL NET SHARES NET ASSET VALUE
ASSETS OUTSTANDING PER SHARE
---------------- ---------------- ----------------
<S> <C> <C> <C>
Boston 1784 Tax-Free Money Market Fund..... $916,206,994 916,321,280 $1.00
(Shares) (Shares) (Shares)
Galaxy Tax-Exempt Fund..................... $556,137,407 556,230,987 $1.00
(Trust Shares) (Trust Shares) (Trust Shares)
N/A N/A N/A
(BKB Shares) (BKB Shares) (BKB Shares)
$160,057,310 160,114,754 $1.00
(Retail A (Retail A (Retail A
Shares) Shares) Shares)
PRO FORMA Combined Fund.................... $1,346,824,043 1,347,016,252 $1.00
(Trust Shares) (Trust Shares) (Trust Shares)
125,520,358 125,536,015 $1.00
(BKB Shares) (BKB Shares) (BKB Shares)
$160,057,310 160,114,754 $1.00
(Retail A (Retail A (Retail A
Shares) Shares) Shares)
</TABLE>
2. The table below reflects the capitalization as of October 31, 1999
(Galaxy's fiscal year end) and PRO FORMA capitalization information for the
combination of the Boston 1784 U.S. Treasury Money Market Fund with the Galaxy
U.S. Treasury Fund.
<TABLE>
<CAPTION>
TOTAL NET SHARES NET ASSET VALUE
ASSETS OUTSTANDING PER SHARE
---------------- ---------------- ----------------
<S> <C> <C> <C>
Boston 1784 U.S. Treasury Money Market $405,165,671 405,158,651 $1.00
Fund..................................... (Shares) (Shares) (Shares)
Galaxy U.S. Treasury Fund.................. $459,791,578 459,651,099 $1.00
(Trust Shares) (Trust Shares) (Trust Shares)
N/A N/A N/A
(BKB Shares) (BKB Shares) (BKB Shares)
$584,363,843 584,187,785 $1.00
(Retail A (Retail A (Retail A
Shares) Shares) Shares)
PRO FORMA Combined Fund.................... $492,204,832 492,063,791 $1.00
(Trust Shares) (Trust Shares) (Trust Shares)
$372,752,417 372,745,959 $1.00
(BKB Shares) (BKB Shares) (BKB Shares)
$584,363,843 584,187,785 $1.00
(Retail A (Retail A (Retail A
Shares) Shares) Shares)
</TABLE>
25
<PAGE>
TABLE IV
CAPITALIZATION (AS OF OCTOBER 31, 1999)
3. The table below reflects the capitalization as of October 31, 1999
(Galaxy's fiscal year end) and PRO FORMA capitalization information for the
combination of the Boston 1784 Institutional U.S. Treasury Money Market Fund and
the Galaxy Institutional Treasury Money Market Fund.
<TABLE>
<CAPTION>
TOTAL NET SHARES NET ASSET VALUE
ASSETS OUTSTANDING PER SHARE
---------------- ---------------- ----------------
<S> <C> <C> <C>
Boston 1784 Institutional U.S. Treasury $4,785,288,837 4,785,240,299 $1.00
Money Market Fund........................ (Shares) (Shares) (Shares)
PRO FORMA Combined Fund.................... $4,785,288,837 4,785,240,299 $1.00
(Shares) (Shares) (Shares)
</TABLE>
4. The table below reflects the capitalization as of October 31, 1999
(Galaxy's fiscal year end) and PRO FORMA capitalization information for the
combination of the Boston 1784 Prime Money Market Fund with the Galaxy Money
Market Fund.
<TABLE>
<CAPTION>
TOTAL NET SHARES NET ASSET VALUE
ASSETS OUTSTANDING PER SHARE
---------------- ---------------- ----------------
<S> <C> <C> <C>
Boston 1784 Prime Money Market Fund........ $169,197,029 169,202,840 $1.00
(Shares) (Shares) (Shares)
Galaxy Money Market Fund................... $1,679,875,447 1,679,783,724 $1.00
(Trust Shares) (Trust Shares) (Trust Shares)
N/A N/A N/A
(BKB Shares) (BKB Shares) (BKB Shares)
$2,434,662,436 2,434,519,607 $1.00
(Retail A (Retail A (Retail A
Shares) Shares) Shares)
PRO FORMA Combined Fund.................... $1,692,057,633 1,691,966,328 $1.00
(Trust Shares) (Trust Shares) (Trust Shares)
$157,014,843 $157,020,236 $1.00
(BKB Shares) (BKB Shares) (BKB Shares)
$2,434,662,436 2,434,519,607 $1.00
(Retail A (Retail A (Retail A
Shares) Shares) Shares)
</TABLE>
5. The table below reflects the capitalization as of October 31, 1999
(Galaxy's fiscal year end) and PRO FORMA capitalization information for the
combination of the Boston 1784 Institutional Prime Money Market Fund with the
Galaxy Institutional Money Market Fund.
<TABLE>
<CAPTION>
TOTAL NET SHARES NET ASSET VALUE
ASSETS OUTSTANDING PER SHARE
---------------- ---------------- ----------------
<S> <C> <C> <C>
Boston 1784 Institutional Prime Money $846,731,242 846,746,897 $1.00
Market Fund.............................. (Shares) (Shares) (Shares)
PRO FORMA Combined Fund.................... $846,731,242 846,746,897 $1.00
(Shares) (Shares) (Shares)
</TABLE>
26
<PAGE>
TABLE IV
CAPITALIZATION (AS OF OCTOBER 31, 1999)
6. The table below reflects the capitalization as of October 31, 1999
(Galaxy's fiscal year end) and PRO FORMA capitalization information for the
combination of the Boston 1784 Short-Term Income Fund with the Galaxy Short-Term
Bond Fund.
<TABLE>
<CAPTION>
TOTAL NET SHARES NET ASSET VALUE
ASSETS OUTSTANDING PER SHARE
---------------- ---------------- ----------------
<S> <C> <C> <C>
Boston 1784 Short-Term Income Fund......... $147,936,314 14,884,495 $9.94
(Shares) (Shares) (Shares)
Galaxy Short-Term Bond Fund................ $31,437,937 3,187,772 $9.86
(Trust Shares) (Trust Shares) (Trust Shares)
N/A N/A N/A
(BKB Shares) (BKB Shares) (BKB Shares)
$24,652,827 2,499,555 $9.86
(Retail A (Retail A (Retail A
Shares) Shares) Shares)
PRO FORMA Combined Fund.................... $153,189,523 15,535,803 $9.86
(Trust Shares) (Trust Shares) (Trust Shares)
$26,184,728 2,655,652 $9.86
(BKB Shares) (BKB Shares) (BKB Shares)
$24,652,827 2,499,555 $9.86
(Retail A (Retail A (Retail A
Shares) Shares) Shares)
</TABLE>
7. The table below reflects the capitalization as of October 31, 1999
(Galaxy's fiscal year end) and PRO FORMA capitalization information for the
combination of the Boston 1784 Income Fund with the Galaxy High Quality Bond
Fund.
<TABLE>
<CAPTION>
TOTAL NET SHARES NET ASSET VALUE
ASSETS OUTSTANDING PER SHARE
---------------- ---------------- ----------------
<S> <C> <C> <C>
Boston 1784 Income Fund.................... $333,501,868 34,329,410 $9.71
(Shares) (Shares) (Shares)
Galaxy High Quality Bond Fund.............. $237,771,762 23,203,752 $10.25
(Trust Shares) (Trust Shares) (Trust Shares)
N/A N/A N/A
(BKB Shares) (BKB Shares) (BKB Shares)
$42,905,576 4,187,138 $10.25
(Retail A (Retail A (Retail A
Shares) Shares) Shares)
PRO FORMA Combined Fund.................... $560,601,570 54,699,343 $10.25
(Trust Shares) (Trust Shares) (Trust Shares)
$10,672,060 1,041,177 $10.25
(BKB Shares) (BKB Shares) (BKB Shares)
$42,905,576 4,187,138 $10.25
(Retail A (Retail A (Retail A
Shares) Shares) Shares)
</TABLE>
27
<PAGE>
TABLE IV
CAPITALIZATION (AS OF OCTOBER 31, 1999)
8. The table below reflects the capitalization as of October 31, 1999
(Galaxy's fiscal year end) and PRO FORMA capitalization information for the
combination of the Boston 1784 U.S. Government Medium-Term Income Fund with the
Galaxy Intermediate Government Income Fund.
<TABLE>
<CAPTION>
TOTAL NET SHARES NET ASSET VALUE
ASSETS OUTSTANDING PER SHARE
---------------- ---------------- ----------------
<S> <C> <C> <C>
Boston 1784 U.S. Government Medium-Term $270,660,859 29,079,361 $9.31
Income Fund.............................. (Shares) (Shares) (Shares)
Galaxy Intermediate Government Income $234,879,571 23,833,798 $9.85
Fund..................................... (Trust Shares) (Trust Shares) (Trust Shares)
N/A N/A N/A
(BKB Shares) (BKB Shares) (BKB Shares)
$56,453,630 5,728,355 $9.86
(Retail A (Retail A (Retail A
Shares) Shares) Shares)
PRO FORMA Combined Fund.................... $489,571,439 49,690,840 $9.85
(Trust Shares) (Trust Shares) (Trust Shares)
$15,968,991 1,621,217 $9.85
(BKB Shares) (BKB Shares) (BKB Shares)
$56,453,630 5,728,355 $9.86
(Retail A (Retail A (Retail A
Shares) Shares) Shares)
</TABLE>
9. The table below reflects the capitalization as of October 31, 1999
(Galaxy's fiscal year end) and PRO FORMA capitalization information for the
combination of the Boston 1784 Tax-Exempt Medium Term Income Fund with the
Galaxy Intermediate Tax-Exempt Bond Fund.
<TABLE>
<CAPTION>
TOTAL NET SHARES NET ASSET VALUE
ASSETS OUTSTANDING PER SHARE
---------------- ---------------- ----------------
<S> <C> <C> <C>
Boston 1784 Tax-Exempt Medium-Term Income $341,720,551 34,977,709 $9.77
Fund..................................... (Shares) (Shares) (Shares)
PRO FORMA Combined Fund.................... $317,458,392 32,494,292 $9.77
(Trust Shares) (Trust Shares) (Trust Shares)
$24,262,159 2,483,417 $9.77
(BKB Shares) (BKB Shares) (BKB Shares)
N/A N/A N/A
(Retail A (Retail A (Retail A
Shares) Shares) Shares)
</TABLE>
28
<PAGE>
TABLE IV
CAPITALIZATION (AS OF OCTOBER 31, 1999)
10. The table below reflects the capitalization as of October 31, 1999
(Galaxy's fiscal year end) and PRO FORMA capitalization information for the
combination of the Boston 1784 Connecticut Tax-Exempt Income Fund with the
Galaxy Connecticut Intermediate Municipal Bond Fund.
<TABLE>
<CAPTION>
TOTAL NET SHARES NET ASSET VALUE
ASSETS OUTSTANDING PER SHARE
---------------- ---------------- ----------------
<S> <C> <C> <C>
Boston 1784 Connecticut Tax-Exempt Income $178,626,897 17,601,524 $10.15
Fund..................................... (Shares) (Shares) (Shares)
PRO FORMA Combined Fund.................... $143,973,279 14,186,836 $10.15
(Trust Shares) (Trust Shares) (Trust Shares)
$34,653,618 3,414,688 $10.15
(BKB Shares) (BKB Shares) (BKB Shares)
N/A N/A N/A
(Retail A (Retail A (Retail A
Shares) Shares) Shares)
</TABLE>
11. The table below reflects the capitalization as of October 31, 1999
(Galaxy's fiscal year end) and PRO FORMA capitalization information for the
combination of the Boston 1784 Florida Tax-Exempt Income Fund with the Galaxy
Florida Municipal Bond Fund.
<TABLE>
<CAPTION>
TOTAL NET SHARES NET ASSET VALUE
ASSETS OUTSTANDING PER SHARE
---------------- ---------------- ----------------
<S> <C> <C> <C>
Boston 1784 Florida Tax-Exempt Income $69,082,982 7,184,862 $9.62
Fund..................................... (Shares) (Shares) (Shares)
PRO FORMA Combined Fund.................... $69,082,982 7,184,862 $9.62
(Shares) (Shares) (Shares)
</TABLE>
12. The table below reflects the capitalization as of October 31, 1999
(Galaxy's fiscal year end) and PRO FORMA capitalization information for the
combination of the Boston 1784 Massachusetts Tax-Exempt Income Fund with the
Galaxy Massachusetts Intermediate Municipal Bond Fund.
<TABLE>
<CAPTION>
TOTAL NET SHARES NET ASSET VALUE
ASSETS OUTSTANDING PER SHARE
---------------- ---------------- ----------------
<S> <C> <C> <C>
Boston 1784 Massachusetts Tax-Exempt Income $253,097,322 25,599,066 $9.89
Fund..................................... (Shares) (Shares) (Shares)
PRO FORMA Combined Fund.................... $178,939,807 18,098,540 $9.89
(Trust Shares) (Trust Shares) (Trust Shares)
$74,157,515 7,500,526 $9.89
(BKB Shares) (BKB Shares) (BKB Shares)
N/A N/A N/A
(Retail A (Retail A (Retail A
Shares) Shares) Shares)
</TABLE>
29
<PAGE>
TABLE IV
CAPITALIZATION (AS OF OCTOBER 31, 1999)
13. The table below reflects the capitalization as of October 31, 1999
(Galaxy's fiscal year end) and PRO FORMA capitalization information for the
combination of the Boston 1784 Rhode Island Tax-Exempt Income Fund with the
Galaxy Rhode Island Municipal Bond Fund.
<TABLE>
<CAPTION>
TOTAL NET SHARES NET ASSET VALUE
ASSETS OUTSTANDING PER SHARE
---------------- ---------------- ----------------
<S> <C> <C> <C>
Boston 1784 Rhode Island Tax-Exempt Income $96,667,530 9,736,602 $9.93
Fund..................................... (Shares) (Shares) (Shares)
Galaxy Rhode Island Municipal Bond Fund.... N/A N/A N/A
(Trust Shares) (Trust Shares) (Trust Shares)
N/A N/A N/A
(BKB Shares) (BKB Shares) (BKB Shares)
$19,833,264 1,914,494 $10.36
(Retail A (Retail A (Retail A
Shares) Shares) Shares)
PRO FORMA Combined Fund.................... $81,200,725 7,837,908 $10.36
(Trust Shares) (Trust Shares) (Trust Shares)
$15,466,805 1,492,935 $10.36
(BKB Shares) (BKB Shares) (BKB Shares)
$19,833,264 1,914,494 $10.36
(Retail A (Retail A (Retail A
Shares) Shares) Shares)
</TABLE>
14. The table below reflects the capitalization as of October 31, 1999
(Galaxy's fiscal year end) and PRO FORMA capitalization information for the
combination of the Boston 1784 Asset Allocation Fund with the Galaxy Asset
Allocation Fund.
<TABLE>
<CAPTION>
TOTAL NET SHARES NET ASSET VALUE
ASSETS OUTSTANDING PER SHARE
---------------- ---------------- ----------------
<S> <C> <C> <C>
Boston 1784 Asset Allocation Fund.......... $53,645,775 3,462,534 $15.49
(Shares) (Shares) (Shares)
Galaxy Asset Allocation Fund............... $269,850,784 15,222,769 $17.73
(Trust Shares) (Trust Shares) (Trust Shares)
N/A N/A N/A
(BKB Shares) (BKB Shares) (BKB Shares)
$389,077,216 21,935,139 $17.74
(Retail A (Retail A (Retail A
Shares) Shares) Shares)
PRO FORMA Combined Fund.................... $295,278,881 16,656,954 $17.73
(Trust Shares) (Trust Shares) (Trust Shares)
$28,217,678 1,591,522 $17.73
(BKB Shares) (BKB Shares) (BKB Shares)
$389,077,216 21,935,139 $17.74
(Retail A (Retail A (Retail A
Shares) Shares) Shares)
</TABLE>
30
<PAGE>
TABLE IV
CAPITALIZATION (AS OF OCTOBER 31, 1999)
15. The table below reflects the capitalization as of October 31, 1999
(Galaxy's fiscal year end) and PRO FORMA capitalization information for the
combination of the Boston 1784 Growth and Income Fund with the Galaxy Growth and
Income Fund.
<TABLE>
<CAPTION>
TOTAL NET SHARES NET ASSET VALUE
ASSETS OUTSTANDING PER SHARE
---------------- ---------------- ----------------
<S> <C> <C> <C>
Boston 1784 Growth and Income Fund......... $511,177,972 21,819,394 $23.43
(Shares) (Shares) (Shares)
Galaxy Growth and Income Fund.............. $309,106,303 19,290,157 $16.02
(Trust Shares) (Trust Shares) (Trust Shares)
N/A N/A N/A
(BKB Shares) (BKB Shares) (BKB Shares)
$232,110,404 14,524,500 $15.98
(Retail A (Retail A (Retail A
Shares) Shares) Shares)
PRO FORMA Combined Fund.................... $676,643,265 42,232,539 $16.02
(Trust Shares) (Trust Shares) (Trust Shares)
$143,641,010 8,966,355 $16.02
(BKB Shares) (BKB Shares) (BKB Shares)
$232,110,404 14,524,500 $15.98
(Retail A (Retail A (Retail A
Shares) Shares) Shares)
</TABLE>
16. The table below reflects the capitalization as of October 31, 1999
(Galaxy's fiscal year end) and PRO FORMA capitalization information for the
combination of the Boston 1784 Growth Fund with the Galaxy Growth Fund II.
<TABLE>
<CAPTION>
TOTAL NET SHARES NET ASSET VALUE
ASSETS OUTSTANDING PER SHARE
---------------- ---------------- ----------------
<S> <C> <C> <C>
Boston 1784 Growth Fund.................... $233,057,404 15,207,877 $15.32
(Shares) (Shares) (Shares)
PRO FORMA Combined Fund.................... $185,746,751 12,120,678 $15.32
(Trust Shares) (Trust Shares) (Trust Shares)
$47,310,653 3,087,199 $15.32
(BKB Shares) (BKB Shares) (BKB Shares)
N/A N/A N/A
(Retail A (Retail A (Retail A
Shares) Shares) Shares)
</TABLE>
31
<PAGE>
17. The table below reflects the capitalization as of October 31, 1999
(Galaxy's fiscal year end) and PRO FORMA capitalization information for the
combination of the Boston 1784 International Equity Fund with the Galaxy
International Equity Fund.
<TABLE>
<CAPTION>
TOTAL NET SHARES NET ASSET VALUE
ASSETS OUTSTANDING PER SHARE
---------------- ---------------- ----------------
<S> <C> <C> <C>
Boston 1784 International Equity Fund...... $446,683,142 27,453,231 $16.27
(Shares) (Shares) (Shares)
Galaxy International Equity Fund........... $501,776,006 23,687,146 $21.18
(Trust Shares) (Trust Shares) (Trust Shares)
N/A N/A N/A
(BKB Shares) (BKB Shares) (BKB Shares)
$89,326,639 4,282,082 $20.86
(Retail A (Retail A (Retail A
Shares) Shares) Shares)
PRO FORMA Combined Fund.................... $912,724,497 43,089,813 $21.18
(Trust Shares) (Trust Shares) (Trust Shares)
$35,734,651 1,687,188 $21.18
(BKB Shares) (BKB Shares) (BKB Shares)
$89,326,639 4,282,082 $20.86
(Retail A (Retail A (Retail A
Shares) Shares) Shares)
</TABLE>
FEDERAL INCOME TAX CONSIDERATIONS. Each Galaxy Fund and each 1784 Fund
intends to qualify as of the effective time of the Reorganization, as a separate
"regulated investment company" under the Internal Revenue Code of 1986, as
amended (the "Code"). Accordingly, each 1784 Fund and each Corresponding Galaxy
Fund has been, and expects to continue to be, relieved of federal income tax
liability.
Consummation of the Reorganization with respect to each 1784 Fund and its
Corresponding Galaxy Fund is subject to the condition that 1784 and Galaxy
receive an opinion from Drinker Biddle & Reath LLP substantially to the effect
that, for federal income tax purposes: (i) the transfer of substantially all of
the assets and liabilities of a 1784 Fund to its Corresponding Galaxy Fund in
exchange for the Galaxy Fund Shares issued by such Corresponding Galaxy Fund,
and the distribution of those Galaxy Fund Shares to shareholders of the 1784
Fund, will consist of seventeen "reorganizations" within the meaning of Section
368(a) of the Code, and each 1784 Fund and its Corresponding Galaxy Fund will
each be a "party to a reorganization" within the meaning of Section 368(b) of
the Code in respect of the Reorganization; (ii) no gain or loss will be
recognized by any 1784 Fund upon the transfer of its assets and liabilities to
its Corresponding Galaxy Fund solely in exchange for Galaxy Fund Shares of the
Corresponding Galaxy Fund; (iii) no gain or loss will be recognized by each
Galaxy Fund upon the receipt of the assets and assumption of liabilities of its
Corresponding 1784 Fund solely in exchange for the Galaxy Fund Shares; (iv) the
basis of each 1784 Fund's assets received by the Corresponding Galaxy Fund
pursuant to the Reorganization will be the same as the basis of those assets in
the hands of such 1784 Fund immediately prior to the Reorganization; (v) the
holding period of each 1784 Fund's assets in the hands of its Corresponding
Galaxy Fund will include the period for which such assets have been held by such
1784 Fund; (vi) no gain or loss will be recognized by any 1784 Fund on the
distribution to its shareholders of the Galaxy Fund Shares of its Corresponding
Galaxy Fund; (vii) no gain or loss will be recognized by the shareholders of any
1784 Fund upon their receipt of the Galaxy Fund Shares in exchange for such
shareholders' shares of the 1784 Fund; (viii) the basis of the Galaxy Fund
Shares received by the shareholders of each 1784 Fund will be the same as the
basis of the 1784 Fund Shares surrendered by such shareholders pursuant to the
Reorganization; (ix) the holding period for the Galaxy Fund Shares received
32
<PAGE>
by each 1784 Fund shareholder will include the period during which such
shareholder held the 1784 Fund Shares surrendered in exchange therefor, provided
that such 1784 Fund shares are held as a capital asset in the hands of such 1784
Fund shareholder on the date of the exchange; and (x) each Galaxy Fund will
succeed to and take into account the tax attributes described in Section 381
(c) of the Code of the 1784 Fund as of the effective time of the Reorganization
with respect to the 1784 Funds, subject to the conditions and limitations
specified in the Code. Shareholders of the 1784 Funds should note, however, that
the sale of securities by the 1784 Funds prior to the effective time of the
Reorganization, whether in the ordinary course of business or in anticipation of
the Closing, could increase the amount of the taxable capital gains distribution
made prior to the Reorganization.
Galaxy and 1784 have not sought, and will not seek, a private ruling from
the Internal Revenue Service ("IRS") with respect to the federal income tax
consequences of the Reorganization. The opinion of Drinker Biddle & Reath LLP
with respect to the federal income tax consequences of the Reorganization is not
binding on the IRS and does not preclude the IRS from adopting a contrary
position. Shareholders should consult their own advisers concerning the
potential tax consequences of the Reorganization to them, including any
applicable foreign, state or local income tax consequences.
33
<PAGE>
COMPARISON OF 1784 FUNDS AND GALAXY FUNDS
INVESTMENT OBJECTIVES AND POLICIES. The investment objectives, policies and
restrictions of each 1784 Fund are, in general, similar to those of its
Corresponding Galaxy Fund. They are summarized in Appendix III. Moreover, the
investment objective, policies and restrictions of each of the Boston 1784
Institutional U.S. Treasury Money Market Fund, Boston 1784 Institutional Prime
Money Market Fund, Boston 1784 Tax-Exempt Medium-Term Income Fund, Boston 1784
Connecticut Tax-Exempt Income Fund, Boston 1784 Florida Tax-Exempt Income Fund,
Boston 1784 Massachusetts Tax-Exempt Income Fund and Boston 1784 Growth Fund
are, in each case, substantially the same as those of its respective
Corresponding Shell Galaxy Fund. Each Shell Galaxy Fund is being created to
acquire the assets and continue the business of its respective corresponding
Continuing 1784 Fund. There are, however, certain differences in the types of
securities in which each of the Reorganizing 1784 Funds may invest and the types
of securities in which its Corresponding Galaxy Fund may invest, as well as
differences in certain investment policies of such Funds. A discussion of some
of the more significant differences between some of the Funds follows.
REORGANIZING MONEY MARKET FUNDS. The 1784 Money Market Funds and the Galaxy
Money Market Funds are all subject to the general restrictions and limitations
of Rule 2a-7 under the 1940 Act. However, there are differences between the
investment policies and restrictions of the 1784 Money Market Funds and their
Corresponding Galaxy Funds. For example, the Boston 1784 Tax-Free Money Market
Fund and the Boston 1784 U.S. Treasury Money Market Fund reserve the right to
invest more than 25% of their assets in money market instruments issued by
banks, while their Corresponding Galaxy Funds may not so concentrate their
assets. The Boston 1784 Prime Money Market Fund may invest in securities whose
credit is rated in the top two rating categories for short-term debt while the
Galaxy Money Market Fund is limited to securities having the highest short-term
debt rating. The Boston 1784 Prime Money Market Fund and the Boston 1784 U.S.
Treasury Money Market Fund may invest in repurchase agreements collateralized by
securities in which such Funds may otherwise invest, while the Galaxy Money
Market Fund may only invest in repurchase agreements that are secured by U.S.
government obligations and the Galaxy U.S. Treasury Fund may not invest in
repurchase agreements.
REORGANIZING BOND FUNDS. The Boston 1784 Short-Term Income Fund, under
normal circumstances, invests at least 80% of its assets in bonds and debentures
while the Galaxy Short-Term Bond Fund normally invests at least 65% of its
assets in bonds and debentures. The Boston 1784 Short-Term Income Fund may
invest up to 30% of its total assets in the securities of foreign issuers while
the Galaxy Short-Term Bond Fund may invest up to 35% of its assets in foreign
issuers. The Boston 1784 Income Fund invests at least 65% of its assets in
securities rated A or better by Standard and Poor's Rating Services ("S&P") or
Moody's Investors Service, Inc. ("Moody's") while the Galaxy High Quality Bond
Fund invests at least 65% of its total assets in securities rated AA or higher
by S&P or Aa or higher by Moody's. The Boston 1784 Income Fund may invest up to
30% of its total assets in the securities of foreign issuers while the Galaxy
High Quality Bond Fund may not invest in foreign issuers.
REORGANIZING EQUITY FUNDS. The Boston 1784 Growth and Income Fund
emphasizes stocks in U.S. companies with market capitalizations of at least $1
billion and normally invests 80% to 90% of its assets in common stocks, while
the Galaxy Growth and Income Fund seeks to invest at least 65% of its assets in
common stocks of U.S. and foreign issuers, preferred stock, common stock
warrants and securities convertible into common stocks of U.S. companies with
market capitalizations of over $2 billion. While the Boston 1784 Growth and
Income Fund may purchase debt securities rated investment grade or higher (i.e.,
Baa by Moody's or BBB by S&P), the Galaxy Growth and Income Fund may purchase
convertible bonds that are rated as low as Ba by Moody's or BB by S&P or Fitch
IBCA, Inc. at the time of purchase. With respect to investment in the securities
of foreign issuers, the Galaxy Asset Allocation Fund and the Galaxy Growth and
Income Fund each limit their investment in such securities to no more than 20%
of the Fund's respective assets, while the Boston 1784 Asset Allocation Fund
imposes no such limit, and the Boston 1784 Growth and Income Fund limits such
investment to 25% of its assets. In addition, the Galaxy International
34
<PAGE>
Equity Fund limits its investments in emerging markets to 20% of its assets. The
Boston 1784 International Equity Fund imposes no such limits. The Galaxy
International Equity Fund requires that all debt securities be rated in the top
three rating categories (i.e. A or higher by S&P or by Moody's) while the Boston
1784 International Equity Fund requires that debt securities be in the top four
rating categories (i.e. rated BBB or higher by S&P or Baa or higher by Moody's).
The Boston 1784 International Equity Fund emphasizes equity securities of
foreign issuers with market capitalizations of at least $100 million while the
Galaxy International Equity Fund has no comparable policy.
The investment objectives, strategies and policies of the 1784 Funds and
Galaxy Funds are more fully discussed in Appendix III. Additional information
about the investment policies and restrictions of the 1784 Funds and Galaxy
Funds is included in their respective prospectuses and statements of additional
information, which have been incorporated herein by reference.
INVESTMENT ADVISORY SERVICES. Fleet serves as investment adviser to the
Galaxy Funds and will continue to serve as investment adviser to the Galaxy
Funds upon consummation of the Reorganization. Oechsle serves as sub-investment
adviser to the Galaxy International Equity Fund and will continue to serve as
sub-investment adviser to such Fund upon consummation of the Reorganization.
The following table shows the contractual investment advisory and, where
applicable, sub-advisory fee ratios for each 1784 Fund and its Corresponding
Galaxy Fund. The table also shows the respective investment advisory and
sub-advisory fee rates paid to the investment advisor and sub-advisor after
taking into account voluntary fee waivers. The fees for the 1784 Funds are as of
October 31, 1999. The fees for the Galaxy Funds (both before and after waivers)
represent the PRO FORMA annualized advisory fees based upon fee arrangements
that will be in place upon consummation of the Reorganization.
35
<PAGE>
TABLE V
INVESTMENT ADVISORY AND SUB-ADVISORY FEE INFORMATION
<TABLE>
<CAPTION>
ADVISORY FEES
BEFORE/AFTER WAIVERS
ADVISORY FEES (PRO FORMA AFTER GIVING
1784 FUND BEFORE/AFTER WAIVERS CORRESPONDING GALAXY FUND EFFECT TO THE REORGANIZATION)
- --------- -------------------- ------------------------- -----------------------------
<S> <C> <C> <C>
Boston 1784 Tax-Free Galaxy Tax-Exempt Fund
Money Market Fund
Advisory Fee 0.40% / 0.40% Advisory Fee 0.40% / 0.37%
- ----------------------------------------------------------------------------------------------------------
Boston 1784 U.S. Treasury Galaxy U.S. Treasury Fund
Money Market Fund
Advisory Fee 0.40% / 0.33% Advisory Fee 0.38% / 0.38%
- ----------------------------------------------------------------------------------------------------------
Boston 1784 Institutional Galaxy Institutional
U.S. Treasury Money Treasury Money Market
Market Fund Fund (shell)
Advisory Fee 0.20% / 0.20% Advisory Fee 0.20% / 0.20%
- ----------------------------------------------------------------------------------------------------------
Boston 1784 Prime Money Galaxy Money Market Fund
Market Fund Advisory Fee 0.40% / 0.36%
Advisory Fee 0.40% / 0.32%
- ----------------------------------------------------------------------------------------------------------
Boston 1784 Institutional Galaxy Institutional
Prime Money Market Fund Money Market Fund
Advisory Fee 0.20% / 0.15% (shell)
Advisory Fee 0.20% / 0.20%
- ----------------------------------------------------------------------------------------------------------
Boston 1784 Short-Term Galaxy Short-Term Bond
Income Fund Fund
Advisory Fee 0.50% / 0.50% Advisory Fee 0.75% / 0.55%
- ----------------------------------------------------------------------------------------------------------
Boston 1784 Income Fund Galaxy High Quality Bond
Fund
Advisory Fee 0.74% / 0.68% Advisory Fee 0.75% / 0.55%
- ----------------------------------------------------------------------------------------------------------
Boston 1784 U.S. Galaxy Intermediate
Government Medium-Term Government Income Fund
Income Fund Advisory Fee 0.75% / 0.55%
Advisory Fee 0.74% / 0.67%
- ----------------------------------------------------------------------------------------------------------
Boston 1784 Tax-Exempt Galaxy Intermediate Tax-
Medium-Term Income Fund Exempt Bond Fund
Advisory Fee 0.74% / 0.68% (shell)
Advisory Fee 0.75% / 0.63%
- ----------------------------------------------------------------------------------------------------------
Boston 1784 Connecticut Galaxy Connecticut
Tax-Exempt Income Fund Intermediate Municipal
Bond Fund (shell)
Advisory Fee 0.74% / 0.67% Advisory Fee 0.75% / 0.63%
- ----------------------------------------------------------------------------------------------------------
Boston 1784 Florida Tax- Galaxy Florida Municipal
Exempt Income Fund Bond Fund (shell)
Advisory Fee 0.74% / 0.65% Advisory Fee 0.75% / 0.58%
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
ADVISORY FEES
BEFORE/AFTER WAIVERS
ADVISORY FEES (PRO FORMA AFTER GIVING
1784 FUND BEFORE/AFTER WAIVERS CORRESPONDING GALAXY FUND EFFECT TO THE REORGANIZATION)
- --------- -------------------- ------------------------- -----------------------------
<S> <C> <C> <C>
Boston 1784 Massachusetts Galaxy Massachusetts
Tax-Exempt Income Fund Intermediate Municipal
Bond Fund (shell)
Advisory Fee 0.74% / 0.67% Advisory Fee 0.75% / 0.63%
- ----------------------------------------------------------------------------------------------------------
Boston 1784 Rhode Island Galaxy Rhode Island
Tax-Exempt Income Fund Municipal Bond Fund
Advisory Fee 0.74% / 0.66% Advisory Fee 0.75% / 0.55%
- ----------------------------------------------------------------------------------------------------------
Boston 1784 Asset Galaxy Asset Allocation
Allocation Fund Fund
Advisory Fee 0.74% / 0.74% Advisory Fee 0.75% / 0.75%
- ----------------------------------------------------------------------------------------------------------
Boston 1784 Growth and Galaxy Growth and Income
Income Fund Fund
Advisory Fee 0.74% / 0.74% Advisory Fee 0.75% / 0.75%
- ----------------------------------------------------------------------------------------------------------
Boston 1784 Growth Fund Galaxy Growth Fund II
(shell)
Advisory Fee 0.74% / 0.74% Advisory Fee 0.75% / 0.75%
- ----------------------------------------------------------------------------------------------------------
Boston 1784 International Galaxy International
Equity Fund Equity Fund
Advisory Fee 1.00% / 1.00% Advisory Fee
Sub-Advisory Fee (paid 0.87% / 0.64%
by Adviser) 0.36% / 0.36%
</TABLE>
OTHER SERVICE PROVIDERS FOR THE 1784 FUNDS AND THE GALAXY FUNDS
1784 and Galaxy have different service providers. Upon completion of the
Reorganization, Galaxy will continue to engage its existing service providers.
In all cases, the types of services provided to the Funds under these service
arrangements are substantially similar.
<TABLE>
<CAPTION>
1784 GALAXY
----------------------------- -----------------------------
<S> <C> <C>
Distributor.......................... SEI Investments Distribution Provident Distributors, Inc.
Co. (formerly known as SEI
Financial Services Company)
Administrator........................ SEI Investments Mutual Fund PFPC Inc. (formerly known as
Services (formerly known as First Data Investor Services
SEI Fund Resources) Group)
Transfer Agent....................... State Street Bank and Trust PFPC Inc. (formerly known as
Company First Data Investor Services
Group)
Custodian............................ Investors Bank and Trust The Chase Manhattan Bank
Company
Independent Accountants.............. PricewaterhouseCoopers LLP Ernst & Young LLP
</TABLE>
37
<PAGE>
SALES LOAD AND DISTRIBUTION ARRANGEMENTS FOR 1784 FUNDS
Shares of 1784 Funds are offered at net asset value per share with no
front-end sales load or contingent deferred sales charge. 1784 has adopted a
distribution plan with respect to each non-money market fund pursuant to Rule
12b-1 under the 1940 Act ("Plan"). Under the Plan, 1784 will pay its distributor
a fee, calculated daily and paid monthly, at an annual rate of 0.25% of the
average daily net assets of each non-money market portfolio of 1784. The
Distributor can use these fees to compensate broker/dealers and service
providers (including Fleet National Bank and its affiliates) that provide
administrative and/or distribution services to holders of these shares or their
customers who beneficially own these shares. Since 1784's inception, no fees
have been paid to the Distributor under the Plan.
SALES LOAD AND SHAREHOLDER SERVICING ARRANGEMENTS FOR GALAXY
BKB SHARES. BKB Shares will be issued in connection with the Reorganization
and will only be available for purchase by shareholders who received BKB Shares
in connection with the Reorganization. BKB Shares are offered at net asset value
per share with no front-end sales load or contingent deferred sales charge. BKB
Shares will convert into Retail A Shares of the same Galaxy Fund on the first
anniversary of the date such 1784 Fund reorganized into its Corresponding Galaxy
Fund provided that the Galaxy Board of Trustees has determined that such
conversion is in the best interests of BKB shareholders.
Galaxy has adopted a Shareholder Services Plan with respect to BKB Shares
pursuant to which it intends to enter into servicing agreements with
institutions (including Fleet Boston Financial Corporation ("Fleet Boston") and
its affiliates). Pursuant to these servicing agreements, institutions render
certain shareholder liaison and/or administrative support services to customers
who are the beneficial owners of BKB Shares. Such services are intended to
supplement the services provided by PFPC Inc. as administrator and transfer
agent to the shareholders of record of the BKB Shares. The Plan provides that
Galaxy will pay fees for such services as follows:
<TABLE>
<CAPTION>
SHAREHOLDER SERVICING FEE
(AS A % OF
GALAXY FUND AVERAGE DAILY NET ASSETS)
- ----------- ----------------------------
<S> <C>
Tax Exempt, U.S. Treasury and Money Market maximum: .25%
current limit: .10%
Short-Term Bond, High Quality Bond, Intermediate Government maximum: .30%
Income, Intermediate Tax-Exempt Bond, Connecticut current limit: .15%
Intermediate Municipal Bond, Massachusetts Intermediate
Municipal Bond, and Rhode Island Municipal Bond
Asset Allocation, Growth and Income, Growth II and maximum: .50%
International Equity current limit: .30%
</TABLE>
The shareholder servicing fee will be waived fully or partially so that no
1784 shareholder will realize an increase in expenses as a result of the
imposition of such fees for only as long as they hold BKB shares, although as
noted above in Table I-B certain Galaxy Fund BKB shareholders will realize an
increase in expense ratios for other reasons. Institutions may receive up to
one-half of this fee for providing one or more of the following services to such
customers: aggregating and processing purchase and redemption requests and
placing net purchase and redemption orders with Provident Distributors, Inc.;
processing dividend payments from a Fund; providing sub-accounting with respect
to BKB Shares or the information necessary for sub-accounting; and providing
periodic mailings to customers. Institutions may also receive up to one-half of
this fee for providing one or more of these additional services to such
customers: providing customers with information as to their positions in BKB
Shares; responding to customer inquiries; and providing a service to invest the
assets of customers in BKB Shares.
38
<PAGE>
As Retail Shareholders, persons holding BKB shares will receive enhanced
shareholder services such as consolidated tax reporting and problem tracking and
resolution services. The expenses of providing those services to Galaxy Fund
shareholders ordinarily is defrayed through a shareholder servicing fee imposed
on Galaxy Fund Retail A Shares. In connection with the Reorganization, Fleet
Boston has agreed to create the class of BKB Shares that is subject to a waiver,
depending upon the Galaxy Fund, of some or all of the fees that could be imposed
under the shareholder servicing plan for those Funds. The purpose of the waiver
is to allow Retail Shareholders to evaluate those services for a period without
an increase in their current expense ratio as a result of the shareholder
servicing fee, although four of the Galaxy Funds that offer BKB Shares will have
HIGHER EXPENSE RATIOS than their corresponding 1784 Funds notwithstanding the
fee waiver. The conversion of the BKB Shares ends the fee waiver and imposes
upon Retail Shareholders the same expenses borne by similarly situated
shareholders of the Galaxy Funds. Before the conversion can be accomplished, the
Board of Trustees of the Galaxy Fund must determine that the conversion of BKB
Shares to Retail A Shares is in the best interests of Retail Shareholders.
RETAIL A SHARES. THERE WILL BE NO SALES LOAD IMPOSED ON CONVERSION OF BKB
SHARES TO RETAIL A SHARES. IN ADDITION, NO SALES LOAD WILL BE IMPOSED (NOR WILL
ANY CONTINGENT DEFERRED SALES LOAD BE IMPOSED ON REDEMPTIONS) ON SUBSEQUENT
PURCHASES OF RETAIL A SHARES BY FORMER 1784 FUND SHAREHOLDERS SO LONG AS AN
ACCOUNT REMAINS CONTINUOUSLY OPEN FROM THE DATE OF THE REORGANIZATION. With the
exception of the Galaxy Money Market Funds, all Galaxy Funds that offer Retail A
Shares charge a front-end sales load. The maximum front-end sales load charged
for Retail A Shares of each non-money market Galaxy Fund is 3.75%. No front-end
sales load is charged on investments in Retail A Shares of $500,000 or more.
However, if the shares are sold within one year of purchase a contingent
deferred sales charge ("CDSC") of the lesser of 1% of the offering price or 1%
of the net asset value of a shareholder's Retail A Shares, will be incurred. The
CDSC will not be charged if the sale of Retail A Shares was the result of the
death or disability of a shareholder. In addition, Galaxy will waive the 1% CDSC
on the initial sale of Retail A Shares. This waiver will not apply to amounts
reinvested within one year following the initial sale of Retail A Shares.
Galaxy has adopted a Shareholder Services Plan with respect to Retail A
Shares pursuant to which it has entered into servicing agreements with
institutions (including New Fleet and its affiliates). Pursuant to these
servicing agreements, institutions render certain shareholder liaison and/or
administrative support services to customers who are the beneficial owners of
Retail A Shares. Such services are provided to customers who are the beneficial
owners of Retail A Shares and are intended to supplement the services provided
by PFPC, Inc. as administrator and transfer agent to the shareholders of record
of the Retail A Shares. The Plan provides that Galaxy will pay fees for such
services as follows:
<TABLE>
<CAPTION>
SHAREHOLDER SERVICING FEE
(AS A % OF
GALAXY FUND AVERAGE DAILY NET ASSETS)
- ----------- ----------------------------
<S> <C>
Tax Exempt, U.S. Treasury and Money Market maximum: .25%
current limit: .10%
Short-Term Bond, High Quality Bond, Intermediate Government maximum: .30%
Income, Intermediate Tax-Exempt Bond, Connecticut current limit: .15%
Intermediate Municipal Bond, Massachusetts Intermediate
Municipal Bond, and Rhode Island Municipal Bond
Asset Allocation, Growth and Income, Growth II and maximum: .50%
International Equity current limit: .30%
</TABLE>
Institutions may receive up to one-half of this fee for providing one or
more of the following services to such customers: aggregating and processing
purchase and redemption requests and placing net purchase and redemption orders
with Provident Distributors, Inc.; processing dividend payments from a Fund;
providing sub-accounting with respect to Retail A Shares or the information
necessary for sub-accounting;
39
<PAGE>
and providing periodic mailings to customers. Institutions may also receive up
to one-half of this fee for providing one or more of these additional services
to such customers: providing customers with information as to their positions in
Retail A Shares; responding to customer inquiries; and providing a service to
invest the assets of customers in Retail A Shares.
TRUST SHARES AND SHARES. Trust Shares and Shares are offered to investors
at net asset value per share without a front-end sales load or CDSC assessed.
Although Galaxy has approved a Shareholder Services Plan with respect to the
Trust Shares of each portfolio, Galaxy has not entered into servicing agreements
under the Shareholder Services Plan.
SHAREHOLDER SERVICING ARRANGEMENTS. Both the 1784 Funds and the Galaxy
Funds provide a variety of shareholder services to shareholders. These services
include financial advisory services, processing purchase and redemption
requests, processing dividends, arranging bank wires and responding to customer
inquiries. In addition to the services listed above, Galaxy also provides
problem tracking and resolution services, consolidated tax reporting, and
dedicated supervision and maintenance of vendor relationships. As described
above, Galaxy provides these services through a Shareholder Services Plan for
BKB Shares and Retail A Shares which compensates financial institutions
(including Fleet Boston and its affiliates) for providing these services to
retail shareholders. For Institutional Shareholders of 1784 and Trust
Shareholders of Galaxy, most of the services described are provided through a
shareholder's arrangement with its financial institution or employer sponsored
plan.
ADMINISTRATION AGREEMENTS
1784 has entered into an administration agreement (the "1784 Administration
Agreement") with SEI Investments Mutual Funds Services (formerly known as SEI
Fund Resources) (the "1784 Administrator").
Under the 1784 Administration Agreement, the 1784 Administrator provides
administrative and fund accounting services (including regulatory reporting,
office facilities, equipment and personnel) to the 1784 Funds. The 1784
Administrator receives a fee for these services, which is computed daily and
paid monthly, at an annual rate of 0.085% of the first $5 billion of the 1784
Funds' combined average daily net assets and 0.045% of combined average daily
net assets in excess of $5 billion. The 1784 Administrator has agreed to waive a
portion of its fees from time to time. The 1784 Administrator may retain
sub-administrators, including Fleet National Bank, whose fees would be paid by
the 1784 Administrator.
Galaxy has entered into an administration agreement (the "Galaxy
Administration Agreement") with PFPC Inc. ("PFPC"). Under the Galaxy
Administration Agreement, PFPC has agreed to maintain office facilities for
Galaxy, furnish Galaxy with statistical and research data, clerical, accounting,
and bookkeeping services, provide Galaxy with certain other services such as
internal auditing services required by Galaxy, and compute the net asset value
and net income of the Galaxy Funds. Among other things, PFPC (a) prepares the
annual and semi-annual reports of the Galaxy Funds to the SEC, the federal and
state tax returns of the Galaxy Funds, and the filings the Galaxy Funds make
with state securities commissions, (b) arranges for and bears the cost of
processing share purchase and redemption orders with respect to the Galaxy
Funds, and (c) maintains the financial accounts and records of the Galaxy Funds.
For the services provided to Galaxy, PFPC is entitled to receive administration
fees based on the combined average daily net assets of the Galaxy Funds. From
time to time, PFPC may voluntarily waive all or a portion of the administration
fee payable to it by the Galaxy Funds, but there is no guarantee that it will do
so. For the services provided to the Galaxy Funds, PFPC is entitled to receive
administration fees based on the
40
<PAGE>
combined average daily net assets of the Funds and the other portfolios offered
by Galaxy computed daily and paid monthly, at the following annual rates:
<TABLE>
<CAPTION>
COMBINED AVERAGE DAILY NET ASSETS ANNUAL RATE
- --------------------------------- -----------
<S> <C>
Up to $2.5 billion.......................................... 0.090%
From $2.5 to $5 billion..................................... 0.085%
From $5 to $12 billion...................................... 0.075%
From $12 to $15 billion..................................... 0.065%
From $15 billion to $18 billion............................. 0.060%
Over $18 billion............................................ 0.0575%
</TABLE>
SHAREHOLDER TRANSACTIONS AND POLICIES. The 1784 Funds and Galaxy Funds
offer generally similar shareholder transactions and policies, but there are
some differences. For example, BKB Shares, Shares and Trust Shares of the Galaxy
Funds, like the shares of the 1784 Funds are offered to investors at net asset
value with no front-end or contingent deferred sales load. Although check
writing privileges are provided with respect to the Boston 1784 Tax-Free Money
Market Fund, the Boston 1784 U.S. Treasury Money Market Fund and the Boston 1784
Prime Money Market Fund, such privileges are only provided for BKB Shares and
Retail A Shares of the Corresponding Galaxy Funds and not for Trust Shares of
such Funds. Another difference is that 1784 provides check-writing privileges on
shares of the Boston 1784 Short-Term Income Fund, while Galaxy does not provide
check-writing privileges for its Corresponding Galaxy Fund (the Galaxy
Short-Term Bond Fund).
The 1784 Funds and the Corresponding Galaxy Funds also offer generally
similar exchange privileges. For a more detailed comparison of shareholder
transactions and policies, see Appendix IV.
FEES AND EXPENSES. Three of the fourteen Corresponding Galaxy Funds which
offer Trust Shares, four of the fourteen Corresponding Galaxy Funds which offer
BKB Shares, and eleven of the fourteen Corresponding Galaxy Funds which offer
Retail A Shares have total operating expense ratios (after fee waivers) which
are higher than the 1784 Fund Shares. For a more detailed summary of fees and
expenses, see Appendix II. Fee waivers, however, are subject to termination.
Furthermore, expenses will not necessarily be the same or lower when BKB Shares
convert into Retail A Shares.
PERFORMANCE. The total returns of the Galaxy Funds are competitive with the
1784 Funds. For a comparison of the total return performance of the Reorganizing
1784 Funds with the Operating Galaxy Fund, see Appendix V. See also Appendix VI
for Management Discussion of Galaxy Fund Performance.
SHARE STRUCTURE. Both 1784 and Galaxy are registered as open-end management
investment companies under the 1940 Act. Currently, 1784 offers seventeen funds.
Galaxy currently offers twenty-nine funds and will offer thirty-six funds
immediately after the Reorganization.
1784 was organized as a Massachusetts business trust on February 5, 1993. It
is subject to the provisions of its Agreement and Declaration of Trust and
By-Laws. Galaxy was organized as a Massachusetts business trust on March 31,
1986 and is subject to the provisions of its Declaration of Trust and Code of
Regulations. 1784's Agreement and Declaration of Trust authorizes the Board of
Trustees to divide the beneficial interest in 1784 into an unlimited number of
shares (with no par value) and to divide the shares into one or more classes.
Shares of 1784 may be issued in series and shares of any series will constitute
units of beneficial interest in 1784 specifically allocated to such series.
Galaxy's Declaration of Trust authorizes the Board of Trustees to divide the
beneficial interest in the Galaxy Funds into an unlimited number of full and
fractional shares ($0.001 par value per share) and to classify and reclassify
any unissued shares into one or more classes of shares. Each share of 1784 and
Galaxy represents an equal proportionate interest in the related investment
portfolio with other shares of the same class (if applicable) and is entitled to
dividends and distributions on the assets belonging to such investment portfolio
as are declared
41
<PAGE>
in the discretion of the Board of Trustees of 1784 or Galaxy, as the case may
be. Shares of both 1784 and Galaxy are entitled to one vote for each full share
held and fractional votes for fractional shares held.
In accordance with 1784's Agreement and Declaration of Trust, shares of
series are entitled to vote separately to approve advisory agreements or changes
in investment policies, but shares of all series vote together in the election
or selection of Trustees and accountants. Matters not affecting all series or
classes shall be voted on only by the shares of the series or classes affected.
There is no cumulative voting in the election of Trustees for the 1784 Funds.
In accordance with Galaxy's Declaration of Trust and Rule 18f-2 of the 1940
Act, all shares of Galaxy shall be voted on a fund-by-fund basis unless it is
clear that the interests of each Galaxy Fund in the matter are identical (in
which case holders of shares in Galaxy Funds will vote together, in the
aggregate, and not on a fund-by-fund basis) and that the matter does not affect
any interests of a particular Galaxy Fund. Shares of a particular class (e.g.
Retail A Shares or Trust Shares of a particular Galaxy Fund) will vote together
in the aggregate and not by class, except that only shares of a particular class
will be entitled to vote on matters pertaining to any distribution and/or
shareholder servicing plan for such class. There is no cumulative voting with
respect to Galaxy Fund shares.
Additional information concerning the attributes of the shares issued by
1784 and Galaxy is included in their respective prospectuses, which are
incorporated herein by reference. Information about the dividend and
distribution policies of both the 1784 Funds and the Galaxy Funds can be found
in Appendix IV.
COMPARISON OF TRUST STRUCTURE. Both 1784 and Galaxy are organized as
Massachusetts business trusts. Under Massachusetts law, interest holders of a
Massachusetts business trust like 1784 and Galaxy, under certain circumstances,
could be held personally liable for the obligations of the trust. Both 1784 and
Galaxy have provisions in their Declaration of Trust that endeavor to protect
shareholders from such liability. Thus, the risk of an interest holder incurring
a financial loss on account of interest holder liability is limited to
circumstances in which the trust itself is unable to meet its obligations.
42
<PAGE>
VOTING MATTERS
GENERAL INFORMATION. The Board of Trustees of 1784 is furnishing this
Proxy/Prospectus in connection with the solicitation of proxies for the Special
Meeting. It is expected that the solicitation of proxies will be primarily by
mail. Officers and service contractors of 1784 and Galaxy may also solicit
proxies by telephone or otherwise. In this connection, 1784 has retained PFPC to
assist in the solicitation of proxies for the Reorganization. Shareholders may
vote (1) by mail, by marking, signing, dating and returning the enclosed Proxy
Ballot(s) in the enclosed postage-paid envelope, (2) by touch-tone voting, or
(3) by on-line voting. Any shareholder giving a proxy may revoke it at any time
before it is exercised by submitting to 1784 a written notice of revocation or a
subsequently executed proxy or by attending the Special Meeting and voting in
person. As the Special Meeting date approaches, certain shareholders of each
Fund may receive a telephone call from a representative of PFPC if their votes
have not yet been received. Authorization to permit PFPC to execute proxies may
be obtained by telephonic or electronically transmitted instructions from
shareholders of each Fund. Proxies that are obtained telephonically will be
recorded in accordance with the procedures set forth below. The Trustees believe
that these procedures are reasonably designed to ensure that the identity of the
shareholder casting the vote is accurately determined and that the voting
instructions of the shareholder are accurately determined.
In all cases where a telephonic proxy is solicited, the PFPC representative
is required to ask for each shareholder's full name, address, social security or
employer identification number, title (if the shareholder is authorized to act
on behalf of an entity, such as a corporation), and the number of shares owned,
and to confirm that the shareholder has received the proxy materials in the
mail. If the information solicited agrees with the information provided to PFPC,
then the PFPC representative has the responsibility to explain the process, read
the Proposals on the proxy card, and ask for the shareholder's instructions on
the Proposals. The PFPC representative, although he or she is permitted to
answer questions about the process, is not permitted to recommend to the
shareholder how to vote, other than to read any recommendation set forth on the
proxy statement. PFPC will record the shareholder's instructions on the card.
Within 72 hours, the shareholder will be sent a letter or mailgram to confirm
his or her vote and asking the shareholder to call PFPC immediately if his or
her instructions are not correctly reflected in the confirmation.
Any expenses incurred as a result of hiring PFPC or any other proxy
solicitation agent will be borne by Fleet. It is anticipated that the cost
associated with using a proxy solicitation agent will be approximately $50,000.
Only shareholders of record at the close of business on February 29, 2000
will be entitled to vote at the Special Meeting. On that date, the following
1784 Shares were outstanding and entitled to be voted:
<TABLE>
<CAPTION>
SHARES OUTSTANDING
AND
1784 FUND ENTITLED TO VOTE
- --------- ------------------
<S> <C>
Money Market Funds:
Boston 1784 Tax-Free Money Market Fund
Retail Shareholders..................................... 168,173,730.510
Institutional Shareholders.............................. 930,918,125.480
- --------------------------------------------------------------------------------
Boston 1784 U.S. Treasury Money Market Fund................. 346,850,184.420
- --------------------------------------------------------------------------------
Boston 1784 Institutional U.S. Treasury Money Market Fund... 5,171,498,643.769
- --------------------------------------------------------------------------------
Boston 1784 Prime Money Market Fund
Retail Shareholders..................................... 158,371,813.640
Institutional Shareholders.............................. 8,259,530.320
- --------------------------------------------------------------------------------
Boston 1784 Institutional Prime Money Market Fund........... 871,674,060.000
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
SHARES OUTSTANDING
AND
1784 FUND ENTITLED TO VOTE
- --------- ------------------
<S> <C>
Bond Funds:
Boston 1784 Short-Term Income Fund
Retail Shareholders..................................... 2,364,159.121
Institutional Shareholders.............................. 11,838,493.016
- --------------------------------------------------------------------------------
Boston 1784 Income Fund
Retail Shareholders..................................... 1,026,439.534
Institutional Shareholders.............................. 32,628,056.652
- --------------------------------------------------------------------------------
Boston 1784 U.S. Government Medium-Term Income Fund
Retail Shareholders..................................... 1,665,049.811
Institutional Shareholders.............................. 26,081,527.637
- --------------------------------------------------------------------------------
Tax-Exempt Funds:
Boston 1784 Tax-Exempt Medium-Term Income Fund
Retail Shareholders..................................... 2,341,831.431
Institutional Shareholders.............................. 30,281,926.675
- --------------------------------------------------------------------------------
Boston 1784 Connecticut Tax-Exempt Income Fund
Retail Shareholders..................................... 3,223,591.173
Institutional Shareholders.............................. 12,747,025.459
- --------------------------------------------------------------------------------
Boston 1784 Florida Tax-Exempt Income Fund.................. 6,523,796.712
- --------------------------------------------------------------------------------
Boston 1784 Massachusetts Tax-Exempt Income Fund
Retail Shareholders..................................... 6,538,432.447
Institutional Shareholders.............................. 17,958,882.864
- --------------------------------------------------------------------------------
Boston 1784 Rhode Island Tax-Exempt Income Fund
Retail Shareholders..................................... 1,282,402.091
Institutional Shareholders.............................. 7,693,800.884
- --------------------------------------------------------------------------------
Stock Funds:
Boston 1784 Asset Allocation Fund
Retail Shareholders..................................... 1,768,251.726
Institutional Shareholders.............................. 1,670,067.246
- --------------------------------------------------------------------------------
Boston 1784 Growth and Income Fund
Retail Shareholders..................................... 6,203,556.591
Institutional Shareholders.............................. 16,180,899.026
- --------------------------------------------------------------------------------
Boston 1784 Growth Fund
Retail Shareholders..................................... 2,976,354.457
Institutional Shareholders.............................. 12,613,768.861
- --------------------------------------------------------------------------------
Boston 1784 International Equity Fund
Retail Shareholders..................................... 2,246,386.301
Institutional Shareholders.............................. 29,327,171.593
</TABLE>
44
<PAGE>
Each whole and fractional share of a 1784 Fund is entitled to a whole or
fractional vote as the case may be.
If an accompanying proxy is executed and returned in time for the Special
Meeting, the shares covered thereby will be voted in accordance with the proxy
on all matters that may properly come before the Special Meeting.
SHAREHOLDER AND BOARD APPROVALS. The Reorganization Agreement is being
submitted for approval at the Special Meeting by 1784's shareholders pursuant to
1784's Agreement and Declaration of Trust and By-Laws, and was unanimously
approved by the 1784 Board of Trustees at a meeting held on February 4, 2000.
With respect to the Boston 1784 Institutional U.S. Treasury Money Market Fund,
Boston 1784 Institutional Prime Money Market Fund and Boston 1784 Florida
Tax-Exempt Income Fund, the Reorganization Agreement must be approved by a
majority of the outstanding shares of each such Fund. With respect to the other
1784 Funds, the Reorganization Agreement must be approved by a majority of the
outstanding shares of those shareholders who will be receiving BKB Shares of
their Corresponding Galaxy Fund and by a majority of the outstanding shares of
the shareholders who will be receiving Trust Shares of their Corresponding
Galaxy Fund. A vote for the Reorganization Agreement includes a vote for the
reorganization of 1784; conversely, a vote against the Reorganization Agreement
is a vote against the reorganization of 1784.
The Reorganization Agreement provides that in the event the Reorganization
Agreement is approved with respect to less than all of the 1784 Funds, the
failure of a 1784 Fund to consummate the transactions contemplated by the
Reorganization Agreement shall not affect the consummation or validity of the
Reorganization with respect to any other 1784 Funds.
With respect to the approval of the Reorganization Agreement, the term
"majority of the outstanding shares" of 1784 or a 1784 Fund means more than 50%
of the outstanding shares of 1784, the particular 1784 Fund or with respect to
those 1784 Funds receiving BKB Shares and Trust Shares, 50% of the outstanding
shares of Retail Shareholders or Institutional Shareholders. The vote of the
shareholders of the Galaxy Funds is not being solicited, since their approval or
consent is not necessary for the Reorganization.
PRINCIPAL SHAREHOLDERS. As of February 29, 2000, the officers and Trustees
of 1784 as a group owned or controlled less than 1% of each 1784 Fund's
outstanding shares. As of February 29, 2000, the officers and Trustees of Galaxy
as a group owned or controlled less than 1% of each Galaxy Fund's outstanding
shares. Table VI(A) shows the name, address and share ownership of each person
known to 1784 to have ownership with respect to 5% or more of a 1784 Fund as of
February 29, 2000. Table VI(B) shows the name, address and share ownership of
each person known to Galaxy to have ownership with respect to 5% or more of a
class of a Galaxy Fund as of February 29, 2000. The type of ownership of each
entry listed on Tables VI(A) and VI(B) is record ownership.
45
<PAGE>
TABLE VI(A)
<TABLE>
<CAPTION>
NAME AND AMOUNT OF PERCENTAGE
1784 FUND ADDRESS SHARES OWNED OF FUND
- --------- -------- ------------------ ----------
<S> <C> <C> <C> <C>
Tax-Free Money Market Fund.. Bob & Co. 930,918,125.4800 84.70%
Bank of Boston
ATTN: Paula McSweeney
Mail Stop: 45-02-08
150 Royall Street
Canton, MA 02021-1031
U.S. Treasury Money Market National Financial 70,943,882.4900 20.45%
Fund...................... Services Corp.
Exclusive Benefit of Our
Customers
ATTN: Mike McLaughlin-5NY
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
Institutional U.S. Treasury Bob & Co. 282,755,430.1100 5.47%
Money Market Fund......... Bank of Boston
ATTN: ACT
Mail Stop: 45-02-93
150 Royall Street
Canton, MA 02021-1031
Bob & Co. 2,675,070,149.8200 51.73%
Precision Sweep
ATTN: A. J. Ferullo
100 Federal Street
# 01-13-07
Boston, MA 02110-1802
Prime Money Market Fund..... National Financial 36,111,467.4600 21.67%
Services Corp.
Exclusive Benefit of Our
Customers
ATTN: Mike McLaughlin-5NY
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
Institutional Prime Money Bob & Co. 170,616,429.8200 19.57%
Market Fund............... Bank of Boston
ATTN: Paula McSweeney
Mail Stop: 45-02-08
150 Royall Street
Canton, MA 02021-1031
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
NAME AND AMOUNT OF PERCENTAGE
1784 FUND ADDRESS SHARES OWNED OF FUND
- --------- -------- ------------------ ----------
<S> <C> <C> <C> <C>
Bob & Co. 77,990,770.4900 8.95%
Treasury
ATTN: A. J. Ferullo
100 Federal Street
# 01-13-07
Boston, MA 02110-1802
Tweeter Home 46,247,017.9000 5.31%
Entertainment
Group Financing Company
Trust
10 Pequot Way
Canton, MA 02021-2306
Century Aluminum Company 90,695,218.8200 10.40%
2511 Garden Road
Bldg. A, Suite 200
Monterey, CA 93940-5330
Short-Term Income Fund...... Bob & Co. 4,523,920.6210 31.85%
Equity & Bond Funds
Wire/Reinvest
P.O. Box 1809
Mail Stop 45-02-08
Boston, MA 02105-1809
Fleet Nat'l Bank TTEE 936,947.8260 6.60%
Alliances Trust
UA Dtd. 06/09/1999
ATTN: Various A/CS
P.O. Box 92800
Rochester, NY 14692-8900
State Street Bank & 5,447,995.4250 38.36%
Trust as TTEE
BankBoston Thrift
Incentive
(401K) Plan
ATTN: Jeff Hopwood
WES IN
105 Rosemont Road
Westwood, MA 02090-2318
Income Fund................. Bob & Co. 27,227,209.6200 80.90%
Equity & Bond Funds
Wire/Wire
P.O. Box 1809
Mail Stop 45-02-08
Boston, MA 02105-1809
Bob & Co. 2,028,392.1050 6.03%
Equity & Bond Funds
Wire/Reinvest
P.O. Box 1809
Mail Stop 45-02-08
Boston, MA 02105-1809
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
NAME AND AMOUNT OF PERCENTAGE
1784 FUND ADDRESS SHARES OWNED OF FUND
- --------- -------- ------------------ ----------
<S> <C> <C> <C> <C>
U.S. Government Medium-Term Bob & Co. 2,219,610.4730 8.00%
Income Fund............... Equity & Bond Funds
Wire/Wire
P.O. Box 1809
Mail Stop 45-02-08
Boston, MA 02105-1809
Bob & Co. 23,008,422.1520 82.92%
Equity & Bond Funds
Wire/Reinvest
P.O. Box 1809
Mail Stop 45-02-08
Boston, MA 02105-1809
Tax-Exempt Medium-Term Bob & Co. 28,632,929.8810 87.77%
Income Fund............... Equity & Bond Funds
Wire/Reinvest
P.O. Box 1809
Mail Stop 45-02-08
Boston, MA 02105-1809
Connecticut Tax-Exempt Bob & Co. 12,526,019.6740 78.43%
Income Fund............... Equity & Bond Funds
Wire/Reinvest
P.O. Box 1809
Mail Stop 45-02-08
Boston, MA 02105-1809
National Financial 1,135,754.3860 7.11%
Services Corp.
For the Exclusive Benefit
of Customers
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
Charles Schwab & Co. Inc. 823,568.6370 5.16%
ATTN: Mutual Funds
101 Montgomery Street
San Francisco, CA
94104-4122
Florida Tax-Exempt Income Bob & Co. 605,918.2990 9.29%
Fund...................... Equity & Bond Funds
Wire/Wire
P.O. Box 1809
Mail Stop 45-02-08
Boston, MA 02105-1809
Bob & Co. 5,815,159.0490 89.14%
Equity & Bond Funds
Wire/Reinvest
P.O. Box 1809
Mail Stop 45-02-08
Boston, MA 02105-1809
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
NAME AND AMOUNT OF PERCENTAGE
1784 FUND ADDRESS SHARES OWNED OF FUND
- --------- -------- ------------------ ----------
<S> <C> <C> <C> <C>
Massachusetts Tax-Exempt Bob & Co. 1,606,895.0630 6.56%
Income Fund............... Equity & Bond Funds
Wire/Wire
P.O. Box 1809
Mail Stop 45-02-08
Boston, MA 02105-1809
Bob & Co. 16,253,618.9260 66.36%
Equity & Bond Funds
Wire/Reinvest
P.O. Box 1809
Mail Stop 45-02-08
Boston, MA 02105-1809
National Financial 3,119,485.5920 12.74%
Services Corp.
For the Exclusive Benefit
of
Customers
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
Rhode Island Tax-Exempt Bob & Co. 452,440.9000 5.04%
Income Fund............... Equity & Bond Funds
Wire/Wire
P.O. Box 1809
Mail Stop 45-02-08
Boston, MA 02105-1809
Bob & Co. 7,241,359.9840 80.67%
Equity & Bond Funds
Wire/Reinvest
P.O. Box 1809
Mail Stop 45-02-08
Boston, MA 02105-1809
National Financial 570,633.9330 6.36%
Services Corp.
For the Exclusive Benefit
of
Customers
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
Asset Allocation Fund....... Bob & Co. 185,348.6190 5.39%
Equity & Bond Funds
Wire/Wire
P.O. Box 1809
Mail Stop 45-02-08
Boston, MA 02105-1809
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
NAME AND AMOUNT OF PERCENTAGE
1784 FUND ADDRESS SHARES OWNED OF FUND
- --------- -------- ------------------ ----------
<S> <C> <C> <C> <C>
Bob & Co. 208,045.5450 6.05%
Equity & Bond Funds
Wire/Reinvest
P.O. Box 1809
Mail Stop 45-02-08
Boston, MA 02105-1809
National Financial 806,838.9060 23.47%
Services Corp.
For the Exclusive Benefit
of Customers
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
State Street Bank & Trust 1,087,338.6990 31.62%
as TTEE
BankBoston Thrift
Incentive
(401K) Plan
ATTN: Jeff Hopwood WES IN
105 Rosemont Road
Westwood, MA 02090-2318
Growth and Income Fund...... Bob & Co. 1,337,865.4670 5.98%
Equity & Bond Funds
Reinvest/Reinvest
P.O. Box 1809
Mail Stop 45-02-08
Boston, MA 02105-1809
Bob & Co. 10,261,601.5150 45.84%
Equity & Bond Funds
Wire/Reinvest
P.O. Box 1809
Mail Stop 45-02-08
Boston, MA 02105-1809
National Financial 2,377,034.0220 10.62%
Services Corp.
For Exclusive Benefit of
Customers
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
State Street Bank & 3,089,674.2080 13.80%
Trust as TTEE
BankBoston Thrift
Incentive
(401k) Plan
ATTN: Jeff Hopwood WES IN
105 Rosemont Road
Westwood, MA 02090-2318
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
NAME AND AMOUNT OF PERCENTAGE
1784 FUND ADDRESS SHARES OWNED OF FUND
- --------- -------- ------------------ ----------
<S> <C> <C> <C> <C>
Growth Fund................. Bob & Co. 5,141,927.4740 32.98%
Equity & Bond Funds
Wire/Wire
P.O. Box 1809
Mail Stop 45-02-08
Boston, MA 02105-1809
Bob & Co. 3,774,848.2880 24.21%
Equity & Bond Funds
Wire/Reinvest
P.O. Box 1809
Mail Stop 45-02-08
Boston, MA 02105-1809
State Street Bank & Trust 2,567,912.5300 16.47%
as TTEE
BankBoston Thrift
Incentive
(401k) Plan
ATTN: Jeff Hopwood WES IN
105 Rosemont Road
Westwood, MA 02090-2318
International Equity Fund... Bob & Co. 3,377,556.7410 10.70%
Equity & Bond Funds
Wire/Wire
P.O. Box 1809
Mail Stop 45-02-08
Boston, MA 02105-1809
Bob & Co. 23,836,335.5760 75.49%
Equity & Bond Funds
Wire/Reinvest
P.O. Box 1809
Mail Stop 45-02-08
Boston, MA 02105-1809
</TABLE>
The percentage of the Shell Galaxy Funds that would be owned by the
shareholders named above upon the consummation of the Reorganization based on
their holdings shown above is expected to be substantially the same. The
percentage of the Operating Galaxy Funds that would be owned by the shareholders
named above upon the consummation of the Reorganization based on their holdings
shown above is expected to decline.
51
<PAGE>
TABLE VI(B)
<TABLE>
<CAPTION>
CLASS;
NAME AND AMOUNT OF PERCENTAGE
GALAXY FUND ADDRESS SHARES OWNED OF CLASS
- ----------- -------- ----------------- ----------
<S> <C> <C> <C>
Tax-Exempt Fund............................ Fleet New York Trust; 99.34%
Fleet Investment Services 423,826,769.420
159 East Main Street
NY/RO/T03C
Rochester, NY 14638-0001
U.S. Treasury Fund......................... US Clearing, A Division Retail A; 9.52%
of Fleet Securities, Inc. 52,522,969.190
26 Broadway
New York, NY 10004-1703
Fleet New York Trust; 94.44%
Fleet Investment Services 470,184,260.500
159 East Main Street
NY/RO/T03C
Rochester, NY 14638-0001
Money Market Fund.......................... Fleet New York Trust; 99.71%
Fleet Investment Services 1,781,662,434.130
159 East Main Street
NY/RO/T03C
Rochester, NY 14638-0001
Short-Term Bond Fund....................... Gales & Co. Trust; 45.83%
Fleet Investment Services 1,444,481.047
Mutual Funds Unit-
NY/RO/T04A
159 East Main Street
Rochester, NY 14638-0001
Gales & Co. Trust; 20.49%
Fleet Investment Services 645,759.761
Mutual Funds Unit-
NY/RO/T04A
159 East Main Street
Rochester, NY 14638-0001
Gales & Co. Trust; 31.33%
Fleet Investment Services 987,531.496
Mutual Funds Unit-
NY/RO/T04A
159 East Main Street
Rochester, NY 14638-0001
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
CLASS;
NAME AND AMOUNT OF PERCENTAGE
GALAXY FUND ADDRESS SHARES OWNED OF CLASS
- ----------- -------- ----------------- ----------
<S> <C> <C> <C>
High Quality Bond Fund..................... Gales & Co. Trust; 59.75%
Fleet Investment Services 14,400,404.066
Mutual Funds Unit-
NY/RO/T04A
159 East Main Street
Rochester, NY 14638-0001
Gales & Co. Trust; 25.94%
Fleet Investment Services 6,252,123.840
Mutual Funds Unit-
NY/RO/T04A
159 East Main Street
Rochester, NY 14638-0001
Gales & Co. Trust; 13.47%
Fleet Investment Services 3,245,618.436
Mutual Funds Unit-
NY/RO/T04A
159 East Main Street
Rochester, NY 14638-0001
Intermediate Government Income Fund........ Gales & Co. Trust; 25.31%
Fleet Investment Services 6,151,079.004
Mutual Funds Unit-
NY/RO/T04A
159 East Main Street
Rochester, NY 14638-0001
Gales & Co. Trust; 33.50%
Fleet Investment Services 8,141,997.486
Mutual Funds Unit-
NY/RO/T04A
159 East Main Street
Rochester, NY 14638-0001
Gales & Co. Trust; 38.75%
Fleet Investment Services 9,418,135.246
Mutual Funds Unit-
NY/RO/T04A
159 East Main Street
Rochester, NY 14638-0001
Rhode Island Municipal Bond Fund........... Gales & Co. Retail A; 35.36%
Fleet Investment Services 808,300.523
Mutual Funds Unit-
NY/RO/T04A
159 East Main Street
Rochester, NY 14638-0001
James R. McCulloch Retail A; 7.66%
c/o Microfibre 175,245.079
P.O. Box 1208
Pawtucket, RI 02862-1208
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
CLASS;
NAME AND AMOUNT OF PERCENTAGE
GALAXY FUND ADDRESS SHARES OWNED OF CLASS
- ----------- -------- ----------------- ----------
<S> <C> <C> <C>
Bob & Co. Retail A; 21.53%
c/o Bank of Boston 492,056.562
ATTN: MUT FD DEPT
45-02-06
P.O. Box 1809
Boston, MA 02105-1809
Asset Allocation Fund...................... Gales & Co. Trust; 93.23%
Fleet Investment Services 13,666,564.715
Mutual Funds Unit-
NY/RO/T04A
159 East Main Street
Rochester, NY 14638-0001
Gales & Co. Trust; 6.05%
Fleet Investment Services 887,582.919
Mutual Funds Unit-
NY/RO/T04A
159 East Main Street
Rochester, NY 14638-0001
Growth and Income Fund..................... Gales & Co. Trust; 76.40%
Fleet Investment Services 14,590,890.595
Mutual Funds Unit-
NY/RO/T04A
159 East Main Street
Rochester, NY 14638-0001
Gales & Co. Trust; 19.81%
Fleet Investment Services 3,783,961.782
Mutual Funds Unit-
NY/RO/T04A
159 East Main Street
Rochester, NY 14638-0001
International Equity Fund.................. Charles Schwab & Co. Inc. Retail A; 8.10%
Special Custody Account 409,629.071
for Exclusive of
Customers
ATTN: Mutual Funds
101 Montgomery Street
San Francisco, CA
94104-4122
Gales & Co. Trust; 42.70%
Fleet Investment Services 11,631,946.454
Mutual Funds Unit-
NY/RO/T04A
159 East Main Street
Rochester, NY 14638-0001
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
CLASS;
NAME AND AMOUNT OF PERCENTAGE
GALAXY FUND ADDRESS SHARES OWNED OF CLASS
- ----------- -------- ----------------- ----------
<S> <C> <C> <C>
Gales & Co. Trust; 37.50%
Fleet Investment Services 10,215,262.842
Mutual Funds Unit-
NY/RO/T04A
159 East Main Street
Rochester, NY 14638-0001
Gales & Co. Trust; 13.62%
Fleet Investment Services 3,711,067.710
Mutual Funds Unit-
NY/RO/T04A
159 East Main Street
Rochester, NY 14638-0001
</TABLE>
The percentage of the Operating Galaxy Funds and their respective share
classes that would be owned by the shareholders named above upon the
consummation of the Reorganization based on their holdings shown above is
expected to decline. The Shell Galaxy Funds had not commenced investment
operations as of March 8, 2000 and, accordingly, no person owned 5% or more of
any such Fund.
For purposes of the 1940 Act, any person who owns directly or through one or
more controlled companies more than 25% of the voting securities of a company is
presumed to "control" such company. Accordingly, to the extent that a
shareholder identified in the foregoing table is identified as the beneficial
holder of more than 25% of a class, or is identified as the holder of record of
more than 25% of a class and has voting and/or investment power, it may be
presumed to control such class.
Galaxy and 1784 have been advised by BankBoston (now known as Fleet National
Bank) that, with respect to the shares of each 1784 Fund over which BankBoston
and its affiliates have voting power, such shares may be voted by BankBoston
itself in its capacity as fiduciary. BankBoston will engage an independent third
party to evaluate the Reorganization proposal and make a recommendation as to
how to vote the shares.
QUORUM. In the event that a quorum is not present at the Special Meeting,
or in the event that a quorum is present at the Special Meeting but sufficient
votes to approve the Reorganization Agreement are not received by 1784 or by one
or more of the 1784 Funds, one or more adjournment(s) may be proposed to permit
further solicitation of proxies. Any adjourned session or sessions may be held
after the date set for the original Special Meeting without notice except
announcement at the Special Meeting. Any such adjournment(s) will require the
affirmative vote of a majority of those shares affected by the adjournment(s)
that are represented at the Special Meeting in person or by proxy. If a quorum
is present, the persons named as proxies will vote those proxies which they are
entitled to vote FOR the particular proposal for which a quorum exists in favor
of such adjournment(s), and will vote those proxies required to be voted AGAINST
such proposal against any adjournment(s). A shareholder vote may be taken with
respect to one or more 1784 Funds (but not the other 1784 Funds) on some or all
matters before any such adjournment(s) if a quorum is present and sufficient
votes have been received for approval with respect to such Funds.
55
<PAGE>
A quorum is constituted with respect to a 1784 Fund by the presence in
person or by proxy of the holders of a majority of the shares of the 1784 Fund
or a majority of the shares of Retail or Institutional Shareholders entitled to
vote at the Special Meeting. For purposes of determining the presence of a
quorum for transacting business at the Special Meeting, abstentions will be
treated as shares that are present at the Special Meeting but which have not
been voted. Abstentions will have the effect of a "no" vote for purposes of
obtaining the requisite approvals of the Reorganization Agreement. Broker "non-
votes" (that is, proxies from brokers or nominees indicating that such persons
have not received instructions from the beneficial owners or other persons
entitled to vote shares on a particular matter with respect to which the brokers
or nominees do not have discretionary power) will be treated as abstentions.
ANNUAL MEETINGS AND SHAREHOLDER MEETINGS. Neither 1784 nor Galaxy presently
intends to hold annual meetings of shareholders for the election of trustees and
other business unless otherwise required by the 1940 Act. Under certain
circumstances, however, holders of at least 10% of the outstanding shares of
either 1784 or Galaxy have the right to call a meeting of shareholders.
ADDITIONAL INFORMATION ABOUT GALAXY
Additional information about the Galaxy Funds is included in their
prospectuses and statements of additional information dated February 29, 2000,
as supplemented through the date hereof, copies of which, to the extent not
included herewith, may be obtained without charge by writing or calling Galaxy
at the address and telephone number set forth on the first page of this
Proxy/Prospectus. Galaxy is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and the 1940 Act, and in accordance
therewith it files reports, proxy materials and other information with the SEC.
Reports and other information filed by Galaxy can be inspected and copied at the
Public Reference Facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the offices of Galaxy listed above. In addition,
these materials can be inspected and copied at the SEC's Regional Offices at 7
World Trade Center, Suite 1300, New York, New York 10048, and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials also can be obtained from the Public Reference Branch,
Office of Consumer Affairs and Information Services, Securities and Exchange
Commission, Washington, D.C. 20549, at prescribed rates.
Information included in this Proxy/Prospectus concerning Galaxy was provided
by Galaxy.
ADDITIONAL INFORMATION ABOUT 1784
Additional information about the 1784 Funds is included in their
prospectuses and statements of additional information, dated October 1, 1999, as
supplemented through the date hereof, copies of which have been filed with the
SEC. Copies of these prospectuses and the related statements of additional
information may be obtained without charge by writing or calling 1784 at the
address and telephone number set forth on the first page of this
Proxy/Prospectus. Reports and other information filed by 1784 can be inspected
and copied at the Public Reference Facilities maintained by the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the offices of 1784 listed above. In
addition, these materials can be inspected and copied at the SEC's Regional
Offices at 7 World Trade Center, Suite 1300, New York, New York 10048, and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials also can be obtained from the Public
Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, Washington, D.C. 20549, at prescribed rates.
Information included in this Proxy/Prospectus concerning 1784 was provided
by 1784.
FINANCIAL STATEMENTS
The annual financial statements and financial highlights of the Galaxy Funds
for the fiscal year ended October 31, 1999 have been audited by Ernst & Young
LLP, independent accountants, to the extent
56
<PAGE>
indicated in their reports thereon, have been incorporated by reference in the
Statement of Additional Information to this Proxy/Prospectus, in reliance upon
such reports given upon the authority of such firm as an expert in accounting
and auditing.
The annual financial statements and financial highlights of the 1784 Funds
for the fiscal year ended May 31, 1999 have been audited by
PricewaterhouseCoopers LLP, independent accountants, to the extent indicated in
their reports thereon, have been incorporated by reference in the Statement of
Additional Information to this Proxy/Prospectus, in reliance upon such reports
given upon the authority of such firm as an expert in accounting and auditing.
The semi-annual financial statements and financial highlights of the 1784 Funds
for the fiscal period ended November 30, 1999 have also been incorporated by
reference in the Statement of Additional Information to the Proxy/Prospectus.
OTHER BUSINESS
1784's Board of Trustees knows of no other business to be brought before the
Special Meeting. However, if any other matters properly come before the Special
Meeting, it is the intention of 1784 that proxies that do not contain specific
restrictions to the contrary will be voted on such matters in accordance with
the judgment of the persons named in the enclosed form of proxy.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to 1784 or to Galaxy in writing at
the address(es), or by phone at the phone number(s), on the cover page of this
Proxy/Prospectuses.
* * *
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE SPECIAL MEETING ARE
REQUESTED TO MARK, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE
ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
SHAREHOLDERS ALSO MAY VOTE ON-LINE OR BY TELEPHONE.
1784 WILL FURNISH, WITHOUT CHARGE, COPIES OF ITS MAY 31, 1999 ANNUAL REPORTS
TO ANY SHAREHOLDER UPON REQUEST ADDRESSED TO: BOSTON 1784 FUNDS AT P.O. BOX
8524, BOSTON, MA 02266-8524 OR BY TELEPHONE AT 1-800-BKB-1784.
57
<PAGE>
APPENDIX I
FORM OF AGREEMENT
AND PLAN OF REORGANIZATION
<PAGE>
AGREEMENT AND PLAN OF
REORGANIZATION
BY AND BETWEEN
THE GALAXY FUND
AND
BOSTON 1784 FUNDS
DATED AS OF FEBRUARY 4, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<C> <S> <C>
1. Certain Definitions......................................... 2
2. The Reorganization.......................................... 2
3. Calculations................................................ 3
4. Valuation of Assets......................................... 4
5. Valuation Times............................................. 5
6. Effective Time of The Reorganization........................ 5
7. Termination of 1784......................................... 6
8. Certain Representations, Warranties, Covenants and
Agreements of 1784.......................................... 6
9. Certain Representations, Warranties, Covenants and
Agreements of Galaxy........................................ 9
10. Shareholder Action on Behalf of The 1784 Funds.............. 10
11. N-14 Registration Statement................................. 11
12. Galaxy Conditions........................................... 11
13. 1784 Conditions............................................. 12
14. Tax Opinion................................................. 14
15. Tax Documents............................................... 15
16. Further Assurances.......................................... 15
17. Termination and Survival of Representations and
Warranties.................................................. 15
18. Termination of Agreement.................................... 15
19. Amendment and Waiver........................................ 15
20. Governing Law............................................... 16
21. Successors and Assigns...................................... 16
22. Beneficiaries............................................... 16
23. Notices..................................................... 16
24. Expenses and Waivers........................................ 17
25. Entire Agreement............................................ 17
26. Counterparts................................................ 17
27. Failure of One Fund to Consummate The Transactions.......... 17
28. No Brokers or Finders....................................... 17
29. Validity.................................................... 17
30. Effect of Facsimile Signature............................... 17
31. Headings.................................................... 17
32. Galaxy Liability............................................ 18
33. 1784 Liability.............................................. 18
</TABLE>
i
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") made as of the
4th day of February, 2000 by The Galaxy Fund ("Galaxy"), a Massachusetts
business trust organized under the laws of the Commonwealth of Massachusetts on
March 31, 1986, and Boston 1784 Funds ("1784"), formerly known as 1784 Funds, a
Massachusetts business trust organized under the laws of the Commonwealth of
Massachusetts on February 5, 1993.
BACKGROUND
WHEREAS, each of the parties hereto is an open-end management investment
company registered with the Securities and Exchange Commission (the "SEC") under
the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, 1784 offers the following investment portfolios: (1) Boston 1784
Tax-Free Money Market Fund, (2) Boston 1784 U.S. Treasury Money Market Fund, (3)
Boston 1784 Prime Money Market Fund, (4) Boston 1784 Short-Term Income Fund, (5)
Boston 1784 Income Fund, (6) Boston 1784 U.S. Government Medium-Term Income
Fund, (7) Boston 1784 Rhode Island Tax-Exempt Income Fund, (8) Boston 1784 Asset
Allocation Fund, (9) Boston 1784 Growth and Income Fund, and (10) Boston 1784
International Equity Fund (each a "Reorganizing 1784 Fund" and collectively, the
"Reorganizing 1784 Funds");
WHEREAS, 1784 also offers the following investment portfolios: (1) Boston
1784 Institutional U.S. Treasury Money Market Fund, (2) Boston 1784
Institutional Prime Money Market Fund, (3) Boston 1784 Tax-Exempt Medium-Term
Income Fund, (4) Boston 1784 Connecticut Tax-Exempt Income Fund, (5) Boston 1784
Florida Tax-Exempt Income Fund, (6) Boston 1784 Massachusetts Tax-Exempt Income
Fund and (7) Boston 1784 Growth Fund (each a "Continuing 1784 Fund" and
collectively, the "Continuing 1784 Funds" and together with the "Reorganizing
1784 Funds," each a "1784 Fund" and collectively, the "1784 Funds");
WHEREAS, Galaxy currently offers, among others, the following investment
portfolios: (1) Galaxy Tax-Exempt Fund, (2) Galaxy U.S. Treasury Fund, (3)
Galaxy Money Market Fund, (4) Galaxy Short-Term Bond Fund, (5) Galaxy High
Quality Bond Fund, (6) Galaxy Intermediate Government Income Fund, (7) Galaxy
Rhode Island Municipal Bond Fund, (8) Galaxy Asset Allocation Fund, (9) Galaxy
Growth and Income Fund, and (10) Galaxy International Equity Fund (each an
"Existing Galaxy Fund" and collectively, the "Existing Galaxy Funds");
WHEREAS, Galaxy has recently organized, or will soon organize, the following
additional investment portfolios: (1) Galaxy Institutional Treasury Money Market
Fund, (2) Galaxy Institutional Money Market Fund, (3) Galaxy Intermediate
Tax-Exempt Bond Fund, (4) Galaxy Connecticut Intermediate Municipal Bond Fund,
(5) Galaxy Florida Municipal Bond Fund, (6) Galaxy Massachusetts Intermediate
Municipal Bond Fund and (7) Galaxy Growth Fund II (each a "Shell Galaxy Fund"
and collectively, the "Shell Galaxy Funds," and, together with the Existing
Galaxy Funds, each a "Galaxy Fund" and collectively, the "Galaxy Funds");
WHEREAS, each of the parties hereto desires, upon the terms and subject to
the conditions set forth herein, to enter into and perform the reorganization
described herein (the "Reorganization"), pursuant to which, among other things,
at the respective times hereinafter set forth, (1) each 1784 Fund shall transfer
substantially all of its respective Assets (as hereinafter defined), subject, in
each case, to substantially all of its respective Liabilities (as hereinafter
defined), to its Corresponding Galaxy Fund (as hereinafter defined), in exchange
for BKB Shares, Trust Shares or Shares issued by such Corresponding Galaxy Fund
(the shares issued to a 1784 Fund by its Corresponding Galaxy Fund in exchange
for the Assets subject to the Liabilities of such 1784 Fund in connection with
the Reorganization, collectively, "Galaxy Fund Shares"), and (2) each 1784 Fund
shall then distribute to its shareholders of record, the Galaxy Fund Shares
received by or on behalf of such 1784 Fund;
1
<PAGE>
WHEREAS, each of the parties intend that the Shell Galaxy Funds will have
nominal assets and liabilities before the Reorganization and will continue the
investment operations of the Continuing 1784 Funds; and
WHEREAS, the parties intend that in connection with the Reorganization, 1784
shall be deregistered and terminated as described in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements hereinafter set forth, and for other good and valuable
consideration, the receipt and legal sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound hereby, agree as
follows:
1. CERTAIN DEFINITIONS. As used herein,
(a) The term "Corresponding Galaxy Fund" shall mean with respect to any
1784 Fund, the particular Galaxy Fund, the name of which is set forth
directly opposite the name of such 1784 Fund on Schedule A hereto.
(b) The term "Corresponding 1784 Fund" shall mean with respect to any
Galaxy Fund, the particular 1784 Fund, the name of which is set forth
directly opposite the name of such Galaxy Fund on Schedule A hereto.
(c) The term "Assets" shall mean all property and assets of every
description and of any nature whatsoever including, without limitation,
cash, cash equivalents, securities, claims (whether absolute or contingent,
known or unknown, accrued or unaccrued), receivables (including dividend and
interest receivables), deferred or prepaid expenses, good will and other
intangible property, books and records, and all interests, rights,
privileges and powers, other than with respect to 1784 and each 1784 Fund,
cash in an amount necessary to pay any unpaid dividends and distributions as
provided in Section 2(c) hereof and its rights under this Agreement.
(d) The term "Liabilities" shall mean all liabilities and obligations of
any nature, whether accrued, absolute, contingent or otherwise including,
with respect to 1784 and each 1784 Fund, any obligation of 1784 to indemnify
1784's current trustees, acting in their capacities as such, to the fullest
extent permitted by law and 1784's Agreement and Declaration of Trust, as in
effect as of the date of this Agreement.
2. THE REORGANIZATION.
(a) At the Applicable Effective Time of the Reorganization (as
hereinafter defined), (i) each 1784 Fund shall transfer, assign and convey
to its Corresponding Galaxy Fund substantially all of the Assets, subject to
substantially all of the Liabilities, of such 1784 Fund, and (ii) each such
Corresponding Galaxy Fund shall accept all such Assets and assume all such
Liabilities, such that at and after the Applicable Effective Time of the
Reorganization: (A) the Assets of each particular 1784 Fund shall become and
be Assets of its Corresponding Galaxy Fund, (B) the Liabilities of each
particular 1784 Fund shall become and be liabilities of, and shall attach
to, its Corresponding Galaxy Fund, and (C) the Liabilities of each
particular 1784 Fund may thenceforth be enforced only against its
Corresponding Galaxy Fund to the same extent as if such Liabilities had been
incurred by such Corresponding Galaxy Fund, subject to any defense and/or
set off that 1784 or such 1784 Fund was entitled to assert immediately prior
to the Applicable Effective Time of the Reorganization with respect to any
such Liability.
(b) In exchange for the transfer of the Assets of each 1784 Fund to its
Corresponding Galaxy Fund as provided in paragraph (a) above, each Galaxy
Fund shall assume the Liabilities of its Corresponding 1784 Fund as provided
in paragraph (a) above and shall also simultaneously issue, at the
Applicable Effective Time of the Reorganization, to its Corresponding 1784
Fund, the number of full and fractional (to the third decimal place) BKB
Shares of such Galaxy Fund, determined and
2
<PAGE>
adjusted as provided in Section 3 hereof, PROVIDED THAT, to the extent that
any then current shareholder or shareholders of any such Corresponding 1784
Fund has or have, as the case may be, purchased his, her, its or their,
shares of such Corresponding 1784 Fund through an investment management,
trust, custody or other agency relationship with BankBoston, N.A. or own
shares of such Corresponding 1784 Fund that represent shares issued as a
dividend with respect to shares purchased through an investment management,
trust, custody or other agency relationship with BankBoston, N.A., then, but
only to such extent, such Corresponding 1784 Fund shall receive Trust Shares
of such Galaxy Fund in lieu of BKB Shares; and further provided that the
Boston 1784 Institutional U.S. Treasury Money Market Fund, Boston 1784
Institutional Prime Money Market Fund and Boston 1784 Florida Tax-Exempt
Income Fund shall receive Shares of such Corresponding Galaxy Fund. BKB
Shares, Trust Shares and Shares shall have the attributes described in
Galaxy's Amended and Restated Plan pursuant to Rule 18f-3 for Operation of a
Multi-Class System attached hereto as Schedule B.
(c) Immediately upon receipt of the BKB Shares, Trust Shares and/or
Shares of such Galaxy Fund in accordance with paragraph (b) above each 1784
Fund shall distribute, in complete liquidation, to the shareholders of
record of such 1784 Fund at the Applicable Effective Time of the
Reorganization (such shareholders of record of such 1784 Fund as of such
time, collectively, the "Recordholders"), the respective BKB Shares, Trust
Shares and/or Shares that have been so received as further provided in the
following two sentences. Recordholders of the Boston 1784 Institutional U.S.
Treasury Money Market Fund, Boston 1784 Institutional Prime Money Market
Fund and Boston 1784 Florida Tax-Exempt Income Fund will be credited with
full and fractional Shares under this Agreement with respect to the shares
in such 1784 Fund that are held by such Recordholders. All other
Recordholders will be credited with full and fractional BKB Shares under
this Agreement with respect to the shares in a 1784 Fund that are held by
such Recordholders, provided that to the extent that Recordholders purchased
their shares through an investment management, trust, custody or other
agency relationship with BankBoston, N.A. or own shares issued as a dividend
with respect to shares purchased through an investment management, trust,
custody or other agency relationship with BankBoston, N.A., such
shareholders will be credited with full and fractional Trust Shares under
this Agreement with respect to the shares in the 1784 Fund that are held by
such Recordholders. In addition, each Recordholder of a 1784 Fund shall have
the right to receive any unpaid dividends or other distributions which were
declared with respect to his, her or its shares of such 1784 Fund before the
Applicable Effective Time of the Reorganization.
(d) In accordance with instructions Galaxy receives from 1784, Galaxy
shall record on its books the ownership, by the Recordholders, of the number
and type of the Galaxy Fund Shares distributed to such Recordholders.
(e) 1784 shall cancel on its books all of the shares (including, without
limitation, any treasury shares) of each 1784 Fund that has so liquidated,
and any such shares issued and outstanding prior to such cancellation shall
thereafter represent only the right to receive the Galaxy Fund Shares issued
to such 1784 Fund in accordance with paragraph (b) above.
(f) The transfer books of 1784 with respect to each 1784 Fund shall be
permanently closed.
3. CALCULATIONS.
(a) The number of BKB Shares, Trust Shares and/or Shares of each
Existing and Shell Galaxy Fund issued to its Corresponding 1784 Fund
pursuant to Section 2(b) hereof will be determined as follows:
(1) With respect to the Boston 1784 Institutional U.S. Treasury Money
Market Fund, the Boston 1784 Institutional Prime Money Market Fund and
the Boston 1784 Florida Tax-Exempt Income Fund, the value of such 1784
Fund's Assets less the Liabilities so conveyed as of the
3
<PAGE>
Applicable Valuation Time (as hereinafter defined) shall be divided by
the net asset value of one Galaxy Fund Share that is to be delivered with
respect thereto;
(2) With respect to all the other 1784 Funds:
(A) The value of such Corresponding 1784 Fund's Assets less the
Liabilities that are so conveyed as of the Applicable Valuation Time
(as hereinafter defined) and which are attributable to shares sold
through an investment management, trust, custody or other agency
relationship with BankBoston, N.A. or were issued through dividend
reinvestment with respect to such shares shall be divided by the net
asset value of one Galaxy Fund Trust Share that is to be delivered
with respect thereto;
(B) The value of such Corresponding 1784 Fund's Assets less the
Liabilities that are so conveyed as of the Applicable Valuation Time
(as hereinafter defined) and which are attributable to shares sold
other than through an investment management, trust, custody or other
agency relationship with BankBoston, N.A. or were issued through
dividend reinvestment with respect to such shares shall be divided by
the net asset value of one Galaxy Fund BKB Share that is to be
delivered with respect thereto;
(b) The net asset value of BKB Shares, Trust Shares and Shares of a
Galaxy Fund shall be computed in the manner set forth in such Galaxy Fund's
then current prospectus under the Securities Act of 1933, as amended (the
"1933 Act"). The net asset value of Shares of a 1784 Fund shall be computed
in the manner set forth in such 1784 Fund's then current prospectus under
the 1933 Act.
4. VALUATION OF ASSETS.
(a) With respect to each 1784 Fund, the value of its Assets shall be the
value of such Assets computed as of the time at which its net asset value is
calculated at the Applicable Valuation Time (as hereinafter defined). The
net asset value of the 1784 Fund Assets to be transferred to the Galaxy
Funds shall be computed by 1784 and shall be subject to adjustment by the
amount, if any, agreed to by Galaxy, its board of trustees, and the
respective Galaxy Funds and 1784, its board of trustees, and the respective
1784 Funds. In determining the value of the securities transferred by a 1784
Fund to its Corresponding Galaxy Fund, each security shall be priced in
accordance with the pricing policies and procedures of such 1784 Fund as
described in its then current prospectus(es) and statement of additional
information. For such purposes, price quotations and the security
characteristics relating to establishing such quotations shall be determined
by 1784, provided that such determination shall be subject to the approval
of Galaxy. Galaxy and 1784 agree to use all commercially reasonable efforts
to resolve, prior to the Applicable Valuation Time, any material pricing
differences between the prices of portfolio securities determined in
accordance with the pricing policies and procedures of a Galaxy Fund and
those determined in accordance with the pricing policies and procedures of
its Corresponding 1784 Fund.
(b) It is understood and agreed that the net asset value of the 1784
Fund Assets of those 1784 Funds that are money market funds shall be based
on the amortized cost valuation procedures that have been adopted by the
Board of Trustees of 1784 Funds; provided that if the difference between the
per share net asset values of such 1784 Funds and the Corresponding Galaxy
Funds equals or exceeds $0.0010 on the Applicable Valuation Time, as
computed by using market values in accordance with the policies and
procedures established by 1784, either party shall have the right to
postpone the Applicable Valuation Time and Applicable Effective Time of the
Reorganization until such time as the per share difference is less than
$.0010.
(c) At least fifteen (15) business days prior to the Applicable
Effective Time of the Reorganization, each 1784 Fund will provide its
Corresponding Galaxy Fund with a schedule of its securities and other Assets
and Liabilities of which it is aware, and such Galaxy Fund will provide the
1784 Fund with a copy of the current investment objective and policies
applicable to such Galaxy Fund. Each 1784
4
<PAGE>
Fund reserves the right to sell any of the securities or other Assets shown
on the list of the Fund's Assets prior to the Applicable Effective Time of
the Reorganization but will not, without the prior approval of Galaxy,
acquire any additional securities other than securities which the
Corresponding Galaxy Fund is permitted to purchase in accordance with its
stated investment objective and policies. At least ten (10) business days
prior to the Applicable Effective Time of the Reorganization, each Galaxy
Fund will advise its Corresponding 1784 Fund of any investments of such 1784
Fund shown on such schedule which the Galaxy Fund would not be permitted to
hold, pursuant to its stated investment objective and policies or otherwise.
In the event that the 1784 Fund holds any investments that its Corresponding
Galaxy Fund would not be permitted to hold under its stated investment
objective or policies, the 1784 Fund, if requested by the Galaxy Fund and,
to the extent permissible and consistent with the 1784 Fund's own investment
objective and policies, will dispose of such securities prior to the
Applicable Effective Time of the Reorganization. In addition, if it is
determined that the portfolios of the 1784 Fund and the Galaxy Fund, when
aggregated, would contain investments exceeding certain percentage
limitations to which the Galaxy Fund is or will be subject with respect to
such investments, the 1784 Fund, if requested by the Galaxy Fund and, to the
extent permissible and consistent with the 1784 Fund's own investment
objective and policies, will dispose of and/or reinvest a sufficient amount
of such investments as may be necessary to avoid violating such limitations
as of the Applicable Effective Time of the Reorganization.
5. VALUATION TIMES. Subject to Section 4(b) hereof, the valuation time with
respect to the Existing Galaxy Funds and the Reorganizing 1784 Funds shall be
4:00 p.m., Eastern Time, on May 5, 2000, or such earlier or later date and time
as may be mutually agreed in writing by an authorized officer of each of the
parties (the "First Valuation Time"). Subject to Section 4(b) hereof, the
Valuation Time with respect to the Shell Galaxy Funds and the Continuing 1784
Funds shall be 4:00 p.m., Eastern Time, on May 12, 2000, or such earlier or
later date and time as may be mutually agreed in writing by an authorized
officer of each of the parties (the "Second Valuation Time" and together with
the First Valuation Time, each an "Applicable Valuation Time"), provided that
the Second Valuation Time shall be no less than one week following the First
Valuation Time, unless otherwise agreed in writing by the parties hereto.
Notwithstanding anything herein to the contrary, in the event that at an
Applicable Valuation Time, (a) the New York Stock Exchange shall be closed to
trading or trading thereon shall be restricted or (b) trading or the reporting
of trading on such exchange or elsewhere shall be disrupted so that, in the
judgment of Galaxy or 1784, accurate appraisal of the value of the net assets of
a Galaxy Fund or a 1784 Fund is impracticable, such Valuation Time shall be
postponed until the first business day after the day when trading shall have
been fully resumed without restriction or disruption, reporting shall have been
restored and accurate appraisal of the value of the net assets of the Galaxy
Funds and the 1784 Funds is practicable in the judgment of Galaxy and 1784.
6. EFFECTIVE TIME OF THE REORGANIZATION.
(a) Delivery by each Reorganizing 1784 Fund of its respective Assets to
its Corresponding Galaxy Fund, delivery by such Corresponding Galaxy Fund of
its respective Galaxy Fund Shares to such Reorganizing 1784 Fund, and
liquidation of each such Reorganizing 1784 Fund, in each case, pursuant to
Section 2 hereof, shall occur at the opening of business on the next
business day following the First Valuation Time (or on such other date,
following the First Valuation Time as is agreed to in writing by an
authorized officer of each of the parties). The date and time at which the
above-described actions are taken shall be the "Applicable Effective Time of
the Reorganization" with respect to the Existing Galaxy Funds and the
Reorganizing 1784 Funds. To the extent any Assets of any Reorganizing 1784
Fund are, for any reason, not transferred to its Corresponding Galaxy Fund
at the Applicable Effective Time of the Reorganization with respect to such
funds, 1784 shall cause such Assets to be transferred in accordance with
this Agreement at the earliest practicable date thereafter.
5
<PAGE>
(b) Delivery by each Continuing 1784 Fund of its respective Assets to
its Corresponding Galaxy Fund, delivery by each such Corresponding Galaxy
Fund, of its respective Galaxy Fund Shares to such Continuing 1784 Fund, and
the liquidation of each such Continuing 1784 Fund, in each case, pursuant to
Section 2 hereof, shall occur at the opening of business on the next
business day following the Second Valuation Time (or on such other date
following the Second Valuation Time as is agreed to in writing by an
authorized officer of each of the parties). The date and time at which the
above-described actions are taken shall be the "Applicable Effective Time of
the Reorganization" with respect to the Galaxy Shell Funds and the
Continuing 1784 Funds. To the extent any Assets of any Continuing 1784 Fund
are, for any reason, not transferred at the Applicable Effective Time of the
Reorganization with respect to such funds, 1784 shall cause such Assets to
be transferred in accordance with this Agreement at the earliest practicable
date thereafter.
7. TERMINATION OF 1784. Promptly following the Applicable Effective Time of
the Reorganization with respect to the Galaxy Shell Funds and their
Corresponding 1784 Funds, 1784 shall file an application pursuant to Section
8(f) of the 1940 Act for an order declaring that 1784 has ceased to be an
investment company; provided that until such order is granted, 1784 shall
continue to comply with all of its obligations as a registered investment
company under the 1940 Act and under any and all other applicable state and
federal securities laws (including, in the case of each of the foregoing, the
rules and regulations thereunder). 1784 shall, promptly after the Applicable
Effective Time of the Reorganization with respect to the Galaxy Shell Funds and
their Corresponding 1784 Funds, file any final regulatory reports, including,
but not limited to, any Form N-SAR and Rule 24f-2 Notice, with respect to such
1784 Fund(s). All reporting and other obligations of 1784 shall remain the
exclusive responsibility of 1784 up to and including the date on which such 1784
Fund is deregistered and terminated. In addition, promptly following the
Applicable Effective Time of the Reorganization with respect to the Galaxy Shell
Funds and their Corresponding 1784 Funds, 1784 shall be terminated pursuant to
Article IX, Section 4 of its Agreement and Declaration of Trust and shall take
all other steps necessary and proper to effect its complete termination. Without
limiting the generality of the foregoing, (a) the affairs of 1784 shall be
immediately wound up, its contracts discharged and its business liquidated; and
(b) the Trustees of 1784 shall execute and Galaxy shall lodge among the records
of 1784 an instrument in writing setting forth the fact of such termination.
8. CERTAIN REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF 1784.
1784, on behalf of itself and each of the 1784 Funds, represents, warrants,
covenants and agrees as follows:
(a) 1784 is a Massachusetts business trust duly created pursuant to its
Agreement and Declaration of Trust for the purpose of acting as a management
investment company under the 1940 Act and is validly existing under the laws
of, and duly authorized to transact business in, the Commonwealth of
Massachusetts.
(b) 1784 is duly and appropriately registered with the SEC as an
open-end, management investment company under the 1940 Act and its
registration with the SEC as such an investment company is in full force and
effect as of the date hereof.
(c) 1784 currently has the power (i) to own all of its Assets, and
(ii) subject to the approval of shareholders referred to in Section 10
hereof, to carry out and consummate the transactions contemplated herein.
1784 has all necessary federal, state and local authorizations, licenses and
approvals necessary or desirable to carry on its business as such business
is now being conducted and upon receipt by 1784 of an exemptive order under
Section 17 of the 1940 Act, to consummate the transactions contemplated by
this Agreement.
(d) This Agreement has been duly and validly authorized, executed and
delivered by 1784, and represents the legal, valid and binding obligation of
1784, enforceable against 1784 in accordance with the terms hereof, subject
as to enforcement to the effect of bankruptcy, insolvency, reorganization,
arrangement, moratorium, fraudulent transfer or conveyance, and other
similar laws of general
6
<PAGE>
applicability relating to or affecting creditors' rights and to general
equity principles and provided that the provisions of this Agreement
intended to limit liability for particular matters to an investment
portfolio and its assets, including but not limited to Sections 32 and 33 of
this Agreement, may not be enforceable. The execution and delivery of this
Agreement does not, and the consummation of the transactions contemplated by
this Agreement will not, violate the Agreement and Declaration of Trust or
By-laws or any other organizational document of 1784 or any agreement,
contract or other arrangement to which 1784 is a party or by which 1784 or
its properties or Assets may be bound, subject or affected other than
(i) that certain Credit Agreement dated as of August 14, 1998, as amended,
between 1784 and The Chase Manhattan Bank and (ii) that certain Custodian
Agreement, dated as of June 1, 1993 between 1784 and Bank Boston, N.A. and
assigned to Investors Bank & Trust Company pursuant to an Instrument of
Assignment and Assumption dated as of September 30, 1998.
(e) Each 1784 Fund has elected to qualify, and has qualified as of and
since its first taxable year, as a regulated investment company under Part I
of Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), and each 1784 Fund currently qualifies, and shall continue to
qualify, as a regulated investment company under such Part of the Code for
its taxable year ending on the date on which the Applicable Effective Time
of the Reorganization occurs. Each 1784 Fund has been a regulated investment
company under such Part of the Code at all times since the end of the first
taxable year when it first so qualified, and shall continue to be a
regulated investment company under such Part of the Code at all times until
the Applicable Effective Time of the Reorganization occurs with respect to
such 1784 Fund.
(f) All federal, state, local and foreign income, profits, franchise,
sales, withholding, customs, transfer and other taxes, including, without
limitation, interest, additions to tax, and penalties thereon,
(collectively, "Taxes") that relate to the Assets of 1784 or of any 1784
Fund, and that are either due or properly shown to be due on any return
filed by 1784 or of any 1784 Fund have been fully and timely paid or
provided for; and to 1784's knowledge, there are no levies, liens, or other
encumbrances relating to Taxes existing, threatened or pending with respect
to the Assets of 1784 (or to any Assets of any 1784 Fund). All federal and
other tax returns and reports of 1784 and each 1784 Fund required by law to
be filed on or before the Applicable Effective Time of the Reorganization,
have been or will be filed, and all federal and other taxes owed by 1784 on
behalf of the 1784 Funds, have been or will be paid so far as due, and to
the best of 1784's knowledge, no such return is currently under audit and no
assessment has been asserted with respect to any such return.
(g) The financial statements of each of the 1784 Funds for its
respective fiscal year ended May 31, 1999, examined by
PricewaterhouseCoopers LLP, copies of which have been previously furnished
to Galaxy, present fairly (i) the financial condition of such 1784 Fund as
of the date indicated therein and (ii) the results of operations of such
1784 Fund for the periods indicated, in the case of both (i) and (ii), in
conformity with generally accepted accounting principles consistently
applied.
(h) Prior to or as of the First Valuation Time, each of the Reorganizing
1784 Funds shall have declared a dividend or dividends, with a record date
and ex-dividend date prior to or as of the First Valuation Time, which,
together with all previous dividends, shall have the effect of distributing
to its shareholders all of its net investment company income, if any, for
the taxable periods or years ended on or before May 31, 1999 and for the
period from said date to and including the Applicable Effective Time of the
Reorganization (computed without regard to any deduction for dividends
paid), and all of its net capital gain, if any, realized in taxable periods
or years ended on or before May 31, 1999 and in the period from said date to
and including the Applicable Effective Time of the Reorganization.
(i) At the Applicable Valuation Time and the Applicable Effective Time
of the Reorganization with respect to each 1784 Fund, all liabilities of
such 1784 Fund which are required to be reflected in
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the net asset value per share of such 1784 Fund in accordance with
applicable law are reflected in the net asset value per share of such 1784
Fund.
(j) To 1784's knowledge, there are currently, and at the Applicable
Valuation Time and the Applicable Effective Time of the Reorganization with
respect to each 1784 Fund there shall be, no legal, administrative or other
proceedings or investigations pending or threatened against or otherwise
involving 1784 or any 1784 Fund which could result in liability on the part
of 1784 or a 1784 Fund.
(k) Subject to the approvals of shareholders referred to in Section 10,
at both the First Valuation Time and the Applicable Effective Time of the
Reorganization with respect to each Reorganizing 1784 Fund, 1784, on behalf
of each Reorganizing 1784 Fund, shall have full right, power and authority
to sell, assign, transfer and deliver the Assets of such Reorganizing 1784
Fund. Upon delivery and payment for the Assets of the Reorganizing 1784
Funds as contemplated in Section 2(b) above, each Corresponding Galaxy Fund
shall acquire good and marketable title to the Assets of its Corresponding
1784 Fund, in each case, free and clear of all liens and encumbrances, and
subject to no restrictions on the ownership or transfer thereof (except as
imposed by federal or state securities laws).
(l) Subject to the approvals of shareholders referred to in Section 10,
at both the Second Valuation Time and the Applicable Effective Time of the
Reorganization with respect to each Continuing 1784 Fund, 1784, on behalf of
each Continuing 1784 Fund, shall have full right, power and authority to
sell, assign, transfer and deliver the Assets of such Continuing 1784 Fund.
Upon delivery and payment for the Assets of the Continuing 1784 Fund, as
contemplated in Section 2(b) above, each Shell Galaxy Fund shall acquire
good and marketable title to the Assets of its Corresponding 1784 Fund, in
each case, free and clear of all liens and encumbrances, and subject to no
restrictions on the ownership or transfer thereof (except as imposed by
federal or state securities laws).
(m) No consent, approval, authorization or order of any court or
governmental authority, or of any other person or entity, is required for
the consummation by 1784 and by each 1784 Fund of the transactions
contemplated by this Agreement, except as may be required by the 1933 Act,
the Securities Exchange Act of 1934, as amended ("1934 Act"), the 1940 Act,
or state securities laws (including, in the case of each of the foregoing,
the rules and regulations thereunder).
(n) The registration statement filed by Galaxy on Form N-14 relating to
the shares of each Galaxy Fund that will be registered with the SEC pursuant
to this Agreement, together with any and all supplements and amendments
thereto and the documents contained or incorporated therein by reference, as
supplemented and amended, including, without limitation, the proxy statement
of 1784 and the prospectuses of 1784 and Galaxy with respect to the
transactions contemplated by this Agreement (such registration statement,
together with such supplements and amendments and the documents contained
therein or incorporated therein by reference, as supplemented and amended,
the "N-14 Registration Statement") shall, on the effective date of the N-14
Registration Statement, at the time of the shareholders' meeting referred to
in Section 10 hereof and at the Applicable Effective Time of the
Reorganization, with respect to 1784 or any of the 1784 Funds: (i) comply in
all material respects with the provisions of the 1933 Act, the 1934 Act, the
1940 Act, and applicable state securities laws (including, in the case of
each of the foregoing, the rules and regulations thereunder), and (ii) not
contain any untrue statement of a material fact or omit to state a material
fact that is required to be stated therein or that is necessary to make the
statements therein not misleading.
(o) All of the issued and outstanding shares of each of the 1784 Funds
have been duly and validly issued, are fully paid and non-assessable by 1784
(except that shareholders of a 1784 Fund may under certain circumstances be
held personally liable for its obligations), and were offered for sale and
sold in conformity with all applicable federal and state securities laws
(including, in the case of each of the foregoing, the rules and regulations
thereunder). All shares of any 1784 Fund issued on or after the date hereof
shall be duly and validly issued, fully paid and non-assessable by 1784
(except that
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shareholders of a 1784 Fund may under certain circumstances be held
personally liable for its obligations) and offered for sale and sold in
conformity with all applicable federal and state securities laws (including,
in the case of each of the foregoing, the rules and regulations thereunder).
No shareholder of any of the 1784 Funds currently has, or will hereafter
have, any statutory or contractual preemptive right of subscription or
purchase in respect of any shares of any 1784 Fund.
(p) 1784 shall not sell or otherwise dispose of any Galaxy Fund Shares
received in the transactions contemplated herein, except in distribution to
the Recordholders as contemplated herein.
9. CERTAIN REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF GALAXY.
Galaxy, on behalf of itself and each of the Galaxy Funds, represents, warrants,
covenants and agrees as follows:
(a) Galaxy is a Massachusetts business trust duly created pursuant to
its Declaration of Trust for the purpose of acting as a management
investment company under the 1940 Act and is validly existing under the laws
of, and duly authorized to transact business in, the Commonwealth of
Massachusetts.
(b) Galaxy is duly and appropriately registered with the SEC as an
open-end, management investment company under the 1940 Act and its
registration with the SEC as such an investment company is in full force and
effect as of the date hereof.
(c) Galaxy currently has the power to own all of its Assets and to carry
out and consummate the transactions contemplated herein. Galaxy has all
necessary federal, state and local authorizations, licenses and approvals
necessary or desirable to carry on its business as such business is now
being conducted and upon receipt by Galaxy of an exemptive order under
Section 17 of the 1940 Act, to consummate the transactions contemplated by
this Agreement.
(d) This Agreement has been duly and validly authorized, executed and
delivered by Galaxy, and represents the legal, valid and binding obligation
of Galaxy, enforceable against Galaxy in accordance with the terms hereof,
subject as to enforcement to the effect of bankruptcy, insolvency,
reorganization, arrangement, moratorium, fraudulent transfer or conveyance,
and other similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles and provided that the
provisions of this Agreement intended to limit liability for particular
matters to an investment portfolio and its assets, including but not limited
to Sections 32 and 33 of this Agreement, may not be enforceable. The
execution and delivery of this Agreement does not, and the consummation of
the transactions contemplated by this Agreement will not, violate the
Declaration of Trust or Code of Regulations or any other organizational
document of Galaxy, or any agreement, contract or other arrangement to which
Galaxy is a party or by which Galaxy or its properties or Assets may be
bound, subject or affected.
(e) Each Galaxy Fund has elected to qualify, and has qualified as of and
since its first taxable year, as a regulated investment company under Part I
of Subchapter M of the Code, and each Galaxy Fund has been a regulated
investment company under such Part of the Code at all times since the end of
its first taxable year when it so qualified. Each Galaxy Fund currently
qualifies, and shall continue to qualify, as a regulated investment company
under the Code.
(f) All Taxes that relate to the Assets of Galaxy or of any Galaxy Fund,
and that are either due or properly shown to be due on any return filed by
Galaxy or of any Galaxy Fund have been fully and timely paid or provided
for; and to Galaxy's knowledge, there are no levies, liens, or other
encumbrances relating to Taxes existing, threatened or pending with respect
to the Assets of Galaxy (or to any Assets of any Galaxy Fund). All federal
and other tax returns and reports of Galaxy and each Galaxy Fund required by
law to be filed on or before the Applicable Effective Time of the
Reorganization, have been or will be filed, and all federal and other taxes
owed by Galaxy on behalf of the Galaxy Funds, have been or will be paid so
far as due, and to the best of Galaxy's knowledge, no such return is
currently under audit and no assessment has been asserted with respect to
any such return.
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(g) The financial statements of each of the Galaxy Funds for its
respective fiscal year ended October 31, 1999, examined by Ernst & Young
LLP, copies of which have been previously furnished to 1784 Funds, present
fairly (i) the financial condition of such Galaxy Fund as of the date
indicated therein and (ii) the results of operations of such Galaxy Fund for
the periods indicated, in the case of both (i) and (ii), in conformity with
generally accepted accounting principles consistently applied.
(h) At the Applicable Valuation Time and the Applicable Effective Time
of the Reorganization with respect to each Galaxy Fund, all liabilities of
such Galaxy Fund which are required to be reflected in the net asset value
per share of the Galaxy Fund Shares issued by such Galaxy Fund pursuant to
this Agreement in accordance with applicable law are reflected in the net
asset value per share of such Galaxy Fund.
(i) To Galaxy's knowledge, there are currently, and at the Applicable
Valuation Time and the Applicable Effective Time of the Reorganization with
respect to each Galaxy Fund there shall be, no legal, administrative or
other proceedings or investigations pending or threatened against or
otherwise involving Galaxy or any Galaxy Fund which could result in
liability on the part of Galaxy or a Galaxy Fund.
(j) No consent, approval, authorization or order of any court or
governmental authority, or of any other person or entity, is required for
the consummation by Galaxy and by each Galaxy Fund of the transactions
contemplated by this Agreement except as may be required by the 1933 Act,
1934 Act, the 1940 Act or state securities laws (including, in the case of
each of the foregoing, the rules and regulations thereunder).
(k) On the effective date of the N-14 Registration Statement, at the
time of the shareholders' meeting referred to in Section 10 hereof and at
the Applicable Effective Time of the Reorganization, with respect to Galaxy
or any of the Galaxy Funds, the N-14 Registration Statement shall:
(i) comply in all material respects with the provisions of the 1933 Act, the
1934 Act, the 1940 Act, and applicable state securities laws (including, in
the case of each of the foregoing, the rules and regulations thereunder),
and (ii) not contain any untrue statement of a material fact or omit to
state a material fact that is required to be stated therein or that is
necessary to make the statements therein not misleading.
(l) The Galaxy Fund Shares to be issued and delivered to each 1784 Fund
pursuant to the terms hereof, shall have been duly authorized as of the
Applicable Effective Time of the Reorganization, and, when so issued and
delivered, shall be registered under the 1933 Act, duly and validly issued,
and fully paid and non-assessable by Galaxy (except that shareholders of a
Galaxy Fund may under certain circumstances be held personally liable for
its obligations), and no shareholder of any Galaxy Fund shall have any
statutory or contractual preemptive right of subscription or purchase in
respect thereof.
(m) For the period beginning at the Applicable Effective Time of the
Reorganization with respect to the Galaxy Shell Funds and the Continuing
1784 Funds and ending not less than six years thereafter, Galaxy shall
provide or cause to be provided, liability coverage for the officers and
trustees of 1784 which covers the actions of such trustees and officers of
1784 for the period they served as such and is at least comparable to the
liability coverage currently applicable to the trustees and officers of
1784. Galaxy agrees that all rights to indemnification existing in favor of
the 1784 Trustees, acting in their capacities as such, under 1784's
Agreement and Declaration of Trust as in effect as of the date of this
Agreement shall survive the Reorganization as obligations of Galaxy, shall
continue in full force and effect without any amendment thereto, and shall
constitute rights which may be asserted against Galaxy.
10. SHAREHOLDER ACTION ON BEHALF OF THE 1784 FUNDS. As soon as practicable
after the effective date of the N-14 Registration Statement, but in any event
prior to the Applicable Effective Time of the Reorganization, and as a condition
to the consummation of the transactions contemplated hereby, the Board of
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Trustees of 1784 shall call, and subject to obtaining any necessary quorum, 1784
shall hold, a meeting of the shareholders of each of the 1784 Funds for the
purpose of considering and voting upon:
(a) Approval of this Agreement and the transactions contemplated hereby,
including, without limitation, the transfer by such 1784 Fund to its
Corresponding Galaxy Fund, of the Assets belonging to such 1784 Fund and the
assumption by such Corresponding Galaxy Fund of the Liabilities of such 1784
Fund in exchange for the Galaxy Fund Shares issued by such Corresponding
Galaxy Fund to such 1784 Fund, in each case, in accordance with, and at the
respective times set forth in, Section 2 hereof.
(b) The liquidation of such 1784 Fund through the distribution of the
Galaxy Fund Shares received by such 1784 Fund, to the Recordholders of the
1784 Fund as described in this Agreement.
(c) Such other matters as may be determined by the Boards of Trustees of
the parties.
11. N-14 REGISTRATION STATEMENT. Galaxy shall file the N-14 Registration
Statement after the N-14 Registration Statement has been approved by 1784.
Galaxy and 1784 have cooperated and shall continue to cooperate with each other,
and have furnished and shall continue to furnish each other with the information
relating to themselves that is required by the 1933 Act, the 1934 Act, the 1940
Act and state securities laws (including, in the case of each of the foregoing,
the rules and regulations thereunder) to be included in the N-14 Registration
Statement (or that is necessary to ensure that the N-14 Registration Statement
does not contain any untrue statement of a material fact and/or to ensure that
the N-14 Registration Statement does not omit to state a material fact that is
required to be stated therein or that is necessary to make the statements
therein not misleading).
12. GALAXY CONDITIONS. The obligations of Galaxy (and of each respective
Galaxy Fund) hereunder shall be subject to the following conditions precedent:
(a) This Agreement and the transactions contemplated by this Agreement
shall have been approved by the Board of Trustees of 1784 (including the
determinations required by Rule 17a-8(a) under the 1940 Act) and by the
shareholders of each of the 1784 Funds, in each case, in the manner required
by law.
(b) 1784 shall have duly executed and delivered to Galaxy, on behalf of
each 1784 Fund, such bills of sale, assignments, certificates and other
instruments of transfer ("Transfer Documents") as Galaxy may reasonably deem
necessary or desirable to transfer to the Corresponding Galaxy Fund of such
1784 Fund all of the right, title and interest of such 1784 Fund in and to
the respective Assets of such 1784 Fund. In each case, the Assets of each
1784 Fund shall be accompanied by all necessary state stock transfer stamps
or cash for the appropriate purchase price therefor.
(c) All representations and warranties of 1784 made in this Agreement
shall be true and correct in all material respects on the date hereof, on
the Applicable Valuation Time and on the Applicable Effective Time of the
Reorganization as if made at and as of such date, and 1784 shall have
complied, in all material respects, with all of its covenants hereunder. As
of the Applicable Valuation Time and at the Applicable Effective Time of the
Reorganization, there shall have been no material adverse change in the
financial position of any 1784 Fund or of 1784 since the date of the
financial statements referred to in Section 8(g), other than those changes
(including, without limitation, changes due to net redemptions) incurred in
the ordinary course of business as an investment company since the date of
the financial statements referred to in Section 8(g). At the Applicable
Effective Time of the Reorganization, Galaxy shall have received a
certificate from the President or Vice President of 1784, dated as of such
date, certifying on behalf of 1784, that as of such date each of the
conditions set forth in Section 8 and in this Section 12 have been, and
continue to be, met.
(d) Galaxy shall have received opinions of Bingham Dana LLP, addressed
to Galaxy, in form and substance reasonably satisfactory to Galaxy, and
dated the Applicable Effective Time of the Reorganization, to the effect
that as of the date of such opinion, and subject to qualifications and
conditions
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reasonably acceptable to Galaxy: (i) 1784 is a Massachusetts business trust
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts; (ii) the shares of each Reorganizing or
Continuing 1784 Fund, as appropriate, outstanding at the Applicable
Effective Time of the Reorganization are duly authorized, validly issued,
fully paid and non-assessable by such 1784 Fund (except that shareholders of
a 1784 Fund may under certain circumstances be held personally liable for
its obligations), and to such counsel's knowledge, no shareholder of any
1784 Fund has any statutory preemptive right to subscription or purchase in
respect thereof; (iii) this Agreement and the Transfer Documents have been
duly and validly authorized, executed and delivered by 1784 and represent
the legal, valid and binding obligations of 1784, enforceable against 1784
in accordance with their terms, subject to the effect of bankruptcy,
insolvency, reorganization, arrangement, moratorium, marshalling, fraudulent
transfer or conveyance and similar laws relating to or affecting creditors'
rights and remedies generally and court decisions with respect thereto, and
such counsel shall express no opinion with respect to the application of
equitable principles in any proceeding, whether at law or in equity, as to
the enforceability of any provision of the Agreement relating to remedies
after default, as to the availability of any specific or equitable relief of
any kind, or with respect to the provisions of this Agreement intended to
limit liability for particular matters to a 1784 Fund and its Assets,
including but not limited to Sections 32 and 33 of this Agreement; (iv) the
execution and delivery of this Agreement did not, and the consummation of
the transactions contemplated by this Agreement will not, violate the
Agreement and Declaration of Trust or By-laws of 1784 or except as may be
noted in such opinion, any material agreement known to counsel to which 1784
is a party or by which 1784 may be bound; and (v) to such counsel's
knowledge, no consent, approval, authorization or order of any court,
governmental authority or agency is required for the consummation by 1784 of
the transactions contemplated by this Agreement, except such as have been
obtained under the 1933 Act, the 1934 Act, the 1940 Act, and Massachusetts
state securities laws (including, in the case of each of the foregoing, the
rules and regulations thereunder). Such opinion may rely on a certificate of
a 1784 Trustee or the President or Vice President of 1784 as to factual
matters.
(e) The N-14 Registration Statement shall have become effective under
the 1933 Act, and no stop order suspending such effectiveness shall have
been instituted or, to the knowledge of Galaxy, contemplated by the SEC, and
the parties shall have received all permits, licenses and other
authorizations necessary under state securities laws to consummate the
transactions contemplated by this Agreement and all such permits, licenses
and other authorizations shall be in full force and effect at such time.
(f) At the Applicable Effective Time of the Reorganization, 1784 has, as
of such date, performed and complied in all material respects with each of
its agreements and covenants required by this Agreement to be performed or
complied with by 1784 prior to or at the Applicable Valuation Time and the
Applicable Effective Time of the Reorganization and Galaxy shall have
received a certificate from the President or Vice President of 1784, dated
as of such date, certifying that the conditions set forth in clause (f) has
been satisfied.
(g) 1784's agreements with each of its service contractors shall have
terminated at the Applicable Effective Time of the Reorganization with
respect to the Galaxy Shell Funds and the Continuing 1784 Funds and each
party has received reasonable assurance that no claim for damages
(liquidated or otherwise) will arise as a result of such termination.
(h) Galaxy shall have received the tax opinion provided for in Section
14 hereof.
(i) Galaxy shall have received any necessary exemptive relief from the
SEC with respect to Section 17(a) of the 1940 Act.
13. 1784 CONDITIONS. The obligations of 1784 (and of each respective
1784 Fund) hereunder shall be subject to the following conditions precedent:
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(a) This Agreement and the transactions contemplated by this Agreement
shall have been approved by the Board of Trustees of Galaxy (including the
determinations required by Rule 17a-8(a) under the 1940 Act) and by the
shareholders of each of the 1784 Funds, in each case, in the manner required
by law and further provided that a majority of the shares of those
shareholders of each 1784 Fund who will receive BKB Shares and a majority of
the shares of those shareholders of each 1784 Fund who will receive Trust
Shares shall have separately voted upon and approved this Agreement.
(b) All representations and warranties of Galaxy made in this Agreement
shall be true and correct in all material respects on the date hereof, on
the Applicable Valuation Time and on the Applicable Effective Time of the
Reorganization as if made at and as of such date, and Galaxy shall have
complied, in all material respects, with all of its covenants hereunder. As
of the Applicable Valuation Time and at the Applicable Effective Time of the
Reorganization, there shall have been no material adverse change in the
financial position of any Galaxy Fund or of Galaxy since the date of the
financial statements referred to in Section 9(g) other than those changes
(including, without limitation, changes due to net redemptions) incurred in
the ordinary course of business as an investment company since the date of
the financial statements referred to in Section 9(g). At the Applicable
Effective Time of the Reorganization, 1784 shall have received a certificate
from the President or Vice President of Galaxy, dated as of such date,
certifying on behalf of Galaxy, that as of such date each of the conditions
set forth in Section 9 and in this Section 13 have been, and continue to be,
met.
(c) 1784 shall have received opinions of Drinker Biddle & Reath LLP,
addressed to 1784 in form and substance reasonably satisfactory to 1784 and
dated the Applicable Effective Time of the Reorganization, to the effect
that as of the date of such opinion, and subject to qualifications and
conditions reasonably acceptable to 1784: (i) Galaxy is a Massachusetts
business trust duly organized, validly existing and in good standing under
the laws of the Commonwealth of Massachusetts; (ii) the shares of each
Existing or Shell Galaxy Fund, as appropriate, to be delivered to its
Corresponding 1784 Fund are duly authorized and upon delivery will be
validly issued, fully paid and non-assessable by such Galaxy Fund (except
that shareholders of a Galaxy Fund may under certain circumstances be held
personally liable for its obligations), and, to such counsel's knowledge, no
shareholder of any Galaxy Fund has any statutory preemptive right to
subscription or purchase in respect thereof; (iii) this Agreement has been
duly and validly authorized, executed and delivered by Galaxy and represents
the legal, valid and binding obligation of Galaxy, enforceable against
Galaxy in accordance with the terms hereof, subject to the effect of
bankruptcy, insolvency, reorganization, arrangement, moratorium,
marshalling, fraudulent transfer or conveyance and similar laws relating to
or affecting creditors' rights and remedies generally and court decisions
with respect thereto, and such counsel shall express no opinion with respect
to the application of equitable principles in any proceeding, whether at law
or in equity, as to the enforceability of any provision of the Agreement
relating to remedies after default, as to the availability of any specific
or equitable relief of any kind, or with respect to the provisions of this
Agreement intended to limit liability for particular matters to a Galaxy
Fund and its Assets, including but not limited to Sections 32 and 33 of this
Agreement; (iv) the execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated by this Agreement will
not, violate the Declaration of Trust or Code of Regulations of Galaxy, or
any material agreement known to such counsel to which Galaxy is a party or
by which Galaxy may be bound; and (v) to such counsel's knowledge, no
consent, approval, authorization or order of any court, governmental
authority or agency is required for the consummation by Galaxy of the
transactions contemplated by this Agreement, except such as have been
obtained under the 1933 Act, the 1934 Act, the 1940 Act, and Massachusetts
state securities laws (including, in the case of each of the foregoing, the
rules and regulations thereunder). Such opinion may rely on the opinion of
Ropes & Gray to the extent set forth in such opinion.
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(d) The N-14 Registration Statement shall have become effective under
the 1933 Act and no stop order suspending such effectiveness shall have been
instituted, or, to the knowledge of 1784, contemplated by the SEC, and the
parties shall have received all permits, licenses and other authorizations
necessary under state securities laws to consummate the transactions
contemplated by this Agreement, and all such permits, licenses and other
authorizations shall be in full force and effect at such time.
(e) At the Applicable Effective Time of the Reorganization, Galaxy has,
as of such date, performed and complied in all material respects with each
of its agreements and covenants required by this Agreement to be performed
or complied with by Galaxy prior to or at the Applicable Valuation Time and
the Applicable Effective Time of the Reorganization and 1784 shall have
received a certificate from the President or Vice President of Galaxy, dated
as of such date, certifying that the conditions set forth in this clause
(e) has been satisfied.
(f) 1784 shall have received the tax opinion provided for in Section 14
hereof.
(g) 1784 shall have received any necessary exemptive relief from the SEC
with respect to Section 17(a) of the 1940 Act.
14. TAX OPINION. Galaxy and 1784 Funds shall receive an opinion of Drinker
Biddle & Reath LLP addressed to both Galaxy and 1784 in a form reasonably
satisfactory to them, and dated as of the Applicable Effective Time of the
Reorganization, substantially to the effect that on the basis of facts,
representations, and assumptions set forth in such opinion:
(a) The Reorganization will consist of seventeen "reorganizations"
within the meaning of Section 368(a) of the Code, and each 1784 Fund and the
Corresponding Galaxy Fund will each be a "party to a reorganization" within
the meaning of Section 368(b) of the Code with respect to such
Reorganization;
(b) In accordance with Section 361(a), 361(c)(1) and 357(a) of the Code,
no gain or loss will be recognized by any 1784 Fund upon the transfer of its
Assets and Liabilities to the Corresponding Galaxy Fund in exchange for the
Galaxy Fund Shares of the Corresponding Galaxy Fund;
(c) In accordance with Section 1032(a) of the Code, no gain or loss will
be recognized by each Galaxy Fund upon the receipt of the Assets and
assumption of Liabilities of the Corresponding 1784 Fund in exchange for the
Galaxy Fund Shares;
(d) In accordance with Section 362(b) of the Code, the basis of each
1784 Fund's Assets received by the Corresponding Galaxy Fund pursuant to the
Reorganization will be the same as the basis of those Assets in the hands of
the 1784 Fund immediately prior to the Reorganization;
(e) In accordance with Section 1223(2) of the Code, the holding period
of each 1784 Fund's Assets in the hands of the Corresponding Galaxy Fund
will include the period for which such assets have been held by the 1784
Fund;
(f) In accordance with Section 361(a), 361(c)(1) and 357(a) of the Code,
no gain or loss will be recognized by any 1784 Fund on the distribution to
its shareholders of the Galaxy Fund Shares to be received by the 1784 Fund
in the Reorganization;
(g) In accordance with Section 354(a)(1) of the Code, no gain or loss
will be recognized by the shareholders of any 1784 Fund upon their receipt
of the Corresponding Galaxy Fund Shares in exchange for such shareholders'
shares of the 1784 Fund;
(h) In accordance with Section 358(a)(1) of the Code, the basis of the
Galaxy Fund Shares received by the shareholders of each Corresponding 1784
Fund will be the same as the basis of the 1784 Fund shares surrendered by
such shareholders pursuant to the Reorganization;
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(i) In accordance with Section 1223(1) of the Code, the holding period
for the Galaxy Fund Shares received by each 1784 Fund shareholder will
include the period during which such shareholder held the 1784 Fund shares
surrendered therefor, provided that such 1784 Fund shares are held as a
capital asset in the hands of such 1784 Fund shareholder on the date of the
exchange; and
(j) Each Galaxy Fund will succeed to and take into account the tax
attributes described in Section 381(c) of the Code of the Corresponding 1784
Fund as of the Applicable Effective Time of the Reorganization, subject to
the conditions and limitations specified in the Code.
In rendering such opinion described in this paragraph, Drinker Biddle &
Reath LLP may require and, to the extent it deems necessary and appropriate, may
rely, as to factual matters, upon representations made in certificates of Galaxy
Funds and 1784 Funds, their affiliates, and principal shareholders.
15. TAX DOCUMENTS. 1784 shall deliver to Galaxy at the Applicable Effective
Time of the Reorganization, confirmations and/or other evidence satisfactory to
Galaxy as to the adjusted tax basis of the Assets of each 1784 Fund delivered to
a Galaxy Fund in accordance with the terms of this Agreement.
16. FURTHER ASSURANCES. Subject to the terms and conditions herein provided,
each of the parties hereto shall use its best efforts to take, or cause to be
taken, such action, to execute and deliver, or cause to be executed and
delivered, such additional documents and instruments and to do, or cause to be
done, all things necessary, proper or advisable under the provisions of this
Agreement and under applicable law to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
delivering and/or causing to be delivered to the other party hereto each of the
items required under this Agreement as a condition to such party's obligations
hereunder. In addition, 1784 shall deliver or cause to be delivered to Galaxy,
each account, book, record or other document of 1784 required to be maintained
by 1784 pursuant to Section 31(a) of the 1940 Act and Rules 31a-1 to 31a-3
thereunder (regardless of whose possession they are in) (the "Records"). Galaxy
shall maintain such Records for the period required pursuant to Section
31(a) of the 1940 Act and Rule 31a-2 thereunder.
17. TERMINATION AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of 1784 set forth in this Agreement shall
terminate upon the consummation of the transactions contemplated herein. The
representations and warranties of Galaxy contained in this Agreement shall
survive the consummation of the transactions contemplated herein.
18. TERMINATION OF AGREEMENT. This Agreement may be terminated by a party at
any time at or prior to the Applicable Effective Time of the Reorganization by a
vote of a majority of such party's Board of Trustees, as applicable, as provided
below:
(a) By Galaxy if the conditions set forth in Section 12 are not
satisfied as specified in said Section;
(b) By 1784 if the conditions set forth in Section 13 are not satisfied
as specified in said Section; or
(c) By mutual consent of both parties.
If a party terminates this Agreement because one or more of its conditions
have not been fulfilled, or if this Agreement is terminated by mutual consent,
this Agreement will become null and void insofar as it is so terminated without
any liability of any party to the other parties except as otherwise provided
herein.
19. AMENDMENT AND WAIVER. At any time prior to or (to the fullest extent
permitted by law) after approval of this Agreement by the shareholders of 1784
in accordance with Section 10 hereof, (a) the parties hereto may, by written
agreement authorized by their respective Boards of Trustees and with or without
the approval of their shareholders, amend, modify or terminate any of the
provisions of this Agreement, and (b) any party may waive any breach by any
other party or any failure by any other party to satisfy any of the
15
<PAGE>
conditions to the obligations of the waiving party (such waiver to be in writing
and authorized by an authorized officer of the waiving party) with or without
the approval of such party's shareholders.
20. GOVERNING LAW. This Agreement and the transactions contemplated hereby
shall be governed, construed and enforced in accordance with the internal laws
of the Commonwealth of Massachusetts, without giving effect to the conflicts of
law principles of such state.
21. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
respective successors and permitted assigns of the parties hereto. This
Agreement and the rights, obligations and liabilities hereunder may not be
assigned by any party without the prior written consent of all other parties.
22. BENEFICIARIES. Nothing contained in this Agreement shall be deemed to
create rights in persons not parties hereto (including, without limitation, any
shareholder of Galaxy or 1784) other than (a) the Trustees of 1784 with respect
to the covenants of Galaxy set forth in Section 9(m); and (b) the successors and
permitted assigns of the parties. Nothing in this Section 22 is intended to
limit the rights of shareholders of the 1784 Funds to maintain derivative
actions with respect to this Agreement subject to, and in accordance with,
applicable law.
23. NOTICES. All notices required or permitted herein shall be in writing
and shall be deemed to be properly given when delivered personally or by
telecopier to the party entitled to receive the notice or when sent by certified
or registered mail, postage prepaid, or delivered to a recognized overnight
courier service, in each case, properly addressed to the party entitled to
receive such notice at the address or telecopier number stated below or to such
other address or telecopier number as may hereafter be furnished in writing by
notice similarly given by one party to the other party hereto:
If to Galaxy:
The Galaxy Fund
4400 Computer Drive
Westborough, Massachusetts 01581
With copies to:
W. Bruce McConnel, III, Esq.
Drinker Biddle & Reath LLP
One Logan Square
18th & Cherry Streets
Philadelphia, Pennsylvania 19103
Telecopier Number: (215) 988-2757
If to 1784:
Boston 1784 Funds
c/o SEI Investments Mutual Funds Services
One Freedom Valley Drive
Oaks, Pennsylvania 19458
With copies to:
Roger P. Joseph, Esq.
Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
Telecopier Number: (617) 951-8736
16
<PAGE>
and
Marianne K. Smythe, Esq.
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, DC 20037-1420
Telecopier Number: (202) 663-6363
24. EXPENSES AND WAIVERS. With regard to the expenses incurred by 1784 and
Galaxy in connection with this Agreement and the transactions contemplated
hereby, Fleet Investment Advisors Inc. shall bear such expenses or cause one of
its affiliates to bear such expenses. Such expenses shall include but are not
limited to (a) transaction costs incurred in connection with the sale of
securities under paragraph 4(c) of this Agreement but only to the extent that
such sales transactions were entered into because (i) a Galaxy Fund was not
permitted to hold such securities pursuant to its stated investment objectives
or policies; or (ii) the securities of the 1784 Fund when aggregated with its
Corresponding Galaxy Fund would exceed certain percentage limitations to which
the Galaxy Fund is subject; and (b) all expenses incurred to effect the
termination of 1784 and the other actions required under section 7 of this
Agreement. Fleet Investment Advisors, Inc. hereby agrees to waive shareholder
servicing fees as needed to ensure that until the later of one year from the
date of the reorganization or such time as the Galaxy Board of Trustees votes on
the conversion of the BKB Shares to Retail A Shares, the Galaxy Funds total
operating expense ratios will not exceed the pro forma after waiver expense
ratios set forth in Table I-B of the N-14 Registration Statement.
25. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding of the parties hereto and supersedes any and all prior agreements,
arrangements and understandings relating to matters provided for herein.
26. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which, when executed and delivered shall be deemed to be
an original, but all of which together shall constitute one and the same
instrument.
27. FAILURE OF ONE FUND TO CONSUMMATE THE TRANSACTIONS. Subject to the
conditions set forth in this Agreement, and provided that the Reorganization
shall continue to qualify for tax-free treatment under the Code and the opinion
is delivered to Galaxy and 1784 as provided in Section 14 hereof, the failure of
one fund to consummate the transactions contemplated hereby shall not affect the
consummation or validity of the Reorganization with respect to any other fund,
and the provisions of this Agreement shall be construed to effect this intent.
28. NO BROKERS OR FINDERS. Each of the parties, on behalf of itself and of
each of its funds, hereby represents and warrants to the other party hereto that
that there are no brokers or finders entitled to receive any payments in
connection with the transactions provided for herein.
29. VALIDITY. Whenever possible, each provision and term of this Agreement
shall be interpreted in a manner to be effective and valid, but if any provision
or term of this Agreement is held to be prohibited by law or invalid, then such
provision or term shall be ineffective only in the jurisdiction or jurisdictions
so holding and only to the extent of such prohibition or invalidity, without
invalidating or affecting in any manner whatsoever the remainder of such
provision or term or the remaining provisions or terms of this Agreement.
30. EFFECT OF FACSIMILE SIGNATURE. A facsimile signature of an authorized
officer of a party hereto on this Agreement and/or any Transfer Document shall
have the same effect as if executed in the original by such officer.
31. HEADINGS. The headings contained herein are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
17
<PAGE>
32. GALAXY LIABILITY. The names "The Galaxy Fund" and "Trustees of The
Galaxy Fund" refer respectively to the trust created and the trustees, as
trustees but not individually or personally, acting from time to time under a
Declaration of Trust dated March 31, 1986, which is hereby referred to and a
copy of which is on file at the office of the Secretary of State of the
Commonwealth of Massachusetts and at the principal office of Galaxy. The
obligations of Galaxy entered into in the name or on behalf thereof by any of
the trustees, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the trustees, shareholders or
representatives of Galaxy personally, but bind only the trust property, and all
persons dealing with any series of shares of Galaxy must look solely to the
trust property belonging to such series for the enforcement of any claims
against Galaxy.
Both parties specifically acknowledge and agree that any liability of Galaxy
under this Agreement with respect to a particular Galaxy Fund, or in connection
with the transactions contemplated herein with respect to a particular Galaxy
Fund, shall be discharged only out of the assets of the particular Galaxy Fund
and that no other portfolio of Galaxy shall be liable with respect thereto.
33. 1784 LIABILITY. The names "Boston 1784 Funds" and "Trustees of The
Boston 1784 Funds" refer respectively to the trust created and the trustees, as
trustees but not individually or personally, acting from time to time under an
Agreement and Declaration of Trust dated February 5, 1993, which is hereby
referred to and a copy of which is on file at the office of the State Secretary
of the Commonwealth of Massachusetts and at the principal office of 1784. The
obligations of 1784 entered into in the name or on behalf thereof by any of the
trustees, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the trustees, shareholders or
representatives of 1784 personally, but bind only the trust property, and all
persons dealing with any series of shares of 1784 must look solely to the trust
property belonging to such series for the enforcement of any claims against
1784.
Both parties specifically acknowledge and agree that any liability of 1784
under this Agreement with respect to a 1784 Fund, or in connection with the
transactions contemplated herein with respect to a particular 1784 Fund, shall
be discharged only out of the assets of the particular 1784 Fund and that no
other portfolio of 1784 shall be liable with respect thereto.
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized officers designated below as of the date first
written above.
<TABLE>
<S> <C> <C>
THE GALAXY FUND
By:
-----------------------------------------
Name:
Title:
BOSTON 1784 FUNDS
By:
-----------------------------------------
Name:
Title:
FLEET INVESTMENT ADVISORS INC., hereby joins in
this Agreement with respect to, and agrees to
be bound by, Section 24.
By:
-----------------------------------------
Name:
Title:
</TABLE>
19
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
COLUMN 1 COLUMN 2
- -------- --------
<S> <C>
GALAXY FUND AND
1784 FUND SHARE CLASS
BOSTON 1784 TAX-FREE MONEY MARKET FUND GALAXY TAX-EXEMPT FUND
Shares (purchased other than through an investment BKB Shares
management, trust, custody or other agency
relationship with BankBoston, N.A.)
Shares (purchased through an investment Trust Shares
management, trust, custody or other agency
relationship with BankBoston, N.A.)
BOSTON 1784 U.S. TREASURY MONEY MARKET FUND GALAXY U.S. TREASURY FUND
Shares (purchased other than through an investment BKB Shares
management, trust, custody or other agency
relationship with BankBoston, N.A.)
Shares (purchased through an investment Trust Shares
management, trust, custody or other agency
relationship with BankBoston, N.A.)
BOSTON 1784 INSTITUTIONAL U.S. TREASURY MONEY MARKET GALAXY INSTITUTIONAL TREASURY MONEY MARKET FUND
FUND Shares
Shares
BOSTON 1784 PRIME MONEY MARKET FUND GALAXY MONEY MARKET FUND
Shares (purchased other than through an investment BKB Shares
management, trust, custody or other agency
relationship with BankBoston, N.A.)
Shares (purchased through an investment Trust Shares
management, trust, custody or other agency
relationship with BankBoston, N.A.)
BOSTON 1784 INSTITUTIONAL PRIME MONEY MARKET FUND GALAXY INSTITUTIONAL MONEY MARKET FUND
Shares Shares
BOSTON 1784 SHORT-TERM INCOME FUND GALAXY SHORT-TERM BOND FUND
Shares (purchased other than through an investment BKB Shares
management, trust, custody or other agency
relationship with BankBoston, N.A.)
Shares (purchased through an investment Trust Shares
management, trust, custody or other agency
relationship with BankBoston, N.A.)
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
COLUMN 1 COLUMN 2
- -------- --------
<S> <C>
BOSTON 1784 INCOME FUND GALAXY HIGH QUALITY BOND FUND
Shares (purchased other than through an investment BKB Shares
management, trust, custody or other agency
relationship with BankBoston, N.A.)
Shares (purchased through an investment Trust Shares
management, trust, custody or other agency
relationship with BankBoston, N.A.)
BOSTON 1784 U.S. GOVERNMENT MEDIUM-TERM INCOME FUND GALAXY INTERMEDIATE GOVERNMENT INCOME FUND
Shares (purchased other than through an investment BKB Shares
management, trust, custody or other agency
relationship with BankBoston, N.A.)
Shares (purchased through an investment Trust Shares
management, trust, custody or other agency
relationship with BankBoston, N.A.)
BOSTON 1784 TAX-EXEMPT MEDIUM-TERM INCOME FUND GALAXY INTERMEDIATE TAX-EXEMPT BOND FUND
Shares (purchased other than through an investment BKB Shares
management, trust, custody or other agency
relationship with BankBoston, N.A.)
Shares (purchased through an investment Trust Shares
management, trust, custody or other agency
relationship with BankBoston, N.A.)
BOSTON 1784 CONNECTICUT TAX-EXEMPT INCOME FUND GALAXY CONNECTICUT INTERMEDIATE MUNICIPAL BOND FUND
Shares (purchased other than through an investment BKB Shares
management, trust, custody or other agency
relationship with BankBoston, N.A.)
Shares (purchased through an investment Trust Shares
management, trust, custody or other agency
relationship with BankBoston, N.A.)
BOSTON 1784 FLORIDA TAX-EXEMPT INCOME FUND GALAXY FLORIDA MUNICIPAL BOND FUND
Shares Shares
BOSTON 1784 MASSACHUSETTS TAX-EXEMPT INCOME FUND GALAXY MASSACHUSETTS INTERMEDIATE MUNICIPAL BOND
Shares (purchased other than through an investment FUND
management, trust, custody or other agency BKB Shares
relationship with BankBoston, N.A.)
Shares (purchased through an investment Trust Shares
management, trust, custody or other agency
relationship with BankBoston, N.A.)
BOSTON 1784 RHODE ISLAND TAX-EXEMPT INCOME FUND GALAXY RHODE ISLAND MUNICIPAL BOND FUND
Shares (purchased other than through an investment BKB Shares
management, trust, custody or other agency
relationship with BankBoston, N.A.)
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
COLUMN 1 COLUMN 2
- -------- --------
<S> <C>
Shares (purchased through an investment Trust Shares
management, trust, custody or other agency
relationship with BankBoston, N.A.)
BOSTON 1784 ASSET ALLOCATION FUND GALAXY ASSET ALLOCATION FUND
Shares (purchased other than through an investment BKB Shares
management, trust, custody or other agency
relationship with BankBoston, N.A.)
Shares (purchased through an investment Trust Shares
management, trust, custody or other agency
relationship with BankBoston, N.A.)
BOSTON 1784 GROWTH AND INCOME FUND GALAXY GROWTH AND INCOME FUND
Shares (purchased other than through an investment BKB Shares
management, trust, custody or other agency
relationship with BankBoston, N.A.)
Shares (purchased through an investment Trust Shares
management, trust, custody or other agency
relationship with BankBoston, N.A.)
BOSTON 1784 GROWTH FUND GALAXY GROWTH FUND II
Shares (purchased other than through an investment BKB Shares
management, trust, custody or other agency
relationship with BankBoston, N.A.)
Shares (purchased through an investment Trust Shares
management, trust, custody or other agency
relationship with BankBoston, N.A.)
BOSTON 1784 INTERNATIONAL EQUITY FUND GALAXY INTERNATIONAL EQUITY FUND
Shares (purchased other than through an investment BKB Shares
management, trust, custody or other agency
relationship with BankBoston, N.A.)
Shares (purchased through an investment Trust Shares
management, trust, custody or other agency
relationship with BankBoston, N.A.)
</TABLE>
A-3
<PAGE>
SCHEDULE B
THE GALAXY FUND
("GALAXY")
AMENDED AND RESTATED
PLAN PURSUANT TO RULE 18f-3 FOR OPERATION OF
A MULTI-CLASS SYSTEM
I. INTRODUCTION
On February 23, 1995, the Securities and Exchange Commission (the
"Commission") promulgated Rule 18f-3 under the Investment Company Act of 1940,
as amended (the "1940 Act"), which permits the creation and operation of a
multi-class distribution structure without the need to obtain an exemptive order
under Section 18 of the 1940 Act. Rule 18f-3, which became effective on
April 3, 1995, requires an investment company to file with the Commission a
written plan specifying all of the differences among the classes, including the
various services offered to shareholders, the different distribution
arrangements for each class, the methods for allocating expenses relating to
those differences and any conversion features or exchange privileges. On
May 25, 1995, the Board of Trustees of Galaxy authorized Galaxy to operate its
multi-class distribution structure in compliance with Rule 18f-3. On
October 10, 1995, Galaxy filed a Plan pursuant to Rule 18f-3 for operation of a
multi-class system (the "Prior Plan"), which had been approved by the Board of
Trustees of Galaxy on September 7, 1995, with the Commission. Prior to the
filing of the Prior Plan, Galaxy operated a multi-class distribution structure
pursuant to an exemptive order granted by the Commission on February 19, 1992.
The Amended and Restated Plan pursuant to Rule 18f-3 for operation of a
multi-class system presented herewith, which was approved by the Board of
Trustees of Galaxy on January 25, 2000, supersedes the Prior Plan and any
subsequent Plans pursuant to Rule 18f-3 approved by the Board of Trustees of
Galaxy prior to January 25, 2000.
B-1
<PAGE>
II. ATTRIBUTES OF CLASSES
1. GENERALLY
EQUITY FUNDS
Galaxy shall offer (a) six classes of shares--Retail A Shares, Retail B
Shares, Prime A Shares, Prime B Shares, BKB Shares and Trust Shares--in the
Asset Allocation Fund, Growth and Income Fund, and International Equity Fund,
(b) five classes of shares--Retail A Shares, Retail B Shares, Prime A Shares,
Prime B Shares and Trust Shares--in the Equity Value Fund, Equity Growth Fund,
Equity Income Fund, Small Company Equity Fund, Small Cap Value Fund and
Strategic Equity Fund, (c) four classes of shares--Retail A Shares, Retail B
Shares, BKB Shares and Trust Shares--in the Growth Fund II and (d) three classes
of shares--Retail A Shares, Retail B Shares and Trust Shares--in the MidCap
Equity Fund (each a "Fund" and collectively, the "Equity Funds").
BOND FUNDS
Galaxy shall offer (a) six classes of shares--Retail A Shares, Retail B
Shares, Prime A Shares, Prime B Shares, BKB Shares and Trust Shares--in the
Short-Term Bond Fund, Intermediate Government Income Fund and High Quality Bond
Fund, (b) five classes of shares--Retail A Shares, Retail B Shares, Prime A
Shares, Prime B Shares and Trust Shares--in the Tax-Exempt Bond Fund, (c) three
classes of shares--Retail A Shares, BKB Shares and Trust Shares--in the
Intermediate Tax-Exempt Bond Fund, Connecticut Intermediate Municipal Bond Fund,
Massachusetts Intermediate Municipal Bond Fund and Rhode Island Municipal Bond
Fund, and (d) two classes of shares--Retail A Shares and Trust Shares--in the
Corporate Bond Fund, New Jersey Municipal Bond Fund, New York Municipal Bond
Fund, Connecticut Municipal Bond Fund and Massachusetts Municipal Bond Fund
(each a "Fund" and collectively, the "Bond Funds").
MONEY MARKET FUNDS
Galaxy shall offer (a) four classes of shares--Retail A Shares, Retail B
Shares, BKB Shares and Trust Shares--in the Money Market Fund, (b) three classes
of shares--Retail A Shares, BKB Shares and Trust Shares--in the Tax-Exempt Fund
and U.S. Treasury Fund, (c) two classes of shares--Retail A Shares and Trust
Shares--in the Government Fund, and (d) two classes of shares--Retail A Shares
and Prime Shares--in the Connecticut Municipal Money Market Fund, Massachusetts
Municipal Money Market Fund and New York Municipal Money Market Fund (each a
"Fund" and collectively, the "Money Market Funds").
In general, shares of each class shall be identical except for different
expense variables (which will result in different returns for each class),
certain related rights and certain shareholder services. More particularly, the
Retail A Shares, the Retail B Shares, the Prime A Shares, the Prime B Shares,
the BKB Shares, the Prime Shares and/or the Trust Shares of each Fund shall
represent interests in the same portfolio of investments of the particular Fund,
and shall be identical in all respects, except for: (a) the impact of
(i) expenses assessed to a class pursuant to the Shareholder Services Plan,
Distribution and Services Plan or Distribution Plan adopted for that class,
(ii) transfer agency expenses, and (iii) any other incremental expenses
identified from time to time that should be properly allocated to one class so
long as any changes in expense allocations are reviewed and approved by a vote
of the Board of Trustees, including a majority of the independent Trustees; (b)
the fact that (i) the Retail A Shares shall vote separately on any matter
submitted to holders of Retail A Shares that pertains to the Shareholder
Services Plan adopted for that class; (ii) the Retail B Shares shall vote
separately on any matter submitted to holders of Retail B Shares that pertains
to the Distribution and Services Plan adopted for that class; (iii) the Prime A
Shares shall vote separately on any matter submitted to holders of Prime A
Shares that pertains to the Distribution Plan adopted for that class; (iv) the
Prime B Shares shall vote separately on any matter submitted to holders of B
Prime Shares that pertains to the Distribution and Services Plan adopted for
that
B-2
<PAGE>
class; (v) the Prime Shares shall vote separately on any matter submitted to
holders of Prime Shares that pertains to the Distribution and Services Plan
adopted for that class; (vi) the BKB Shares shall vote separately on any matter
submitted to holders of BKB Shares that pertains to the Shareholder Services
Plan adopted for that class; (vii) the Trust Shares shall vote separately on any
matter submitted to holders of Trust Shares that pertains to the Shareholder
Services Plan adopted for that class; and (viii) each class shall vote
separately on any matter submitted to shareholders that pertains to the class
expenses borne by that class; (c) the exchange privileges of each class of
shares; (d) the designation of each class of shares; and (e) the different
shareholder services relating to a class of shares.
2. DISTRIBUTION ARRANGEMENTS, EXPENSES AND SALES CHARGES
(a) EQUITY FUNDS
RETAIL A SHARES
Retail A Shares of the Equity Funds shall be offered to individuals or
corporations who submit a purchase application to Galaxy, purchasing directly
either for their own accounts or for the accounts of others ("Direct Investors")
and shall be offered to FIS Securities, Inc., Fleet Brokerage Securities, Inc.,
Fleet Securities, Inc., Fleet Enterprises, Inc., FleetBoston Financial
Corporation, its affiliates, their correspondent banks and other qualified
banks, savings and loan associations and broker-dealers ("Institutions") who
purchase the shares on behalf of their customers ("Customers") who are the
beneficial owners of the shares.
Retail A Shares of the Equity Funds shall be subject to a front-end sales
charge which shall not initially exceed 3.75% of the offering price of Retail A
Shares of those Funds (subject to the reductions and exemptions described in the
prospectus and Statement of Additional Information ("SAI") for such Shares).
When the aggregate offering price of Retail A Shares of the Equity and Bond
Funds purchased by an investor qualifies the investor to purchase such Retail A
Shares without payment of a front-end sales charge, a contingent deferred sales
charge of 1% may be imposed if such Retail A Shares are redeemed within one year
of purchase.
Retail A Shares of the Equity Funds shall further be subject to a fee
payable pursuant to the Shareholder Services Plan adopted for that class of up
to .25% (on an annualized basis) of the average daily net asset value of Retail
A Shares beneficially owned by Customers of Institutions. Services provided by
Institutions for such fee may include: (a) aggregating and processing purchase
and redemption requests and placing net purchase and redemption orders with the
distributor; (b) processing dividend payments from an Equity Fund;
(c) providing sub-accounting with respect to Retail A Shares or the information
necessary for sub-accounting; and (d) providing periodic mailings to Customers.
Retail A Shares of the Equity Funds shall further be subject to a separate
fee payable pursuant to the same Shareholder Services Plan adopted for that
class of up to .25% (on an annualized basis) of the average daily net asset
value of Retail A Shares beneficially owned by Customers of Institutions.
Services provided by Institutions for such separate fee may include: (a)
providing Customers with information as to their positions in Retail A Shares;
(b) responding to Customer inquiries; and (c) providing a service to invest the
assets of Customers in Retail A Shares.
Galaxy shall initially limit the total fees payable by Retail A Shares of
the Equity Funds pursuant to the Shareholder Services Plan adopted for that
class to an amount which shall not initially exceed .30% (on an annualized
basis) of the average daily net asset value of Retail A Shares beneficially
owned by Customers of Institutions.
RETAIL B SHARES
Retail B Shares of the Equity Funds shall be offered to Direct Investors and
to Institutions who purchase the shares on behalf of Customers who are the
beneficial owners of the shares.
B-3
<PAGE>
Retail B Shares of the Equity Funds, if redeemed within six years of
purchase, shall be subject to a contingent deferred sales charge which shall not
initially exceed 5.0% of the original purchase price or redemption proceeds,
whichever is lower (subject to the reductions and exemptions described in the
prospectus and SAI for such Shares).
Retail B Shares of the Equity Funds shall be further subject to a fee
payable pursuant to the Distribution and Services Plan adopted for that class
(a) for distribution expenses, which shall not initially exceed .65% (on an
annualized basis) of the average daily net asset value of the Equity Funds'
respective outstanding Retail B Shares, (b) for shareholder liaison services,
which shall not initially exceed .25% (on an annualized basis) of the average
daily net assets attributable to Retail B Shares of the respective Equity Funds
that are owned of record or beneficially by customers of securities dealers,
brokers, financial institutions or other industry professionals ("Service
Organizations") that provide shareholder liaison services with respect to such
customers' Retail B Shares, and (c) for administrative support services, which
shall not initially exceed .25% (on an annualized basis) of the average daily
net assets attributable to Retail B Shares of the respective Equity Funds that
are owned of record or beneficially by customers of Service Organizations that
provide administrative support services with respect to such customers'
Retail B Shares.
Galaxy shall initially limit the total fees payable by Retail B Shares of
the Equity Funds for shareholder liaison services and administrative support
services pursuant to the Distribution and Services Plan adopted for that class
to an amount not to exceed .30% (on an annualized basis) of the average daily
net asset value of Retail B Shares owned of record or beneficially by customers
of Service Organizations.
Shareholder liaison services provided under the Distribution and Services
Plan means "personal service and/or the maintenance of shareholder accounts"
within the meaning of the Conduct Rules of the National Association of
Securities Dealers, Inc. ("NASD"), such as responding to customer inquiries and
providing information on their investments.
Administrative support services provided under the Distribution and Services
Plan may include, but are not limited to, (a) transfer agent and subtransfer
agent services for beneficial owners of Retail B Shares; (b) aggregating and
processing purchase and redemption orders; (c) providing beneficial owners with
statements showing their positions in Retail B Shares; (d) processing dividend
payments; (e) providing sub-accounting services for Retail B Shares held
beneficially; (f) forwarding shareholder communications, such as proxies,
shareholder reports, dividend and tax notices, and updating prospectuses to
beneficial owners; and (g) reviewing, tabulating and transmitting proxies
executed by beneficial owners.
PRIME A SHARES
Prime A Shares of the Equity Funds shall be offered through selected
broker-dealers to individual or institutional customers.
Prime A Shares of the Equity Funds shall be subject to a front-end sales
charge which shall not initially exceed 5.50% of the offering price of Prime A
Shares of those Funds (subject to the reductions and exemptions described in the
prospectus and SAI for such Shares). When the aggregate offering price of Prime
A Shares of the Equity and Bond Funds purchased by an investor qualifies the
investor to purchase such Prime A Shares without payment of a front-end sales
charge, a contingent deferred sales charge of 1% may be imposed if such Prime A
Shares are redeemed within one year of purchase.
Prime A Shares of the Equity Funds shall further be subject to a fee payable
pursuant to the Distribution Plan adopted for that class for distribution
expenses, which shall not initially exceed .30% (on an annualized basis) of the
average daily net asset value of the Equity Funds' respective outstanding Prime
A Shares.
B-4
<PAGE>
PRIME B SHARES
Prime B Shares of the Equity Funds shall be offered through selected
broker-dealers to individual or institutional customers.
Prime B Shares of the Equity Funds, if redeemed within six years of
purchase, shall be subject to a contingent deferred sales charge which shall not
initially exceed 5.0% of the original purchase price or redemption proceeds,
whichever is lower (subject to the reductions and exemptions described in the
prospectus and SAI for such Shares).
Prime B Shares of the Equity Funds shall be further subject to a fee payable
pursuant to the Distribution and Services Plan adopted for that class (a) for
distribution expenses, which shall not initially exceed .75% (on an annualized
basis) of the average daily net asset value of the Equity Funds' respective
outstanding Prime B Shares, (b) for shareholder liaison services, which shall
not initially exceed .25% (on an annualized basis) of the average daily net
assets attributable to Prime B Shares of the respective Equity Funds that are
owned of record or beneficially by customers of securities dealers, brokers,
financial institutions or other industry professionals ("Service Organizations")
that provide shareholder liaison services with respect to such customers' Prime
B Shares, and (c) for administrative support services, which shall not initially
exceed .25% (on an annualized basis) of the average daily net assets
attributable to Prime B Shares of the respective Equity Funds that are owned of
record or beneficially by customers of Service Organizations that provide
administrative support services with respect to such customers' Prime B Shares.
Galaxy shall initially limit the total fees payable by Prime B Shares of the
Equity Funds for shareholder liaison services and administrative support
services pursuant to the Distribution and Services Plan adopted for that class
to an amount not to exceed .25% (on an annualized basis) of the average daily
net asset value of Prime B Shares owned of record or beneficially by customers
of Service Organizations.
Shareholder liaison services provided under the Distribution and Services
Plan means "personal service and/or the maintenance of shareholder accounts"
within the meaning of the Conduct Rules of the NASD, such as responding to
customer inquiries and providing information on their investments.
Administrative support services provided under the Distribution and Services
Plan may include, but are not limited to, (a) transfer agent and subtransfer
agent services for beneficial owners of Prime B Shares; (b) aggregating and
processing purchase and redemption orders; (c) providing beneficial owners with
statements showing their positions in Prime B Shares; (d) processing dividend
payments; (e) providing subaccounting services for Prime B Shares held
beneficially; (f) forwarding shareholder communications, such as proxies,
shareholder reports, dividend and tax notices, and updating prospectuses to
beneficial owners; and (g) reviewing, tabulating and transmitting proxies
executed by beneficial owners.
BKB SHARES
BKB Shares of the Equity Funds shall be issued to retail shareholders of
corresponding portfolios of the Boston 1784 Funds (the "1784 Funds") in
connection with the reorganization of the 1784 Funds into Galaxy (the
"Galaxy/1784 Reorganization"). Following the Galaxy/1784 Reorganization, BKB
Shares of the Equity Funds shall be available for purchase only by those
shareholders who received BKB Shares in the Galaxy/1784 Reorganization.
BKB Shares of the Equity Funds shall not be subject to a sales charge.
BKB Shares of the Equity Funds shall be subject to a fee payable pursuant to
the Shareholder Services Plan adopted for that class for shareholder liaison
services, which shall not initially exceed .25% (on an annualized basis) of the
average daily net asset value of BKB Shares beneficially owned by Customers of
Institutions. Services provided by Institutions for such fee may include:
(a) providing Customers with information as to their positions in BKB Shares;
(b) responding to Customer inquiries; and (c) providing a service to invest the
assets of Customers in BKB Shares.
B-5
<PAGE>
BKB Shares of the Equity Funds shall be subject to a separate fee payable
pursuant to the same Shareholder Services Plan adopted for that class for
administrative support for services, which shall not initially exceed .25% (on
an annualized basis) of the average daily net asset value of BKB Shares
beneficially owned by Customers of Institutions. Services provided by
Institutions for such separate fee may include: (a) aggregating and processing
purchase and redemption requests and placing net purchase and redemption orders
with the distributor; (b) processing dividend payments from an Equity Fund; (c)
providing sub-accounting with respect to BKB Shares or the information necessary
for sub-accounting; and (d) providing periodic mailings to Customers.
Galaxy shall initially limit the total fees payable by BKB Shares of the
Equity Funds pursuant to the Shareholder Services Plan adopted for that class to
an amount which shall not initially exceed .30% (on an annualized basis) of the
average daily net asset value of BKB Shares beneficially owned by Customers of
Institutions.
TRUST SHARES
Trust Shares of the Equity Funds shall be offered to investors maintaining
qualified accounts at bank and trust institutions, including subsidiaries of
FleetBoston Financial Corporation and to participants in employer-sponsored
defined contribution plans. Trust Shares of the International Equity Fund also
shall be offered to clients, members and employees of Oechsle International
Advisors, LLC, the sub-adviser to that Fund.
Trust Shares of the Equity Funds shall not be subject to a sales charge and
shall not initially be subject to the shareholder servicing fee payable pursuant
to the Shareholder Services Plan adopted but not yet implemented with respect to
that class.
(b) BOND FUNDS
RETAIL A SHARES
Retail A Shares of the Bond Funds shall be offered to Direct Investors and
shall be offered to Institutions who purchase shares on behalf of Customers. As
of the date of filing of this Plan with the Commission, Retail A Shares of the
Corporate Bond Fund shall not initially be offered to investors.
Retail A Shares of the Bond Funds shall be subject to a front-end sales
charge which shall not initially exceed 3.75% of the offering price of Retail A
Shares of those Funds (subject to the reductions and exemptions described in the
prospectus and SAI for such Shares). When the aggregate offering price of Retail
A Shares of the Equity and Bond Funds purchased by an investor qualifies the
investor to purchase such Retail A Shares without payment of a front-end sales
charge, a contingent deferred sales charge of 1% may be imposed if such Retail A
Shares are redeemed within one year of purchase.
Retail A Shares of the Bond Funds shall further be subject to a fee payable
pursuant to the Shareholder Services Plan adopted for that class of up to .15%
(on an annualized basis) of the average daily net asset value of Retail A Shares
beneficially owned by Customers of Institutions. Services provided by
Institutions for such fee may include: (a) aggregating and processing purchase
and redemption requests and placing net purchase and redemption orders with the
distributor; (b) processing dividend payments from a Bond Fund; (c) providing
sub-accounting with respect to Retail A Shares or the information necessary for
sub-accounting; and (d) providing periodic mailings to Customers.
Retail A Shares of the Bond Funds shall further be subject to a separate fee
payable pursuant to the same Shareholder Services Plan adopted for that class of
up to .15% (on an annualized basis) of the average daily net asset value of
Retail A Shares beneficially owned by Customers of Institutions. Services
provided by Institutions for such separate fee may include: (a) providing
Customers with information as to their positions in Retail A Shares;
(b) responding to Customer inquiries; and (c) providing a service to invest the
assets of Customers in Retail A Shares.
B-6
<PAGE>
Galaxy shall initially limit the total fees payable by Retail A Shares of
the Bond Funds pursuant to the Shareholder Services Plan adopted for that class
to an amount which shall not initially exceed .15% (on an annualized basis) of
the average daily net asset value of Retail A Shares beneficially owned by
Customers of Institutions.
RETAIL B SHARES
Retail B Shares of the Bond Funds shall be offered to Direct Investors and
to Institutions who purchase the shares on behalf of Customers who are the
beneficial owners of the shares.
Retail B Shares of the Bond Funds, if redeemed within six years of purchase,
shall be subject to a contingent deferred sales charge which shall not initially
exceed 5.0% of the original purchase price or redemption proceeds, whichever is
lower (subject to the reductions and exemptions described in the prospectus and
SAI for such Shares).
Retail B Shares of the Bond Funds shall be further subject to a fee payable
pursuant to the Distribution and Services Plan adopted for that class (a) for
distribution expenses, which shall not initially exceed .65% (on an annualized
basis) of the average daily net asset value of the Bond Funds' respective
outstanding Retail B Shares, (b) for shareholder liaison services, which shall
not initially exceed .25% (on an annualized basis) of the average daily net
assets attributable to Retail B Shares of the respective Bond Funds that are
owned of record or beneficially by customers of securities dealers, brokers,
financial institutions or other industry professionals ("Service Organizations")
that provide shareholder liaison services with respect to such customers' Retail
B Shares, and (c) for administrative support services, which shall not initially
exceed .25% (on an annualized basis) of the average daily net assets
attributable to Retail B Shares of the respective Bond Funds that are owned of
record or beneficially by customers of Service Organizations that provide
administrative support services with respect to such customers' Retail B Shares.
Galaxy shall initially limit the total fees payable by Retail B Shares of
the Bond Funds for shareholder liaison services and administrative support
services pursuant to the Distribution and Services Plan adopted for that class
to an amount not to exceed .15% (on an annualized basis) of the average daily
net asset value of Retail B Shares owned of record or beneficially by customers
of Service Organizations.
Shareholder liaison services provided under the Distribution and Services
Plan means "personal service and/or the maintenance of shareholder accounts"
within the meaning of the Conduct Rules of the NASD, such as responding to
customer inquiries and providing information on their investments.
Administrative support services provided under the Distribution and Services
Plan may include, but are not limited to, (a) transfer agent and subtransfer
agent services for beneficial owners of Retail B Shares; (b) aggregating and
processing purchase and redemption orders; (c) providing beneficial owners with
statements showing their positions in Retail B Shares; (d) processing dividend
payments; (e) providing subaccounting services for Retail B Shares held
beneficially; (f) forwarding shareholder communications, such as proxies,
shareholder reports, dividend and tax notices, and updating prospectuses to
beneficial owners; and (g) reviewing, tabulating and transmitting proxies
executed by beneficial owners.
B-7
<PAGE>
PRIME A SHARES
Prime A Shares of the Bond Funds shall be offered through selected
broker-dealers to individual or institutional customers.
Prime A Shares of the Bond Funds shall be subject to a front-end sales
charge which shall not initially exceed 4.75% of the offering price of Prime A
Shares of those Funds (subject to the reductions and exemptions described in the
prospectus and SAI for such Shares). When the aggregate offering price of Prime
A Shares of the Equity and Bond Funds purchased by an investor qualifies the
investor to purchase such Prime A Shares without payment of a front-end sales
charge, a contingent deferred sales charge of 1% may be imposed if such Prime A
Shares are redeemed within one year of purchase.
Prime A Shares of the Bond Funds shall further be subject to a fee payable
pursuant to the Distribution Plan adopted for that class for distribution
expenses, which shall not initially exceed .30% (on an annualized basis) of the
average daily net asset value of the Bond Funds' respective outstanding Prime A
Shares.
PRIME B SHARES
Prime B Shares of the Bond Funds shall be offered through selected
broker-dealers to individual or institutional customers.
Prime B Shares of the Bond Funds, if redeemed within six years of purchase,
shall be subject to a contingent deferred sales charge which shall not initially
exceed 5.0% of the original purchase price or redemption proceeds, whichever is
lower (subject to the reductions and exemptions described in the prospectus and
SAI for such Shares).
Prime B Shares of the Bond Funds shall be further subject to a fee payable
pursuant to the Distribution and Services Plan adopted for that class (a) for
distribution expenses, which shall not initially exceed .75% (on an annualized
basis) of the average daily net asset value of the Bond Funds' respective
outstanding Prime B Shares, (b) for shareholder liaison services, which shall
not initially exceed .25% (on an annualized basis) of the average daily net
assets attributable to Prime B Shares of the respective Bond Funds that are
owned of record or beneficially by customers of securities dealers, brokers,
financial institutions or other industry professionals ("Service Organizations")
that provide shareholder liaison services with respect to such customers' Prime
B Shares, and (c) for administrative support services, which shall not initially
exceed .25% (on an annualized basis) of the average daily net assets
attributable to Prime B Shares of the respective Bond Funds that are owned of
record or beneficially by customers of Service Organizations that provide
administrative support services with respect to such customers' Prime B Shares.
Galaxy shall initially limit the total fees payable by Prime B Shares of the
Bond Funds for shareholder liaison services and administrative support services
pursuant to the Distribution and Services Plan adopted for that class to an
amount not to exceed .25% (on an annualized basis) of the average daily net
asset value of Prime B Shares owned of record or beneficially by customers of
Service Organizations.
Shareholder liaison services provided under the Distribution and Services
Plan means "personal service and/or the maintenance of shareholder accounts"
within the meaning of the Conduct Rules of the NASD, such as responding to
customer inquiries and providing information on their investments.
Administrative support services provided under the Distribution and Services
Plan may include, but are not limited to, (a) transfer agent and subtransfer
agent services for beneficial owners of Prime B Shares; (b) aggregating and
processing purchase and redemption orders; (c) providing beneficial owners with
statements showing their positions in Prime B Shares; (d) processing dividend
payments; (e) providing subaccounting services for Prime B Shares held
beneficially; (f) forwarding shareholder communications, such as proxies,
shareholder reports, dividend and tax notices, and updating prospectuses to
beneficial owners; and (g) reviewing, tabulating and transmitting proxies
executed by beneficial owners.
B-8
<PAGE>
BKB SHARES
BKB Shares of the Bond Funds shall be issued to retail shareholders of
corresponding portfolios of the 1784 Funds in connection with the Galaxy/1784
Reorganization. Following the Galaxy/1784 Reorganization, BKB Shares of the Bond
Funds shall be available for purchase only by those shareholders who received
BKB Shares in the Galaxy/1784 Reorganization.
BKB Shares of the Bond Funds shall not be subject to a sales charge.
BKB Shares of the Bond Funds shall be subject to a fee payable pursuant to
the Shareholder Services Plan adopted for that class for shareholder liaison
services, which shall not initially exceed .15% (on an annualized basis) of the
average daily net asset value of BKB Shares beneficially owned by Customers of
Institutions. Services provided by Institutions for such fee may include:
(a) providing Customers with information as to their positions in BKB Shares;
(b) responding to Customer inquiries; and (c) providing a service to invest the
assets of Customers in BKB Shares.
BKB Shares of the Bond Funds shall further be subject to a separate fee
payable pursuant to the same Shareholder Services Plan adopted for that class
for administrative support services, which shall not initially exceed .15% (on
an annualized basis) of the average daily net asset value of BKB Shares
beneficially owned by Customers of Institutions. Services provided by
Institutions for such separate fee may include: (a) aggregating and processing
purchase and redemption requests and placing net purchase and redemption orders
with the distributor; (b) processing dividend payments from a Bond Fund; (c)
providing sub-accounting with respect to BKB Shares or the information necessary
for sub-accounting; and (d) providing periodic mailings to Customers.
Galaxy shall initially limit the total fees payable by BKB Shares of the
Bond Funds pursuant to the Shareholder Services Plan adopted for that class to
an amount which shall not initially exceed .15% (on an annualized basis) of the
average daily net asset value of BKB Shares beneficially owned by Customers of
Institutions.
TRUST SHARES
Trust Shares of the Bond Funds shall be offered to investors maintaining
qualified accounts at bank and trust institutions, including subsidiaries of
FleetBoston Corporation and, with respect to each Bond Fund other than the
tax-exempt Bond Funds, to participants in employer-sponsored defined
contribution plans. Trust Shares of the Corporate Bond Fund shall also be
offered to Direct Investors and to Institutions who purchase shares on behalf of
Customers. As of the date of filing of this Plan with the Commission, Trust
Shares of the Rhode Island Municipal Bond Fund shall not initially be offered to
investors.
Trust Shares of the Bond Funds shall not be subject to a sales charge and
shall not initially be subject to the shareholder servicing fee payable pursuant
to the Shareholder Services Plan adopted but not yet implemented with respect to
that class.
(c) MONEY MARKET FUNDS
RETAIL A SHARES
Retail A Shares of the Money Market Funds shall be offered to Direct
Investors and shall be offered to Institutions who purchase shares on behalf of
Customers.
Retail A Shares of the Money Market Funds shall not be subject to a sales
charge.
Retail A Shares of the Money Market Funds shall be subject to a shareholder
servicing fee payable pursuant to the Shareholder Services Plan adopted for that
class of up to .25% (on an annualized basis) of the average daily net asset
value of the Retail A Shares beneficially owned by Customers of Institutions.
B-9
<PAGE>
Services provided by Institutions for such fee may include: (a) aggregating
and processing purchase and redemption requests and placing net purchase and
redemption orders with Galaxy's distributor; (b) processing dividend payments
from a Money Market Fund; (c) providing Customers with information as to their
position in BKB Shares; (d) providing sub-accounting with respect to Retail A
Shares or the information necessary for sub-accounting; and (e) providing
periodic mailings to Customers.
Galaxy shall initially limit the shareholder servicing fee payable by Retail
A Shares of the Money Market Funds pursuant to the Shareholder Services Plan
adopted for that class to an amount which shall not initially exceed .10% (on an
annualized basis) of the average daily net asset value of Retail A Shares
beneficially owned by Customers of Institutions.
RETAIL B SHARES
Retail B Shares of the Money Market Fund shall be offered to Direct
Investors and to Institutions who purchase the shares on behalf of Customers who
are the beneficial owners of the shares.
Retail B Shares of the Money Market Fund, if redeemed within six years of
purchase, shall be subject to a contingent deferred sales charge which shall not
initially exceed 5.0% of the original purchase price or redemption proceeds,
whichever is lower (subject to the reductions and exemptions described in the
prospectus and SAI for such Shares).
Retail B Shares of the Money Market Fund shall be further subject to a fee
payable pursuant to the Distribution and Services Plan adopted for that class
(a) for distribution expenses, which shall not initially exceed .65% (on an
annualized basis) of the average daily net asset value of the Money Market
Fund's outstanding Retail B Shares, (b) for shareholder liaison services, which
shall not initially exceed .05% (on an annualized basis) of the average daily
net assets attributable to Retail B Shares of the Money Market Fund that are
owned of record or beneficially by customers of securities dealers, brokers,
financial institutions or other industry professionals ("Service Organizations")
that provide shareholder liaison services with respect to such customers' Retail
B Shares, and (c) for administrative support services, which shall not initially
exceed .05% (on an annualized basis) of the average daily net assets
attributable to Retail B Shares of the Money Market Fund that are owned of
record or beneficially by customers of Service Organizations that provide
administrative support services with respect to such customers' Retail B Shares.
Shareholder liaison services provided under the Distribution and Services
Plan means "personal service and/or the maintenance of shareholder accounts"
within the meaning of the Conduct Rules of the NASD, such as responding to
customer inquiries and providing information on their investments.
Administrative support services provided under the Distribution and Services
Plan may include, but are not limited to, (a) transfer agent and subtransfer
agent services for beneficial owners of Retail B Shares; (b) aggregating and
processing purchase and redemption orders; (c) providing beneficial owners with
statements showing their positions in Retail B Shares; (d) processing dividend
payments; (e) providing sub-accounting services for Retail B Shares held
beneficially; (f) forwarding shareholder communications, such as proxies,
shareholder reports, dividend and tax notices, and updating prospectuses to
beneficial owners; and (g) reviewing, tabulating and transmitting proxies
executed by beneficial owners.
PRIME SHARES
Prime Shares of the Money Market Funds shall be offered through selected
broker-dealers to individual or institutional customers.
Prime Shares of the Money Market Funds shall not be subject to a sales
charge.
Prime Shares of the Money Market Funds will be subject to a fee payable
pursuant to the Distribution and Services Plan adopted for that class (a) for
distribution expenses, which shall not initially exceed .75% (on an annualized
basis) of the average daily net asset value of the Money Market Funds'
respective
B-10
<PAGE>
outstanding Prime Shares, and (b) for administrative support services, which
shall not initially exceed .25% (on an annualized basis) of the average daily
net assets attributable to Prime Shares of the respective Money Market Funds
that are owned of record or beneficially by customers of Service Organizations
that provide administrative support services with respect to such customers'
Prime Shares.
Administrative support services provided under the Distribution and Services
Plan may include, but are not limited to, (a) processing dividend and
distribution payments; (b) providing beneficial owners with statements showing
their positions in Prime Shares; (c) arranging for bank wires; (d) responding to
routine inquiries from beneficial owners concerning their investments in Prime
Shares; (e) providing subaccounting services for Prime Shares; (f) forwarding
shareholder communications, such as proxies, shareholder reports, dividends and
tax notices, and updating prospectuses to beneficial owners; and
(g) aggregating and processing purchase and redemption orders and placing net
purchase and redemption orders for beneficial owners.
BKB SHARES
BKB Shares of the Money Market Funds shall be issued to retail shareholders
of corresponding portfolios of the 1784 Funds in connection with the Galaxy/1784
Reorganization. Following the Galaxy/1784 Reorganization, BKB Shares of the
Money Market Funds shall be available for purchase only by those shareholders
who received BKB Shares in the Galaxy/1784 Reorganization.
BKB Shares of the Money Market Funds shall not be subject to a sales charge.
BKB Shares of the Money Market Funds shall be subject to a fee payable
pursuant to the Shareholder Services Plan adopted for that class for shareholder
liaison and/or administrative support services, which shall not initially exceed
.25% (on an annualized basis) of the average daily net asset value of BKB Shares
beneficially owned by Customers of Institutions.
Services provided by Institutions for such fee may include: (a) aggregating
and processing purchase and redemption requests and placing net purchase and
redemption orders with the distributor; (b) processing dividend payments from a
Money Market Fund; (c) providing Customers with information as to their position
in BKB Shares; (d) providing sub-accounting with respect to BKB Shares or the
information necessary for sub-accounting; and (e) providing periodic mailings to
Customers.
Galaxy shall initially limit the fees payable by BKB Shares of the Money
Market Funds pursuant to the Shareholder Services Plan adopted for that class to
an amount which shall not initially exceed .10% (on an annualized basis) of the
average daily net asset value of BKB Shares beneficially owned by Customers of
Institutions.
TRUST SHARES
Trust Shares of the Money Market Funds shall be offered to investors
maintaining qualified accounts at bank and trust institutions, including
subsidiaries of FleetBoston Corporation, and with respect to each Money Market
Fund other than the Tax-Exempt Fund, to participants in employer-sponsored
defined contribution plans.
Trust Shares of the Money Market Funds shall not be subject to a sales
charge and shall not initially be subject to the shareholder servicing fee
payable pursuant to the Shareholder Services Plan adopted but not yet
implemented with respect to that class.
3. EXCHANGE PRIVILEGES
RETAIL A SHARES
Holders of Retail A Shares generally shall be permitted to exchange their
Retail A Shares in a Fund for Retail A Shares of other Funds of Galaxy or shares
of other funds advised by Fleet Investment Advisors
B-11
<PAGE>
Inc. or its affiliates in which the shareholders maintain an existing account.
No additional sales charge will be incurred when exchanging Retail A Shares of a
Fund for Retail A Shares of another Fund that imposes a sales charge. Galaxy
shall not initially charge any exchange fee.
RETAIL B SHARES
Holders of Retail B Shares generally shall be permitted to exchange their
Retail B Shares in a Fund for Retail B Shares of other Funds of Galaxy without
paying any exchange fee or contingent deferred sales charge at the time the
exchange is made.
PRIME A SHARES
Holders of Prime A Shares generally shall be permitted to exchange their
Prime A Shares in a Fund for Prime A Shares of other Funds of Galaxy. No
additional sales charge will be incurred when exchanging Prime A Shares of a
Fund for Prime A Shares of another Fund. Galaxy shall not initially charge any
exchange fee.
PRIME B SHARES
Holders of Prime B Shares generally shall be permitted to exchange their
Prime B Shares in a Fund for Prime B Shares of other Funds of Galaxy without
paying any exchange fee or contingent deferred sales charge at the time the
exchange is made.
BKB SHARES
Holders of BKB Shares generally shall be permitted to exchange their BKB
Shares in a Fund for BKB Shares of other Funds of Galaxy. Galaxy shall not
initially charge any exchange fee.
PRIME SHARES
Galaxy shall not initially offer an exchange privilege to holders of Prime
Shares.
TRUST SHARES
Galaxy shall not initially offer an exchange privilege to holders of Trust
Shares.
4. CONVERSION FEATURES
RETAIL A SHARES
Galaxy shall not initially offer a conversion feature to holders of Retail A
Shares.
RETAIL B SHARES
Retail B Shares acquired by purchase generally shall convert automatically
to Retail A Shares, based on relative net asset value, six years after the
beginning of the calendar month in which the Shares were purchased.
Retail B Shares acquired through a reinvestment of dividends or
distributions generally shall convert automatically to Retail A Shares, based on
relative net asset value, at the earlier of (a) six years after the beginning of
the calendar month in which the reinvestment occurred or (b) the date of the
most recently purchased Retail B Shares that were not acquired through
reinvestment of dividends or distributions.
PRIME A SHARES
Galaxy shall not initially offer a conversion feature to holders of Prime A
Shares.
B-12
<PAGE>
PRIME B SHARES
Prime B Shares acquired by purchase generally shall convert automatically to
Prime A Shares, based on relative net asset value, eight years after the
beginning of the calendar month in which the Shares were purchased.
Prime B Shares acquired through a reinvestment of dividends or distributions
generally shall convert automatically to Prime A Shares, based on relative net
asset value, at the earlier of (a) eight years after the beginning of the
calendar month in which the reinvestment occurred or (b) the date of the most
recently purchased Prime B Shares that were not acquired through reinvestment of
dividends or distributions.
BKB SHARES
BKB Shares generally shall convert to Retail A Shares, based on relative net
asset value, one year after the date of the Galaxy/1784 Reorganization, provided
that Galaxy's Board of Trustees has determined that such conversion is in the
best interest of the holders of BKB Shares.
PRIME SHARES
Galaxy shall not initially offer a conversion feature to holders of Prime
Shares.
TRUST SHARES
Galaxy shall not initially offer a conversion feature to holders of Trust
Shares.
5. SHAREHOLDER SERVICES
(a) RETIREMENT PLANS
RETAIL A SHARES, RETAIL B SHARES AND BKB SHARES
Galaxy shall initially make Retail A Shares, Retail B Shares and BKB Shares
of the Funds (other than the tax-exempt Funds) available for purchase in
connection with the following tax-deferred prototype retirement plans:
individual retirement accounts, simplified employee pension plans,
multi-employee retirement plans and Keogh plans.
PRIME A SHARES, PRIME B SHARES, PRIME SHARES AND TRUST SHARES
Galaxy shall not initially make Prime A Shares, Prime B Shares, Prime Shares
or Trust Shares of the Funds available for purchase in connection with any
retirement plans.
(b) CHECKWRITING PRIVILEGE
RETAIL A SHARES, RETAIL B SHARES AND BKB SHARES--MONEY MARKET FUNDS
Galaxy shall initially offer a checkwriting privilege to holders of Retail A
Shares, Retail B Shares and/ or BKB Shares of the Money Market Funds. A charge
for use of the checkwriting privilege may be imposed by Galaxy.
RETAIL A SHARES, RETAIL B SHARES AND BKB SHARES--EQUITY FUNDS AND BOND FUNDS
Galaxy shall not initially offer a checkwriting privilege to holders of
Retail A Shares, Retail B Shares or BKB Shares of the Equity or Bond Funds.
B-13
<PAGE>
PRIME A SHARES, PRIME B SHARES, PRIME SHARES AND TRUST SHARES
Galaxy shall not initially offer a checkwriting privilege to holders of
Prime A Shares, Prime B Shares, Prime Shares or Trust Shares.
(c) AUTOMATIC INVESTMENT PROGRAM
RETAIL A SHARES, RETAIL B SHARES AND BKB SHARES
Direct Investors (with respect to Retail A Shares and Retail B Shares) and
all investors (with respect to BKB Shares) shall initially be offered an
automatic investment program whereby a Direct Investor (with respect to Retail A
Shares and Retail B Shares) or an investor (with respect to BKB Shares)
generally may purchase Retail A Shares, Retail B Shares and/or BKB Shares, as
the case may be, of a Fund on a monthly or quarterly basis by having a specific
amount of money debited from his/her account at a financial institution.
Galaxy shall not initially offer an automatic investment program to
Customers of Institutions.
PRIME A SHARES, PRIME B SHARES, PRIME SHARES AND TRUST SHARES
Galaxy shall not initially offer an automatic investment program to holders
of Prime A Shares, Prime B Shares, Prime Shares or Trust Shares.
(d) SYSTEMATIC WITHDRAWAL PLAN
RETAIL A SHARES, RETAIL B SHARES AND BKB SHARES
Direct Investors (with respect to Retail A Shares and Retail B Shares) and
all investors (with respect to BKB Shares) shall initially be offered a
systematic withdrawal plan which, in general, shall permit a Direct Investor
(with respect to Retail A Shares and Retail B Shares) or an investor (with
respect to BKB Shares) to automatically redeem Retail A Shares, Retail B Shares
and/or BKB Shares, as the case may be, on a monthly, quarterly, semi-annual or
annual basis.
Galaxy shall not initially offer a systematic withdrawal plan to Customers
of Institutions.
PRIME A SHARES, PRIME B SHARES, PRIME SHARES AND TRUST SHARES
Galaxy shall not initially offer a systematic withdrawal plan to holders of
Prime A Shares, Prime B Shares, Prime Shares or Trust Shares.
(e) COLLEGE INVESTMENT PROGRAM
RETAIL A SHARES, RETAIL B SHARES AND BKB SHARES
Direct Investors (with respect to Retail A Shares and Retail B Shares) and
all investors (with respect to BKB Shares) shall initially be offered a college
investment program whereby a Direct Investor (with respect to Retail A Shares
and Retail B Shares) or an investor (with respect to BKB Shares) may purchase
Retail A Shares, Retail B Shares and/or BKB Shares of a Fund as a means to
finance a college savings plan.
Galaxy shall not initially offer a college investment program to Customers
of Institutions.
PRIME A SHARES, PRIME B SHARES, PRIME SHARES AND TRUST SHARES
Galaxy shall not initially offer a college investment program to holders of
Prime A Shares, Prime B Shares, Prime Shares or Trust Shares.
B-14
<PAGE>
(f) DIRECT DEPOSIT PROGRAM
RETAIL A SHARES, RETAIL B SHARES AND BKB SHARES
Direct Investors (with respect to Retail A Shares and Retail B Shares) and
all investors (with respect to BKB Shares) receiving social security benefits
shall initially be eligible for a direct deposit program whereby a Direct
Investor (with respect to Retail A Shares and Retail B Shares) or an investor
(with respect to BKB Shares) generally may purchase Retail A Shares, Retail B
Shares and/or BKB Shares of a Fund by having social security payments
automatically deposited into his or her Fund account.
Galaxy shall not initially offer a direct deposit program to Customers of
Institutions.
PRIME A SHARES, PRIME B SHARES, PRIME SHARES AND TRUST SHARES
Galaxy shall not initially offer a direct deposit program to holders of
Prime A Shares, Prime B Shares, Prime Shares or Trust Shares.
(g) INFORMATION SERVICES
RETAIL A SHARES, RETAIL B SHARES AND BKB SHARES
Holders of Retail A Shares, Retail B Shares and BKB Shares shall initially
be able to obtain Fund performance and investment information 24 hours a day, 7
days a week by telephoning the Galaxy Information Center--24 Hour Information
Service.
Galaxy shall initially offer Direct Investors (with respect to Retail A
Shares and Retail B Shares) and all investors (with respect to BKB Shares) a
Voice Response System which, in general, will provide a Direct Investor (with
respect to Retail A Shares and Retail B Shares) or an investor (with respect to
BKB Shares) with automated telephone access to Fund and account information and
the ability to make telephone exchanges and redemptions. Galaxy shall not
initially offer Customers of Institutions a voice response system.
Galaxy shall initially offer Direct Investors (with respect to Retail A
Shares and Retail B Shares) and all investors (with respect to BKB Shares) a
Galaxy Shareholder Services telephone number which, in general, will provide a
Direct Investor (with respect to Retail A Shares and Retail B Shares) or an
investor (with respect to BKB Shares) with account information and recent
exchange transaction information. Galaxy shall not initially offer Customers of
Institutions a shareholder services telephone number.
PRIME A SHARES, PRIME B SHARES, PRIME SHARES AND TRUST SHARES
Galaxy shall initially offer holders of Prime A Shares, Prime B Shares,
Prime Shares and Trust Shares a telephone number to call for applications and
information concerning initial purchases and current performance and a telephone
number to call for additional purchases, redemptions, exchanges and other
shareholder services.
Galaxy shall initially offer holders of Trust Shares in the Corporate Bond
Fund the information services described for Retail Shares.
(h) PAYROLL DEDUCTION PROGRAM
RETAIL A SHARES, RETAIL B SHARES AND BKB SHARES
Direct Investors (with respect to Retail A Shares and Retail B Shares) and
all investors (with respect to BKB Shares) shall initially be offered a payroll
deduction program whereby a Direct Investor (with respect to Retail A Shares and
Retail B Shares) or an investor (with respect to BKB Shares) may purchase Retail
A Shares, Retail B Shares and/or BKB Shares of a Fund each pay period by having
a specific amount of money debited from his/her paycheck.
B-15
<PAGE>
Galaxy shall not initially offer a payroll deduction program to Customers of
Institutions.
PRIME A SHARES, PRIME B SHARES, PRIME SHARES AND TRUST SHARES
Galaxy shall not initially offer a payroll deduction program to holders of
Prime A Shares, Prime B Shares, Prime Shares or Trust Shares.
6. METHODOLOGY FOR ALLOCATING EXPENSES AMONG CLASSES
Class-specific expenses of a Fund shall be allocated to the specific class
of shares of that Fund. Non-class-specific expenses of a Fund shall be allocated
in accordance with Rule 18f-3(c) under the 1940 Act.
B-16
<PAGE>
APPENDIX II
EXPENSE SUMMARIES OF THE 1784 FUNDS
AND CORRESPONDING GALAXY FUNDS
The following tables (a) compare the fees and expenses as of October 31,
1999, for the 1784 Funds and their Corresponding Galaxy Funds and (b) show the
estimated fees and expenses for the Corresponding Galaxy Funds on a pro forma
basis after giving effect to the Reorganization. The purpose of these tables is
to assist shareholders in understanding the various costs and expenses that
investors in these portfolios will bear as shareholders. The tables do not
reflect any charges that may be imposed by institutions directly on their
customer accounts in connection with investments in the portfolios. The fund
operating expense levels shown in this Proxy/Prospectus assume current net asset
levels; PRO FORMA expense levels shown should not be considered an actual
representation of future expenses or performance. Such PRO FORMA expense levels
project anticipated levels but may be greater or less than those shown.
The Galaxy Institutional Treasury Money Market Fund, Galaxy Institutional
Money Market Fund, Galaxy Intermediate Tax-Exempt Bond Fund, Galaxy Connecticut
Intermediate Municipal Bond Fund, Galaxy Florida Municipal Bond Fund, Galaxy
Massachusetts Intermediate Municipal Bond Fund and Galaxy Growth Fund II are new
investment portfolios with nominal assets and liabilities that will commence
investment operations upon the completion of the Reorganization.
In considering the consequences of the Reorganization, if you are a Retail
Shareholder, you should note that BKB Shares of the Galaxy Fund will convert to
Retail A Shares of the Galaxy Fund one year after the Reorganization, provided
that the Galaxy Board of Trustees determines that converting the shares is in
the best interests of the Retail Shareholders holding BKB Shares. Fleet has
committed to waive shareholder servicing fees as needed to ensure that until the
later of one year from the date of the reorganization or such time as the Galaxy
Board of Trustees votes on the conversion of the BKB Shares to Retail A Shares,
the Galaxy Funds' total operating expense ratios will not exceed the PRO FORMA
after waiver expense ratios in Table I-B above.
II-1
<PAGE>
BOSTON 1784 TAX-FREE MONEY MARKET FUND--SHARES
GALAXY TAX-EXEMPT FUND--TRUST SHARES,
BKB SHARES AND RETAIL A SHARES
<TABLE>
<CAPTION>
BOSTON 1784 TAX- GALAXY TAX- COMBINED FUND
FREE MONEY EXEMPT FUND PRO FORMA
MARKET FUND ------------------------------ ------------------------------
---------------- TRUST BKB RETAIL A TRUST BKB RETAIL A
ALL SHARES+ SHARES SHARES SHARES SHARES SHARES SHARES
---------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES:
Maximum Sales Load
Imposed on Purchases (as a
percentage of offering
price)......................... None None None None None None None
Maximum Sales Load Imposed on
Reinvested Dividends........... None None None None None None None
Maximum Deferred Sales Load (as a
Percentage of redemption
proceeds)...................... None None None None None None None
Redemption Fees.................. None None None None None None None
Exchange Fee..................... None None None None None None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net
assets)
Management Fees (before
waivers)(1).................... 0.40% 0.40% ++ 0.40% 0.40% 0.40% 0.40%
Distribution and Service (12b-1)
Fees........................... None None ++ None None None None
Other Expenses(2)................ 0.11% 0.12% ++ 0.24% 0.10% 0.22% 0.22%
---- ---- ---- ---- ---- ---- ----
TOTAL FUND OPERATING EXPENSES(3)
(before waivers)................. 0.51% 0.52% ++ 0.64% 0.50% 0.62% 0.62%
==== ==== ==== ==== ==== ==== ====
</TABLE>
- ------------------------
+ Boston 1784 Tax-Free Money Market Fund currently sells its shares without
class designation.
++ BKB Shares will not be issued until the Reorganization is effective.
(1) Management Fees (after waivers) would be 0.37% for the Combined Fund PRO
FORMA.
(2) Affiliates of the Galaxy Fund's investment adviser are currently waiving a
portion of shareholder servicing fees (that are included in Other Expenses)
so that Other Expenses are 0.15% for the BKB Shares of the Combined Fund PRO
FORMA.
(3) Total Fund Operating Expenses (after waivers) would be:
<TABLE>
<CAPTION>
TRUST SHARES BKB SHARES RETAIL A SHARES
------------ ---------- ---------------
<S> <C> <C> <C>
Combined Fund PRO FORMA............................. 0.47% 0.52% 0.59%
</TABLE>
II-2
<PAGE>
EXAMPLE:*
You would pay the following expenses on a $10,000 investment, assuming
(1) 5% gross annual return and (2) the operating expenses remain the same as
those shown on the above table:
<TABLE>
<CAPTION>
BOSTON 1784
TAX-FREE
MONEY MARKET GALAXY TAX- COMBINED FUND
FUND EXEMPT FUND PRO FORMA
------------ ------------------------------ ------------------------------
TRUST BKB RETAIL A TRUST BKB RETAIL A
ALL SHARES SHARES SHARES SHARES SHARES SHARES SHARES
------------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 year..... $ 52 $ 53 N/A $ 65 $ 51 $63** $ 63
3 years.... $164 $167 N/A $205 $160 N/A $199
5 years.... $285 $291 N/A $357 $280 N/A $346
10 years... $640 $653 N/A $798 $628 N/A $774
</TABLE>
- ------------------------
* THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5%
ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN. ACTUAL RETURN MAY BE
GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL
DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED.
** BKB SHARES WILL CONVERT TO RETAIL A SHARES ON THE FIRST ANNIVERSARY OF
THE REORGANIZATION OF THE BOSTON 1784 TAX-FREE MONEY MARKET FUND INTO THE
GALAXY TAX-EXEMPT FUND PROVIDED THAT GALAXY'S BOARD OF TRUSTEES
DETERMINES THAT THE CONVERSION IS IN THE BEST INTERESTS OF THE HOLDERS OF
BKB SHARES.
The purpose of the foregoing tables is to assist an investor in
understanding the various costs and expenses that an investor in the Funds will
bear directly or indirectly.
II-3
<PAGE>
BOSTON 1784 U.S. TREASURY MONEY MARKET FUND--SHARES
GALAXY U.S. TREASURY FUND--TRUST SHARES,
BKB SHARES AND RETAIL A SHARES
<TABLE>
<CAPTION>
BOSTON 1784
U.S. TREASURY
MONEY GALAXY U.S. COMBINED FUND
MARKET FUND TREASURY FUND PRO FORMA
------------- ------------------------------ ------------------------------
TRUST BKB RETAIL A TRUST BKB RETAIL A
ALL SHARES+ SHARES SHARES SHARES SHARES SHARES SHARES
------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on
Purchases (as a percentage of
offering price).................... None None None None None None None
Maximum Sales Load Imposed on
Reinvested Dividends............... None None None None None None None
Maximum Deferred Sales Load (as a
Percentage of redemption
proceeds).......................... None None None None None None None
Redemption Fees...................... None None None None None None None
Exchange Fee......................... None None None None None None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net
assets)
Management Fees (before
waivers)(1)........................ 0.40% 0.39% ++ 0.39% 0.38% 0.38% 0.38%
Distribution and Service (12b-1)
Fees............................... None None ++ None None None None
Other Expenses....................... 0.32% 0.12% ++ 0.26% 0.10% 0.25% 0.25%
---- ---- ---- ---- ---- ----
TOTAL FUND OPERATING EXPENSES (before
waivers)(2).......................... 0.72% 0.51% ++ 0.65% 0.48% 0.63% 0.63%
==== ==== ==== ==== ==== ====
</TABLE>
- ------------------------
+ Boston 1784 U.S. Treasury Money Market Fund currently sells its shares
without class designation.
++ BKB Shares will not be issued until the Reorganization is effective.
(1) Management Fees (after waivers) would be:
Boston 1784 U.S. Treasury Money Market Fund 0.33%
(2) Total Fund Operating Expenses (after waivers) would be:
<TABLE>
<CAPTION>
SHARES
--------
<S> <C>
Boston 1784 U.S. Treasury Money Market Fund........... 0.65%
</TABLE>
II-4
<PAGE>
EXAMPLE:*
You would pay the following expenses on a $10,000 investment, assuming
(1) 5% gross annual return and (2) the operating expenses remain the same as
those shown in the above table:
<TABLE>
<CAPTION>
BOSTON 1784
U.S. TREASURY
MARKET
MONEY GALAXY U.S. COMBINED FUND
FUND TREASURY FUND PRO FORMA
------------- ------------------------------------ ------------------------------------
TRUST BKB RETAIL A TRUST BKB RETAIL A
ALL SHARES SHARES SHARES SHARES SHARES SHARES SHARES
------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 year...................... $ 74 $ 52 N/A $ 66 $ 49 $ 64** $ 64
3 years..................... $230 $164 N/A $208 $154 N/A $202
5 years..................... $401 $285 N/A $362 $269 N/A $351
10 years.................... $894 $640 N/A $810 $604 N/A $786
</TABLE>
- ------------------------
* THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN. ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE
REINVESTED.
** BKB SHARES WILL CONVERT TO RETAIL A SHARES ON THE FIRST ANNIVERSARY OF THE
REORGANIZATION OF THE BOSTON 1784 U.S. TREASURY MONEY MARKET FUND INTO THE
GALAXY U.S. TREASURY FUND PROVIDED THAT GALAXY'S BOARD OF TRUSTEES
DETERMINES THAT THE CONVERSION IS IN THE BEST INTERESTS OF THE HOLDERS OF
BKB SHARES.
The purpose of the foregoing tables is to assist an investor in
understanding the various costs and expenses that an investor in the Funds will
bear directly or indirectly.
II-5
<PAGE>
BOSTON 1784 INSTITUTIONAL U.S. TREASURY
MONEY MARKET FUND--SHARES
GALAXY INSTITUTIONAL TREASURY
MONEY MARKET FUND--SHARES
<TABLE>
<CAPTION>
GALAXY INSTITUTIONAL
BOSTON 1784 TREASURY
INSTITUTIONAL MONEY MARKET
U.S. TREASURY FUND
MONEY MARKET FUND PRO FORMA
----------------- --------------------
SHARES SHARES
----------------- --------------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases (as a percentage
of offering price).................................... None None
Maximum Sales Load Imposed on Reinvested Dividends...... None None
Maximum Deferred Sales Load (as a percentage of
redemption proceeds).................................. None None
Redemption Fees......................................... None None
Exchange Fee............................................ None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)
Management Fees (before waivers)........................ 0.20% 0.20%
Distribution and Service (12b-1) Fees................... None None
Other Expenses(1)....................................... 0.11% 0.10%
---- ----
TOTAL FUND OPERATING EXPENSES (before waivers)(2)......... 0.31% 0.30%
==== ====
</TABLE>
- ------------------------
(1) The administrator of the Galaxy Institutional Treasury Money Market Fund has
agreed to waive fees such that Other Expenses (after waivers) would be
0.06%.
(2) Total Fund Operating Expenses (after waivers) would be:
<TABLE>
<CAPTION>
SHARES
--------
<S> <C>
Galaxy Institutional Treasury Money Market Fund Pro Forma... 0.26%
</TABLE>
EXAMPLE:*
You would pay the following expenses on a $10,000 investment, assuming (1)
5% gross annual return and (2) the operating expenses remain the same as those
shown in the above table:
<TABLE>
<CAPTION>
BOSTON 1784 GALAXY INSTITUTIONAL
INSTITUTIONAL U.S. TREASURY MONEY
TREASURY MONEY MARKET FUND
MARKET FUND PRO FORMA
------------------ --------------------
SHARES SHARES
------------------ --------------------
<S> <C> <C>
1 year....................................... $ 32 $ 31
3 years...................................... $100 $ 97
5 years...................................... $174 $169
10 years..................................... $393 $381
</TABLE>
- ------------------------
* THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN. ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
THESE EXAMPLES ASSUME THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE
REINVESTED.
The purpose of the foregoing tables is to assist an investor in
understanding the various costs and expenses that an investor in the Funds will
bear directly or indirectly.
II-6
<PAGE>
BOSTON 1784 PRIME MONEY MARKET FUND--SHARES
GALAXY MONEY MARKET FUND--TRUST SHARES,
BKB SHARES AND RETAIL A SHARES
<TABLE>
<CAPTION>
BOSTON 1784
PRIME MONEY GALAXY COMBINED FUND
MARKET FUND MONEY MARKET FUND PRO FORMA
----------- ------------------------------ ----------------------------------
TRUST BKB RETAIL A TRUST BKB RETAIL A
ALL SHARES+ SHARES SHARES SHARES SHARES SHARES SHARES
----------- -------- -------- -------- -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on
Purchases (as a percentage of
offering price)................. None None None None None None None
Maximum Sales Load Imposed on
Reinvested Dividends............ None None None None None None None
Maximum Deferred Sales Load (as a
Percentage of redemption
proceeds)....................... None None None None None None None
Redemption Fees................... None None None None None None None
Exchange Fee...................... None None None None None None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net
assets)
Management Fees (before
waivers)(1)..................... 0.40% 0.40% ++ 0.40% 0.40% 0.40% 0.40%
Distribution and Service (12b-1)
Fees............................ None None ++ None None None None
Other Expenses.................... 0.33% 0.11% ++ 0.28% 0.11% 0.27% 0.27%
---- ---- ---- ---- ---- ----
TOTAL FUND OPERATING EXPENSES
(BEFORE WAIVERS)(2)............... 0.73% 0.51% ++ 0.68% 0.51% 0.67% 0.67%
==== ==== ==== ==== ==== ====
</TABLE>
- ------------------------
+ Boston 1784 Prime Money Market Fund currently sells its shares without class
designation.
++ BKB Shares will not be issued until the Reorganization is effective.
(1) Management Fees (after waivers) would be:
<TABLE>
<S> <C>
Boston 1784 Prime Money Market Fund......................... 0.32%
Galaxy Money Market Fund.................................... 0.36%
Combined Fund PRO FORMA..................................... 0.36%
</TABLE>
(2) Total Fund Operating Expenses (after waivers) would be:
<TABLE>
<CAPTION>
RETAIL A
SHARES TRUST SHARES BKB SHARES SHARES
-------- ------------ ---------- --------
<S> <C> <C> <C> <C>
Boston 1784 Prime Money
Market Fund........................... 0.65% -- -- --
Galaxy Money Market Fund.............. -- 0.47% -- 0.64%
Combined Fund PRO FORMA............... -- 0.47% 0.63% 0.63%
</TABLE>
II-7
<PAGE>
EXAMPLE:*
You would pay the following expenses on a $10,000 investment, assuming
(1) 5% gross annual return and (2) the operating expenses remain the same as
those shown in the above table:
<TABLE>
<CAPTION>
BOSTON 1784
PRIME MONEY GALAXY COMBINED FUND
MARKET FUND MONEY MARKET FUND PRO FORMA
----------- ------------------------------ ----------------------------------
TRUST BKB RETAIL A TRUST BKB RETAIL A
ALL SHARES SHARES SHARES SHARES SHARES SHARES SHARES
----------- -------- -------- -------- -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 year............... $ 75 $ 52 N/A $ 69 $ 52 $ 68** $ 68
3 years.............. $233 $164 N/A $218 $164 N/A $214
5 years.............. $406 $285 N/A $379 $285 N/A $373
10 years............. $906 $640 N/A $847 $640 N/A $835
</TABLE>
- ------------------------
* THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN. ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE
REINVESTED.
** BKB SHARES WILL CONVERT TO RETAIL A SHARES ON THE FIRST ANNIVERSARY OF THE
REORGANIZATION OF THE BOSTON 1784 PRIME MONEY MARKET FUND INTO THE GALAXY
MONEY MARKET FUND PROVIDED THAT GALAXY'S BOARD OF TRUSTEES DETERMINES THAT
THE CONVERSION IS IN THE BEST INTERESTS OF THE HOLDERS OF BKB SHARES.
The purpose of the foregoing tables is to assist an investor in
understanding the various costs and expenses that an investor in the Funds will
bear directly or indirectly.
II-8
<PAGE>
BOSTON 1784 INSTITUTIONAL PRIME MONEY MARKET FUND--SHARES
GALAXY INSTITUTIONAL MONEY MARKET FUND--SHARES
<TABLE>
<CAPTION>
BOSTON 1784 GALAXY INSTITUTIONAL
INSTITUTIONAL PRIME MONEY
MONEY MARKET MARKET FUND
FUND PRO FORMA
------------------- --------------------
SHARES SHARES
------------------- --------------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases (as a percentage
of offering price)..................................... None None
Maximum Sales Load Imposed on Reinvested Dividends....... None None
Maximum Deferred Sales Load (as a percentage of
redemption proceeds)................................... None None
Redemption Fees.......................................... None None
Exchange Fee............................................. None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)
Management Fees (before waivers)(1)...................... 0.20% 0.20%
Distribution and Service (12b-1) Fees.................. None None
Other Expenses(2)........................................ 0.15% 0.10%
---- ----
TOTAL FUND OPERATING EXPENSES (BEFORE WAIVERS)(3)........ 0.35% 0.30%
==== ====
</TABLE>
- ------------------------
<TABLE>
<S> <C> <C>
(1) Management Fees (after waivers) would be:
Boston 1784 Institutional Prime Money Market Fund......................... 0.15%
(2) The administrator of the Galaxy Institutional Money Market Fund has agreed
to waive fees such that Other Expenses (after waivers) would be 0.08%.
(3) Total Fund Operating Expenses (after waivers) would be:
Boston 1784 Institutional Prime Money Market Fund......................... 0.30%
Galaxy Institutional Money Market Fund Pro Forma.......................... 0.28%
</TABLE>
EXAMPLE:*
You would pay the following expenses on a $10,000 investment, assuming
(1) 5% gross annual return and (2) the operating expenses remain the same
as those shown in the above table:
<TABLE>
<CAPTION>
BOSTON 1784
INSTITUTIONAL GALAXY INSTITUTIONAL
PRIME MONEY
MONEY MARKET MARKET FUND
FUND PRO FORMA
------------- --------------------
SHARES SHARES
------------- --------------------
<S> <C> <C>
1 year.................................... $ 36 $ 31
3 years................................... $113 $ 97
5 years................................... $197 $169
10 years.................................. $443 $381
</TABLE>
- ------------------------
* THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN. ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
THESE EXAMPLES ASSUME THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE
REINVESTED.
The purpose of the foregoing tables is to assist an investor in
understanding the various costs and expenses that an investor in the Funds will
bear directly or indirectly.
II-9
<PAGE>
BOSTON 1784 SHORT-TERM INCOME FUND--SHARES
GALAXY SHORT-TERM BOND FUND--TRUST SHARES,
BKB SHARES AND RETAIL A SHARES
<TABLE>
<CAPTION>
BOSTON 1784
SHORT-TERM
INCOME GALAXY SHORT- COMBINED FUND
FUND TERM BOND FUND PRO FORMA
----------- ------------------------------ ------------------------------
ALL TRUST BKB RETAIL A TRUST BKB RETAIL A
SHARES+ SHARES SHARES SHARES SHARES SHARES SHARES
----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES:
Maximum Sales Load Imposed
on Purchases (as a
percentage of offering
price).................... None None None 3.75% None None 3.75%(1)
Maximum Sales Load Imposed
on Reinvested Dividends... None None None None None None None
Maximum Deferred Sales Load
(as a Percentage of
redemption proceeds)...... None None None None(2) None None None(1),(2)
Redemption Fees............. None None None None None None None
Exchange Fee................ None None None None None None None
ANNUAL FUND OPERATING
EXPENSES:
(as a percentage of average
net assets)
Management Fees (before
waivers)(3)............... 0.50% 0.75% ++ 0.75% 0.75% 0.75% 0.75%
Distribution and Service
(12b-1) Fees(4)........... 0.25% None ++ None None None None
Other Expenses (before
waivers)(5)............... 0.14% 0.31% ++ 0.55% 0.24% 0.38% 0.40%
---- ---- ---- ---- ---- ---- ----
TOTAL FUND OPERATING EXPENSES
(BEFORE WAIVERS)(6)......... 0.89% 1.06% ++ 1.30% 0.99% 1.13% 1.15%
==== ==== ==== ==== ==== ==== ====
</TABLE>
- ------------------------
+ The Boston 1784 Short-Term Income Fund currently sells its shares without
class designation.
++ BKB Shares will not be issued until the Reorganization is effective.
(1) There will be no sales load imposed on the conversion of BKB Shares to
Retail A Shares, and no front-end or contingent deferred sales load will be
imposed on subsequent purchases of Retail A Shares by former 1784 Fund
shareholders so long as they keep their account with Galaxy continuously
open.
(2) Except for investments of $500,000 or more. See Appendix IV.
(3) Management Fees (after waivers) would be:
<TABLE>
<S> <C>
Galaxy Short-Term Bond Fund................................. 0.55%
Combined Fund Pro Forma..................................... 0.55%
</TABLE>
(4) The Distributor of the 1784 Funds currently waives its entire Distribution
and Service Fee.
II-10
<PAGE>
(5) Affiliates of the Galaxy Fund's investment adviser are currently waiving a
portion of shareholder servicing fees (that are included in Other Expenses)
so that Other Expenses are 0.23% for BKB Shares of the Combined Fund PRO
FORMA.
(6) Total Fund Operating Expenses (after waivers) would be:
<TABLE>
<CAPTION>
TRUST BKB RETAIL A
SHARES SHARES SHARES SHARES
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Boston 1784 Short-Term Income Fund........................ 0.64% -- -- --
Galaxy Short-Term Bond Fund............................... -- 0.86% -- 1.10%
Combined Fund Pro Forma................................... -- 0.79% 0.78% 0.95%
</TABLE>
EXAMPLE:*
You would pay the following expenses on a $10,000 investment, assuming
(1) 5% gross annual return and (2) the operating expenses remain the same as
those shares in the above table:
<TABLE>
<CAPTION>
BOSTON 1784
SHORT-TERM
INCOME GALAXY SHORT-TERM BOND COMBINED FUND
FUND FUND PRO FORMA
----------- ------------------------------ ----------------------------------
TRUST BKB RETAIL A TRUST BKB RETAIL A
ALL SHARES SHARES SHARES SHARES SHARES SHARES SHARES
----------- -------- -------- -------- -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 year............... $ 91 $ 108 N/A $ 502 $ 101 $ 115** $ 488
3 years.............. $ 284 $ 337 N/A $ 772 $ 315 N/A $ 727
5 years.............. $ 493 $ 585 N/A $1,061 $ 547 N/A $ 984
10 years............. $1,096 $1,294 N/A $1,884 $1,213 N/A $1,720
</TABLE>
- ------------------------
* THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN. ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE
REINVESTED.
** BKB SHARES WILL CONVERT TO RETAIL A SHARES ON THE FIRST ANNIVERSARY OF THE
REORGANIZATION OF THE BOSTON 1784 SHORT-TERM INCOME FUND INTO THE GALAXY
SHORT-TERM BOND FUND PROVIDED THAT GALAXY'S BOARD OF TRUSTEES DETERMINES
THAT THE CONVERSION IS IN THE BEST INTERESTS OF THE HOLDERS BKB SHARES.
The purpose of the foregoing tables is to assist an investor in understanding
the various costs and expenses that an investor in the Funds will bear directly
or indirectly.
II-11
<PAGE>
BOSTON 1784 INCOME FUND--SHARES
GALAXY HIGH QUALITY BOND FUND--TRUST SHARES, BKB SHARES AND RETAIL A SHARES
<TABLE>
<CAPTION>
BOSTON 1784 GALAXY HIGH COMBINED FUND
INCOME QUALITY BOND FUND PRO FORMA
FUND ------------------------------ ------------------------------
----------- TRUST BKB RETAIL A TRUST BKB RETAIL A
ALL SHARES+ SHARES SHARES SHARES SHARES SHARES SHARES
----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)..... None None None 3.75% None None 3.75%(1)
Maximum Sales Load Imposed on Reinvested
Dividends............................... None None None None None None None
Maximum Deferred Sales Load (as a
Percentage of redemption proceeds)...... None None None None(2) None None None(1),(2)
Redemption Fees........................... None None None None None None None
Exchange Fee.............................. None None None None None None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)
Management Fees (before waivers)(3)....... 0.74% 0.75% ++ 0.75% 0.75% 0.75% 0.75%
Distribution and Service (12b-1)
Fees(4)................................. 0.25% None ++ None None None None
Other Expenses (before waivers)(5)........ 0.12% 0.30% ++ 0.45% 0.19% 0.36% 0.41%
---- ---- ---- ------ ---- ---- ----
TOTAL FUND OPERATING EXPENSES (BEFORE
WAIVERS)(6)............................... 1.11% 1.05% ++ 1.20% 0.94% 1.11% 1.16%
==== ==== ==== ====== ==== ==== ====
</TABLE>
- --------------------------
+ Boston 1784 Income Fund currently sells its shares without class
designation.
++ BKB Shares will not be issued until the Reorganization is effective.
(1) There will be no sales load imposed on the conversion of BKB Shares to
Retail A Shares, and no front-end or contingent deferred sales load will be
imposed on subsequent purchases of Retail A Shares by former 1784 Fund
shareholders so long as they keep the account with Galaxy continuously open.
(2) Except for investments of $500,000 or more. See Appendix IV.
(3) Management Fees (after waivers) would be:
<TABLE>
<S> <C>
Boston 1784 Income Fund...... 0.68%
Galaxy High Quality Bond
Fund....................... 0.55%
Combined Fund PRO FORMA...... 0.55%
</TABLE>
(4) The Distributor of the 1784 Funds currently waives its entire Distribution
and Service Fee.
(5) Affiliates of the Galaxy Fund's investment adviser are currently waiving a
portion of shareholder servicing fees (that are included in Other Expenses)
so that Other Expenses would be:
<TABLE>
<S> <C>
BKB
SHARES
------
Combined Fund PRO FORMA....... 0.25%
</TABLE>
(6) Total Fund Operating Expenses (after waivers) would be:
<TABLE>
<CAPTION>
TRUST BKB RETAIL A
SHARES SHARES SHARES SHARES
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Boston 1784 Income Fund..................................... 0.80% -- -- --
Galaxy High Quality Bond Fund............................... -- 0.85% -- 1.00%
Combined Fund PRO FORMA..................................... -- 0.74% 0.80% 0.96%
</TABLE>
II-12
<PAGE>
EXAMPLE:*
You would pay the following expenses on a $10,000 investment, assuming
(1) 5% gross annual return and (2) the operating expenses remain the same as
those shown in the above table:
<TABLE>
<CAPTION>
GALAXY HIGH QUALITY COMBINED FUND
BOSTON 1784 BOND FUND PRO FORMA
INCOME FUND ------------------------------ ------------------------------
----------- TRUST BKB RETAIL A TRUST BKB RETAIL A
ALL SHARES SHARES SHARES SHARES SHARES SHARES SHARES
----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 year................... $ 113 $ 107 N/A $ 493 $ 96 $113** $ 489
3 years.................. $ 353 $ 334 N/A $ 742 $ 300 N/A $ 730
5 years.................. $ 612 $ 579 N/A $1,010 $ 520 N/A $ 989
10 years................. $1,352 $1,283 N/A $1,795 $1,155 N/A $1,731
</TABLE>
- --------------------------
* THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN. ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE
REINVESTED.
** BKB SHARES WILL CONVERT TO RETAIL A SHARES ON THE FIRST ANNIVERSARY OF THE
REORGANIZATION OF THE BOSTON 1784 INCOME FUND INTO THE GALAXY HIGH QUALITY
BOND FUND PROVIDED THAT GALAXY'S BOARD OF TRUSTEES DETERMINES THAT THE
CONVERSION IS IN THE BEST INTEREST OF THE HOLDERS OF BKB SHARES.
The purpose of the foregoing tables is to assist an investor in
understanding the various costs and expenses that an investor in the Funds will
bear directly or indirectly.
II-13
<PAGE>
BOSTON 1784 U.S. GOVERNMENT MEDIUM-TERM INCOME FUND--SHARES
GALAXY INTERMEDIATE GOVERNMENT INCOME
FUND--TRUST SHARES, BKB SHARES AND RETAIL A SHARES
<TABLE>
<CAPTION>
BOSTON 1784
U.S.
GOVERNMENT GALAXY
MEDIUM- INTERMEDIATE
TERM GOVERNMENT COMBINED FUND
INCOME INCOME FUND PRO FORMA
FUND ------------------------------ ------------------------------
----------- TRUST BKB RETAIL A TRUST BKB RETAIL A
ALL SHARES+ SHARES SHARES SHARES SHARES SHARES SHARES
----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on
Purchases (as a percentage of
offering price)................. None None None 3.75% None None 3.75%(1)
Maximum Sales Load Imposed on
Reinvested Dividends............ None None None None None None None
Maximum Deferred Sales Load (as a
Percentage of redemption
proceeds)....................... None None None None(2) None None None(1),(2)
Redemption Fees................... None None None None None None None
Exchange Fee...................... None None None None None None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net
assets)
Management Fees (before
waivers)(3)..................... 0.74% 0.75% ++ 0.75% 0.75% 0.75% 0.75%
Distribution and Service (12b-1)
Fees(4)......................... 0.25% None ++ None None None None
Other Expenses (before
waivers)(5)..................... 0.13% 0.16% ++ 0.41% 0.13% 0.33% 0.38%
---- ---- ---- ---- ---- ---- ----
TOTAL FUND OPERATING EXPENSES
(BEFORE WAIVERS)(6)............... 1.12% 0.91% ++ 1.16% 0.88% 1.08% 1.13%
==== ==== ==== ==== ==== ==== ====
</TABLE>
- ------------------------
+ Boston 1784 U.S. Government Medium-Term Income Fund currently sells its
shares without class designation.
++ BKB Shares will not be issued until the Reorganization is effective.
(1) There will be no sales load imposed on the conversion of BKB Shares to
Retail A Shares, and no front-end or contingent deferred sales load will be
imposed on subsequent purchases of Retail A Shares by former 1784 Fund
shareholders so long as they keep their account with Galaxy continuously
open.
(2) Except for investments of $500,000 or more. See Appendix IV.
(3) Management Fees (after waivers) would be:
<TABLE>
<S> <C>
Boston 1784 U.S. Government Medium-Term Income Fund 0.67%
Galaxy Intermediate Government Income Fund 0.55%
Combined Fund PRO FORMA 0.55%
</TABLE>
(4) The Distributor of the 1784 Funds currently waives its entire Distribution
and Service Fee.
II-14
<PAGE>
(5) Affiliates of the Galaxy Fund's investment adviser are currently waiving a
portion of shareholder servicing fees (that are included in Other Expenses)
so that Other Expenses are 0.25% for BKB Shares of the Combined Fund PRO
FORMA.
(6) Total Fund Operating Expenses (after waivers) would be:
<TABLE>
<CAPTION>
TRUST BKB RETAIL A
SHARES SHARES SHARES SHARES
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Boston 1784 U.S. Government Medium-Term Income Fund......... 0.80% -- -- --
Galaxy Intermediate Government Income Fund.................. -- 0.71% -- 0.96%
Combined Fund PRO FORMA..................................... -- 0.68% 0.80% 0.93%
</TABLE>
EXAMPLE:*
You would pay the following expenses on a $10,000 investment, assuming
(1) 5% gross annual return and (2) the operating expenses remain the same as
those shown in the above table:
<TABLE>
<CAPTION>
BOSTON 1784
U.S.
GOVERNMENT
MEDIUM-
TERM
INCOME GALAXY INTERMEDIATE COMBINED FUND
FUND GOVERNMENT INCOME FUND PRO FORMA
----------- ------------------------------ ----------------------------------
TRUST BKB RETAIL A TRUST BKB RETAIL A
ALL SHARES SHARES SHARES SHARES SHARES SHARES SHARES
----------- -------- -------- -------- -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 year............... $ 114 $ 93 N/A $ 489 $ 90 $110** $ 486
3 years.............. $ 356 $ 290 N/A $ 730 $ 281 N/A $ 721
5 years.............. $ 617 $ 504 N/A $ 989 $ 488 N/A $ 974
10 years............. $1,363 $1,120 N/A $1,731 $1,084 N/A $1,698
</TABLE>
- ------------------------
* THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN. ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE
REINVESTED.
** BKB SHARES WILL CONVERT TO RETAIL A SHARES ON THE FIRST ANNIVERSARY OF THE
REORGANIZATION OF THE BOSTON 1784 U.S. GOVERNMENT MEDIUM-TERM INCOME FUND
INTO THE GALAXY INTERMEDIATE GOVERNMENT INCOME FUND PROVIDED THAT GALAXY'S
BOARD OF TRUSTEES DETERMINES THAT THE CONVERSION IS IN THE BEST INTEREST OF
THE HOLDERS OF BKB SHARES.
The purpose of the foregoing tables is to assist an investor in
understanding the various costs and expenses that an investor in the Funds will
bear directly or indirectly.
II-15
<PAGE>
BOSTON 1784 TAX-EXEMPT MEDIUM-TERM INCOME FUND--SHARES
GALAXY INTERMEDIATE TAX-EXEMPT BOND
FUND--TRUST SHARES, BKB SHARES AND RETAIL A SHARES
<TABLE>
<CAPTION>
BOSTON 1784 GALAXY INTERMEDIATE TAX-EXEMPT
TAX-EXEMPT BOND FUND
MEDIUM-TERM PRO FORMA
INCOME FUND ---------------------------------------
----------- TRUST BKB RETAIL A
ALL SHARES+ SHARES SHARES SHARES++
----------- -------- --------------- --------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on
Purchases (as a percentage of
offering price).................... None None None 3.75%(1)
Maximum Sales Load Imposed on
Reinvested Dividends............... None None None None
Maximum Deferred Sales Load (as a
percentage of redemption
proceeds).......................... None None None None(1),(2)
Redemption Fees...................... None None None None
Exchange Fee......................... None None None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net
assets)
Management Fees (before
waivers)(3)........................ 0.74% 0.75% 0.75% 0.75%
Distribution and Service (12b-1)
Fees(4)............................ 0.25% None None None
Other Expenses(5).................... 0.12% 0.13% 0.30% 0.30%
---- ---- ---- ----
TOTAL FUND OPERATING EXPENSES (BEFORE
WAIVERS)(6).......................... 1.11% 0.88% 1.05% 1.05%
==== ==== ==== ====
</TABLE>
- ------------------------
+ Boston 1784 Tax-Exempt Medium-Term Income Fund currently sells its
shares without class designation.
++ Galaxy does not currently intend to offer Retail A Shares of the Galaxy
Intermediate Tax Exempt Bond Fund until the BKB Shares convert into
Retail A Shares.
(1) There will be no sales load imposed on the conversion of BKB Shares to
Retail A Shares, and no front-end or contingent deferred sales load will
be imposed on subsequent purchases of Retail A Shares by former 1784 Fund
shareholders so long as they keep their account with Galaxy continuously
open.
(2) Except for investments of $500,000 or more. See Appendix IV.
(3) Management Fees (after waivers) would be:
<TABLE>
<S> <C>
Boston 1784 Tax-Exempt Medium-Term Income Fund.............. 0.68%
Galaxy Intermediate Tax-Exempt Bond Fund PRO FORMA.......... 0.63%
</TABLE>
(4) The Distributor of the 1784 Funds currently waives its entire
Distribution and Service Fee.
(5) Affiliates of the Galaxy Fund's investment adviser are currently waiving
a portion of shareholder servicing fees (that are included in Other
Expenses) so that Other Expenses are 0.17% for BKB Shares of the Galaxy
Intermediate Tax-Exempt Bond Fund PRO FORMA.
II-16
<PAGE>
(6) Total Fund Operating Expenses (after waivers) would be:
<TABLE>
<CAPTION>
TRUST BKB RETAIL A
SHARES SHARES SHARES SHARES
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Boston 1784 U.S. Tax-Exempt Medium-Term Income
Fund........................................ 0.80% -- -- --
Galaxy Intermediate Tax-Exempt Bond Fund PRO
FORMA....................................... -- 0.76% 0.80% 0.93%
</TABLE>
Example:*
You would pay the following expenses on a $10,000 investment, assuming
(1) 5% gross annual return and (2) the operating expenses remain the same as
those shown in the above table:
<TABLE>
<CAPTION>
BOSTON 1784 GALAXY INTERMEDIATE
TAX-EXEMPT TAX-EXEMPT
MEDIUM-TERM BOND FUND
INCOME FUND PRO FORMA
------------------- ---------------------
TRUST BKB RETAIL A
SHARES SHARES SHARES SHARES
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1 year........................................ $ 113 $ 90 $107** $ 478
3 years....................................... $ 353 $ 281 N/A $ 697
5 years....................................... $ 612 $ 488 N/A $ 933
10 years...................................... $1,352 $1,084 N/A $1,609
</TABLE>
- ------------------------
* THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN. ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
THESE EXAMPLES ASSUME THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE
REINVESTED.
** BKB SHARES WILL CONVERT TO RETAIL A SHARES ON THE FIRST ANNIVERSARY OF THE
REORGANIZATION OF THE BOSTON 1784 TAX-EXEMPT MEDIUM-TERM INCOME FUND INTO
THE GALAXY INTERMEDIATE TAX-EXEMPT BOND FUND PROVIDED THAT GALAXY'S BOARD OF
TRUSTEES DETERMINES THAT THE CONVERSION IS IN THE BEST INTERESTS OF THE
HOLDERS OF BKB SHARES.
The purpose of the foregoing tables is to assist an investor in
understanding the various costs and expenses that an investor in the Funds will
bear directly or indirectly.
II-17
<PAGE>
BOSTON 1784 CONNECTICUT TAX-EXEMPT INCOME FUND--SHARES
GALAXY CONNECTICUT INTERMEDIATE MUNICIPAL BOND
FUND--TRUST SHARES, BKB SHARES AND RETAIL A SHARES
<TABLE>
<CAPTION>
BOSTON 1784 GALAXY CONNECTICUT
CONNECTICUT INTERMEDIATE
TAX-EXEMPT MUNICIPAL BOND FUND
INCOME PRO FORMA
FUND ------------------------------
----------- TRUST BKB RETAIL A
ALL SHARES+ SHARES SHARES SHARES++
----------- -------- -------- --------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)................. None None None 3.75%(1)
Maximum Sales Load Imposed on Reinvested Dividends.... None None None None
Maximum Deferred Sales Load (as a percentage of
redemption proceeds)................................ None None None None(1),(2)
Redemption Fees....................................... None None None None
Exchange Fee.......................................... None None None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)
Management Fees (before waivers)(3)................... 0.74% 0.75% 0.75% 0.75%
Distribution and Service (12b-1) Fees(4).............. 0.25% None None None
Other Expenses(5)..................................... 0.13% 0.15% 0.32% 0.32%
---- ---- ---- ----
TOTAL FUND OPERATING EXPENSES (BEFORE WAIVERS)(6)....... 1.12% 0.90% 1.07% 1.07%
==== ==== ==== ====
</TABLE>
- ------------------------
+ Boston 1784 Connecticut Tax-Exempt Income Fund currently sells its shares
without class designation.
++ Galaxy does not currently intend to offer Retail A Shares of the Galaxy
Connecticut Intermediate Municipal Bond Fund until the BKB Shares convert
into Retail A Shares.
(1) There will be no sales load imposed on the conversion of BKB Shares to
Retail A Shares, and no front-end or contingent deferred sales load will be
imposed on subsequent purchases of Retail A Shares by former 1784 Fund
shareholders so long as they keep their account with Galaxy continuously
open.
(2) Except for investments of $500,000 or more. See Appendix IV.
(3) Management Fees (after waivers) would be:
<TABLE>
<S> <C>
Boston 1784 Connecticut Tax-Exempt Income Fund.............. 0.67%
Galaxy Connecticut Intermediate Municipal Bond Fund PRO
FORMA..................................................... 0.63%
</TABLE>
(4) The Distributor of the 1784 Funds currently waives its entire Distribution
and Service Fee.
(5) Affiliates of the Galaxy Fund's investment adviser are currently waiving a
portion of shareholder servicing fees (that are included in Other Expenses)
so that Other Expenses are 0.17% for BKB Shares of the Galaxy Connecticut
Intermediate Municipal Bond Fund PRO FORMA.
II-18
<PAGE>
(6) Total Fund Operating Expenses (after waivers) would be:
<TABLE>
<CAPTION>
TRUST BKB RETAIL A
SHARES SHARES SHARES SHARES
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Boston 1784 Connecticut Tax-Exempt Income
Fund.................................... 0.80% -- -- --
Galaxy Connecticut Intermediate Municipal
Bond Fund PRO FORMA..................... -- 0.78% 0.80% 0.95%
</TABLE>
EXAMPLE:*
You would pay the following expenses on a $10,000 investment, assuming (1)
5% gross annual return and (2) the Fund's operating expenses remain the same as
those shown in the above table:
<TABLE>
<CAPTION>
BOSTON 1784
CONNECTICUT
TAX-EXEMPT GALAXY CONNECTICUT
INCOME INTERMEDIATE
FUND MUNICIPAL BOND FUND
----------- ------------------------------
TRUST BKB RETAIL A
SHARES SHARES SHARES SHARES
----------- -------- -------- --------
<S> <C> <C> <C> <C>
1 year.................................... $ 114 $ 92 $109** $ 480
3 years................................... $ 356 $ 287 N/A $ 703
5 years................................... $ 617 $ 498 N/A $ 943
10 years.................................. $1,363 $1,108 N/A $1,632
</TABLE>
- ------------------------
* THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN. ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
THESE EXAMPLES ASSUME THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE
REINVESTED.
** BKB SHARES WILL CONVERT TO RETAIL A SHARES ON THE FIRST ANNIVERSARY OF THE
REORGANIZATION OF THE BOSTON 1784 CONNECTICUT TAX-EXEMPT INCOME FUND INTO
THE GALAXY CONNECTICUT INTERMEDIATE MUNICIPAL BOND FUND PROVIDED THAT
GALAXY'S BOARD OF TRUSTEES DETERMINES THAT THE CONVERSION IS IN THE BEST
INTERESTS OF THE HOLDERS OF BKB SHARES.
The purpose of the foregoing tables is to assist an investor in understanding
the various costs and expenses that an investor in the Funds will bear directly
or indirectly.
II-19
<PAGE>
BOSTON 1784 FLORIDA TAX-EXEMPT INCOME FUND--SHARES
GALAXY FLORIDA MUNICIPAL BOND FUND--SHARES
<TABLE>
<CAPTION>
BOSTON 1784 GALAXY FLORIDA
FLORIDA MUNICIPAL
TAX-EXEMPT BOND
INCOME FUND
FUND PRO FORMA
----------- --------------
SHARES SHARES
----------- --------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases (as a percentage
of offering price)...................................... None None
Maximum Sales Load Imposed on Reinvested Dividends........ None None
Maximum Deferred Sales Load (as a percentage of redemption
proceeds)............................................... None None
Redemption Fees........................................... None None
Exchange Fee.............................................. None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)
Management Fees (before waivers)(1)....................... 0.74% 0.75%
Distribution and Service (12b-1) Fees(2).................. 0.25% None
Other Expenses............................................ 0.15% 0.22%
---- ----
TOTAL FUND OPERATING EXPENSES (BEFORE WAIVERS)(3)........... 1.14% 0.97%
==== ====
</TABLE>
- ------------------------
1 Management Fees (after waivers) would be:
<TABLE>
<S> <C>
Boston 1784 Florida Tax-Exempt Income Fund.................. 0.65%
Galaxy Florida Municipal Bond Fund PRO FORMA................ 0.58%
</TABLE>
2 The Distributor of the 1784 Funds currently waives its entire Distribution
and Service Fee.
3 Total Fund Operating Expenses (after waivers) would be:
<TABLE>
<S> <C>
Boston 1784 Florida Tax-Exempt Income Fund.................. 0.80%
Galaxy Florida Municipal Bond Fund PRO FORMA................ 0.80%
</TABLE>
II-20
<PAGE>
BOSTON 1784 FLORIDA TAX-EXEMPT INCOME FUND--SHARES
GALAXY FLORIDA MUNICIPAL BOND FUND--SHARES
EXAMPLE:*
You would pay the following expenses on a $10,000 investment, assuming (1)
5% gross annual return and (2) the Fund's operating expenses remain the same as
those shown in the above table:
<TABLE>
<CAPTION>
GALAXY FLORIDA
BOSTON 1784 MUNICIPAL BOND
FLORIDA TAX-EXEMPT FUND
INCOME FUND PRO FORMA
------------------ --------------
SHARES SHARES
------------------ --------------
<S> <C> <C>
1 year........................................ $ 116 $ 99
3 years....................................... $ 362 $ 309
5 years....................................... $ 628 $ 536
10 years...................................... $1,386 $1,190
</TABLE>
- ------------------------
* THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN. ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
THESE EXAMPLES ASSUME THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE
REINVESTED.
The purpose of the foregoing tables is to assist an investor in
understanding the various costs and expenses that an investor in the Funds will
bear directly or indirectly.
II-21
<PAGE>
BOSTON 1784 MASSACHUSETTS TAX-EXEMPT INCOME FUND--SHARES
GALAXY MASSACHUSETTS INTERMEDIATE MUNICIPAL BOND
FUND--TRUST SHARES, BKB SHARES AND RETAIL A SHARES
<TABLE>
<CAPTION>
BOSTON 1784 GALAXY MASSACHUSETTS
MASSACHUSETTS INTERMEDIATE
TAX-EXEMPT MUNICIPAL BOND FUND
INCOME FUND PRO FORMA
------------- ------------------------------
TRUST BKB RETAIL A
ALL SHARES+ SHARES SHARES SHARES++
------------- -------- -------- --------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases (as a
percentage of offering price)........................ None None None 3.75%(1)
Maximum Sales Load Imposed on Reinvested Dividends..... None None None None
Maximum Deferred Sales Load (as a percentage of
redemption proceeds)................................. None None None None(1,2)
Redemption Fees........................................ None None None None
Exchange Fee........................................... None None None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)
Management Fees (before waivers)(3).................... 0.74% 0.75% 0.75% 0.75%
Distribution and Service (12b-1) Fees(4)............... 0.25% None None None
Other Expenses(5)...................................... 0.13% 0.15% 0.32% 0.32%
---- ---- ---- ----
TOTAL FUND OPERATING EXPENSES (BEFORE WAIVERS)(6)........ 1.12% 0.90% 1.07% 1.07%
==== ==== ==== ====
</TABLE>
- ------------------------
+ Boston 1784 Massachusetts Tax-Exempt Income Fund currently sells its shares
without class designation.
++ Galaxy does not currently intend to offer Retail A Shares of the Galaxy
Massachusetts Intermediate Municipal Bond Fund until the BKB Shares convert
into Retail A Shares.
(1) There will be no sales load imposed on the conversion of BKB Shares to
Retail A Shares, and no front-end or contingent deferred sales load will be
imposed on subsequent purchases of Retail A Shares by former 1784 Fund
shareholders so long as they keep their account with Galaxy continuously
open.
(2) Except for investments of $500,000 or more. See Appendix IV.
(3) Management Fees (after waivers) would be:
<TABLE>
<S> <C>
Boston 1784 Massachusetts Tax-Exempt Income Fund............ 0.67%
Galaxy Massachusetts Intermediate Municipal Bond Fund PRO
FORMA..................................................... 0.63%
</TABLE>
(4) The Distributor of the 1784 Funds currently waives its entire Distribution
and Service Fee.
(5) Affiliates of the Galaxy Fund's investment adviser are currently waiving a
portion of shareholder servicing fees (that are included in Other Expenses)
so that Other Expenses are 0.17% for BKB Shares of the Galaxy Massachusetts
Intermediate Municipal Bond Fund PRO FORMA.
II-22
<PAGE>
(6) Total Fund Operating Expenses (after waivers) would be:
<TABLE>
<CAPTION>
TRUST BKB RETAIL A
SHARES SHARES SHARES SHARES
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Boston 1784 Massachusetts Tax-Exempt Income Fund............ 0.80% -- -- --
Galaxy Massachusetts Intermediate Municipal Bond Fund PRO
FORMA..................................................... -- 0.78% 0.80% 0.95%
</TABLE>
EXAMPLE:*
You would pay the following expenses on a $10,000 investment, assuming (1)
5% gross annual return and (2) the Fund's operating expenses remain the same
as those shown in the above table.
<TABLE>
<CAPTION>
GALAXY MASSACHUSETTS
BOSTON 1784 INTERMEDIATE
MASSACHUSETTS MUNICIPAL BOND FUND
TAX-EXEMPT PRO FORMA
INCOME FUND ------------------------------
------------- TRUST BKB RETAIL A
SHARES SHARES SHARES SHARES
------------- -------- -------- --------
<S> <C> <C> <C> <C>
1 year.................................. $ 114 $ 92 $109** $ 480
3 years................................. $ 356 $ 287 N/A $ 703
5 years................................. $ 617 $ 498 N/A $ 943
10 years................................ $1,363 $1,108 N/A $1,632
</TABLE>
- ------------------------
* THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN. ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
THESE EXAMPLES ASSUME THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE
REINVESTED.
** BKB SHARES WILL CONVERT TO RETAIL A SHARES ON THE FIRST ANNIVERSARY OF THE
REORGANIZATION OF THE BOSTON 1784 MASSACHUSETTS TAX-EXEMPT INCOME FUND INTO
THE GALAXY MASSACHUSETTS INTERMEDIATE MUNICIPAL BOND FUND PROVIDED THAT
GALAXY'S BOARD OF TRUSTEES DETERMINES THAT THE CONVERSION IS IN THE BEST
INTERESTS OF THE HOLDERS OF BKB SHARES.
The purpose of the foregoing tables is to assist an investor in
understanding the various costs and expenses that an investor in the Funds will
bear directly or indirectly.
II-23
<PAGE>
BOSTON 1784 RHODE ISLAND TAX-EXEMPT INCOME FUND--SHARES
GALAXY RHODE ISLAND MUNICIPAL BOND FUND--
TRUST SHARES, BKB SHARES AND RETAIL A SHARES
<TABLE>
<CAPTION>
BOSTON
1784 RHODE
ISLAND
TAX-EXEMPT GALAXY RHODE ISLAND COMBINED FUND
INCOME FUND MUNICIPAL BOND FUND PRO FORMA
----------- ------------------------------ ----------------------------------
TRUST BKB RETAIL A TRUST BKB RETAIL A
ALL SHARES+ SHARES SHARES SHARES SHARES SHARES SHARES
----------- -------- -------- -------- -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES:
Maximum Sales Load Imposed
on Purchases (as a
percentage of offering
price).................... None None None 3.75% None None 3.75%(1)
Maximum Sales Load Imposed
on Reinvested Dividends... None None None None None None None
Maximum Deferred Sales Load
(as a percentage of
redemption proceeds)...... None None None None(1) None None None(1,2)
Redemption Fees............. None None None None None None None
Exchange Fee................ None None None None None None None
ANNUAL FUND OPERATING
EXPENSES:
(as a percentage of average
net assets)
Management Fees (before
waivers)(3)............... 0.74% * ++ 0.75% 0.75% 0.75% 0.75%
Distribution and Service
(12b-1) Fees(4)........... 0.25% * ++ None None None None
Other Expenses.............. 0.14% * ++ 0.42% 0.17% 0.19% 0.19%
---- ---- ---- ---- ----
TOTAL FUND OPERATING EXPENSES
(BEFORE WAIVERS)(5)......... 1.13% * ++ 1.17% 0.92% 0.94% 0.94%
==== ==== ==== ==== ====
</TABLE>
- ------------------------
+ Boston 1784 Rhode Island Tax-Exempt Income Fund currently sells its shares
without class designation.
++ BKB Shares will not be issued until the Reorganization is effective.
* As of October 31, 1999, no Trust Shares of the Galaxy Rhode Island Municipal
Bond Fund were outstanding.
(1) There will be no sales load imposed on the conversion of BKB Shares to
Retail A Shares, and no front-end or contingent deferred sales load will be
imposed on subsequent purchases of Retail A Shares by former 1784 Fund
shareholders so long as they keep their account with Galaxy continuously
open.
(2) Except for investments of $500,000 or more. See Appendix IV.
II-24
<PAGE>
(3) Management Fees (after waivers) would be:
<TABLE>
<S> <C>
Boston 1784 Rhode Island Tax-Exempt Income Fund............. 0.66%
Galaxy Rhode Island Municipal Bond Fund..................... 0.35%
Combined Fund PRO FORMA..................................... 0.55%
</TABLE>
(4) The Distributor of the 1784 Funds currently waives its entire Distribution
and Service Fee.
(5) Total Fund Operating Expenses (after waivers) would be:
<TABLE>
<CAPTION>
TRUST BKB RETAIL A
SHARES SHARES SHARES SHARES
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Boston 1784 Rhode Island Tax-Exempt Income Fund........... 0.80% -- -- --
Galaxy Rhode Island Municipal Bond Fund................... -- -- -- 0.77%
Combined Fund PRO FORMA................................... -- 0.72% 0.74% 0.74%
</TABLE>
EXAMPLE:*
You would pay the following expenses on a $10,000 investment, assuming
(1) 5% gross annual return and (2) the Fund's operating expenses remain the same
as those shown in the table above:
<TABLE>
<CAPTION>
BOSTON 1784 RHODE
ISLAND TAX-EXEMPT GALAXY RHODE ISLAND COMBINED FUND
INCOME FUND MUNICIPAL BOND FUND PRO FORMA
----------------- ------------------------------ ----------------------------------
TRUST BKB RETAIL A TRUST BKB RETAIL A
SHARES SHARES SHARES SHARES SHARES SHARES SHARES
----------------- -------- -------- -------- -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 year............... $ 115 N/A N/A $ 490 $ 94 $ 96** $ 467
3 years.............. $ 359 N/A N/A $ 733 $ 293 N/A $ 663
5 years.............. $ 622 N/A N/A $ 995 $ 509 N/A $ 876
10 years............. $1,375 N/A N/A $1,742 $1,131 N/A $1,486
</TABLE>
- ------------------------
* THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN. ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE
REINVESTED.
** BKB SHARES WILL CONVERT TO RETAIL A SHARES ON THE FIRST ANNIVERSARY OF THE
REORGANIZATION OF THE BOSTON 1784 RHODE ISLAND TAX-EXEMPT INCOME FUND INTO
THE GALAXY RHODE ISLAND MUNICIPAL BOND FUND PROVIDED THAT GALAXY'S BOARD OF
TRUSTEES DETERMINES THAT THE CONVERSION IS IN THE BEST INTERESTS OF THE
HOLDERS OF BKB SHARES.
The purpose of the foregoing tables is to assist an investor in understanding
the various costs and expenses that an investor in the Funds will bear directly
or indirectly.
II-25
<PAGE>
BOSTON 1784 ASSET ALLOCATION FUND--SHARES
GALAXY ASSET ALLOCATION FUND--
TRUST SHARES, BKB SHARES AND RETAIL A SHARES
<TABLE>
<CAPTION>
BOSTON
1784
ASSET
ALLOCATION GALAXY ASSET ALLOCATION COMBINED FUND
FUND FUND PRO FORMA
----------- ------------------------------ ------------------------------
TRUST BKB RETAIL A TRUST BKB RETAIL A
ALL SHARES+ SHARES SHARES SHARES SHARES SHARES SHARES
----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on
Purchases (as a percentage of
offering price)................ None None None 3.75% None None 3.75%(1)
Maximum Sales Load Imposed on
Reinvested Dividends........... None None None None None None None
Maximum Deferred Sales Load (as a
percentage of redemption
proceeds)...................... None None None None(1) None None None(1,2)
Redemption Fees.................. None None None None None None None
Exchange Fee..................... None None None None None None None
ANNUAL FUND OPERATING EXPENSES: (as
a percentage of average net
assets)
Management Fees (before
waivers)....................... 0.74% 0.75% ++ 0.75% 0.75% 0.75% 0.75%
Distribution and Service (12b-1)
Fees(3)........................ 0.25% None ++ None None None None
Other Expenses(4)................ 0.22% 0.36% ++ 0.55% 0.36% 0.49% 0.54%
---- ---- ---- ---- ---- ---- --------
TOTAL FUND OPERATING EXPENSES:
(BEFORE WAIVERS)(5).............. 1.21% 1.11% ++ 1.30% 1.11% 1.24% 1.29%
==== ==== ==== ==== ==== ==== ========
</TABLE>
- ------------------------
+ Boston 1784 Asset Allocation Fund currently sells its shares without a class
designation.
++ BKB Shares will not be issued until the Reorganization is effective.
(1) There will be no sales load imposed on the conversion of BKB Shares to
Retail A Shares, and no front-end or contingent deferred sales load will be
imposed on subsequent purchases of Retail A Shares by former 1784 Fund
shareholders so long as they keep their account with Galaxy continuously
open.
(2) Except for investments of $500,000 or more. See Appendix IV.
(3) The Distributor of 1784 Funds currently waives its entire Distribution and
Service Fee.
(4) Affiliates of the Galaxy Fund's investment adviser are currently waiving a
portion of shareholder servicing fees (that are included in Other Expenses)
so that Other Expenses are 0.21% for BKB Shares of the Combined Fund PRO
FORMA.
II-26
<PAGE>
(5) Fund Operating Expenses (after waivers) would be:
<TABLE>
<CAPTION>
SHARES BKB SHARES
-------- ----------
<S> <C> <C>
Boston 1784 Asset Allocation Fund........................... 0.96% --
Combined Fund PRO FORMA..................................... -- 0.96%
</TABLE>
EXAMPLE:*
You would pay the following expenses on a $10,000 investment, assuming
(1) 5% gross annual return and (2) the Fund's operating expenses remain the same
as those shown in the table above:
<TABLE>
<CAPTION>
BOSTON
1784
ASSET
ALLOCATION GALAXY ASSET COMBINED FUND
FUND ALLOCATION FUND PRO FORMA
---------- ------------------------------ ------------------------------
TRUST BKB RETAIL A TRUST BKB RETAIL A
SHARES SHARES SHARES SHARES SHARES SHARES SHARES
---------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 year.................... $ 123 $ 113 N/A $ 502 $ 113 $ 126** $ 501
3 years................... $ 384 $ 353 N/A $ 772 $ 353 N/A $ 769
5 years................... $ 665 $ 612 N/A $1,061 $ 612 N/A $1,056
10 years.................. $1,466 $1,352 N/A $1,884 $1,352 N/A $1,873
</TABLE>
- ------------------------
* THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN. ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE
REINVESTED.
** BKB SHARES WILL CONVERT INTO RETAIL A SHARES ON THE FIRST ANNIVERSARY OF THE
REORGANIZATION OF THE BOSTON 1784 ASSET ALLOCATION FUND INTO THE GALAXY
ASSET ALLOCATION FUND PROVIDED THAT GALAXY'S BOARD OF TRUSTEES DETERMINES
THAT THE CONVERSION IS IN THE BEST INTERESTS OF THE HOLDERS OF BKB SHARES.
The purpose of the foregoing tables is to assist an investor in
understanding the various costs and expenses that an investor in the Funds will
bear directly or indirectly.
II-27
<PAGE>
BOSTON 1784 GROWTH AND INCOME FUND--SHARES
GALAXY GROWTH AND INCOME FUND--
TRUST SHARES, BKB SHARES AND RETAIL A SHARES
<TABLE>
<CAPTION>
GALAXY
BOSTON 1784 GROWTH AND COMBINED FUND
GROWTH AND INCOME FUND PRO FORMA
INCOME FUND ------------------------------ ------------------------------
----------- TRUST BKB RETAIL A TRUST BKB RETAIL A
ALL SHARES+ SHARES SHARES SHARES SHARES SHARES SHARES
----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on
Purchases (as a percentage of
offering price).................... None None None 3.75% None None 3.75%(1)
Maximum Sales Load Imposed on
Reinvested Dividends............... None None None None None None None
Maximum Deferred Sales Load (as a
percentage of redemption
proceeds).......................... None None None None(1) None None None(1,2)
Redemption Fees...................... None None None None None None None
Exchange Fee......................... None None None None None None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net
assets)
Management Fees...................... 0.74% 0.75% ++ 0.75% 0.75% 0.75% 0.75%
Distribution and Service (12b-1)
Fees(3)............................ 0.25% None ++ None None None None
Other Expenses (before waivers)(4)... 0.15% 0.31% ++ 0.64% 0.21% 0.47% 0.61%
---- ---- ---- ---- ---- ---- ----
TOTAL FUND OPERATING EXPENSES (BEFORE
WAIVERS)(5).......................... 1.14% 1.06% ++ 1.39% 0.96% 1.22% 1.36%
==== ==== ==== ==== ==== ==== ====
</TABLE>
- ------------------------
+ Boston 1784 Growth and Income Fund currently sells its shares without a
class designation.
++ BKB Shares will not be issued until the Reorganization is effective.
(1) There will be no sales load imposed on the conversion of BKB Shares to
Retail A Shares, and no front-end or contingent deferred sales load will be
imposed on subsequent purchases of Retail A Shares by former 1784 Fund
shareholders so long as they keep their account with Galaxy continuously
open.
(2) Except for investments of $500,000 or more. See Appendix IV.
(3) The Distributor of 1784 Funds currently waives its entire Distribution and
Service Fee.
(4) Affiliates of the Galaxy Fund's investment adviser are currently waiving a
portion of shareholder servicing fees (that are included in Other Expenses)
so that Other Expenses are 0.17% for BKB Shares of the Combined Fund PRO
FORMA and 0.53% for Retail A Shares of the Galaxy Growth and Income Fund and
Combined Fund PRO FORMA.
(5) Total Fund Operating Expenses (after waivers) would be
<TABLE>
<CAPTION>
BKB RETAIL A
SHARES SHARES SHARES
-------- -------- --------
<S> <C> <C> <C>
Boston 1784 Growth and Income Fund.......................... 0.89% -- --
Galaxy Growth and Income Fund............................... -- -- 1.28%
Combined Fund PRO FORMA..................................... -- 0.92% 1.28%
</TABLE>
II-28
<PAGE>
EXAMPLE:*
You would pay the following expenses on a $10,000 investment, assuming
(1) 5% gross annual return and (2) the Fund operating expenses remain the same
as those shown in the above table:
<TABLE>
<CAPTION>
BOSTON 1784
GROWTH AND
INCOME GALAXY GROWTH COMBINED FUND
FUND AND INCOME FUND PRO FORMA
----------- ------------------------------ ------------------------------
TRUST BKB RETAIL A TRUST BKB RETAIL A
SHARES SHARES SHARES SHARES SHARES SHARES SHARES
----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 year............... $ 116 $ 108 N/A $ 511 $ 98 $124** $ 508
3 years.............. $ 362 $ 337 N/A $ 799 $ 306 N/A $ 790
5 years.............. $ 628 $ 585 N/A $1,107 $ 531 N/A $1,092
10 years............. $1,386 $1,294 N/A $1,981 $1,178 N/A $1,949
</TABLE>
- ------------------------
* THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN. ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE
REINVESTED.
** BKB SHARES WILL CONVERT INTO RETAIL A SHARES ON THE FIRST ANNIVERSARY OF THE
REORGANIZATION OF THE BOSTON 1784 GROWTH AND INCOME FUND INTO THE GALAXY
GROWTH AND INCOME FUND PROVIDED THAT GALAXY'S BOARD OF TRUSTEES DETERMINES
THAT THE CONVERSION IS IN THE BEST INTERESTS OF THE HOLDERS OF BKB SHARES.
The purpose of the foregoing tables is to assist an investor in
understanding the various costs and expenses that an investor in the Funds will
bear directly or indirectly.
II-29
<PAGE>
BOSTON 1784 GROWTH FUND--SHARES
GALAXY GROWTH FUND II--
TRUST SHARES, BKB SHARES AND RETAIL A SHARES
<TABLE>
<CAPTION>
BOSTON 1784 GALAXY GROWTH FUND II
GROWTH FUND PRO FORMA
----------- --------------------------------------
TRUST BKB RETAIL A
ALL SHARES+ SHARES SHARES SHARES++
----------- -------- -------- --------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases (as a
percentage of offering price)............... None None None 3.75%(1)
Maximum Sales Load Imposed on Reinvested
Dividends................................... None None None None
Maximum Deferred Sales Load (as a percentage
of redemption proceeds)..................... None None None None(1,2)
Redemption Fees............................... None None None None
Exchange Fee.................................. None None None None
ANNUAL FUND OPERATING EXPENSES: (as a percentage
of average net assets) Management Fees........ 0.74% 0.75% 0.75% 0.75%
Distribution and Service (12b-1) Fees(3)...... 0.25% None None None
Other Expenses(4)............................. 0.19% 0.15% 0.49% 0.49%
---- ---- ---- --------
TOTAL FUND OPERATING EXPENSES (BEFORE
WAIVERS)(5)................................... 1.18% 0.90% 1.24% 1.24%
==== ==== ==== ========
</TABLE>
- ------------------------
+ Boston 1784 Growth Fund currently sells its shares without a class
designation.
++ Galaxy does not currently intend to offer Retail A Shares of the Galaxy
Growth Fund II until the BKB Shares convert into Retail A Shares.
(1) There will be no sales load imposed on the conversion of BKB Shares to
Retail A Shares, and no front-end or contingent deferred sales load will be
imposed on subsequent purchases of Retail A Shares by former 1784 Fund
shareholders so long as they keep their account with Galaxy continuously
open.
(2) Except for investments of $500,000 or more. See Appendix IV.
(3) The Distributor of 1784 Funds currently waives its entire Distribution and
Service Fee.
(4) Affiliates of the Galaxy Fund's investment adviser are currently waiving a
portion of shareholder servicing fees (that are included in Other Expenses)
so that Other Expenses are 0.19% for BKB Shares of the Combined Fund PRO
FORMA.
(5) Total Fund Operating Expenses (after waivers) would be:
<TABLE>
<CAPTION>
SHARES BKB SHARES
-------- ----------
<S> <C> <C>
Boston 1784 Growth Fund..................................... 0.93% --
Galaxy Growth Fund II PRO FORMA............................. -- 0.94%
</TABLE>
II-30
<PAGE>
EXAMPLE:*
You would pay the following expenses on a $10,000 investment, assuming
(1) 5% gross annual return and (2) the Fund operating expenses remain the same
as those shown in the above table:
<TABLE>
<CAPTION>
GALAXY GROWTH FUND II
BOSTON 1784 PRO FORMA
GROWTH FUND ---------------------------------------
----------- TRUST RETAIL A
SHARES SHARES BKB SHARES SHARES
----------- -------- ----------------- --------
<S> <C> <C> <C> <C>
1 year....................... $ 120 $ 92 $ 126** $ 497
3 years...................... $ 375 $ 287 N/A $ 754
5 years...................... $ 649 $ 498 N/A $1,030
10 years..................... $1,432 $1,108 N/A $1,819
</TABLE>
- ------------------------
* THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN. ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE
REINVESTED.
** BKB SHARES WILL CONVERT INTO RETAIL A SHARES ON THE FIRST ANNIVERSARY OF THE
REORGANIZATION OF THE BOSTON 1784 GROWTH FUND INTO THE GALAXY GROWTH FUND II
PROVIDED THAT GALAXY'S BOARD OF TRUSTEES DETERMINES THAT THE CONVERSION IS
IN THE BEST INTERESTS OF THE HOLDERS OF BKB SHARES.
The purpose of the foregoing tables is to assist an investor in
understanding the various costs and expenses that an investor in the Funds will
bear directly or indirectly.
II-31
<PAGE>
BOSTON 1784 INTERNATIONAL EQUITY FUND--SHARES
GALAXY INTERNATIONAL EQUITY FUND--TRUST SHARES, BKB SHARES AND
RETAIL A SHARES
<TABLE>
<CAPTION>
BOSTON 1784 GALAXY INTERNATIONAL COMBINED FUND
INTERNATIONAL EQUITY FUND PRO FORMA
EQUITY FUND ------------------------------ ------------------------------
------------- TRUST BKB RETAIL A TRUST BKB RETAIL A
ALL SHARES+ SHARES SHARES SHARES SHARES SHARES SHARES
------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on
Purchases (as a percentage of
offering price).................... None None None 3.75% None None 3.75%(1)
Maximum Sales Load Imposed on
Reinvested Dividends............. None None None None None None None
Maximum Deferred Sales Load (as a
percentage of redemption
proceeds)........................ None None None None(1) None None None(1,2)
Redemption Fees.................... None None None None None None None
Exchange Fee....................... None None None None None None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net
assets)
Management Fees (before
waivers)(3)...................... 1.00% 0.89% ++ 0.89% 0.87% 0.87% 0.87%
Distribution and Service Fees(4)... 0.25% None ++ None None None None
Other Expenses (before
waivers)(5)...................... 0.20% 0.27% ++ 0.75% 0.21% 0.51% 0.71%
---- ---- ---- ---- ---- ---- ----
TOTAL FUND OPERATING EXPENSES (BEFORE
WAIVERS)(6)........................ 1.45% 1.16% ++ 1.64% 1.08% 1.38% 1.58%
==== ==== ==== ==== ==== ==== ====
</TABLE>
- ------------------------
+ Boston 1784 International Equity Fund currently sells its shares without a
class designation.
++ BKB Shares will not be issued until the Reorganization is effective.
(1) There will be no sales load imposed on the conversion of BKB Shares to
Retail A Shares, and no front-end or contingent deferred sales load will be
imposed on subsequent purchases of Retail A Shares by former 1784 Fund
shareholders so long as they keep their account with Galaxy continuously
open.
(2) Except for investments of $500,000 or more. See Appendix IV.
(3) Management Fees (after waivers) would be:
<TABLE>
<S> <C>
Galaxy International Equity Fund..... 0.64%
Combined Fund PRO FORMA.............. 0.64%
</TABLE>
(4) The Distributor of the 1784 Funds currently waives its entire Distribution
and Service Fee.
(5) Affiliates of the Galaxy Fund's investment adviser are currently waiving a
portion of shareholder servicing fees (that are included in Other Expenses)
so that Other Expenses are 0.46% for BKB Shares of the Combined Fund PRO
FORMA.
II-32
<PAGE>
(6) Total Fund Operating Expenses (after waivers) would be:
<TABLE>
<CAPTION>
TRUST BKB RETAIL A
SHARES SHARES SHARES SHARES
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Boston 1784 International Equity Fund......... 1.20% -- -- --
Galaxy International Equity Fund.............. -- 0.91% -- 1.39%
Combined Fund PRO FORMA....................... -- 0.85% 1.10% 1.35%
</TABLE>
EXAMPLE:*
You would pay the following expenses on a $10,000 investment, assuming
(1) 5% gross annual return and (2) the Fund operating expenses remain the same
as those shown in the above table:
<TABLE>
<CAPTION>
BOSTON 1784
INTERNATIONAL GALAXY INTERNATIONAL COMBINED FUND
EQUITY FUND EQUITY FUND PRO FORMA
------------- ------------------------------ ------------------------------
TRUST BKB RETAIL A TRUST BKB RETAIL A
SHARES SHARES SHARES SHARES SHARES SHARES SHARES
------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 year............... $ 148 $ 118 N/A $ 536 $ 110 $140** $ 530
3 years.............. $ 459 $ 368 N/A $ 873 $ 343 N/A $ 855
5 years.............. $ 792 $ 638 N/A $1,233 $ 595 N/A $1,203
10 years............. $1,735 $1,409 N/A $2,246 $1,317 N/A $2,183
</TABLE>
- ------------------------
* THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN. ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE
REINVESTED.
** BKB SHARES WILL CONVERT TO RETAIL A SHARES ON THE FIRST ANNIVERSARY OF THE
REORGANIZATION OF THE BOSTON 1784 INTERNATIONAL EQUITY FUND INTO THE GALAXY
INTERNATIONAL EQUITY FUND PROVIDED THAT GALAXY'S BOARD OF TRUSTEES
DETERMINES THAT THE CONVERSION IS IN THE BEST INTERESTS OF THE HOLDERS OF
BKB SHARES.
The purpose of the foregoing tables is to assist an investor in
understanding the various costs and expenses that an investor in the Funds will
bear directly or indirectly.
II-33
<PAGE>
APPENDIX III
INVESTMENT OBJECTIVES, LIMITATIONS AND CERTAIN SIGNIFICANT INVESTMENT POLICIES
OF THE REORGANIZING 1784 FUNDS AND CORRESPONDING GALAXY FUNDS.
This Appendix highlights the investment objectives and certain significant
similarities and differences among the investment limitations and policies of
ten 1784 Funds and their Corresponding Galaxy Funds. Because the Boston 1784
Institutional U.S. Treasury Money Market Fund, Boston 1784 Institutional Prime
Money Market Fund, Boston 1784 Tax-Exempt Medium-Term Income Fund, Boston 1784
Connecticut Tax-Exempt Income Fund, Boston 1784 Florida Tax-Exempt Income Fund,
Boston 1784 Massachusetts Tax-Exempt Income Fund and Boston 1784 Growth Fund
will be reorganized into Shell Galaxy Funds that have substantially the same
investment objectives, restrictions and policies as their corresponding
Continuing 1784 Funds, they are not discussed in this Appendix. The following is
qualified in its entirety by the more detailed information included in the
prospectuses and statements of additional information for the 1784 Funds and the
Corresponding Galaxy Funds which are incorporated by reference into this Proxy
Statement/Prospectus.
1. BOSTON 1784 TAX-FREE MONEY MARKET FUND/GALAXY TAX-EXEMPT FUND
INVESTMENT OBJECTIVES:
(a) BOSTON 1784 TAX-FREE MONEY MARKET FUND: seeks to preserve the principal
value of a shareholder's investment and maintain a high degree of liquidity
while providing current income that is exempt from federal income tax.
(b) GALAXY TAX-EXEMPT FUND: seeks as high a level of current interest income
exempt from federal income tax as is consistent with stability of principal.
COMMENT: Each Fund is a money market fund and in accordance with Rule 2a-7
under the 1940 Act, will generally invest in instruments with remaining
maturities not exceeding 397 days, and each Fund's dollar weighted average
portfolio maturity may not exceed 90 days. Both Funds invest in securities rated
in one of the two highest, short-term rating categories (i.e., rated AA or
higher by S&P or Aa or higher by Moody's).
The Boston 1784 Tax-Free Money Market Fund invests at least 80% of its net
assets in short-term municipal money market instruments that are issued by
states, territories and possessions of the United States (including the District
of Columbia) and their political subdivisions, agencies and instrumentalities.
These securities pay interest exempt from federal income tax, including the
alternative minimum tax. The Boston 1784 Tax-Free Money Market Fund may also
invest not more than 20% of its assets in taxable money market instruments.
Further, the Boston 1784 Tax-Free Money Market Fund, unlike the Galaxy
Tax-Exempt Fund, reserves the right to concentrate its investments (i.e., invest
at least 25% of its assets) in money market instruments issued by domestic
banks, foreign branches of domestic banks and U.S. branches of foreign banks.
The Galaxy Tax-Exempt Fund, like the Boston 1784 Tax-Free Money Market Fund,
invests (as a matter of fundamental policy which cannot be changed without the
requisite consent of the Fund's shareholders) at least 80% of its total assets
in municipal securities issued by or on behalf of states, territories and
possessions of the United States, the District of Columbia, and their
authorities, agencies, instrumentalities and political subdivisions, the
interest on which in the opinion of bond counsel or counsel to the issuer is
exempt from regular federal income tax. The municipal securities in which the
Galaxy Tax-Exempt Fund may invest are generally the same as those eligible for
investment by the Boston 1784 Tax-Free Money Market Fund, except that the Galaxy
Tax-Exempt Fund may not invest in participations in municipal leases. The Galaxy
Tax-Exempt Fund (but not the Boston 1784 Tax-Free Money Market Fund) may invest
more than 25% of its assets in municipal securities the interest on which is
paid solely from revenues of similar projects, although the Galaxy Tax-Exempt
Fund does not presently intend to do so on a
III-1
<PAGE>
regular basis. In addition, investments in private activity bonds by the Galaxy
Tax-Exempt Fund, unlike the Boston 1784 Tax-Free Money Market Fund, will not be
treated as investments in municipal securities for purposes of the Fund's 80%
requirement stated above and, under normal market conditions will not exceed 20%
of the Fund's net assets when added together with any taxable investments held
by the Fund.
The Galaxy Tax-Exempt Fund, like the Boston 1784 Tax-Free Money Market Fund,
may invest not more than 20% of its total assets in taxable obligations under
normal conditions. Taxable obligations in which the Galaxy Tax-Exempt Fund may
invest are generally the same as those eligible for investment by the Boston
1784 Tax-Free Money Market Fund, except that the Galaxy Tax-Exempt Fund may not
invest in asset-backed securities (including asset-backed commercial paper),
foreign securities, forward commitments, guaranteed investment contracts, loan
participations, Separately Traded Interest and Principal Securities, Treasury
Receipts, Treasury Investment Growth Receipts and Certificates of Accrual on
Treasury Securities, reverse repurchase agreements and zero coupon securities.
The Boston 1784 Tax-Free Money Market Fund, unlike the Galaxy Tax-Exempt Fund,
may engage in securities lending. The Galaxy Tax-Exempt Fund, unlike the Boston
1784 Tax-Free Money Market Fund, however, may invest in tender option bonds. The
Galaxy Tax-Exempt Fund may borrow from domestic banks for temporary purposes and
then in amounts not in excess of 10% of such Fund's total assets. The 1784
Tax-Free Money Market Fund may borrow money from banks and may enter into
reverse repurchase agreements, in either case in an amount not to exceed 33-1/3%
of the Fund's total assets and then only as a temporary measure for
extraordinary or emergency purposes.
2. BOSTON 1784 U.S. TREASURY MONEY MARKET FUND/GALAXY U.S. TREASURY FUND
INVESTMENT OBJECTIVES:
(a) BOSTON 1784 U.S. TREASURY MONEY MARKET FUND: seeks to preserve the
principal value of a shareholder's investment and maintain a high degree of
liquidity while providing current income.
(b) GALAXY U.S. TREASURY FUND: seeks current income with liquidity and
stability of principal.
COMMENT: Each Fund is a money market fund and in accordance with Rule 2a-7
under the 1940 Act, will generally invest in instruments with a remaining
maturity not exceeding 397 days, and each Fund's dollar weighted average
portfolio maturity may not exceed 90 days. The Boston 1784 U.S. Treasury Money
Market Fund invests, under normal circumstances, at least 65% of its assets in
money market instruments issued by the U.S. Treasury, including bills, notes and
bonds, and repurchase agreements secured by U.S. Treasury securities. The
remainder of such Fund's assets may be invested in obligations of the U.S.
Government, its agencies and instrumentalities (including mortgage-backed
securities). The Boston 1784 U.S. Treasury Money Market Fund, unlike the Galaxy
U.S. Treasury Fund, reserves the right to concentrate (i.e., invest at least 25%
of its assets) in money market instruments issued by domestic banks, foreign
branches of domestic banks and U.S. branches of foreign banks.
While the Galaxy U.S. Treasury Fund's main investment strategies are similar
to those of the Boston 1784 U.S. Treasury Money Market Fund, there are some
differences. The Galaxy U.S. Treasury Fund invests at least 65% of its total
assets in direct U.S. government obligations. The Galaxy U.S. Treasury Fund,
unlike the Boston 1784 U.S. Treasury Money Market Fund, may not engage in
repurchase agreements. The Boston 1784 U.S. Treasury Money Market Fund, unlike
the Galaxy Fund, may invest in guaranteed investment contracts, other investment
companies (subject to applicable regulations), Separately Traded Interest and
Principal Securities, Treasury Receipts, Treasury Investment Growth Receipts,
Certificates of Accrual on Treasury Securities and zero coupon securities. The
Boston 1784 U.S. Treasury Money Market Fund, unlike the Galaxy U.S. Treasury
Fund, may engage in securities lending. The Boston 1784 U.S. Treasury Money
Market Fund may borrow money from banks and may enter into reverse repurchase
agreements in either case in an amount not to exceed 33-1/3% of its total assets
and then only as a temporary measure for extraordinary or emergency purposes.
The Galaxy U.S. Treasury Fund may
III-2
<PAGE>
only borrow from domestic banks for temporary purposes and then in amounts not
in excess of 10% of such Fund's total assets.
3. BOSTON 1784 PRIME MONEY MARKET FUND/GALAXY MONEY MARKET FUND
INVESTMENT OBJECTIVES:
(a) BOSTON 1784 PRIME MONEY MARKET FUND: seeks to preserve the principal
value of a shareholder's investment and maintain a high degree of liquidity
while providing current income.
(b) GALAXY MONEY MARKET FUND: seeks as high a level of current income as is
consistent with liquidity and stability of principal.
COMMENT: Each Fund is a money market fund and in accordance with Rule 2a-7
under the 1940 Act, will invest in instruments with a remaining maturity not
exceeding 397 days, and each Fund's dollar weighted average portfolio maturity
may not exceed 90 days. The Boston 1784 Prime Money Market Fund only invests in
securities rated in the top two short-term debt rating categories (i.e., rated
AA or higher by S&P or Aa or higher by Moody's) while the Galaxy Money Market
Fund only invests in securities rated in the highest rating category (i.e.,
rated AAA by S&P or Aaa by Moody's). The Boston 1784 Prime Money Market Fund
invests primarily in high quality short-term debt obligations issued by banks,
U.S. corporations or the U.S. Government as well as state or local governments,
including various types of commercial paper (such as asset-backed commercial
paper and tax-exempt commercial paper), certificates of deposit, bankers'
acceptances, time deposits, variable rate demand notes, corporate bonds, U.S.
Government agency obligations, taxable municipal securities, repurchase
agreements collateralized by securities in which the Fund may invest and reverse
repurchase agreements. The Boston 1784 Prime Money Market Fund reserves the
right to concentrate (i.e., invest at least 25% of its assets) in money market
instruments issued by domestic banks, foreign branches of domestic banks and
U.S. branches of foreign banks. Similarly, the Galaxy Money Market Fund may
invest more than 25% of its assets in obligations of domestic banks and U.S.
branches of foreign banks.
The Galaxy Money Market Fund, like the Boston 1784 Prime Money Market Fund,
invests in a diversified portfolio of money market instruments issued by banks,
U.S. corporations or the U.S. Government and its agencies and instrumentalities,
including commercial paper, certificates of deposit, bankers' acceptances, time
deposits, certain variable and floating rate securities, corporate notes and
bonds, obligations of the U.S. Government, its agencies and instrumentalities,
taxable municipal securities, repurchase agreements backed by U.S. Government
obligations and reverse repurchase agreements.
The Boston 1784 Prime Money Market Fund, unlike the Galaxy Money Market
Fund, may invest in forward commitments, loan participations, securities of
other investment companies (subject to applicable regulations), Separately
Traded Interest and Principal Securities, Treasury Receipts, Treasury Investment
Growth Receipts and Certificates of Accrual on Treasury Securities, certain
tax-exempt municipal notes, bonds and participations in municipal leases,
stand-by commitments and zero coupon securities. The Boston 1784 Prime Money
Market Fund may borrow money from banks and may enter into reverse repurchase
agreements, in either case in an amount not to exceed 33-1/3% of its total
assets and then only as a temporary measure for extraordinary or emergency
purposes. The Galaxy Money Market Fund limits such borrowings to domestic banks
for temporary purposes and then in amounts not in excess of 10% of its total
assets.
4. BOSTON 1784 SHORT-TERM INCOME FUND/GALAXY SHORT-TERM BOND FUND
INVESTMENT OBJECTIVES:
(a) BOSTON 1784 SHORT-TERM INCOME FUND: seeks to provide investors with
maximum current income, and as a secondary goal, to preserve investors' capital.
III-3
<PAGE>
(b) GALAXY SHORT-TERM BOND FUND: seeks to provide a high level of current
income consistent with preservation of capital.
COMMENT: The Boston 1784 Short-Term Income Fund invests primarily in debt
securities, such as U.S. government obligations, corporate bonds, notes,
mortgage- and asset-backed securities, and taxable municipal securities. Under
normal circumstances, at least 80% of the Boston 1784 Short-Term Income Fund's
assets are invested in these securities. The Boston 1784 Short-Term Income Fund
may invest up to 30% of its assets in securities of foreign issuers, including
Yankee bonds, which are dollar-denominated bonds issued in the U.S. by foreign
borrowers, and issuers in developing countries. The Boston 1784 Short-Term
Income Fund generally invests in investment grade securities (i.e., rated BBB or
higher by S&P or Baa or higher by Moody's). Under normal circumstances, the
Boston 1784 Short-Term Income Fund expects to invest at least 65% of its assets
in securities rated A or better by S&P or Moody's or of comparable quality as
determined by the Fund's investment adviser. The Boston 1784 Short-Term Income
Fund may also invest in lower rated investment grade securities, securities that
were investment grade when purchased by the Fund but have since been downgraded
and securities that are not investment grade at the time of purchase but the
investment adviser believes will be upgraded to investment grade. The Boston
1784 Short-Term Income Fund's average weighted maturity is normally expected to
be not more than three years and it generally maintains an average maturity of
between 1.8 and 2.3 years.
The Galaxy Short-Term Bond 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. The Fund normally invests at least 65% of its total assets in
bonds and debentures. The Galaxy Short-Term Bond Fund, like the Boston 1784
Short-Term Income Fund, may also invest in mortgage- and asset-backed securities
and in money market instruments such as commercial paper and the obligations of
U.S. and foreign banks. Nearly all Fund investments will be of investment grade
quality (i.e., rated BBB or higher by S&P or Baa or higher by Moody's or are
unrated securities determined by the investment 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 (i.e., A or higher by S&P or Moody's) or unrated securities
determined to be of comparable quality. The Galaxy Short-Term Bond Fund may
invest up to 35% of its assets in the securities of foreign issuers which is a
higher percentage than permitted for the Boston 1784 Short-Term Income Fund. The
Fund's average weighted maturity will generally be less than 3 years.
Unlike the Boston 1784 Short-Term Income Fund, the Galaxy Short-Term Bond
Fund limits its investments in securities of other investment companies to money
market mutual funds. The 1784 Short-Term Income Fund may invest up to 15% of its
total assets in illiquid securities while its Galaxy counterpart is limited to
10% of total assets. Both the Boston 1784 Income Fund and the Galaxy Short-Term
Bond Fund may invest in municipal securities, however, the Boston 1784
Short-Term Income Fund may also invest in certificates of indebtedness and
municipal leases. The Galaxy Short-Term Bond Fund may only borrow from domestic
banks for temporary purposes and enter into reverse repurchase agreements and
then in amounts not in excess of 10% of its total assets. The 1784 Boston
Short-Term Income Fund may borrow money from banks and enter into reverse
repurchase agreements in an amount not to exceed 33-1/3% of the Fund's total
assets and then only as a temporary measure for extraordinary or emergency
purposes.
The Boston 1784 Short-Term Income Fund, unlike the Galaxy Short-Term Bond
Fund, may invest in Continental Depository Receipts, convertible securities,
currency swaps, common and preferred stock, options, options on futures
contracts and certain receipts including Treasury Investment Growth Receipts and
Certificates of Accrual on Treasury Securities, Separately Traded Interest and
Principal Securities, loan participations, and warrants.
III-4
<PAGE>
5. BOSTON 1784 INCOME FUND/GALAXY HIGH QUALITY BOND FUND
INVESTMENT OBJECTIVES:
(a) BOSTON 1784 INCOME FUND: seeks to provide investors with maximum current
income and, as a secondary goal, to preserve investors' capital.
(b) GALAXY HIGH QUALITY BOND FUND: seeks to provide a high level of current
income consistent with prudent risk of capital.
COMMENT: The Boston 1784 Income Fund invests primarily in debt securities,
such as U.S. government obligations, corporate bonds, notes, mortgage- and
asset-backed securities, and taxable municipal securities. Under normal
circumstances, at least 80% of the Boston 1784 Income Fund's assets are invested
in these securities. The Boston 1784 Income Fund may invest up to 30% of its
assets in securities of foreign issuers, including Yankee bonds, which are
dollar-denominated bonds issued in the U.S. by foreign borrowers, and issuers in
developing countries. The Boston 1784 Income Fund generally invests in
investment grade securities (i.e., rated BBB or higher by S&P or Baa or higher
by Moody's). Under normal circumstances, the Boston 1784 Income Fund expects to
invest at least 65% of its assets in securities rated A or better by S&P or
Moody's or of comparable quality as determined by the investment adviser. The
Fund's portfolio may also include lower rated investment grade securities,
securities that were investment grade when purchased by a Fund but have since
been downgraded and securities that are not investment grade at the time of
purchase but the investment adviser believes will be upgraded to investment
grade. The Fund is permitted to invest in bonds with any maturity. However, the
Fund's average weighted maturity is normally expected to be between 7 and 30
years.
The Galaxy High Quality Bond 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 Galaxy High
Quality Bond Fund, like the Boston 1784 Income Fund, may also invest in
mortgage-backed and asset-backed securities and in money market instruments such
as commercial paper and bank obligations. Nearly all Fund investments will be of
investment grade quality (i.e., rated BBB or higher by S&P or Baa or higher by
Moody's or are unrated and determined to be of comparable quality by the
investment adviser). Under normal 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 (AA or higher) or by Moody's (Aa or higher) or are
unrated and determined to be of comparable quality by the investment adviser.
The Fund's average weighted maturity will vary from time to time depending on
current market and economic conditions and the investment adviser's assessment
of probable changes in interest rates.
Unlike the Boston 1784 Income Fund, the Galaxy High Quality Bond Fund limits
its investments in securities of other investment companies to money market
mutual funds. Both the Boston 1784 Income Fund and the Galaxy High Quality Bond
Fund may invest in municipal securities, however, the Boston 1784 Income Fund
may also invest in certificates of indebtedness and municipal leases. The Galaxy
High Quality Bond Fund may only borrow from domestic banks for temporary
purposes and enter into reverse repurchase agreements and then in amounts not in
excess of 10% of its total assets. The Boston 1784 Income Fund may borrow money
from banks and enter into reverse repurchase agreements in an amount not to
exceed 33-1/3% of the Fund's total assets and then only as a temporary measure
for extraordinary or emergency purposes.
The Boston 1784 Income Fund, unlike the Galaxy High Quality Bond Fund, may
invest in American Depository Receipts, European Depository Receipts and
Continental Depository Receipts, foreign securities, currency swaps, common and
preferred stock, options, options on futures contracts, and certain receipts
including Treasury Investment Growth Receipts and Certificates of Accrual on
Treasury Securities, loan participations, and warrants.
III-5
<PAGE>
6. BOSTON 1784 U.S. GOVERNMENT MEDIUM-TERM INCOME FUND/GALAXY INTERMEDIATE
GOVERNMENT INCOME FUND
INVESTMENT OBJECTIVES:
(a) BOSTON 1784 U.S. GOVERNMENT MEDIUM-TERM INCOME FUND: seeks to provide
investors with current income consistent with preservation of capital.
(b) GALAXY INTERMEDIATE GOVERNMENT INCOME FUND: seeks to provide the highest
level of current income consistent with prudent risk of capital.
COMMENT: The Boston 1784 U.S. Government Medium-Term Income Fund invests
primarily in U.S. government obligations and repurchase agreements secured by
U.S. Government obligations. Under normal circumstances, at least 65% of the
Boston 1784 U.S. Government Medium-Term Income Fund's assets are invested in
these securities. The Boston 1784 U.S. Government Medium-Term Income Fund
invests in both U.S. Treasury obligations and obligations such as
mortgage-backed securities issued or guaranteed by the U.S. government or its
agencies. The Boston 1784 U.S. Government Medium-Term Income Fund also invests
in non-government agency mortgage- and asset-backed securities. The Boston 1784
U.S. Government Medium-Term Income Fund is permitted to invest in bonds with any
maturity. However, the Fund's average weighted maturity is normally expected to
be from 3 to 10 years.
The Galaxy Intermediate Government Income 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. The Galaxy Intermediate
Government Income Fund 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. Nearly all of the Galaxy Intermediate Government Income Fund's
investments will be of investment grade quality and will have one of the top
three ratings assigned by S&P or Moody's (i.e., A or higher) or will be unrated
securities determined by the investment adviser to be of comparable quality. The
Galaxy Intermediate Government Income Fund's average weighted maturity will
generally be between 3 to 10 years.
Unlike the Boston 1784 U.S. Government Medium-Term Income Fund, the Galaxy
Intermediate Government Income Fund limits its investments in securities of
other investment companies to money market mutual funds. The Galaxy Intermediate
Government Income Fund may only borrow for temporary purposes from domestic
banks and enter into reverse repurchase agreements and then in amounts not in
excess of 10% of its total assets. The Boston 1784 U.S. Government Medium-Term
Income Fund may borrow money from banks and enter into reverse repurchase
agreements in an amount not to exceed 33-1/3% of the Fund's total assets and
then only as a temporary measure for extraordinary or emergency purposes.
The Boston 1784 U.S. Government Medium-Term Income Fund, unlike the Galaxy
Intermediate Government Income Fund, may invest in American Depository Receipts,
European Depository Receipts and Continental Depository Receipts, convertible
securities, currency swaps, common and preferred stock, options, options on
futures contracts, certain receipts including Treasury Investment Growth
Receipts and Certificates of Accrual on Treasury Securities, and loan
participations.
The Galaxy Intermediate Government Income Fund, unlike the Boston 1784 U.S.
Government Medium Term Income Fund, may invest in municipal securities, standby
commitments with respect to municipal securities, bank investment contracts and
mortgage dollar rolls.
III-6
<PAGE>
7. BOSTON 1784 RHODE ISLAND TAX-EXEMPT INCOME FUND/GALAXY RHODE ISLAND
MUNICIPAL BOND FUND
INVESTMENT OBJECTIVES:
(a) BOSTON 1784 RHODE ISLAND TAX-EXEMPT INCOME FUND: seeks to provide
investors with current income exempt from federal income tax and Rhode Island
personal income and business corporation taxes, with a secondary goal of
preserving capital.
(b) GALAXY RHODE ISLAND MUNICIPAL BOND FUND: seeks to provide 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.
COMMENT: The Boston 1784 Rhode Island Tax-Exempt Income Fund invests
primarily in municipal securities that pay interest that is exempt from federal
income tax and Rhode Island personal income and business corporation taxes. The
Boston 1784 Rhode Island Tax-Exempt Fund may also invest in limited amounts in
municipal securities that pay interest that is exempt from federal income tax
but not exempt from Rhode Island taxes as well as taxable debt securities such
as U.S. government obligations, corporate bonds, money market instruments and
repurchase agreements. Under normal circumstances, at least 80% of the Boston
1784 Rhode Island Tax-Exempt Income Fund's net assets are invested in municipal
securities, or in mutual funds or other investment companies that invest in
municipal securities and at least 65% of the Boston 1784 Rhode Island Tax-Exempt
Income Fund's assets are invested in Rhode Island municipal securities. The
Boston 1784 Rhode Island Tax-Exempt Income Fund may from time to time, invest as
a hedging strategy in a limited amount of futures contracts or options on
futures contracts. The Boston 1784 Rhode Island Tax-Exempt Income Fund may only
use futures contracts or options on futures contracts in an effort to offset
unfavorable changes in the value of securities held by the Fund for investment
purposes. The Boston 1784 Rhode Island Tax-Exempt Income Fund invests primarily
in investment grade securities (i.e., BBB or higher by S&P or Baa or higher by
Moody's) and generally invests in securities rated A or better by S&P or
Moody's. The Boston 1784 Rhode Island Tax-Exempt Income Fund's average weighted
maturity is expected to be from 5 to 10 years under normal circumstances. The
Boston 1784 Rhode Island Tax-Exempt Income Fund is non-diversified, which means
that it may invest a relatively high percentage of its assets in the obligations
of a limited number of issuers.
The Galaxy Rhode Island Municipal Bond 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. Under normal conditions, the Galaxy Rhode Island Municipal
Bond 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. Nearly all of the Galaxy Rhode Island Municipal Bond
Fund's investments will be of investment grade quality (i.e., rated BBB or
higher by S&P or Baa or higher by Moody's) or are unrated securities determined
by the investment adviser to be of comparable quality. Under normal market
conditions, the Galaxy Rhode Island Municipal Bond 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 (A or higher) or unrated securities determined by the
Fund's investment adviser to be of comparable quality. The Galaxy Rhode Island
Municipal Bond Fund is also classified as non-diversified. Although it has no
current intention to do so, the Galaxy Rhode Island Municipal Bond Fund may
invest more than 25% of its assets in municipal securities the interest on which
is paid solely from revenues on similar projects if such investment is deemed
necessary or appropriate by the investment adviser.
Unlike the Boston 1784 Rhode Island Tax-Exempt Income Fund, the Galaxy Rhode
Island Municipal Bond Fund limits its investments in securities of other
investment companies to money market mutual funds. Both the Boston 1784 Rhode
Island Tax-Exempt Income Fund and the Galaxy Rhode Island Municipal Bond Fund
may invest in municipal securities, however, the Boston 1784 Rhode Island Tax-
III-7
<PAGE>
Exempt Income Fund may also invest in certificates of indebtedness and municipal
leases. The Galaxy Rhode Island Municipal Bond Fund may only borrow from
domestic banks for temporary purposes and enter into reverse repurchase
agreements and then in amounts not in excess of 10% of its total assets. The
Boston 1784 Rhode Island Tax-Exempt Income Fund may borrow money from banks and
enter into reverse repurchase agreements in an amount not to exceed 33-1/3% of
the Fund's total assets and then only as a temporary measure for extraordinary
or emergency purposes.
The Boston 1784 Rhode Island Tax-Exempt Income Fund, unlike the Galaxy Rhode
Island Municipal Bond Fund, may invest in American Depository Receipts, European
Depository Receipts and Continental Depository Receipts, convertible securities,
currency swaps, foreign currency exchange transactions, common and preferred
stock, options, options on futures contracts, certain receipts including
Treasury Receipts, Treasury Investment Growth Receipts and Certificates of
Accrual on Treasury Securities, Separately Traded Interest and Principal
Securities, loan participations, and zero coupon securities.
8. BOSTON 1784 ASSET ALLOCATION FUND/GALAXY ASSET ALLOCATION FUND
INVESTMENT OBJECTIVES:
(a) BOSTON 1784 ASSET ALLOCATION FUND: seeks to provide investors with a
favorable total rate of return through current income and capital appreciation
consistent with preservation of capital, derived from investing in fixed income
and equity securities.
(b) GALAXY ASSET ALLOCATION 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 (such as the Dow Jones Industrial Average and Standard &
Poor's Composite Stock Price Index), as well as long-term growth in the value of
the Fund's assets.
COMMENT: The Boston 1784 Asset Allocation Fund invests in a balance of
equity and debt securities and short-term or money market instruments. Normally,
30% to 70% of the Boston 1784 Asset Allocation Fund's assets are invested in
equity securities, 30% to 60% of its assets are invested in intermediate and
long-term debt obligations and 0% to 40% of its assets are invested in
short-term debt and money market instruments.
The equity portion of the Boston 1784 Asset Allocation Fund is primarily
invested in the stocks of large U.S. companies that the Fund's managers believe
offer the prospect for above-average earnings growth and are available at
reasonable prices. From time to time the Boston 1784 Asset Allocation Fund may
also invest in mid-sized U.S. companies and large, multi-national companies
based outside of the U.S. The Boston 1784 Asset Allocation Fund's equity
securities also include warrants to purchase common stock, debt securities
convertible into common stock, convertible and non-convertible preferred stock
and depositary receipts.
The Boston 1784 Asset Allocation Fund's debt securities include investment
grade corporate debt securities and debt obligations issued or guaranteed as to
the payment of principal and interest by the U.S. government or by foreign
governments. The Boston 1784 Asset Allocation Fund may also invest in
mortgage-backed and asset-backed securities rated A or better by S&P or Moody's
or of comparable quality as determined by its adviser.
Like the Boston 1784 Asset Allocation Fund, under normal market conditions
the Galaxy Asset Allocation Fund will invest primarily in short-term debt
securities, common stocks, preferred stocks, and bonds. The Galaxy Asset
Allocation Fund seeks a mix of stocks and bonds and keeps at least 25% of its
assets in fixed income securities and preferred stocks. Both Funds limit their
investment to investment grade debt obligations (i.e., securities rated BBB or
higher by S&P or Baa or higher by Moody's).
While the Boston 1784 Asset Allocation Fund and the Galaxy Asset Allocation
Fund generally invest in a similar pool of investments, there are some
differences. For example, the Galaxy Asset Allocation
III-8
<PAGE>
Fund may not invest in guaranteed investment contracts, purchase loan
participations, enter into bond and interest rate futures contracts, purchase
and write options on futures contracts, invest in Treasury Receipts, Treasury
Investment Growth Receipts, and Certificates of Accrual on Treasury Securities,
invest in Separately Traded Interest and Principal Securities, invest in zero
coupon securities, invest in forward commitments, engage in currency swaps,
invest in warrants and invest in global depository receipts.
Although both Funds are permitted to invest in securities of other
investment companies, the Galaxy Asset Allocation Fund is limited to money
market funds while the Boston 1784 Asset Allocation Fund may invest in shares of
other investment companies and foreign investment trusts. The Boston 1784 Asset
Allocation Fund may invest in closed-end investment companies that primarily
hold securities of non-U.S. issuers.
The Galaxy Asset Allocation Fund limits its investment in foreign securities
to 20% of its net assets and the Boston 1784 Asset Allocation Fund has no
comparable limits. The Boston 1784 Asset Allocation Fund may invest 15% of its
net assets in illiquid securities, while the Galaxy Asset Allocation Fund limits
its investment in illiquid securities to 10% of its net assets.
The Boston 1784 Asset Allocation Fund, unlike the Galaxy Asset Allocation
Fund, may not enter into mortgage dollar rolls or invest in real estate
investment trusts.
9. BOSTON 1784 GROWTH AND INCOME FUND/GALAXY GROWTH AND INCOME FUND
INVESTMENT OBJECTIVES:
(a) BOSTON 1784 GROWTH AND INCOME FUND: seeks to provide investors with
long-term growth of capital with a secondary goal of income.
(b) GALAXY GROWTH AND INCOME FUND: seeks to provide a relatively high total
return through long-term capital appreciation and current income.
COMMENT: The Boston 1784 Growth and Income Fund normally invests 80% to 90%
or more of the Fund's assets in the common stocks (including depositary
receipts) of U.S. and foreign issuers. The Fund emphasizes the selection of
stocks in U.S. companies with market capitalizations of at least $1 billion but
may also invest in stocks in smaller U.S. companies. The Boston 1784 Growth and
Income Fund may also invest up to 35% of its assets in convertible and
non-convertible debt securities, preferred stock, warrants and money market
instruments. The Boston 1784 Growth and Income Fund may invest up to 25% of the
Fund's assets in securities of foreign companies, including smaller companies
and companies in developing markets.
The Galaxy Growth and Income normally invests at least 65% of its total
assets in the common stocks, preferred stock, common stock warrants and
securities convertible into common stocks of U.S. companies with large market
capitalization (generally over $2 billion as compared to over $1 billion for the
Boston 1784 Growth and Income Fund) that have prospects for above-average growth
and dividends. The Fund may purchase convertible securities, including
convertible preferred stock, convertible bonds or debentures, units consisting
of "usable" bonds and warrants or a combination of the above features. While
both Funds are permitted to invest in the securities of foreign issuers, the
Boston 1784 Growth and Income Fund limits its investment in foreign securities
to 25% of its net assets, while the Galaxy Growth and Income Fund may invest up
to 20% of its total assets in foreign securities that are freely traded on
United States exchanges or in the over-the-counter market in the form of
American Depository Receipts, European Depository Receipts or Global Depository
Receipts.
While the Boston 1784 Growth and Income Fund and Galaxy Growth and Income
Fund generally invest in a similar pool of investments, there are some
differences. For example, the Galaxy Growth and Income Fund may not purchase
loan participations, invest in Treasury Receipts, Treasury Investment
III-9
<PAGE>
Growth Receipts and Certificates of Accrual on Treasury Securities, invest in
Separately Traded Interest and Principal Securities, invest in zero coupon
securities, or purchase guaranteed investment contracts.
While the Boston 1784 Growth and Income Fund may purchase debt securities
rated investment grade or higher (i.e., Baa by Moody's or BBB by S&P), the
Galaxy Growth and Income Fund may purchase convertible bonds that are rated as
low as Ba by Moody's or BB by S&P or Fitch IBCA, Inc. at the time of purchase.
These securities provide questionable protection of principal and interest.
The Boston 1784 Growth and Income Fund, unlike the Galaxy Growth and Income
Fund, may not invest in real estate investment trusts.
10. BOSTON 1784 INTERNATIONAL EQUITY FUND/GALAXY INTERNATIONAL EQUITY FUND
INVESTMENT OBJECTIVES:
(a) BOSTON 1784 INTERNATIONAL EQUITY FUND: seeks to provide investors with
long-term growth of capital. Dividend income, if any, is incidental to this
goal.
(b) GALAXY INTERNATIONAL EQUITY FUND: seeks long term capital appreciation.
COMMENT: The Boston 1784 International Equity Fund invests primarily in
equity securities of foreign issuers including securities of issuers in
developing countries. The Fund is not restricted in the percentage of assets it
may invest in one particular country or region, and from time to time the Fund
may invest a substantial portion of its assets in one or more countries or
regions. The Boston 1784 International Equity Fund emphasizes equity securities
of foreign issuers with market capitalizations of at least $100 million. The
Fund may engage in foreign currency hedging transactions in an attempt to
minimize the affects of currency fluctuations on the Fund. The Fund may also
invest in convertible and non-convertible bonds and other debt securities and
money market instruments.
The Galaxy International Equity Fund invests at least 75% of its total
assets in 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.
While the Boston 1784 International Equity Fund and the Galaxy International
Equity Fund generally invest in a similar pool of investments, there are some
differences. For example, the Boston 1784 International Equity Fund, unlike the
Galaxy International Equity Fund may purchase guaranteed investment contracts,
purchase loan participations, invest in asset backed securities, purchase and
write options on futures contracts, invest in Treasury Receipts, Treasury
Investment Growth Receipts and Certificates of Accrual on Treasury Securities,
invest in Separately Traded Interest and Principal Securities and invest in zero
coupon securities.
Unlike the Boston 1784 International Equity Fund which allows securities to
be purchased that are rated investment grade (i.e. Baa by Moody's or BBB by
S&P), the Galaxy International Equity Fund requires all debt securities
purchased to be rated A or higher by Moody's or S&P.
The Galaxy International Equity Fund, unlike the Boston 1784 International
Equity Fund may invest in real estate investment trusts.
III-10
<PAGE>
APPENDIX IV
SHAREHOLDER TRANSACTIONS AND SERVICES OF THE GALAXY FUNDS
AND THE CORRESPONDING 1784 FUNDS
This Appendix compares the shareholder transactions and services of the
Galaxy Funds and their corresponding 1784 Funds. The following is qualified in
its entirety by the more detailed information included in the prospectuses for
the 1784 Funds and the Galaxy Funds which are incorporated by reference in this
Proxy/Prospectus. Unless otherwise indicated, terms used herein and not
otherwise defined have the same meanings as are given to them in such
prospectuses.
A. SALES CHARGES AND EXEMPTIONS
Shares of the 1784 Funds and Shares and Trust Shares of the Galaxy Funds are
offered at net asset value with no front-end or contingent deferred sales
charges.
BKB Shares of the Galaxy Funds are offered at net asset value per share with
no front-end or contingent deferred sales charges. BKB Shares will be issued in
connection with the Reorganization and will only be available for purchase by
shareholders who received BKB Shares in connection with the Reorganization. BKB
shares will convert into Retail A Shares on the first anniversary of the date
the 1784 Fund reorganized into its Corresponding Galaxy Fund provided that
Galaxy's Board of Trustees determines that the conversion is in the best
interests of BKB shareholders.
THERE WILL BE NO SALES LOAD IMPOSED ON THE CONVERSION OF BKB SHARES INTO
RETAIL A SHARES. IN ADDITION, NO SALES LOAD WILL BE IMPOSED ON SUBSEQUENT
PURCHASES OF RETAIL A SHARES (NOR WILL ANY CDSC BE IMPOSED UPON REDEMPTION OF
RETAIL A SHARES) BY FORMER 1784 FUND SHAREHOLDERS SO LONG AS THEY KEEP AN
ACCOUNT WITH GALAXY CONTINUOUSLY OPEN. Otherwise, there is a maximum sales
charge of 3.75% of the offering price per share on Retail A Shares of Galaxy's
non-money market funds. Sales charges are reduced as the amount invested
increases, provided that the amount invested reaches certain specified levels.
There is no sales charge on purchases of Retail A Shares of Galaxy of $500,000
or more. However, a contingent deferred sales charge or CDSC of the lesser of 1%
of the offering price or 1% of the net asset value of the shareholder's shares
is assessed to Galaxy shareholders who sell their Retail A Shares within one
year of purchase unless the redemption is the result of the shareholder's death
or disability. Galaxy, however, will waive the 1% CDSC on the initial sale of
Retail A Shares. This waiver will not apply to amounts reinvested within one
year following the initial sale of Retail A Shares. An investor may also be
entitled to reduced sales charges on Retail A Shares through Rights of
Accumulation, a Letter of Intent or certain reinvestment privileges (including
investing dividends and distributions of a Galaxy Fund or into such Galaxy Fund
or into another Galaxy Fund). In addition, Retail A Shares purchased by certain
qualified groups or for certain retirement accounts may be subject to reduced
sales charges. Finally, the front-end sales charge may be waived with respect to
certain types of investors and transactions, either because of the nature of the
investor or to reduce sales efforts required to attract such investments.
IV-1
<PAGE>
B. PURCHASE POLICIES
<TABLE>
<CAPTION>
TRUST SHARES AND
SHARES OF THE 1784 SHARES BKB SHARES OF THE RETAIL A SHARES OF
FUNDS OF THE GALAXY FUNDS GALAXY FUND THE GALAXY FUNDS
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Minimum Initial $1,000 for a regular Follow established $2,500 for a regular $2,500 for a regular
Investment account; $250 for procedures of account (no minimum account (no minimum
tax-sheltered customer's financial investment if you investment if you
retirement plans. institution or participate in the participate in the
$100,000 for the employer sponsored Automatic Investment Automatic Investment
Boston 1784 plan. $2,000,000 for Program); $500 for Program); $500 for
Institutional U.S. the Galaxy retirement plan retirement plan
Treasury Money Market Institutional accounts such as IRA, accounts such as IRA,
Fund and the Boston Treasury Money Market SEP and Keogh Plan SEP and Keogh Plan
1784 Institutional Fund and accounts; $100 for accounts; $100 for
Prime Money Market Institutional Money college savings college savings
Fund. Market Fund. accounts, including accounts, including
Education IRA Education IRA
accounts. accounts; no minimum
investment for salary
reduction retirement
plans such as 401(k)
or SIMPLE IRAs.
Minimum subsequent $250 for a regular Follow established Generally, $100; $50 Generally $100; $50
investments account; $50 through procedures of per month or $150 per per month or $150 per
an automatic customer's financial quarter for regular quarter for regular
investment plan. institution or accounts using the accounts using the
$5,000 for the Boston employer sponsored Automatic Investment Automatic Investment
1784 Institutional plan. No minimum for Program and $40 per Program and $40 per
U.S. Treasury Money the Galaxy month or $125 per month or $125 per
Market Fund and the Institutional quarter for Education quarter for Education
Boston 1784 Treasury Money Market IRAs using the IRAs using the
Institutional Prime Fund and Automatic Investment Automatic Investment
Money Market Fund. Institutional Money Program; $100 through Program; $100 through
Market Fund. the College the College
Investment Program Investment Program
($50 if you use the ($50 if you use the
Automatic Investment Automatic Investment
Program); and $25 per Program); and $25 per
pay period using the pay period using the
Payroll Deduction Payroll Deduction
Program. Program.
Purchase Methods Through SEI Follow established Through Provident Through Provident
Investments procedures of Distributors Inc. or Distributors Inc. or
Distribution Co. or a customer's financial a financial a financial
broker/dealer or institution or institution that has institution that has
financial institution employer sponsored an agreement with an agreement with
that has an agreement plan; through Provident Provident
with SEI Investments Provident Distributors Inc.; by Distributors Inc.; by
Distribution Co.; by Distributors Inc.; by mail; by telephone; mail; by telephone;
mail; by telephone; mail or by wire. or by wire. or by wire.
by wire; or
electronic transfer.
</TABLE>
IV-2
<PAGE>
C. REDEMPTION PROCEDURES
<TABLE>
<CAPTION>
TRUST SHARES AND
SHARES OF THE 1784 SHARES BKB SHARES OF THE RETAIL A SHARES OF
FUNDS OF THE GALAXY FUNDS GALAXY FUND THE GALAXY FUNDS
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Through an authorized Yes Terms set by Yes Yes
selling or financial institution
servicing agent or employer sponsored
plan. Otherwise, yes.
By mail Yes Terms set by Yes Yes
financial institution
or employer sponsored
plan. Otherwise, yes.
By telephone Yes Terms set by Yes Yes
financial institution
or employer sponsored
plan. Otherwise, yes.
By wire Yes Terms set by Yes Yes
financial institution
or employer sponsored
plan. Otherwise, yes.
By systematic Yes (shareholders of Institutional Yes (except that the Yes (except that the
withdrawal plan all 1784 Funds whose Shareholders must account must have a account must have a
accounts maintain an follow established starting value of at starting value of at
aggregate value of procedures of least $10,000). least $10,000).
$10,000 (except customer's financial
shareholders of the institution or
Boston 1784 employer sponsored
Institutional U.S. plan.
Treasury Money Market
Fund and Boston 1784
Institutional Prime
Money Market Fund)
may receive
systematic payments
of at least $100).
Institutional
Shareholders must
follow established
procedures of
customer's financial
institution or
employer sponsored
plan.
By electronic Yes No No No
transfer
Checkwriting feature Checkwriting Institutional Checkwriting Checkwriting
privileges are Shareholders must privileges are privileges are
available for the follow established available for the available for the
Boston 1784 Tax-Free procedures of Galaxy Money Market Galaxy Money Market
Money Market Fund, customer's financial Fund, Galaxy U.S. Fund, Galaxy U.S.
Boston 1784 U.S. institution or Treasury Fund and Treasury Fund and
Treasury Money Market employer sponsored Galaxy Tax-Exempt Galaxy Tax-Exempt
Fund, Boston 1784 plan. Fund. ($250 minimum). Fund. ($250 minimum).
Prime Money Market
Fund and Boston 1784
Short-Term Income
Fund. ($250 minimum).
</TABLE>
IV-3
<PAGE>
Due to the high cost of maintaining fund accounts with small balances, each
of the 1784 Funds may redeem Shares in a shareholder's account if the balance in
such shareholder's account with the Fund drops below $250, in the case of a
tax-sheltered retirement plan account, or $1,000 ($100,000 for the Boston 1784
Institutional U.S. Treasury Money Market Fund and the Boston 1784 Institutional
Prime Money Market Fund) in the case of other shareholder accounts. If a
shareholder's account falls below the minimum required investment as a result of
selling or exchanging shares, the shareholder will be given 60 days to re-
establish the minimum balance or the account will be closed.
Galaxy may redeem Retail A Shares if the balance in a shareholder's account
(other than a retirement plan account) falls below $250 as a result of selling
or exchanging shares. In such event, Galaxy will provide shareholders with 60
days' written notice of such fact. If such shareholder does not re-establish the
required minimum balance within such period the account will be closed.
D. ADDITIONAL SHAREHOLDER SERVICES
<TABLE>
<CAPTION>
TRUST SHARES AND
SHARES OF THE 1784 SHARES BKB SHARES OF THE RETAIL A SHARES OF
FUNDS OF THE GALAXY FUNDS GALAXY FUND THE GALAXY FUNDS
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Systematic/automatic Yes (minimum initial Institutional Yes ($50 per month or Yes ($50 per month or
investment plan investment amounts Shareholders must $150 per quarter $150 per quarter
described above follow established minimum initial and minimum initial and
apply; $50 minimum procedures of subsequent investment subsequent investment
for subsequent customer's financial for regular accounts, for regular accounts,
investments). institution or $40 or $125 per $40 or $125 per
Institutional employer sponsored quarter minimum quarter minimum
Shareholders must plan. initial and initial and
follow established subsequent investment subsequent investment
procedures of for Education IRAs). for Education IRAs).
customer's financial
institution or
employer sponsored
plan.
</TABLE>
IV-4
<PAGE>
E. SHARE EXCHANGES
<TABLE>
<CAPTION>
TRUST SHARES AND
SHARES OF THE 1784 SHARES BKB SHARES OF THE RETAIL A SHARES OF
FUNDS OF THE GALAXY FUNDS GALAXY FUND THE GALAXY FUNDS
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Through an Authorized Yes, Institutional N/A N/A Yes
Selling or Shareholders must
Servicing Agent follow established
procedures of
customer's financial
institution or
employer sponsored
plan
By mail Yes, Institutional N/A N/A Yes
Shareholders must
follow established
procedures of
customer's financial
institution or
employer sponsored
plan
By telephone Yes, Institutional N/A N/A Yes
Shareholders must
follow established
procedures of
customer's financial
institution or
employer sponsored
plan
Minimum None N/A N/A Retail A Shares
exchanged must have a
value of at least
$100
</TABLE>
F. DIVIDENDS FOR EACH OF THE 1784 FUNDS AND GALAXY FUNDS ARE DECLARED AND
PAID AS FOLLOWS:
<TABLE>
<CAPTION>
1784 FUNDS GALAXY FUNDS
------------------------------------ ------------------------------------
<S> <C> <C>
Declared daily and paid monthly Tax-Free Money Market Fund Tax Exempt Fund
U.S. Treasury Money Market Fund U.S. Treasury Fund
Institutional U.S. Treasury Money Institutional Treasury Money Market
Market Fund Fund
Prime Money Market Fund Money Market Fund
Institutional Prime Money Market Institutional Money Market Fund
Fund Short-Term Bond Fund
Short-Term Income Fund High Quality Bond Fund
Income Fund Intermediate Government Income Fund
U.S. Government Medium-Term Income Intermediate Tax-Exempt Bond Fund
Fund Connecticut Intermediate Municipal
Tax-Exempt Medium-Term Income Fund Bond Fund
Connecticut Tax-Exempt Income Fund Florida Municipal Bond Fund
Florida Tax-Exempt Income Fund Massachusetts Intermediate Municipal
Massachusetts Tax-Exempt Income Fund Bond Fund
Rhode Island Tax-Exempt Income Fund Rhode Island Municipal Bond Fund
Declared and paid quarterly Asset Allocation Fund Asset Allocation Fund
Growth and Income Fund Growth and Income Fund
Declared and paid semi-annually Growth Fund Growth Fund II
Declared and paid at least annually International Equity Fund International Equity Fund
</TABLE>
IV-5
<PAGE>
APPENDIX V
PERFORMANCE COMPARISONS OF THE
OPERATING GALAXY FUNDS AND THEIR
CORRESPONDING 1784 FUNDS
TOTAL RETURN PERFORMANCE
(AS OF 12/31/99)
The total returns of the Galaxy Funds are competitive with those of the 1784
Funds as shown below. No BKB Shares or Shares were outstanding as of 12/31/99.
Performance shown is based on historical earnings and is not predictive of
future performance. Performance reflects reinvestment of dividends and other
earnings.
<TABLE>
<CAPTION>
BOSTON 1784 TAX-FREE
MONEY MARKET FUND GALAXY TAX-EXEMPT FUND
-------------------- -------------------------------------------
TRUST RETAIL A
SHARES SHARES SHARES
-------------------- -------- -----------------------
<S> <C> <C> <C>
1 Year............................. 3.03% 2.73% 2.59%
5 Years............................ 3.30% 3.02% 2.87%
10 Years........................... N/A N/A 3.07%
Since Inception.................... 3.14% (6/14/93) 2.73% (11/1/94) 3.43% (6/23/88)
Best Quarter....................... 0.96% 6/95 0.88% 6/95 1.55% 6/89
Worst Quarter...................... 0.58% 3/94 0.59% 3/99 0.45% 9/93
</TABLE>
<TABLE>
<CAPTION>
BOSTON 1784 U.S. TREASURY
MONEY MARKET FUND GALAXY U.S. TREASURY FUND
------------------------- ------------------------------------------
TRUST RETAIL A
SHARES SHARES SHARES
------------------------- -------- -----------------------
<S> <C> <C> <C>
1 Year........................... 4.45% 4.37% 4.20%
5 Years.......................... 4.91% 4.81% 4.63%
Since Inception.................. 4.52% (6/7/93) 4.81% (11/1/94) 4.27% (1/22/91)
Best Quarter..................... 1.38% 6/95 1.32% 6/95 1.28% 6/95
Worst Quarter.................... 0.65% 3/94 1.03% 3/99 0.65% 6/93
</TABLE>
<TABLE>
<CAPTION>
BOSTON 1784 PRIME
MONEY MARKET FUND GALAXY MONEY MARKET FUND
------------------------ ------------------------------------------
TRUST RETAIL A
SHARES SHARES SHARES
------------------------ -------- -----------------------
<S> <C> <C> <C>
1 Year........................... 4.65% 4.80% 4.63%
5 Years.......................... 5.07% 5.12% 4.92%
10 Years......................... N/A N/A 4.86%
Since Inception.................. 4.48% (6/6/91) 5.11% (11/1/94) 5.50% (11/17/86)
Best Quarter..................... 1.39% 6/95 1.39% 6/95 2.34% 6/89
Worst Quarter.................... 0.66% 3/94 1.11% 6/99 0.65% 9/93
</TABLE>
V-1
<PAGE>
<TABLE>
<CAPTION>
BOSTON 1784 SHORT-TERM GALAXY SHORT-TERM
INCOME FUND BOND FUND
------------------------ ------------------------------------------
TRUST RETAIL A
SHARES SHARES SHARES
------------------------ -------- -----------------------
<S> <C> <C> <C>
1 Year........................... 2.66% 2.56% -1.49%
5 Years.......................... 6.14% 5.89% 4.83%
Since Inception.................. 5.70% (7/1/94) 5.14% (12/30/91) 4.49% (12/30/91)
Best Quarter..................... 3.31% 6/95 4.14% 9/92 4.14% 9/92
Worst Quarter.................... 0.27% 3/96 -0.72% 3/94 -0.66% 6/94
</TABLE>
<TABLE>
<CAPTION>
BOSTON 1784 GALAXY HIGH QUALITY
INCOME FUND BOND FUND
------------------------ ------------------------------------------
TRUST RETAIL A
SHARES SHARES SHARES
------------------------ -------- -----------------------
<S> <C> <C> <C>
1 Year........................... -2.70% -3.99% -7.71%
5 Years.......................... 6.47% 7.19% 6.22%
Since Inception.................. 5.88% (7/1/94) 6.98% (12/14/90) 6.44% (12/14/90)
Best Quarter..................... 6.34% 6/95 7.59% 6/95 7.54% 6/95
Worst Quarter.................... -2.42% 3/96 -3.85% 3/94 -3.85% 3/94
</TABLE>
<TABLE>
<CAPTION>
BOSTON 1784
U.S. GOVERNMENT
MEDIUM-TERM GALAXY INTERMEDIATE
INCOME FUND GOVERNMENT INCOME FUND
------------------------ ------------------------------------------
TRUST RETAIL A
SHARES SHARES SHARES
------------------------ -------- -----------------------
<S> <C> <C> <C>
1 Year........................... -1.57% -1.72% -5.66%
5 Years.......................... 6.30% 6.44% 5.35%
10 Years......................... N/A 6.19% 5.67%
Since Inception.................. 4.71% (6/7/93) 6.73% (9/1/88) 6.28% (9/1/88)
Best Quarter..................... 5.51% 6/95 8.56% 6/89 8.56% 6/89
Worst Quarter.................... 2.95% 3/94 -2.90% 3/94 -2.90% 3/94
</TABLE>
<TABLE>
<CAPTION>
BOSTON 1784 RHODE ISLAND GALAXY RHODE ISLAND
TAX-EXEMPT INCOME FUND MUNICIPAL BOND FUND
------------------------ ------------------------------------------
TRUST RETAIL A
SHARES SHARES SHARES
------------------------ -------- -----------------------
<S> <C> <C> <C>
1 Year........................... -2.69% N/A -6.39%
5 Years.......................... 5.87% 4.96%
Since Inception.................. 5.01% (8/1/94) 4.96% (12/20/94)
Best Quarter..................... 5.66% 3/95 4.90% 3/95
Worst Quarter.................... -2.04% 6/99 -1.90% 6/99
</TABLE>
<TABLE>
<CAPTION>
BOSTON 1784 ASSET GALAXY ASSET ALLOCATION
ALLOCATION FUND FUND
------------------------ ------------------------------------------
TRUST RETAIL A
SHARES SHARES SHARES
------------------------ -------- -----------------------
<S> <C> <C> <C>
1 Year........................... 12.43% 7.41% 3.22%
5 Years.......................... 16.88% 17.98% 16.89%
Since Inception.................. 12.84% (6/14/93) 12.53% (12/30/91) 11.86% (12/30/91)
Best Quarter..................... 10.79% 6/97 11.74% 12/98 11.74% 12/98
Worst Quarter.................... -5.12% 9/98 -3.75% 9/98 -3.80% 9/98
</TABLE>
V-2
<PAGE>
<TABLE>
<CAPTION>
BOSTON 1784 GROWTH GALAXY GROWTH AND INCOME
AND INCOME FUND FUND
------------------------ ------------------------------------------
TRUST RETAIL A
SHARES SHARES SHARES
------------------------ -------- -----------------------
<S> <C> <C> <C>
1 Year........................... 18.14% 7.09% 2.83%
5 Years.......................... 22.86% 20.20% 18.98%
Since Inception.................. 18.25% (6/7/93) 16.43% (12/14/92) 15.90% (2/12/93)
Best Quarter..................... 21.88% 12/99 20.76% 12/98 20.66% 12/98
Worst Quarter.................... -12.79% 9/98 -13.49% 9/98 -13.50% 9/98
</TABLE>
<TABLE>
<CAPTION>
BOSTON 1784
INTERNATIONAL GALAXY INTERNATIONAL
EQUITY FUND EQUITY FUND
------------------------ ------------------------------------------
TRUST RETAIL A
SHARES SHARES SHARES
------------------------ -------- -----------------------
<S> <C> <C> <C>
1 Year........................... 56.27% 41.89% 35.80%
5 Years.......................... N/A 19.56% 17.97%
Since Inception.................. 17.53% (1/3/95) 15.04% (12/30/91) 14.06% (12/30/91)
Best Quarter..................... 37.15% 12/99 24.53% 12/99 24.36% 12/99
Worst Quarter.................... -16.34% 9/98 -14.53% 9/98 -14.61% 9/98
</TABLE>
V-3
<PAGE>
APPENDIX VI
MANAGEMENT DISCUSSION OF GALAXY FUND
PERFORMANCE
VI-1
<PAGE>
PORTFOLIO REVIEWS
[PHOTO]
Glenn Migliozzi is the managing director of Fixed Income Investments for Fleet
Investment Advisors, Inc. He is also a member of Fleet's Taxable Fixed Income
Strategy Committee, which has managed the Galaxy Short-Term Bond Fund since
October of 1999.
GALAXY SHORT-TERM BOND FUND
BY GLENN MIGLIOZZI
MANAGING DIRECTOR
FIXED INCOME INVESTMENTS
As short-term interest rates edged higher over the past year, the Galaxy
Short-Term Bond Fund benefited from holding sizable investments in Treasury
securities and cash, and from keeping its maturity structure near or somewhat
shorter than that of its market benchmarks. We further enhanced returns by
taking advantage of near-term opportunities to increase yield that market
fluctuations created in individual bond sectors.
For the 12 months ended October 31, 1999, the Fund's Trust Shares earned a
total return of 2.67%, and its Retail A Shares had a total return of 2.43%
before deducting the 3.75% maximum front-end sales charge. During this time, the
Fund's Retail B Shares had a total return of 1.71% before deducting the maximum
5.00% contingent deferred sales charge. (Please see the chart on page VI-11 for
total returns after deducting the front-end sales charge and the chart on
page VI-12 for total returns after deducting the contingent deferred sales
charge.)
Over the same period, the average short-term bond fund tracked by Lipper
Analytical Services ("Lipper") earned a total return of 2.98%, and the Lehman
One-to-Three-Year Government Index had a total return of 2.97%.
On October 31, 1999, when the reporting period ended, the Galaxy Short-Term
Bond Fund had an average maturity near that of the Fund's benchmark, and the
Fund's Trust Shares had a 30-day Securities and Exchange Commission ("SEC")
annualized yield of 5.31%. On the same date, Retail A Shares of the Fund had a
30-day SEC annualized yield of 4.96%, and Retail B Shares had a 30-day SEC
annualized yield of 4.34%.
ENHANCING RETURN AS YIELDS ROSE
In the final months of 1998 and the first months of 1999, the Fund benefited
from earlier additions of short-term issues, whose prices suffered less than
those with longer maturities as interest rates rose. Of further help was the
Fund's exposure to high-quality corporate bonds, which recorded relatively good
VI-2
<PAGE>
results as the economic outlook indicated continued strength. Holdings in
mortgage-backed securities also performed well, as rising interest rates reduced
the risk of home-loan prepayments. During this time we increased investments in
mortgage-backed securities and made opportunistic trades within the corporate
sector.
In the second quarter of 1999, with robust growth and the Fed's rate hike of
25 basis points (0.25%), yields for shorter maturities rose 30 to 70 basis
points. While corporate bonds suffered from lighter demand and increased
supplies at this time, the added income from corporates more than compensated
for the slight lag in their price performance. During the second quarter, we
took advantage of selected opportunities in corporates, as well as in
asset-backed and mortgage-backed securities.
With a further rise in yields, the higher yields earned on non-Treasury debt
helped offset any extra price loss by those securities. Anticipating a continued
flight to quality, we added Treasury securities to the portfolio and increased
the Fund's cash position. We also continued to take advantage of selected
trading opportunities that arose from market fluctuations.
DEFENSIVE POSTURE TO CONTINUE
Given the many uncertainties that investors will face at the end of 1999, we
intend to focus new purchases on issues that mature next year when many of these
concerns should be resolved. In addition, we plan to maintain large investments
in Treasuries and cash. Besides giving the Fund added liquidity, Treasuries
could benefit from any year-end flight to quality. As always, we plan to focus
on high-quality securities in other sectors and make the most of new investment
opportunities that arise.
GALAXY SHORT-TERM BOND FUND
DISTRIBUTION OF TOTAL NET ASSETS AS OF OCTOBER 31, 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Repurchase Agreement and Net Other Assets & Liabilities 13%
Commercial Paper 2%
U.S.Government and Agency Obligations 31%
Asset-Backed and Mortgage-Backed Securities 21%
Corporate Notes and Bonds 33%
</TABLE>
VI-3
<PAGE>
GALAXY SHORT-TERM BOND FUND
GROWTH OF $10,000 INVESTMENT*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
12/30/91 10/31/99
<S> <C> <C>
Lehman Brothers One to Three Year Government Bond Index $10,000 $15,562
Galaxy Short-Term Bond Fund - Retail A Shares $9,625 $14,164
Galaxy Short-Term Bond Fund - Trust Shares $10,000 $14,888
Galaxy Short-Term Bond Fund - Retail B Shares $10,000 $11,335
</TABLE>
- ------------------------
* Since inception on 12/30/91 for Trust and Retail A Shares. Since inception
on 3/4/96 for Retail B Shares. Performance figures for Retail A Shares
include the effect of the maximum 3.75% front-end sales charge. Performance
figures for Retail B Shares reflect the deduction of the 3.00% contingent
deferred sales charge as if shares were redeemed on October 31, 1999. The
Lehman Brothers One to Three Year Government Bond Index is an unmanaged
index in which investors cannot invest. Results for the index do not reflect
investment management fees and other expenses incurred by the Fund.
VI-4
<PAGE>
PORTFOLIO REVIEWS
[PHOTO]
Marie Schofield has managed the Galaxy High Quality Bond Fund since March of
1996. She has managed fixed-income investments since 1975.
GALAXY HIGH QUALITY BOND FUND
BY MARIE SCHOFIELD
PORTFOLIO MANAGER
In the first half of the reporting period, as the global economic outlook
improved and risk premiums contracted, corporate, asset-backed, and
mortgage-backed securities outperformed Treasuries. Additional commitments made
to these sectors benefited Fund returns. Later in the period, risk premiums in
selected sectors saw renewed widening while certain favored sectors, such as
U.S. Government agency and mortgage-backed issues, asset-backed issues, and
especially the Yankee sector, continued to perform well. Throughout the period
we continued to increase our allocations to mortgage-backed and asset-backed
securities and adjusted our weightings to the corporate sector in order to take
advantage of these changes. During this time, we also remained overweighted in
short and long maturities following a barbell strategy throughout much of the
year. This positioning is optimal when the yield curve flattens and serves to
minimize the impact of falling prices as short-term interest rates rise more
than long-term interest rates. During this time, interest rates on long-term
Treasuries rose 100 basis points while interest rates on short-term Treasuries
rose nearly 170 basis points--typical in an environment of monetary policy
tightening.
As real yields rose, the Fund's duration was increased periodically when
interest rates spiked to historically attractive levels. While relative value
was deemed high, these moves also made the Fund more sensitive to changes in
interest rates. As rates continued to march upward and top out at levels above
6%, the Fund underperformed for the reporting period. Since the Fund is
generally not permitted to invest in foreign securities, its returns also
suffered from an absence of dollar-denominated "Yankee" bonds issued by foreign
corporations and institutions. Yankee bonds saw stellar performance during the
period in response to exceptional demand, as wide spread levels attracted
investors. Financial issues also performed well during the period.
For the 12 months ended October 31, 1999, the Fund's Trust Shares earned a
total return of -2.52%. Over the same time, Retail A Shares of the Fund had a
total return of -2.66% before deducting the maximum 3.75% front-end sales
charge, and its Retail B Shares had a total return of -3.46% before deducting
the maximum 5.00% contingent deferred sales charge. A Prime Shares of the Fund
had a total return of -2.68% before deducting the maximum 4.75% front-end sales
charge and its B Prime Shares had a total return of -3.46% before deducting the
maximum 5.00% contingent deferred sales charge. (Please see the charts on
page VI-11 for total returns after deducting the applicable front-end sales
charge
VI-5
<PAGE>
and the charts on page VI-12 for total returns after deducting the applicable
contingent deferred sales charge.)
Over the same 12-month period, the average A-rated corporate bond fund
tracked by Lipper had a total return of -0.92%, the Lehman Brothers
Government/Corporate Bond Index had a total return of -0.66% and the Lehman
Brothers Long-Term Government/ Corporate Bond Index had a total return of
- -4.31%. The Fund has changed its benchmark from the Lehman Brothers Long-Term
Government/ Corporate Bond Index to the Lehman Brothers Government/Corporate
Bond Index, which is comprised of securities with remaining maturities that more
closely approximate the remaining maturities of those securities held by the
Fund.
On October 31, 1999, the Fund's Trust Shares had a 30-day SEC annualized
yield of 5.76%, its Retail A Shares had a 30-day SEC annualized yield of 5.41%
and its Retail B Shares had a 30-day SEC annualized yield of 5.00%. On such
date, the Fund's A Prime Shares had a 30-day SEC annualized yield of 5.66% and
its B Prime Shares had a 30-day SEC annualized yield of 4.89%.
PORTFOLIO ADJUSTMENTS
Early in the fiscal year, we reduced Treasuries in favor of additional
corporate, asset-backed, and mortgage-backed securities, as well as U.S.
Government agency issues. As the yield for 30-year Treasuries fell below 5% in
December of 1998, we reduced the Fund's duration to 104% of benchmark duration.
When the 30-year Treasury yield moved above 5.40% in the first quarter of 1999,
we extended the Fund's duration to 109% of that for the Index.
As the global economic outlook brightened in the first and second quarters
of 1999, corporate securities performed well versus Treasuries and our higher
allocation to this sector helped Fund performance. Specifically, our overweights
included issues in industrials, consumer non-cyclicals, and telecommunications
due to their stable outlook and strong credit quality. We remained underweighted
in corporate bonds issued by financial firms. We also found opportunities in
high-quality debt of retailers, drug companies, and energy firms. While
corporate bonds underperformed in the second half-year period, due to
expectations of a glut of new supply ahead of Y2K, agency, mortgage-backed and
asset-backed securities continued to contribute positively to Fund returns. In
June, after the yield on the 30-year Treasury bonds reached 6.15%, we further
extended the Fund's duration to 114% of the duration for its benchmark.
As rates rose further in the final months of the period, the Fund benefited
from its focus on better-quality issues and from a barbelled maturity structure.
The higher yields on investments in mortgage-backed securities and corporate
bonds helped to offset the price declines in those sectors. When risk premiums
on U.S. Government agencies became more attractive, we added to holdings in that
sector. As we approached the final quarter of this calendar year, we increased
investments in Treasuries in an effort to highlight liquidity.
PREPARED FOR SLOWER GROWTH
With a duration that remains 114% of its benchmark, the Fund should enjoy
strong gains when growth finally slows and bond prices rally. Tentative evidence
of slowing is already apparent in the housing sector and consumer demand has
slowed somewhat. In addition, employment gains have begun to soften. The Fed is
resolved to slow economic growth to head off any inflationary pressures from
tight labor markets. How much additional tightening, if any, that is required to
achieve this goal remains a major question. With the eventual slowdown, the Fund
should benefit from its emphasis on high credit quality and its longer maturity
structure.
VI-6
<PAGE>
GALAXY HIGH QUALITY BOND FUND
DISTRIBUTION OF TOTAL NET ASSETS AS OF OCTOBER 31, 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Foreign Bond, Repurchase Agreement and
Net Other Assets & Liabilities 4%
Mortgage-Backed Securities 18%
U.S. Government and Agency Obligations 40%
Asset-Backed Securities 6%
Corporate Notes and Bonds 32%
</TABLE>
GALAXY HIGH QUALITY BOND FUND
GROWTH OF $10,000 INVESTMENT*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
12/14/90 10/31/99
<S> <C> <C>
Lehman Brothers Long-Term Government/Corporate Bond Index $10,000 $20,028
Lehman Brothers Government/Corporate Bond Index $10,000 $23,623
Galaxy High Quality Bond Fund - Retail A Shares $9,625 $17,762
Galaxy High Quality Bond Fund - Trust Shares $10,000 $18,602
Galaxy High Quality Bond Fund - Retail B Shares $10,000 $11,362
Galaxy High Quality Bond Fund - A Prime Shares $9,525 $9,269
Galaxy High Quality Bond Fund - B Prime Shares $10,000 $9,197
</TABLE>
- ------------------------
* Since inception on 12/14/90 for Trust and Retail A Shares. Since inception
on 3/4/96 for Retail B Shares. Since inception on 11/1/98 for A Prime and B
Prime Shares. Performance figures for Retail A Shares include the effect of
the maximum 3.75% front-end sales charge. Performance figures for Prime A
Shares include the effect of the maximum 4.75% front-end sales charge.
Performance figures for Retail B and B Prime Shares reflect the deduction of
the 3.00% contingent deferred sales charge (applicable to shares redeemed in
the fourth year after purchase) and maximum 5.00% contingent deferred sales
charge, respectively, as if shares were redeemed on October 31, 1999. The
Lehman Brothers Long-Term Government/Corporate Bond Index and the Lehman
Brothers Government/ Corporate Bond Index are unmanaged indices in which
investors cannot invest. Results for the indices do not reflect investment
management fees and other expenses incurred by the Fund.
VI-7
<PAGE>
PORTFOLIO REVIEWS
[PHOTO]
Marie Schofield became manager of the Galaxy Intermediate Government Income Fund
in December of 1996. She has managed fixed-income investments since 1975.
GALAXY INTERMEDIATE GOVERNMENT INCOME FUND
BY MARIE SCHOFIELD
PORTFOLIO MANAGER
In a climate where investors were concerned that rising interest rates would
curtail future growth and generally favored U.S. Government securities and other
issues with higher credit quality, the Galaxy Intermediate Government Income
Fund benefited from sizable holdings in government debt. We further enhanced
returns during this time by taking advantage of attractive yield opportunities
that arose in other sectors and by emphasizing investments with longer
maturities. While the increased yield from longer maturities was sometimes
offset by the lesser price performance of these issues, we feel the Fund's
longer maturity structure should serve it well once interest rates fall and bond
prices rally.
For the 12 months ended October 31, 1999, the Fund's Trust Shares had a
total return of -0.86% and its Retail A Shares had a total return of -1.11%
before deducting the maximum 3.75% front-end sales charge. During the same
period, the Fund's Retail B Shares had a total return of -1.78% before deducting
the maximum 5.00% contingent deferred sales charge. (Please see the chart on
page VI-11 for total returns after deducting the front-end charge and the chart
on page VI-12 for total returns after deducting the contingent deferred sales
charge.)
Those returns compare with a total return of -0.83% for the average
intermediate government bond fund tracked by Lipper, a total return of 0.99% for
the Lehman Brothers Intermediate Government/ Corporate Intermediate Bond Index
and a total return of 0.53% for the Lehman Brothers Aggregate Bond Index. As of
October 31, 1999, the Fund's Trust Shares had a 30-day SEC annualized yield of
5.76%. On the same date, Retail A Shares of the Fund had a 30-day SEC annualized
yield of 5.38% and Retail B Shares had a 30-day SEC annualized yield of 4.82%.
ADAPTING TO ECONOMIC CHANGES
In the first half of the reporting period, the Fund increased investments in
corporate, asset-backed, and mortgage-backed securities as well as in issues of
U.S. Government agencies. Besides being attractive on an historical basis, the
yields of these "spread products" provided some protection as interest rates
rose and bond prices fell. To facilitate these purchases, we reduced our
allocation in Treasuries. Continually throughout the period, U.S. Government
issues represented more than 70% of the portfolio, which is well above the 65%
threshold required by the Fund's investment policies.
VI-8
<PAGE>
During this time we maintained a "barbelled" maturity structure, which
overweights both long and short maturities and underweights intermediate
maturities. This positioning is optimal when the yield curve flattens, and
serves to minimize the impact of falling prices as short-term interest rates
rise more than long-term interest rates. During this time, interest rates on
long-term Treasuries rose 100 basis points while interest rates on short-term
Treasuries rose nearly 170 basis points, which is typical in an environment of
monetary policy tightening. We reduced the Fund's duration early in the period
when long-term Treasury yields fell below 5.00%. Overall, this gave the Fund a
duration that was about 105% of the duration for the average of the Lehman
Brothers Intermediate Government/Corporate Bond Index and the Lehman Brothers
Aggregate Bond Index. When the 30-year Treasury yield moved above 5.40% in the
first quarter of 1999, we extended the Fund's duration to 109% of that of the
Index.
As yield spreads increased in the second quarter of 1999, we added
selectively to bonds of domestic banks and intermediate-term industrials and
consumer non-cyclicals. Throughout the period, however, holdings of corporate
issues remained light versus the Fund's benchmark, a blend of the Lehman
Brothers Intermediate Government/Corporate Bond Index and the Lehman Brothers
Aggregate Bond Index. We did maintain a significant overweight in mortgages due
to their ongoing attractive valuation, and increased holdings as the year
progressed. At the end of the period, weightings in mortgage-backed securities
were about double those of the benchmark. We reduced positions in
intermediate-term corporates in favor of government issues, as spread levels
between these two sectors narrowed dramatically. As real (inflation-adjusted)
yields rose, the Fund's duration was increased periodically when interest rates
spiked to historically attractive levels. While relative value was deemed high,
these moves also made the Fund more sensitive to changes in interest rates. The
Fund's duration was extended a final time in June as long-term Treasury yields
rose above 6%. By the end of June, the duration was approximately 114% of that
for the benchmark.
STRATEGIES FOR SLOWER GROWTH
If slower growth allows yields to fall and prices to rally, as we expect,
longer-maturity issues should enjoy strong gains. In the meantime, they provide
the Fund with added income. The Fund should also benefit from its investments in
agencies and mortgage-backed securities, whose strong credit quality is likely
to attract investors in a less robust economy.
GALAXY INTERMEDIATE GOVERNMENT INCOME FUND
DISTRIBUTION OF TOTAL NET ASSETS AS OF OCTOBER 31, 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Asset-Backed Securities, Foreign Bonds, Repurchase Agreement
and Net Other Assets & Liabilities 6%
Mortgage-Backed Securities 30%
U.S. Government and Agency Obligations 49%
Corporate Notes and Bonds 15%
</TABLE>
VI-9
<PAGE>
GALAXY INTERMEDIATE GOVERNMENT INCOME FUND
GROWTH OF $10,000 INVESTMENT*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
9/1/88 10/31/99
<S> <C> <C>
Lehman Brothers Aggregate Bond Index $10,000 $23,892
Lehman Brothers Intermediate Government/Corporate Bond Index $10,000 $23,781
Galaxy Intermediate Government Income Fund - Retail A Shares $9,625 $20,046
Galaxy Intermediate Government Income Fund - Trust Shares $10,000 $21,038
Galaxy Intermediate Government Income Fund - Retail B Shares $10,000 $9,353
</TABLE>
- ------------------------
* Since inception on 9/1/88 for Trust and Retail A Shares. Since inception on
11/1/98 for Retail B Shares. Performance figures for Retail A Shares include
the effect of the maximum 3.75% front-end sales charge. Performance figures
for Retail B Shares reflect the deduction of the maximum 5.00% contingent
deferred sales charge as if shares were redeemed on October 31, 1999. The
Lehman Brothers Aggregate Bond Index and the Lehman Brothers Intermediate
Government/Corporate Bond Index are unmanaged indices in which investors
cannot invest. Results for the indices do not reflect investment management
fees and other expenses incurred by the Fund.
VI-10
<PAGE>
PERFORMANCE AT-A-GLANCE
AVERAGE ANNUAL TOTAL RETURNS--RETAIL A SHARES*
<TABLE>
<CAPTION>
10 YEARS/
AS OF OCTOBER 31, 1999 1 YEAR 3 YEARS 5 YEARS LIFE OF FUND
- ---------------------- -------- -------- -------- ------------
<S> <C> <C> <C> <C>
Short-Term Bond Fund
(Inception date 12/30/91).................................. -1.38% 3.48% 4.85% 4.54%
High Quality Bond Fund
(Inception date 12/14/90).................................. -6.34 3.81 6.68 6.68
Intermediate Government
Income Fund (Inception date 9/1/88)**...................... -4.83 3.73 5.45 5.76
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS--A PRIME SHARES*
<TABLE>
<CAPTION>
AS OF OCTOBER 31, 1999 1 YEAR 3 YEARS 5 YEARS LIFE OF FUND
- ---------------------- -------- -------- -------- ------------
<S> <C> <C> <C> <C>
High Quality Bond Fund
(Inception date 11/1/98)................................... -7.31% N/A N/A -7.31%
</TABLE>
- ------------------------
* Return figures for Retail A Shares have been restated to include the effect
of the maximum 3.75% front-end sales charge which became effective on
December 1, 1995. Return figures for A Prime Shares include the effect of
the maximum 4.75% front-end sales charge.
** Retail A Shares of the Intermediate Government Income Fund were first
offered during the fiscal year ended October 31, 1992. The returns for
Retail A Shares for prior periods represent the returns for Trust Shares of
the Fund. Prior to November 1, 1993, the returns for Retail A Shares and
Trust Shares of the Fund were the same because each series of shares had the
same expenses.
AVERAGE ANNUAL TOTAL RETURNS--TRUST SHARES
<TABLE>
<CAPTION>
10 YEARS/
AS OF OCTOBER 31, 1999 1 YEAR 3 YEARS 5 YEARS LIFE OF FUND
- ---------------------- -------- -------- -------- ------------
<S> <C> <C> <C> <C>
Short-Term Bond Fund
(Inception date 12/30/91)................................ 2.67% 5.03% 5.89% 5.21%
High Quality Bond Fund
(Inception date 12/14/90)................................ -2.52 5.29 7.66 7.24
Intermediate Government Income Fund
(Inception date 9/1/88).................................. -0.86 5.33 6.56 6.27
</TABLE>
VI-11
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS--RETAIL B SHARES**
<TABLE>
<CAPTION>
1 YEAR 1 YEAR 3 YEAR 3 YEAR LIFE OF FUND
RETURNS BEFORE RETURNS AFTER RETURNS BEFORE RETURNS AFTER RETURNS BEFORE
AS OF CONTINGENT CONTINGENT CONTINGENT CONTINGENT CONTINGENT
OCTOBER 31, DEFERRED SALES DEFERRED SALES DEFERRED SALES DEFERRED SALES DEFERRED SALES
1999 CHARGE DEDUCTED CHARGE DEDUCTED* CHARGE DEDUCTED CHARGE DEDUCTED* CHARGE DEDUCTED
- --------------------- ---------------- ----------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
Short-Term Bond Fund
(Inception date
3/4/96).............. 1.71% -3.17% 4.13% 3.21% 3.97%
High Quality Bond
Fund (Inception date
3/4/96).............. -3.25 -7.82 4.53 3.63 4.02
Intermediate
Government Income
Fund (Inception date
11/1/98)............. -1.78 -6.47 N/A N/A -1.78
<CAPTION>
LIFE OF FUND
RETURNS AFTER
AS OF CONTINGENT
OCTOBER 31, DEFERRED SALES
1999 CHARGE DEDUCTED*
- --------------------- -----------------
<S> <C>
Short-Term Bond Fund
(Inception date
3/4/96).............. 3.48%
High Quality Bond
Fund (Inception date
3/4/96).............. 3.55
Intermediate
Government Income
Fund (Inception date
11/1/98)............. -6.47
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS--B PRIME SHARES**
<TABLE>
<CAPTION>
1 YEAR 1 YEAR LIFE OF FUND LIFE OF FUND
RETURNS BEFORE RETURNS AFTER RETURNS BEFORE RETURNS AFTER
CONTINGENT CONTINGENT CONTINGENT CONTINGENT
AS OF DEFERRED SALES DEFERRED SALES DEFERRED SALES DEFERRED SALES
OCTOBER 31, 1999 CHARGE DEDUCTED CHARGE DEDUCTED* CHARGE DEDUCTED CHARGE DEDUCTED*
- ---------------- --------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
High Quality Bond Fund
(Inception date 11/1/98)...... -3.46% -8.03% -3.46% -8.03%
</TABLE>
- ------------------------
* As if shares were redeemed at end of period.
** Retail B Shares and B Prime Shares are subject to a 5.00% contingent
deferred sales charge if shares are redeemed within the first year. The
charge decreases to 4.00%, 3.00%, 3.00%, 2.00% and 1.00% for redemptions
made during the second through sixth years, respectively. Retail B Shares
automatically convert to Retail A Shares after six years and B Prime Shares
automatically convert to A Prime Shares after eight years.
Past performance is no guarantee of future results. Investment returns and
principal values will vary with market conditions so that an investor's shares,
when redeemed, may be worth more or less than their original cost. The
Investment Advisor is presently waiving fees and/or reimbursing expenses and may
revise or discontinue such practice at any time. Without such waivers and/or
reimbursements, performance would be lower. Total return figures in this report
include changes in share price, reinvestment of dividends and capital gains
distributions and include the deduction of any sales charges, where applicable,
unless otherwise indicated.
VI-12
<PAGE>
PORTFOLIO REVIEWS
GALAXY RHODE ISLAND MUNICIPAL BOND FUND
BY GLENN MIGLIOZZI, CFA
MANAGING DIRECTOR,
FIXED INCOME INVESTMENTS
[PHOTO]
In the 12 months ended October 31, 1999, the Galaxy Rhode Island Municipal
Bond Fund benefited from additions of intermediate-term investments that tended
to outperform longer maturities as bond prices fell. Attention to attributes
that investors favor in a weakening market also helped returns. At the same
time, the values of existing municipal bonds in Rhode Island were bolstered by
the lack of supply of new issues.
For the 12-month reporting period the Fund's Retail A Shares had a total
return of -2.73% before deducting the maximum 3.75% front-end sales charge.
(Please see chart on page VI-15 for total returns after deducting the front-end
sales charge.) Over the same time the average Rhode Island municipal bond fund
tracked by Lipper had a total return of -3.34%. The Lehman Brothers Municipal
Bond Index, whose duration is shorter than that for the Fund and its Lipper
group, had a total return of -1.78%.
On October 31, 1999, the Fund's Retail A Shares had a 30-day SEC annualized
yield of 4.54%. This equaled a taxable yield of 7.59% for taxpayers in the 36%
federal income tax bracket that live in Rhode Island.
A DEFENSIVE STRATEGY
For most of 1998, we had maintained sizable holdings in longer-term
municipals to make the most of a bond price rally. As the reporting period
started in the fourth quarter, however, prices seemed to be peaking. Finding
better relative value in intermediate-term issues, which could also help to
buffer the Fund against a price reversal, we increased investments in that
sector.
In a further defense against falling prices, we increased the Fund's cash
position early in 1999. We then deployed these reserves in the months that
followed as we found investments with more attractive yields. As before, we
emphasized issues with premium coupons, strong credit quality, and good
liquidity--attributes that investors tend to favor when yields are rising.
Although intermediate-term issues underperformed in the second quarter, they
significantly outperformed in the third quarter.
VI-13
<PAGE>
REMAINING PREPARED FOR HIGHER RATES
We expect to maintain these strategies in the months ahead. If interest
rates edge higher, intermediate-term issues could again outperform, and
investors should continue to favor issues with higher coupons, strong credit
quality, and good liquidity. By keeping larger cash reserves, we should be able
to make the most of any further opportunities to enhance the Fund's yield that
might arise.
GALAXY RHODE ISLAND MUNICIPAL BOND FUND
DISTRIBUTION OF TOTAL NET ASSETS AS OF OCTOBER 31, 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Other Territories 4%
Cash Equivalents & Net Other Assets and Liabilities 5%
Puerto Rico 12%
Rhode Island 79%
</TABLE>
GALAXY RHODE ISLAND MUNICIPAL BOND FUND
GROWTH OF $10,000 INVESTMENT*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
12/20/1994 10/31/1999
<S> <C> <C>
Lehman Brothers Municipal Bond Index $10,000 $13,271
Galaxy Rhode Island Municipal Bond Fund - Retail A Shares $10,000 $12,683
</TABLE>
- ------------------------
* Since inception on 12/20/94. Performance figures for Retail A Shares include
the effect of the maximum 3.75% front-end sales charge. The Lehman Brothers
Municipal Bond Index is an unmanaged index in which investors cannot invest.
Results for the index do not reflect investment management fees and other
expenses incurred by the Fund. Results for the index are calculated since
12/31/94 because the index returns are calculated at month-end only.
VI-14
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS--RETAIL A SHARES+
<TABLE>
<CAPTION>
AS OF OCTOBER 31, 1999 1 YEAR 3 YEARS 5 YEARS LIFE OF FUND
- ---------------------- ------------- ----------- ---------- ----------------
<S> <C> <C> <C> <C>
Rhode Island Municipal Bond Fund
(Inception date 12/20/94)....................... -6.42 2.71 N/A 5.01
</TABLE>
- ------------------------
+ Return figures have been restated to include the effect of the maximum 3.75%
front-end sales charge which became effective on December 1, 1995.
Past performance is no guarantee of future results. Investment returns and
principal values will vary with market conditions so that an investor's shares,
when redeemed, may be worth more or less than their original cost. The
Investment Advisor is presently waiving fees and/or reimbursing expenses and may
revise or discontinue such practice at any time. Without such waivers and/or
reimbursements, performance would be lower. Total return figures in this report
include changes in share price, reinvestment of dividends and capital gains
distributions and include the deduction of any sales charges, where applicable,
unless otherwise indicated.
VI-15
<PAGE>
PORTFOLIO REVIEWS
GALAXY ASSET ALLOCATION FUND
BY DON JONES
PORTFOLIO MANAGER
[PHOTO]
Don Jones became manager of the Galaxy Asset Allocation Fund in April 1995. He
has managed investment portfolios for Fleet Investment Advisors Inc., and its
predecessors, since 1977.
As the economic outlook changed over the past year, individual sectors of
the stock and bond markets responded differently. We tried to make the best of
this environment by routinely taking profits in investments that outperformed,
and adding securities that represented better value.
For the 12 months ended October 31, 1999, Trust Shares of the Galaxy Asset
Allocation Fund earned a total return of 9.63%. For the same period, the Fund's
Retail A Shares returned 9.53%, before deducting the maximum 3.75% front-end
sales charge, and its Retail B Shares returned 8.76%, before deducting the
maximum 5.00% contingent deferred sales charge. A Prime Shares of the Fund
returned 9.72% before deducting the maximum 5.50% front-end sales charge, and
B Prime Shares returned 8.91% before deducting the maximum 5.00% contingent
deferred sales charge. (Please see the charts on page VI-24 for total returns
after deducting the applicable front-end sales charge and the charts on
page VI-25 for total returns after deducting the applicable contingent deferred
sales charge.)
These total returns compare with a total return of 13.59% for the average
flexible fund tracked by Lipper Analytical Services, Inc. ("Lipper"). During the
same time, the S&P 500 Index, which tracks the performance of stocks only,
returned a total of 25.67%.
ALLOCATION STRATEGIES
Early in the period, we found many new investment opportunities in stocks
resulting from the market's sharp correction in the fall of 1998. Using proceeds
from the sale of manufacturing shares, we bought stocks of financial and
technology companies. With investors nervous about the future of financial
markets here and abroad, we reduced the Fund's allocation to corporate bonds in
the fixed-income portfolio from 60% to 50%.
As a strong economy helped stocks rise briskly early in 1999, we continued
to benefit from our emphasis on individual stocks and market sectors that
investors favored, such as shares of consumer staples and technology firms. An
underweighting in economically sensitive issues, which were out of favor at the
time, further enhanced Fund returns. Using profits from medical and energy
stocks that had performed well, we increased shares of capital goods, oil
service, retail, transportation, and Internet firms.
VI-16
<PAGE>
During the second quarter of 1999, a shift away from large-cap growth stocks
into shares of smaller companies and economically sensitive issues reduced Fund
returns. Performance was particularly disappointing for drug and technology
stocks, which represent large portions of the portfolio. The Fund benefited,
however, from additions of capital goods shares that performed well. We also
bought shares of money-center banks and Internet firms at this time.
As the period progressed, strong performance by individual stocks and
selected non-Treasury fixed-income issues helped offset the generally
disappointing returns from the Fund's stock and bond portfolios. We took
advantage of price fluctuations to add stocks that offered attractive investment
opportunities. These included stocks of money-center banks as well as shares of
technology, consumer cyclical, and capital goods firms. To finance these
purchases, we sold issues that had performed well or had otherwise reduced their
potential for gains.
Throughout the period, we maintained a 40% weighting in bonds, split almost
evenly between U.S. government and corporate issues.
A POSITIVE LONG-TERM OUTLOOK
We believe the long-term prospects for stocks are quite favorable, given the
positive outlook for inflation and earnings. In coming months, we may see a
short-term correction that could present attractive buying opportunities among
companies with good prospects for long-term growth. To take advantage of these
opportunities, we will likely reduce the Fund's cash reserves. If stock prices
become especially attractive, we may also trim the Fund's 40% weighting in
bonds.
Recent purchases in the technology area have focused on blue-chip Internet
stocks. Once current economic uncertainties ease, we may look for lesser
Internet names that could offer shareholders greater appreciation potential over
time. For now, we plan to keep the fixed-income portfolio split between
corporate bonds and U.S. Government securities. The higher yields from
corporates should help boost returns as bond prices continue to fluctuate.
GALAXY ASSET ALLOCATION FUND
DISTRIBUTION OF TOTAL NET ASSETS AS OF OCTOBER 31, 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
U.S. Government and Agency Obligations &
Net Other Assets and Liabilities 23%
Commercial Paper 8%
Corporate Notes and Bonds 14%
Asset-Backed and Mortgage-Backed Securities 2%
Common & Convertible Preferred Stocks 53%
</TABLE>
VI-17
<PAGE>
GALAXY ASSET ALLOCATION FUND
GROWTH OF $10,000 INVESTMENT*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
12/30/91 10/31/09
<S> <C> <C>
S&P 500 Index $10,000 $38,978
Galaxy Asset Allocation Fund - Retail A
Shares $9,625 $23,581
Galaxy Asset Allocation Fund - Retail B
Shares $10,000 $15,618
Galaxy Asset Allocation Fund - Trust Shares $10,000 $24,736
Galaxy Asset Allocation Fund - A Prime Shares $9,450 $10,366
Galaxy Asset Allocation Fund - B Prime Shares $10,000 $10,391
</TABLE>
- ------------------------
* Since inception on 12/30/91 for Trust and Retail A Shares. Since inception
on 3/4/96 for Retail B Shares. Since inception on 11/1/98 for A Prime Shares
and B Prime Shares. Performance figures for Retail A Shares include the
effect of the maximum 3.75% front-end sales charge. Performance figures for
A Prime Shares include the effect of the maximum 5.50% front-end sales
charge. Performance figures for Retail B and B Prime Shares reflect the
deduction of the 3.00% contingent deferred sales charge (applicable to
shares redeemed during the fourth year after purchase) and the maximum 5.00%
contingent deferred sales charge, respectively, as if shares were redeemed
on October 31, 1999. The S&P 500 Index is an unmanaged index in which
investors cannot invest. Results for the index do not reflect the investment
management fees and other expenses incurred by the Fund.
VI-18
<PAGE>
PORTFOLIO REVIEWS
[PHOTO]
Greg Miller has managed the Galaxy Growth and Income Fund since July of 1998. He
has managed equity portfolios since 1988.
GALAXY GROWTH AND INCOME FUND
BY GREG MILLER
PORTFOLIO MANAGER
During a time when growth stocks outperformed value-oriented issues, we
tried to make the most of the many attractive investment opportunities that were
available. As positions in the Galaxy Growth and Income Fund performed well, we
sold shares of those issues and invested the proceeds in stocks that we felt had
better potential. This strategy helped the Fund outperform other funds with
similar investment objectives.
For the 12 months ended October 31, 1999, the Fund's Trust Shares earned a
total return of 14.85%. Over the same time, the Fund's Retail A Shares earned
14.56% before deducting the maximum 3.75% front-end sales charge and Retail B
Shares earned 13.72% before deducting the maximum 5.00% contingent deferred
sales charge. A Prime Shares of the Fund earned 14.81% before deducting the
maximum 5.50% front-end sales charge and B Prime Shares earned a total return of
13.98% before deducting the maximum 5.00% contingent deferred sales charge.
(Please see the charts on page VI-24 for total returns after deducting the
applicable front-end sales charge and the charts on page VI-25 for total returns
after deducting the applicable contingent deferred sales charge.)
These results compare to a total return of 11.72% for the average multi-cap
value fund tracked by Lipper. For the same period, the S&P 500 Index, which
represents a more growth-oriented universe of stocks, had a total return of
25.67%.
SECTOR STRATEGIES ENHANCE RESULTS
When the period began in the fourth quarter of 1998, we used the pullback in
stocks from the third quarter to increase positions in banking, retail, and
energy firms. The Fund benefited during this time from its specific selection of
technology and retail stocks. The strong gains by these shares helped to offset
disappointing results from an overweighted position in energy stocks hurt by
falling oil prices. As additional market fluctuations occurred, we traded
certain technology, health care, and telecommunications shares that had
performed well for stocks with better potential.
The Fund's overweighted position in energy stocks boosted performance in the
first months of 1999, when rising oil prices helped the sector rebound strongly.
During this time, the Fund also enjoyed strong returns from overweighted
positions in the capital goods and basic materials groups and from its specific
VI-19
<PAGE>
PORTFOLIO REVIEWS
selection of capital goods, basic materials, and transportation stocks. An
underweighting in the lesser-performing consumer staples enhanced returns, as
well. With investors favoring issues with greater economic sensitivity, we
continued to take profits in health care issues. Because interest in technology
stocks was ebbing, we focused on shares in the sector with more reasonable
valuations.
As the rally broadened in the second quarter of 1999, the Fund benefited
further from its cyclical positions and from an underweighting in consumer
staples shares. Eventually we traded capital goods and consumer cyclical shares
that had performed well for stocks in the consumer staples area with better
value.
Although investors abandoned economically sensitive and value-oriented
issues in the final months of the period, the Fund's overweighted position in
energy shares and a strong performance from its technology holdings contributed
positively to total returns. During this time, we traded shares of technology,
drug, and banking stocks that had performed well for shares of energy, health
care and other firms with better potential.
VALUATIONS ARE ATTRACTIVE
Many stocks in the Fund's portfolio are more attractive now than they have
been for some time. While it is difficult to know when value investing will be
in favor again, a strong outlook for corporate earnings should lay the
foundation for further gains. Once we get past the uncertainty surrounding
potential Y2K computer problems, we may see value stocks assume market
leadership in the first months of next year. Given our current emphasis on these
securities, the Fund would be well positioned to benefit from such a turnaround.
GALAXY GROWTH AND INCOME FUND
DISTRIBUTION OF TOTAL NET ASSETS AS OF OCTOBER 31, 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Other Preferred & Common Stocks 17%
Repurchase Agreement & Net Other Assets and Liabilities 7%
Consumer Staples 18%
Technology 16%
Consumer Cyclical 10%
Utilities 9%
Energy 10%
Finance 13%
</TABLE>
VI-20
<PAGE>
PORTFOLIO REVIEWS
GALAXY GROWTH AND INCOME FUND
GROWTH OF $10,000 INVESTMENT*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
12/14/92 10/31/99
<S> <C> <C>
S&P 500 Index $10,000 $36,669
Galaxy Growth and Income Fund - Retail A
Shares $9,625 $26,641
Galaxy Growth and Income Fund - Retail B
Shares $10,000 $16,912
Galaxy Growth and Income Fund - Trust Shares $10,000 $28,180
Galaxy Growth and Income Fund - A Prime Shares $9,450 $10,847
Galaxy Growth and Income Fund - B Prime Shares $10,000 $10,898
</TABLE>
- ------------------------
* Since inception on 12/14/92 for Trust Shares and 2/12/93 for Retail A
Shares. Since inception on 3/4/96 for Retail B Shares. Since inception on
11/1/98 for A Prime Shares and B Prime Shares. Performance figures for
Retail A Shares include the effect of the maximum 3.75% front-end sales
charge. Performance figures for A Prime Shares include the effect of the
maximum 5.50% front-end sales charge. Performance figures for Retail B and B
Prime Shares reflect the deduction of the 3.00% contingent deferred sales
charge (applicable to shares redeemed during the fourth year after purchase)
and the maximum 5.00% contingent deferred sales charge, respectively, as if
shares were redeemed on October 31, 1999. The S&P 500 is an unmanaged index
in which investors cannot invest. Results for the index do not reflect the
investment management fees and other expenses incurred by the Fund.
VI-21
<PAGE>
PORTFOLIO REVIEWS
[PHOTO]
Thomas M. O'Neill is Chief Investment Officer of Fleet Investment Advisors Inc.
and Oechsle International Advisors, LLC, sub-advisor for the Fund. Oechsle is a
firm dedicated to international investing and has approximately $15 billion in
assets under management.
GALAXY INTERNATIONAL EQUITY FUND
BY THOMAS O'NEILL, CHIEF INVESTMENT OFFICER, FLEET INVESTMENT ADVISORS INC., AND
OECHSLE INTERNATIONAL ADVISORS, LLC, SUB-ADVISOR
As foreign economies recovered in the past year, the rebound for stocks in
Japan and other parts of Asia was generally stronger than stock reversals in
European markets. Because the outlook for Asian equities had been so uncertain,
the Galaxy International Equity Fund was underweighted in those securities
versus its market benchmark in the first part of the reporting period. With
exceptional performance by individual issues in Japan and elsewhere and a higher
weighting in Japan later in the period, the Fund performed well against its
benchmarks for the fiscal year.
During the 12 months ended October 31, 1999, the Fund's Trust Shares earned
a total return of 29.71%. Over the same time, Retail A Shares of the Fund earned
29.04%, before deducting the maximum 3.75% front-end sales charge, and Retail B
Shares earned 28.41% before deducting the maximum 5.00% contingent deferred
sales charge. The Fund's A Prime Shares earned a total return of 29.73% before
deducting the maximum 5.50% front-end sales charge, and B Prime Shares earned a
total return of 28.74% before deducting the maximum 5.00% contingent deferred
sales charge. (Please see the charts on page VI-24 for total returns after
deducting the applicable front-end sales charge and the charts on page VI-25 for
total returns after deducting the applicable contingent deferred sales charge.)
Those total returns compare with 25.53% for the average international fund
tracked by Lipper, and 23.37% for the EAFE Index.
JAPANESE STOCKS HELP LIFT RETURNS
In the final months of 1998 and the first months of 1999, the Fund enjoyed
strong performance by shares of Japanese telecommunications and financial
companies. Many European stocks also performed well, especially shares of
telecommunications firms and companies involved in mergers.
During this time, we added selectively to investments in Japan, seeking to
improve the earnings quality of shares that we owned. We gave particular
attention to consumer-finance companies and firms that can benefit from
corporate restructuring. In Europe, we reduced shares in French companies that
were particularly sensitive to a weak global economy.
VI-22
<PAGE>
The Fund's increased weighting in Japan, along with modest additions in the
emerging markets of Asia, enhanced performance in the second quarter of 1999.
The shift in assets to Asia, reduced investments in Europe somewhat. Strong
stock selection in Asia and Europe further enhanced the Fund's total returns
during this time.
By the final months of 1999, the Fund was slightly overweighted in Japanese
stocks, which rallied strongly. Outstanding performance by many individual
Japanese issues made further positive contributions to performance. As in
previous months, we focused on opportunities in stocks that could benefit most
over time from the expansion of economies abroad.
FAVORABLE GROWTH PROSPECTS
The recent improvement in economies overseas seem to have taken many
corporate purchasing managers by surprise, leading to an inadvertent depletion
in business inventories. Efforts by managers to rebuild those inventories, which
may be boosted by Y2K concerns, could spur further growth in months to come.
Growth may then slow, however, with a return to more normal inventory levels,
higher interest rates and actual Y2K disruptions.
Near term, the Fund should benefit from careful stock selection. Given our
favorable outlook for long-term growth, we plan to continue seeking
opportunities in stocks from economically sensitive sectors. We are particularly
optimistic about opportunities in Europe, where positive economic fundamentals
are not yet reflected in stock valuations. Japanese stocks could also continue
to perform well, if recent economic trends and corporate restructuring continue.
GALAXY INTERNATIONAL EQUITY FUND
DISTRIBUTION OF TOTAL NET ASSETS AS OF OCTOBER 31, 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Repurchase Agreement & Net Other Assets and Liabilities 4%
Australia & New Zealand 3%
United Kingdom 16%
Europe 41%
Far East 32%
Canada 4%
</TABLE>
VI-23
<PAGE>
GALAXY INTERNATIONAL EQUITY FUND
GROWTH OF $10,000 INVESTMENT*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
12/30/91 10/31/99
<S> <C> <C>
EAFE Index $10,000 $20,349
Galaxy International Equity Fund - Retail A
Shares $9,625 $23,949
Galaxy International Equity Fund - Retail B
Shares $10,000 $12,341
Galaxy International Equity Fund - Trust Shares $10,000 $25,623
Galaxy International Equity Fund - A Prime Shares $9,450 $12,260
Galaxy International Equity Fund - B Prime Shares $10,000 $12,374
</TABLE>
- ------------------------
* Since inception on 12/30/91 for Trust and Retail A Shares. Since inception
on 11/1/98 for Retail B, A Prime Shares and B Prime Shares. Performance
figures for Retail A Shares include the effect of the maximum 3.75%
front-end sales charge. Performance figures for A Prime Shares include the
effect of the maximum 5.50% front-end sales charge. Performance figures for
Retail B and B Prime Shares reflect the deduction of the maximum 5.00%
contingent deferred sales charge as if shares were redeemed on October 31,
1999. The EAFE Index is an unmanaged index in which investors cannot invest.
Results for the index do not reflect the investment management fees and
other expenses incurred by the Fund.
PERFORMANCE AT-A-GLANCE
AVERAGE ANNUAL TOTAL RETURNS--TRUST SHARES
<TABLE>
<CAPTION>
10 YEARS/
AS OF OCTOBER 31, 1999 1 YEAR 3 YEARS 5 YEARS LIFE OF FUND
- ---------------------- -------- -------- -------- ------------
<S> <C> <C> <C> <C>
Asset Allocation Fund (Inception date 12/30/91)............ 9.63% 14.61% 16.89% 12.25%
Growth and Income Fund (Inception date 12/14/92)........... 14.85 18.15 18.80 16.25
International Equity Fund (Inception date 12/30/91)........ 29.71 20.02 14.02 12.76
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS--RETAIL A SHARES*
<TABLE>
<CAPTION>
10 YEARS/
AS OF OCTOBER 31, 1999 1 YEAR 3 YEARS 5 YEARS LIFE OF FUND
- ---------------------- -------- -------- -------- ------------
<S> <C> <C> <C> <C>
Asset Allocation Fund (Inception date 12/30/91)............ 5.42% 12.99% 15.79% 11.57%
Growth and Income Fund (Inception date 2/12/93)............ 10.26 16.39 17.59 15.71
International Equity Fund (Inception date 12/30/91)........ 24.22 17.83 12.50 11.79
</TABLE>
- ------------------------
* Return figures have been restated to include the effect of the maximum 3.75%
front-end sales charge which became effective on December 1, 1995.
VI-24
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS--A PRIME SHARES*
<TABLE>
<CAPTION>
10 YEARS/
AS OF OCTOBER 31, 1999 1 YEAR 3 YEARS 5 YEARS LIFE OF FUND
- ---------------------- -------- -------- -------- ------------
<S> <C> <C> <C> <C>
Asset Allocation Fund (Inception date 11/1/98)............. 3.66% N/A N/A 3.66%
Growth and Income Fund (Inception date 11/1/98)............ 8.47 N/A N/A 8.47
International Equity Fund (Inception date 11/1/98)......... 22.60 N/A N/A 22.60
</TABLE>
- ------------------------
* Return figures include the effect of the maximum 5.50% front-end sales
charge.
AVERAGE ANNUAL TOTAL RETURNS--RETAIL B SHARES**
<TABLE>
<CAPTION>
1 YEAR 1 YEAR 3 YEAR 3 YEAR LIFE OF FUND
RETURN BEFORE RETURN AFTER RETURN BEFORE RETURN AFTER RETURN BEFORE
CONTINGENT CONTINGENT CONTINGENT CONTINGENT CONTINGENT
DEFERRED SALES DEFERRED SALES DEFERRED SALES DEFERRED SALES DEFERRED SALES
AS OF OCTOBER 31, 1999 CHARGE DEDUCTED CHARGE DEDUCTED* CHARGE DEDUCTED CHARGE DEDUCTED* CHARGE DEDUCTED
- ---------------------- --------------- ---------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Asset Allocation Fund
(Inception date
3/4/96)................. 8.76% 3.76% 13.66% 12.88% 13.35%
Growth and Income Fund
(Inception date
3/4/96)................. 13.72 8.72 17.00 16.27 15.81
International Equity Fund
(Inception date
11/1/98)................ 28.41 23.41 N/A N/A 28.41
<CAPTION>
LIFE OF FUND
RETURN AFTER
CONTINGENT
DEFERRED SALES
AS OF OCTOBER 31, 1999 CHARGE DEDUCTED*
- ---------------------- ----------------
<S> <C>
Asset Allocation Fund
(Inception date
3/4/96)................. 12.95%
Growth and Income Fund
(Inception date
3/4/96)................. 15.44
International Equity Fund
(Inception date
11/1/98)................ 23.41
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS--B PRIME SHARES**
<TABLE>
<CAPTION>
1 YEAR 1 YEAR LIFE OF FUND LIFE OF FUND
RETURN BEFORE RETURN AFTER RETURN BEFORE RETURN AFTER
CONTINGENT CONTINGENT CONTINGENT CONTINGENT
AS OF OCTOBER 31, 1999 CHARGE DEDUCTED CHARGE DEDUCTED* CHARGE DEDUCTED CHARGE DEDUCTED*
- ---------------------- --------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Asset Allocation Fund
(Inception date 11/1/98)...... 8.91% 3.91% 8.91% 3.91%
Growth and Income Fund
(Inception date 11/1/98)...... 13.98 8.98 13.98 8.98
International Equity Fund
(Inception date 11/1/98)...... 28.74 23.74 28.74 23.74
</TABLE>
- ------------------------
* As if shares were redeemed at end of period.
** Retail B Shares and B Prime Shares are subject to a 5.00% contingent
deferred sales charge if shares are redeemed within the first year. The
charge decreases to 4.00%, 3.00%, 3.00%, 2.00% and 1.00% for redemptions
made during the second through sixth years, respectively. Retail B Shares
automatically convert to Retail A Shares after six years and B Prime Shares
automatically convert to A Prime Shares after eight years.
Past performance is no guarantee of future results. Investment returns and
principal values will vary with market conditions so that an investor's shares,
when redeemed, may be worth more or less than their original cost. The
Investment Advisor is presently waiving fees and/or reimbursing expenses and may
revise or discontinue such practice at any time. Without such waivers and/or
reimbursements, performance would be lower. Total return figures in this report
include changes in share price, reinvestment of dividends and capital gains
distributions and include the deduction of any sales charges, where applicable,
unless otherwise indicated.
VI-25
<PAGE>
BOSTON 1784 FUNDS
2 OLIVER STREET
BOSTON, MASSACHUSETTS 02109
1-(800) 342-5734
THE GALAXY FUND
4400 COMPUTER DRIVE
WESTBOROUGH, MASSACHUSETTS 01581-5108
1-(877) 289-4252
STATEMENT OF ADDITIONAL INFORMATION
(APRIL 28, 2000 SPECIAL MEETING OF SHAREHOLDERS OF BOSTON 1784 FUNDS)
This Statement of Additional Information is not a prospectus but should
be read in conjunction with the Combined Proxy Statement/Prospectus dated
March 8, 2000 ("Combined Proxy Statement/Prospectus") for the Special Meeting of
Shareholders of the Boston 1784 Funds to be held on April 28, 2000. Copies of
the Combined Proxy Statement/Prospectus may be obtained at no charge by writing
or calling Boston 1784 Funds or The Galaxy Fund at the addresses or telephone
numbers set forth above.
Unless otherwise indicated, capitalized terms used herein and not
otherwise defined have the same meanings as are given to them in the Combined
Proxy Statement/Prospectus.
Incorporation of Documents by Reference in Statement of Additional
Information
Further information about the BKB Shares of the Galaxy Money Market Fund,
Galaxy U.S. Treasury Fund, Galaxy Tax-Exempt Fund, Galaxy Short-Term Bond Fund,
Galaxy Intermediate Government Income Fund, Galaxy High Quality Bond Fund,
Galaxy Rhode Island Municipal Bond Fund, Galaxy Asset Allocation Fund, Galaxy
Growth and Income Fund and Galaxy International Equity Fund is contained in and
incorporated herein by reference to the Statement of Additional Information
dated February 29, 2000.
Further information about the Retail A Shares and Trust Shares of the
Galaxy Asset Allocation, Galaxy Growth and Income and Galaxy International
Equity Funds is contained in and incorporated herein by reference to the
Statement of Additional Information dated February 29, 2000.
Further information about the Retail A Shares and Trust Shares of the
Galaxy Short-Term Bond, Galaxy Intermediate Government Income and Galaxy High
Quality Bond Funds is contained in and incorporated herein by reference to the
Statement of Additional Information dated February 29, 2000.
Further information about the Retail A Shares and Trust Shares of the
Galaxy Rhode Island Municipal Bond Funds is contained in and incorporated herein
by reference to the Statement of Additional Information dated February 29, 2000.
<PAGE>
Further information about the Retail A Shares and Trust Shares of the
Galaxy Money Market Fund, Galaxy U.S. Treasury and Galaxy Tax-Exempt Funds is
contained in and incorporated herein by reference to the Statement of Additional
Information dated February 29, 2000.
Further information about the Shares of the Boston 1784 Tax-Free Money
Market, Boston 1784 U.S. Treasury Money Market, Boston 1784 Institutional U.S.
Treasury Money Market, Boston 1784 Prime Money Market, Boston 1784 Institutional
Prime Money Market, Boston 1784 Short-Term Income, Boston 1784 Income, Boston
1784 U.S. Government Medium-Term Income, Boston 1784 Tax-Exempt Medium-Term
Income, Boston 1784 Connecticut Tax-Exempt Income, Boston 1784 Florida
Tax-Exempt Income, Boston 1784 Massachusetts Tax-Exempt Income, Boston 1784
Rhode Island Tax-Exempt Income, Boston 1784 Asset Allocation, Boston 1784 Growth
and Income, Boston 1784 Growth and Boston 1784 International Equity Funds is
contained in and incorporated herein by reference to the Statement of Additional
Information dated October 1, 1999.
The audited financial statements and related Report of Independent
Auditors for the year ended October 31, 1999 for the Galaxy Asset Allocation,
Galaxy Growth and Income, Galaxy International Equity, Galaxy Short-Term Bond,
Galaxy Intermediate Government Income, Galaxy High Quality Bond, Galaxy Rhode
Island Municipal Bond, Galaxy Money Market, Galaxy U.S. Treasury and Galaxy
Tax-Exempt Funds are incorporated herein by reference. No other parts of the
annual and semi-annual reports are incorporated herein by reference.
The audited financial statements and related Report of Independent
Accountants for the year ended May 31, 1999 and the unaudited financial
statements for the semi-annual period ended November 30, 1999 for the Boston
1784 Tax-Free Money Market, Boston 1784 U.S. Treasury Money Market, Boston 1784
Institutional U.S. Treasury Money Market, Boston 1784 Prime Money Market, Boston
1784 Institutional Prime Money Market, Boston 1784 Short-Term Income, Boston
1784 Income, Boston 1784 U.S. Government Medium-Term Income, Boston 1784
Tax-Exempt Medium-Term Income, Boston 1784 Connecticut Tax-Exempt Income, Boston
1784 Florida Tax-Exempt Income, Boston 1784 Massachusetts Tax-Exempt Income,
Boston 1784 Rhode Island Tax-Exempt Income, Boston 1784 Asset Allocation, Boston
1784 Growth and Income, Boston 1784 Growth and Boston 1784 International Equity
Funds are incorporated herein by reference. No other parts of the annual and
semi-annual reports are incorporated herein by reference.
The date of this Statement of Additional Information is March 8, 2000.
<PAGE>
TABLE OF CONTENTS
PAGE
General Information................................................... 1
Introductory Note to PRO FORMA Financial Statements................... 1
PRO FORMA Financial Statements
<PAGE>
GENERAL INFORMATION
The Reorganization contemplates the transfer of substantially all of the
assets and liabilities of each 1784 Fund to a Corresponding Galaxy Fund in
exchange for shares of designated classes of the Corresponding Galaxy Fund.
The Shares issued by a Galaxy Fund will have an aggregate value equal to
the aggregate value of the shares of the respective corresponding 1784 Funds
that were outstanding immediately before the effective time of the
Reorganization.
After the transfer of substantially all of their assets and liabilities
in exchange for the Galaxy Fund shares, the 1784 Funds will distribute the
shares to their shareholders in liquidation of such 1784 Fund. Each shareholder
owning shares of a particular 1784 Fund at the effective time of the
Reorganization will receive shares from its Corresponding Galaxy Fund of equal
value, and will receive any unpaid dividends or distributions that were declared
before the effective time of the Reorganization on shares of the 1784 Funds. The
Corresponding Galaxy Fund will establish an account for each former shareholder
of the 1784 Funds reflecting the appropriate number of shares distributed to the
shareholder. These accounts will be substantially identical to the accounts
maintained by 1784 Funds for each shareholder. Upon completion of the
Reorganization with respect to all 1784 Funds, all outstanding shares of the
1784 Funds will have been redeemed and cancelled in exchange for shares
distributed by its Corresponding Galaxy Fund, and 1784 will wind up its affairs
and be deregistered as an investment company under the 1940 Act and terminated
under Massachusetts law.
For further information about the transaction, see the Combined Proxy
Statement/ Prospectus.
INTRODUCTORY NOTE TO PRO FORMA FINANCIAL INFORMATION
The following unaudited PRO FORMA information gives effect to the
proposed transfer of the assets and liabilities of the 1784 Funds to the
Corresponding Galaxy Funds, accounted for as if each transfer had occurred as of
October 31, 1999. In addition, each pro-forma combined statement has been
prepared based upon the proposed fee and expense structure of the applicable
Corresponding Galaxy Fund.
The PRO FORMA financial information should be read in conjunction with
the historical financial statements and notes thereto of the 1784 Funds and
Galaxy Funds incorporated herein by reference in this Statement of Additional
Information. Each combination of the above 1784 Funds and Galaxy Funds will be
accounted for as a tax-free reorganization.
1
<PAGE>
GALAXY TAX-EXEMPT FUND
BOSTON 1784 TAX-FREE MONEY MARKET FUND
PRO FORMA COMBINING PORTFOLIO OF INVESTMENTS (UNAUDITED)
OCTOBER 31, 1999
<TABLE>
<CAPTION>
PAR VALUE DESCRIPTION VALUE (NOTE 2)
- ----------------------------------------------------------------------------------------------------------------------------------
BOSTON 1784
TAX-FREE BOSTON 1784 TAX-
GALAXY TAX- MONEY MARKET PRO FORMA GALAXY TAX- FREE MONEY PRO FORMA
EXEMPT FUND FUND COMBINED EXEMPT FUND MARKET FUND COMBINED
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MUNICIPAL SECURITIES - 93.46%
ALABAMA - 1.42%
$ 6,000,000 $ - $ 6,000,000 Chatom IDB, PCR
National Rural Utilities CFC
3.45%, 11/17/99 $ 6,000,000 $ - $ 6,000,000
15,000,000 - 15,000,000 Montgomery County, IDB
3.55%, 11/02/99 15,000,000 - 15,000,000
1,200,000 - 1,200,000 North Alabama, PCR
Environmental Improvement Authority
Reynolds Metals
3.65%, 12/01/00 (A)
LOC: Bank of Nova Scotia 1,200,000 - 1,200,000
1,000,000 - 1,000,000 Phoenix County IDB
Environmental Improvements
Georgia Kraft Project
3.60%, 12/01/15 (A)
LOC: Deutsche Bank AG 1,000,000 - 1,000,000
--------------------------------------------
23,200,000 - 23,200,000
--------------------------------------------
ALASKA - 1.12%
- 9,500,000 9,500,000 Valdez
Arco Transportation Project
3.30%, 02/17/00 - 9,500,000 9,500,000
3,400,000 - 3,400,000 Valdez Marine Terminal Revenue
Exxon Pipeline Co. Project, Series B
3.50%, 12/01/33 (A) 3,400,000 - 3,400,000
Guaranteed: Exxon Corp.
5,400,000 - 5,400,000 Valdez Marine Terminal Revenue
Exxon Pipeline Co. Project, Series C
3.50%, 12/01/33 (A) 5,400,000 - 5,400,000
--------------------------------------------
8,800,000 9,500,000 18,300,000
--------------------------------------------
ARIZONA - 3.25%
14,000,000 - 14,000,000 Maricopa County, PCR
Arizona Public Service Co.
Series A
3.50%, 05/01/29 (A)
LOC: Morgan Guaranty Trust 14,000,000 - 14,000,000
- 19,000,000 19,000,000 Pima County IDA
Tucson Electric Power Co. - Irvington
3.45%, 10/01/22 (A) - 19,000,000 19,000,000
- 20,000,000 20,000,000 Salt River Agriculture Improvement &
Power
Series A
3.40%, 02/11/00 - 20,000,000 20,000,000
--------------------------------------------
14,000,000 39,000,000 53,000,000
--------------------------------------------
ARKANSAS - 0.50%
5,900,000 - 5,900,000 Crossett, PCR
Georgia Pacific Corp. Project
3.45%, 10/01/07 (A)
LOC: Wachovia Bank N.A. 5,900,000 - 5,900,000
2,200,000 - 2,200,000 Pulaski County, PCR
Minnesota Mining & Manufacturing
3.40%, 08/01/22 (A) 2,200,000 - 2,200,000
--------------------------------------------
8,100,000 - 8,100,000
--------------------------------------------
CALIFORNIA - 1.14%
1,000,000 - 1,000,000 Los Angeles Regional
Airports Improvement Corp.
American Airlines, Inc., Series A
LA International Airport
3.65%, 12/01/24 (A)
LOC: Wachovia Bank, N.A. 1,000,000 - 1,000,000
<PAGE>
5,000,000 - 5,000,000 Los Angeles Regional
Airports Improvement Corp.
Lease Revenue
LAX Two Corp
3.65%, 12/01/25 (A)
LOC: Societe Generale 5,000,000 - 5,000,000
- 12,500,000 12,500,000 Student Education Loan Marketing Corp.
Revenue, Series A
3.20%, 11/01/02 (A)
LOC: State Street Bank - 12,500,000 12,500,000
--------------------------------------------
6,000,000 12,500,000 18,500,000
--------------------------------------------
COLORADO - 1.84%
3,815,000 - 3,815,000 Colorado State HFA
Boulder Community Hospital Project
Series B
3.45%, 10/01/14 (A)
Insured: MBIA
SPA: Rabobank Nederland NV 3,815,000 - 3,815,000
3,070,000 - 3,070,000 Colorado State HFA
Boulder Community Hospital Project
Series C
3.45%, 10/01/14 (A)
Insured: MBIA
SPA: Rabobank Nederland NV 3,070,000 - 3,070,000
- 23,100,000 23,100,000 Colorado State HFA
Catholic Health Initiatives
Revenue, Series B
3.50%, 12/01/25 (A)
SPA: Toronto Dominion Bank - 23,100,000 23,100,000
--------------------------------------------
6,885,000 23,100,000 29,985,000
--------------------------------------------
FLORIDA - 2.18%
- 25,600,000 25,600,000 Dade County Water and Sewer Systems
3.45%, 10/05/22 (A)
Insured: FGIC
SPA: Commerzbank A.G. - 25,600,000 25,600,000
- 6,300,000 6,300,000 Florida Housing Finance Agency
Multifamily, Series AA
3.40%, 06/15/25 (A)
Insured: FNMA - 6,300,000 6,300,000
10,000,000 - 10,000,000 Putnam County Development
Authority, PCR, Seminole Electric
Cooperative, Series D
3.13%, 12/15/09 (A)
Guaranteed: National Rural
Utilities CFC 10,000,000 - 10,000,000
--------------------------------------------
10,000,000 31,900,000 41,900,000
--------------------------------------------
GEORGIA - 5.08%
8,495,000 - 8,495,000 Burke County Development
Authority, PCR, Oglethorpe
Power Corp., Series A
3.50%, 01/01/16 (A)
Insured: FGIC
SPA: Canadian Imperial
Bank of Commerce 8,495,000 - 8,495,000
- 13,750,000 13,750,000 Burke County Development
Authority, PCR, Oglethorpe
Power Corp., Series A
3.40%, 01/01/19 (A) - 13,750,000 13,750,000
4,955,000 - 4,955,000 Georgia State, GO
Series A
5.80%, 03/01/00 4,997,841 - 4,997,841
9,000,000 - 9,000,000 Municipal Electric Authority
Project One, Series B
3.40%, 01/01/16 (A)
LOC: ABN-AMRO Bank N.V. 9,000,000 - 9,000,000
13,600,000 800,000 14,400,000 Municipal Electric Authority
Project One, Series C
3.40%, 01/01/20 (A)
LOC: ABN-AMRO Bank N.V. 13,600,000 800,000 14,400,000
1,900,000 - 1,900,000 Municipal Electric Authority
Project One, Series D
3.40%, 01/01/22 (A)
LOC: ABN-AMRO Bank N.V. 1,900,000 - 1,900,000
- 24,100,000 24,100,000 Southern Georgia Hospital Authority
Revenue
Georgia Alliance Community Hospital
Series A
3.60%, 04/01/29 (A)
Insured: AMBAC
SPA: Wachovia Bank - 24,100,000 24,100,000
--------------------------------------------
37,992,841 38,650,000 76,642,841
--------------------------------------------
<PAGE>
HAWAII - 0.18%
- 2,925,000 2,925,000 Hawaii, GO
Series CF
4.40%, 07/01/00 - 2,944,833 2,944,833
--------------------------------------------
ILLINOIS - 5.02%
- 10,000,000 Chicago, GO
3.75%, 01/31/00
LOC: Morgan Guaranty Trust - 10,000,000 10,000,000
4,900,000 - 4,900,000 Chicago O'Hare International Airport
American Airlines, Series C
3.60%, 12/01/17(A)
LOC: Royal Bank of Canada 4,900,000 - 4,900,000
5,000,000 - 5,000,000 Illinois Development Finance
Authority, PCR, Illinois Power Co.
Project, Series A
3.45%, 11/01/28 (A)
LOC: ABN-AMRO Bank N.V. 5,000,000 - 5,000,000
- 14,030,000 14,030,000 Illinois Development Finance
Authority, Putters, Series 42A
3.40%, 05/15/13 (A) - 14,030,000 14,030,000
9,800,000 - 9,800,000 Illinois Educational Facility
Authority Revenue
3.60%, 11/17/99 9,800,000 - 9,800,000
- 6,000,000 6,000,000 Illinois Educational Facility
Authority, Shedd Aquarium Society
Revenue, Series B
3.70%, 07/01/27 (A)
LOC: Bank of America - 6,000,000 6,000,000
- 25,000,000 25,000,000 Illinois State Toll Highway Authority
Revenue, Series B
3.50%, 01/01/17 (A)
Insured: FSA
SPA: Landesbank Hessen Thrgn - 25,000,000 25,000,000
5,100,000 - 5,100,000 Joliet Regional Port District
Marine Terminal Revenue
Exxon Project
3.50%, 10/01/24 (A) 5,100,000 - 5,100,000
2,100,000 - 2,100,000 Northbrook, IDR
Euromarket Designs, Inc.
3.50%, 07/01/02 (A)
LOC: Harris Trust & Savings Bank 2,100,000 - 2,100,000
--------------------------------------------
26,900,000 55,030,000 81,930,000
--------------------------------------------
INDIANA - 3.35%
5,205,000 - 5,205,000 Fort Wayne Hospital Authority
Parkview Memorial Hospital
Series B
3.45%, 01/01/16 (A)
LOC: Bank of America NT & SA 5,205,000 - 5,205,000
3,840,000 - 3,840,000 Fort Wayne Hospital Authority
Parkview Memorial Hospital
Series C
3.45%, 01/01/16 (A)
LOC: Bank of America NT & SA 3,840,000 - 3,840,000
- 4,400,000 4,400,000 Indiana Secondary Market for Educational
Loans Inc.
Revenue, Series E
4.20%, 06/01/00
Insured: AMBAC - 4,422,022 4,422,022
5,000,000 - 5,000,000 Indiana State Development Finance
Authority, Environmental Revenue
USX Corp. Project
3.45%, 12/01/22 (A)
LOC: Bank of Nova Scotia 5,000,000 - 5,000,000
16,000,000 - 16,000,000 Mount Vernon County
3.55%, 11/02/99
Guaranteed: General Electric Co. 16,000,000 - 16,000,000
8,700,000 - 8,700,000 Princeton Industrial, PCR
PSI Energy, Inc. Project
3.50%, 03/01/19 (A)
LOC: Canadian Imperial Bank of Commerce 8,700,000 - 8,700,000
11,500,000 - 11,500,000 Sullivan Industrial Pollution Control
3.55%, 11/04/99
Guaranteed: National Rural Utility CFC 11,500,000 - 11,500,000
--------------------------------------------
50,245,000 4,422,022 54,667,022
--------------------------------------------
<PAGE>
IOWA - 0.68%
- 9,190,000 9,190,000 Iowa Financing Authority
Single Family, Revenue, Mortgage-Backed
Securities Programs
Series A
2.95%, 01/01/24 (A)
Insured: FNMA/GNMA - 9,141,753 9,141,753
- 2,000,000 2,000,000 Iowa Student Loan Liquidity Corp.
Revenue, Series A
4.10%, 12/01/99 - 2,000,746 2,000,746
--------------------------------------------
- 11,142,499 11,142,499
--------------------------------------------
KENTUCKY - 2.39%
8,800,000 - 8,800,000 Ashland, PCR
Ashland Oil, Inc. Project
3.35%, 04/01/09 (A)
LOC: Suntrust Bank 8,800,000 - 8,800,000
- 4,100,000 4,100,000 Boone County PCR
Cincinnati Gas and Electric Co.
Revenue, Series A
3.90%, 08/01/13 (A)
LOC: UBS AG - 4,100,000 4,100,000
15,000,000 - 15,000,000 Kentucky Asset Liability Commission
General Fund Revenue, TRAN
Series A
4.25%, 06/28/00 15,083,207 - 15,083,207
- 11,100,000 11,100,000 Ohio County PCR
Big Rivers Electric Corp.
3.50%, 10/01/15 (A)
Insured: AMBAC
SPA: Credit Suisse First Boston - 11,100,000 11,100,000
--------------------------------------------
23,883,207 15,200,000 39,083,207
--------------------------------------------
LOUISIANA - 9.04%
9,800,000 - 9,800,000 Ascension Parish, PCR
Shell Oil Co.
3.35%, 05/01/26 (A) 9,800,000 - 9,800,000
- 10,000,000 10,000,000 De Soto Parish, PCR
Central Louisiana Electric Co.
Revenue, Series B
3.60%, 07/01/18 (A) - 10,000,000 10,000,000
1,800,000 - 1,800,000 Lake Charles Harbor &
Terminal District
Port Facilities Revenue
Citgo Petroleum Corp.
3.50%, 08/01/07 (A)
LOC: Westdeutsche Landesbank 1,800,000 - 1,800,000
1,100,000 - 1,100,000 Lake Charles Harbor &
Terminal District
Revenue Updates
Reynolds Metals Co. Project
3.50%, 05/01/06 (A)
LOC: Canadian Imperial
Bank of Commerce 1,100,000 - 1,100,000
11,700,000 - 11,700,000 Louisiana State Offshore Terminal
Authority, Deepwater Port Revenue
Loop, Inc., 1st Stage
3.55%, 09/01/06
LOC: UBS AG 11,700,000 - 11,700,000
11,100,000 - 11,100,000 Louisiana State Offshore Terminal
Authority, Deepwater Port Revenue
Loop, Inc., 1st Stage A
3.50%, 09/01/08 (A)
LOC: UBS AG 11,100,000 - 11,100,000
- 10,800,000 10,800,000 Louisiana State Offshore Terminal
Authority, Deepwater Port Revenue
Loop, Inc., 1st Stage A
3.40%, 09/01/17 (A) - 10,800,000 10,800,000
1,000,000 - 1,000,000 Louisiana Public Facilities Authority
PCR, Ciba-Geigy Corp. Project
3.45%, 12/01/04 (A)
LOC: UBS AG 1,000,000 - 1,000,000
- 37,000,000 37,000,000 Louisiana Public Facilities Authority
Hospital Revenue
Willis-Knighton Medical Center
3.60%, 09/01/27 (A)
Insured: AMBAC
SPA: Credit Local de France - 37,000,000 37,000,000
- 10,900,000 10,900,000 Plaquemines Port Harbor and Terminal
District
Port Facilities Revenue
International Marine Terminals Project,
Series B
3.05%, 03/15/06 (A)
LOC: Kredietbank N.V. - 10,900,000 10,900,000
<PAGE>
- 9,650,000 9,650,000 Rapides Parish IDB, PCR
Central Louisiana Electric Co. Project
3.60%, 07/01/18 (A) - 9,650,000 9,650,000
- 10,000,000 10,000,000 Southern Louisiana Port Commision
Revenue
Occidental Petroleum Project
3.50%, 07/01/18 (A)
LOC: Wachovia Bank Georgia - 10,000,000 10,000,000
8,800,000 - 8,800,000 St. Charles Parish, PCR
Shell Oil Co. Project
3.35%, 06/01/05 (A) 8,800,000 - 8,800,000
14,000,000 - 14,000,000 St. James Parish, PCR
3.50%, 01/19/00
Guaranteed: Texaco, Inc. 14,000,000 - 14,000,000
--------------------------------------------
59,300,000 88,350,000 147,650,000
--------------------------------------------
MARYLAND - 1.07%
- 17,225,000 17,225,000 Maryland State Department of
Transportation, Revenue
5.00%, 09/01/00 - 17,419,839 17,419,839
--------------------------------------------
MASSACHUSETTS - 1.28%
6,000,000 - 6,000,000 Brookline, BAN, GO
3.25%, 12/16/99 6,002,515 - 6,002,515
- 8,080,000 8,080,000 Massachusetts, GO
Consolidated Loan, Series B
4.00%, 05/01/00 - 8,111,660 8,111,660
3,000,000 - 3,000,000 Massachusetts State Housing Finance
Agency, Multi-Family, Series A
3.35%, 12/01/25 (A)
LOC: GNMA
SPA: Republic National Bank of New York 3,000,000 - 3,000,000
3,850,000 - 3,850,000 Stoneham, BAN, GO
3.25%, 11/16/99 3,850,538 - 3,850,538
--------------------------------------------
12,853,053 8,111,660 20,964,713
--------------------------------------------
MICHIGAN - 1.33%
- 12,200,000 12,200,000 Kent Hospital Finance Authority Revenue
Spectrum Health Project
Series B
3.45%, 01/15/26 (A)
Insured: MBIA
SPA: NBD Bank - 12,200,000 12,200,000
9,535,000 - 9,535,000 Michigan State University
Revenue, Series A-2
3.45%, 08/15/22 (A) 9,535,000 - 9,535,000
--------------------------------------------
9,535,000 12,200,000 21,735,000
--------------------------------------------
MISSISSIPPI - 1.50%
1,100,000 - 1,100,000 Harrison County PCR
duPont (E.I) deNemours & Co.
3.50%, 09/01/10 (A) 1,100,000 - 1,100,000
2,000,000 - 2,000,000 Jackson County
Water System
3.35%, 11/01/24 (A)
Guaranteed: Chevron Corp. 2,000,000 - 2,000,000
1,600,000 - 1,600,000 Jackson County, PCR
Chevron USA, Inc. Project
3.50%, 12/01/16 (A) 1,600,000 - 1,600,000
- 3,925,000 3,925,000 Mississippi State, GO
5.00%, 11/01/99 - 3,925,000 3,925,000
2,240,000 - 2,240,000 Mississippi State, GO
Capital Improvements, Series B
4.50%, 11/01/99 2,240,000 - 2,240,000
13,595,000 - 13,595,000 Mississippi State Highway Revenue
Four Lane Highway Project, Series 39
4.50%, 06/01/00 13,679,552 - 13,679,552
--------------------------------------------
20,619,552 3,925,000 24,544,552
--------------------------------------------
MISSOURI - 0.54%
- 2,715,000 2,715,000 Missouri Higher Education Loan Authority
Revenue, Series CC
3.20%, 02/15/00 - 2,715,000 2,715,000
6,100,000 - 6,100,000 Missouri State Environmental
Improvement and Energy Resources
Authority, PCR
3.30%, 02/18/00
LOC: UBS AG 6,100,000 - 6,100,000
--------------------------------------------
6,100,000 2,715,000 8,815,000
--------------------------------------------
<PAGE>
NEBRASKA - 0.58%
- 3,195,000 3,195,000 American Public Energy Agency
Nebraska Gas Supply Revenue
Nebraska Public Gas Agency Project
Series C
3.55%, 03/01/00
Insured: AMBAC - 3,197,949 3,197,949
- 6,245,000 6,245,000 Omaha Public Power District
Nebraska Electric
Revenue, Series A
4.85%, 02/01/00 - 6,270,743 6,270,743
--------------------------------------------
- 9,468,692 9,468,692
--------------------------------------------
NEVADA - 0.47%
7,700,000 - 7,700,000 Reno Hospital Revenue
St Mary's Regional Medical Center
Series B
3.65%, 05/15/23 (A)
Insured: MBIA
SPA: Rabobank Nederland NV 7,700,000 - 7,700,000
--------------------------------------------
NEW HAMPSHIRE - 1.02%
- 12,600,000 12,600,000 New Hampshire Higher Edcuation and
Health Facilities Authority Revenue
Mary Hitchcock, Series 85-D
3.45%, 07/01/21 (A)
Insured: FGIC
SPA: Chemical Bank - 12,600,000 12,600,000
- 4,000,000 4,000,000 New Hampshire Higher Edcuation and
Health Facilities Authority Revenue
New England Inc., Series C
3.55%, 12/01/25 (A)
Insured: AMBAC
SPA: Mellon Bank N.A. - 4,000,000 4,000,000
--------------------------------------------
- 16,600,000 16,600,000
--------------------------------------------
NEW JERSEY - 0.74%
- 11,992,000 11,992,000 Bayonne, GO, BAN
4.00%, 07/14/00 - 12,008,294 12,008,294
--------------------------------------------
NEW MEXICO - 1.25%
3,900,000 - 3,900,000 Farmington, PCR
El Paso Electric Co.
Series A
3.55%, 11/01/13 (A)
LOC: Barclays Bank Plc 3,900,000 - 3,900,000
16,500,000 - 16,500,000 New Mexico State, TRAN
4.00%, 06/30/00 16,581,282 - 16,581,282
--------------------------------------------
20,481,282 - 20,481,282
--------------------------------------------
NEW YORK - 3.29%
6,300,000 - 6,300,000 Long Island Power Authority
Electric Systems Revenue
Series 6
3.65%, 05/01/33 (A)
LOC: ABN-AMRO Bank NV 6,300,000 - 6,300,000
- 15,400,000 15,400,000 Long Island Power Authority
Revenue, Sub-Series 5
3.50%, 05/01/33 (A) - 15,400,000 15,400,000
- 7,915,000 7,915,000 New York , GO
Subseries A-5
3.55%, 08/01/15 (A)
LOC: KBC Bank N.V. - 7,915,000 7,915,000
- 10,000,000 10,000,000 New York City Municipal Water
Finance Authority, Water & Sewer
System Revenue, Series C
3.55%, 06/15/23 (A)
Insured: FGIC
SPA: FGIC-SPI - 10,000,000 10,000,000
5,000,000 - 5,000,000 New York City Municipal Water
Finance Authority, Water & Sewer
System Revenue, Series G
3.50%, 06/15/24 (A)
LOC: FGIC
SPA: FGIC-SPI 5,000,000 - 5,000,000
- 9,105,000 9,105,000 New York State Housing Finance Agency
Revenue, Series PA 423
3.57%, 11/01/16 (A) - 9,105,000 9,105,000
--------------------------------------------
11,300,000 42,420,000 53,720,000
--------------------------------------------
<PAGE>
NORTH CAROLINA - 2.23%
9,500,000 - 9,500,000 North Carolina Educational
Facilities Finance Agency
Bowman Gray School Project
3.50%, 09/01/26 (A)
LOC: Wachovia Bank, N.A. 9,500,000 - 9,500,000
6,000,000 - 6,000,000 Wake County Industrial Facilities &
Pollution Control Financing Authority
Revenue
Carolina Power & Light
Co. Project, Series A
3.60%, 06/15/14 (A)
LOC: First National Bank 6,000,000 - 6,000,000
- 8,600,000 8,600,000 Wake County Industrial Facilities &
Pollution Control Financing Authority
Revenue
Carolina Power & Light
Co. Project, Series B
3.50%, 09/01/15 (A)
LOC: First Union National Bank - 8,600,000 8,600,000
- 12,250,000 12,250,000 Wake County Industrial Facilities &
Pollution Control Financing Authority
Carolina Power & Light
Co. Project, Series C
3.50%, 10/01/15 (A)
LOC: First Union National Bank - 12,250,000 12,250,000
--------------------------------------------
15,500,000 20,850,000 36,350,000
--------------------------------------------
OHIO - 0.84%
1,700,000 - 1,700,000 Evendale, IDR
SHV Real Estate, Inc.
3.35%, 09/01/15 (A)
LOC: ABN-AMRO Bank NV 1,700,000 - 1,700,000
- 10,000,000 10,000,000 Ohio State, GO
Highway Capital Improvements, Series D
4.00%, 05/01/00 - 10,037,769 10,037,769
1,900,000 - 1,900,000 Ohio State Air Quality
Development Authority Revenue
Cincinnati Gas & Electric, Series A
3.50%, 09/01/30 (A)
LOC: ABN-AMRO Bank NV 1,900,000 - 1,900,000
--------------------------------------------
3,600,000 10,037,769 13,637,769
--------------------------------------------
OKLAHOMA - 1.60%
- 26,160,000 26,160,000 Oklahoma State Water Reserve Board
Student Loan Program
3.60%, 09/01/26 (A)
SPA: Union Bank of Switzerland - 26,160,000 26,160,000
--------------------------------------------
OREGON - 0.40%
6,600,000 - 6,600,000 Port Portland, PCR
Reynolds Metals Co.
3.65%, 12/01/09 (A)
LOC: Bank of Nova Scotia 6,600,000 - 6,600,000
--------------------------------------------
PENNSYLVANIA - 6.34%
2,000,000 - 2,000,000 Beaver County IDA, PCR
Duquesne-Beaver Valley, Series A
3.40%, 08/01/20 (A)
LOC: Barclays Bank Plc 2,000,000 - 2,000,000
6,900,000 - 6,900,000 Beaver County IDA, PCR
Duquesne-Mansfield, Series B
3.40%, 08/01/09 (A)
LOC: Barclays Bank Plc 6,900,000 - 6,900,000
3,500,000 - 3,500,000 Chester County IDA, IDR
General Motors Corp. Project
3.50%, 08/01/01 (A) 3,500,000 - 3,500,000
3,005,000 - 3,005,000 Delaware County IDA
Resource Recovery Facility, Series G
3.40%, 12/01/31 (A)
Guaranteed: General Electric
Capital Corp. 3,005,000 - 3,005,000
2,140,000 - 2,140,000 Delaware County IDA
Resource Recovery Facility
Series G
3.40%, 12/01/31 (A)
Guaranteed: General Electric Capital Corp. 2,140,000 - 2,140,000
6,300,000 - 6,300,000 Delaware County Industrial, PCR
Philadelphia Electric
3.35%, 11/09/99
Insured: FGIC 6,300,000 - 6,300,000
<PAGE>
6,000,000 - 6,000,000 Delaware Valley Regional
Finance Authority, Local
Government Revenue
3.50%, 08/01/16 (A)
LOC: Credit Suisse First Boston 6,000,000 - 6,000,000
3,100,000 - 3,100,000 Delaware Valley Regional
Finance Authority, Local
Government Revenue, Series A
3.50%, 12/01/19 (A)
LOC: Credit Suisse First Boston 3,100,000 - 3,100,000
5,000,000 - 5,000,000 Delaware Valley Regional
Finance Authority, Local
Government Revenue, Series B
3.50%, 12/01/20 (A)
LOC: Credit Suisse First Boston 5,000,000 - 5,000,000
8,100,000 - 8,100,000 Delaware Valley Regional
Finance Authority, Local
Government Revenue, Series C
3.50%, 12/01/20 (A)
LOC: Credit Suisse First Boston 8,100,000 - 8,100,000
12,000,000 11,240,000 23,240,000 Quakertown General Authority Revenue
Pooled Financing Program, Series A
3.60%, 06/01/28 (A)
LOC: PNC Bank, N.A. 12,000,000 11,240,000 23,240,000
- 34,200,000 34,200,000 Quakertown Hospital Authority Revenue
Hospital Group Pooled Financing
3.60%, 07/01/05 (A)
LOC: PNC Bank, N.A. - 34,200,000 34,200,000
--------------------------------------------
58,045,000 45,440,000 103,485,000
--------------------------------------------
SOUTH CAROLINA - 2.61%
- 19,400,000 19,400,000 Piedmont Municipal Power Agency
Electric Revenue, Series C
3.50%, 01/01/22 (A)
Insured: MBIA
SPA: Morgan Guaranty Trust - 19,400,000 19,400,000
13,260,000 - 13,260,000 South Carolina Jobs
Economic Development Authority
St. Francis Hospital
3.65%, 07/01/22 (A)
LOC: Chase Manhattan Bank 13,260,000 - 13,260,000
10,000,000 - 10,000,000 Spartanburg County
Health Services District, Inc.
Hospital Revenue
3.45%, 04/15/23 (A)
LOC: MBIA
SPA: NationsBank N.A. 10,000,000 - 10,000,000
--------------------------------------------
23,260,000 19,400,000 42,660,000
--------------------------------------------
TENNESSEE - 2.30%
- 2,500,000 2,500,000 Metropolitan Government Nashville and
Davidson County, HEFB
Vanderbilt University, Series 85-A
3.10%, 01/15/14 (A) - 2,500,000 2,500,000
8,400,000 - 8,400,000 Metropolitan Nashville Airport
Authority Special Facilities Revenue
American Airlines Project, Series A
3.65%, 10/01/12 (A)
LOC: Credit Suisse First Boston 8,400,000 - 8,400,000
1,200,000 - 1,200,000 Sullivan County IDB, PCR
Mead Corp. Project
3.60%, 10/01/16 (A)
LOC: UBS AG 1,200,000 - 1,200,000
2,300,000 19,600,000 21,900,000 Tennessee State, BAN, GO, Series C
3.50%, 07/02/01 (A)
SPA: Tennessee Conservative
Retirement System 2,300,000 19,600,000 21,900,000
3,450,000 - 3,450,000 Tennessee State, GO
Series A
5.00%, 05/01/00 3,483,137 - 3,483,137
--------------------------------------------
15,383,137 22,100,000 37,483,137
--------------------------------------------
TEXAS - 15.00%
- 7,835,000 7,835,000 Austin
3.45%, 11/17/99 - 7,835,000 7,835,000
- 11,300,000 11,300,000 Bexar County Housing Financing Authority
Multifamily Revenue, Altomonte Apartments
Project
3.45%, 09/15/26 (A)
Insured: FNMA - 11,300,000 11,300,000
2,750,000 - 2,750,000 Dallas, GO
7.50%, 02/15/00 2,785,941 - 2,785,941
<PAGE>
2,300,000 - 2,300,000 Grapevine IDC
American Airlines, Series A2
3.65%, 12/01/24 (A)
LOC: Morgan Guaranty Trust 2,300,000 - 2,300,000
5,690,000 - 5,690,000 Guadalupe-Blanco River Authority
PCR, Central Power & Light Co. Project
3.50%, 11/01/15 (A)
LOC: ABN-AMRO Bank NV 5,690,000 - 5,690,000
11,700,000 - 11,700,000 Gulf Coast Waste Disposal Authority
PCR, Amoco Oil Co. Project
3.50%, 10/01/17 (A) 11,700,000 - 11,700,000
12,500,000 - 12,500,000 Gulf Coast Waste Disposal
Authority, PCR
Exxon Project
3.40%, 10/01/24 (A) 12,500,000 - 12,500,000
13,000,000 - 13,000,000 Harris County IDC
Baytank Houston, Inc. Project
3.40%, 02/01/20 (A)
LOC: Rabobank Nederland 13,000,000 - 13,000,000
- 9,420,000 9,420,000 Harris County HFDC
St Lukes Episcopal Hospital
Revenue, Series B
3.65%, 02/15/27 (A)
SPA: Morgan Guaranty Trust - 9,420,000 9,420,000
- 18,000,000 18,000,000 Harris County HFDC
Texas Childrens Hospital
Revenue, Series B-1
3.50%, 10/01/29 (A)
Insured: MBIA
SPA: Morgan Guaranty Trust - 18,000,000 18,000,000
10,000,000 - 10,000,000 Hockley County IDC, PCR
Amoco Project, Standard Oil Co.
3.60%, 03/01/14 (A) 10,001,042 - 10,001,042
10,000,000 - 10,000,000 Houston Higher Education Finance Corp.
Rice University, Series A
3.75%, 05/10/00 10,000,000 - 10,000,000
15,000,000 - 15,000,000 Houston, TRAN
4.25%, 06/30/00 15,086,424 - 15,086,424
3,700,000 - 3,700,000 Lone Star Airport
Improvement Authority
American Airlines, Inc., Series A-3
3.65%, 12/01/14 (A)
LOC: Royal Bank of Canada 3,700,000 - 3,700,000
2,770,000 - 2,770,000 Lone Star Airport
Improvement Authority
American Airlines, Inc., Series A-4
3.65%, 12/01/14 (A)
LOC: Royal Bank of Canada 2,770,000 - 2,770,000
1,300,000 - 1,300,000 Lone Star Airport
Improvement Authority
American Airlines, Inc., Series A-5
3.65%, 12/01/14 (A)
LOC: Royal Bank of Canada 1,300,000 - 1,300,000
1,800,000 - 1,800,000 Lone Star Airport
American Airlines, Inc., Series B-3
3.65%, 12/01/14 (A)
LOC: Royal Bank of Canada 1,800,000 - 1,800,000
- 15,200,000 15,200,000 Lower Colorado River Authority
Junior Lien, Third Supply Series
3.60%, 01/01/13 (A)
Insured: MBIA
SPA: Bayerische Vereinsbank AG - 15,200,000 15,200,000
13,250,000 - 13,250,000 Lower Neches Valley Authority
Chevron USA, Inc. Project
3.45%, 02/15/17 (A) 13,250,000 13,250,000
- 12,000,000 12,000,000 Midlothian IDC PCR
Box-Crow Cement Co. Project
3.45%, 12/01/09 (A)
LOC: UBS AG - 12,000,000 12,000,000
5,110,000 - 5,110,000 North Central HFDC
Presbyterian Medical Center
Series D
3.65%, 12/01/15 (A)
LOC: MBIA
SPA: NationsBank of Texas 5,110,000 - 5,110,000
14,300,000 - 14,300,000 Sabine River Authority, PCR
Texas Utilities Project, Series A
3.50%, 03/01/26 (A)
Insured: AMBAC
SPA: Bank of New York 14,300,000 - 14,300,000
<PAGE>
10,500,000 35,000,000 45,500,000 Texas, TRAN
Series A
4.50%, 08/31/00 10,567,426 35,220,240 45,787,666
--------------------------------------------
135,860,833 108,975,240 244,836,073
--------------------------------------------
UTAH - 1.87%
10,000,000 11,000,000 21,000,000 Utah State, GO
Series B
3.35%, 07/01/16 (A)
SPA: Toronto Dominion Bank 10,000,000 11,000,000 21,000,000
9,500,000 - 9,500,000 Utah State, GO
Series C
3.40%, 07/01/16 (A)
SPA: Toronto Dominion Bank 9,500,000 - 9,500,000
--------------------------------------------
19,500,000 11,000,000 30,500,000
--------------------------------------------
VERMONT - 0.45%
- 1,500,000 1,500,000 Vermont Education and Health Buildings
Finance Agency Revenue
Middlebury College Project, Series A
3.10%, 11/01/27 (A) - 1,500,000 1,500,000
- 5,900,000 5,900,000 Vermont Education and Health Buildings
Finance Agency Revenue
VHA Hospital of New England, Series D
3.55%, 12/01/25 (A)
Insured: AMBAC
SPA: Mellon Bank N.A. - 5,900,000 5,900,000
--------------------------------------------
- 7,400,000 7,400,000
--------------------------------------------
VIRGINIA - 0.33%
5,400,000 - 5,400,000 Peninsula Ports Authority
Coal Term Revenue
Dominion Terminal Project
Series C
3.65%, 07/01/16 (A)
LOC: Barclays Bank Plc 5,400,000 - 5,400,000
--------------------------------------------
WASHINGTON - 3.73%
6,750,000 - 6,750,000 Seattle Municipal Light and Power
Revenue
3.50%, 11/16/99
SPA: Morgan Guaranty Trust 6,750,000 - 6,750,000
1,000,000 - 1,000,000 Snohomish County Public Utility
District No. 1, Electric Revenue
Generation System
3.45%, 01/01/25 (A)
Insured: MBIA
SPA: Bayerische Vereinsbank 1,000,000 - 1,000,000
5,025,000 - 5,025,000 Washington State
Public Power Supply System
Nuclear Project No. 1 Revenue
Series 1A-1
3.400%, 07/01/17 (A)
LOC: Bank of America NT & SA 5,025,000 - 5,025,000
3,950,000 - 3,950,000 Washington State
Public Power Supply System
Nuclear Project No. 1
Series 1A-3
3.35%, 07/01/17 (A)
LOC: Morgan Guaranty Trust 3,950,000 - 3,950,000
- 10,525,000 10,525,000 Washington State
3.70%, 07/01/16 (A) - 10,525,000 10,525,000
- 17,660,000 17,660,000 Washington State Public Power Supply
System
Nuclear Project Number 2
Revenue, Series A
Pre-Refunded 07/01/00
5.00%, 07/01/00 (C) - 17,864,802 17,864,802
- 5,000,000 5,000,000 Washington State Public Power Supply
System
Nuclear Project Number 2
Revenue, Series A, Project II
Pre-Refunded 07/01/00
7.38%, 07/01/12 (C) - 5,230,728 5,230,728
- 5,500,000 5,500,000 Washington State Public Power Supply
System
Nuclear Project Number 2 Revenue,
Series B Pre-Refunded 07/01/00 7.00%,
07/01/12 (C)
Insured: FSA - 5,741,958 5,741,958
<PAGE>
- 4,640,000 4,640,000 Washington State Public Power Supply
System
Nuclear Project Number 2
Revenue, Series B, Project II
Pre-Refunded 07/01/00
7.00%, 07/01/12 (C) - 4,843,499 4,843,499
--------------------------------------------
16,725,000 44,205,987 60,930,987
--------------------------------------------
WISCONSIN - 1.62%
- 9,000,000 9,000,000 Pleasant Prairie PCR
Wisconsin Electric Power Co. Project
Series A
3.50%, 09/01/30 (A) - 9,000,000 9,000,000
- 3,250,000 3,250,000 Wisconsin Public Power, Inc.
Power Supply System
Revenue, Series A
7.40%, 07/01/20
Insured: AMBAC - 3,400,935 3,400,935
7,355,000 - 7,355,000 Wisconsin State, GO
Series A
4.25%, 05/01/00 7,403,826 - 7,403,826
- 6,550,000 6,550,000 Wisconsin State HEFA Revenue
Gundersen Clinic, La Crosse Inc.
5.50%, 12/01/99
Insured: FSA - 6,560,381 6,560,381
--------------------------------------------
7,403,826 18,961,316 26,365,142
--------------------------------------------
WYOMING - 3.88%
10,000,000 - 10,000,000 Kemmerer, PCR
Exxon Project
3.50%, 11/01/14 (A) 10,000,000 - 10,000,000
- 17,650,000 17,650,000 Lincoln County, GO
3.75%, 01/19/00 - 17,650,000 17,650,000
1,000,000 - 1,000,000 Platte County, PCR
Tri-State G & T, Series A
3.75%, 07/01/14 (A)
LOC: National Rural Utility CFC 1,000,000 - 1,000,000
12,100,000 - 12,100,000 Sweetwater County, PCR
Pacific Corp. Project
3.65%, 02/11/00
LOC: UBS AG 12,100,000 - 12,100,000
2,400,000 - 2,400,000 Sweetwater County, PCR
Pacific Corp. Project
3.75%, 02/11/00
LOC: UBS AG 2,400,000 - 2,400,000
5,800,000 - 5,800,000 Uinta County, PCR
Amoco, Inc.
3.50%, 07/01/26 (A) 5,800,000 - 5,800,000
1,000,000 - 1,000,000 Uinta County, PCR
Chevron USA, Inc.
3.50%, 04/01/10 (A) 1,000,000 - 1,000,000
- 13,400,000 13,400,000 Uinta County, PCR
Chevron USA, Inc.
3.60%, 08/15/20 (A)
Guaranteed: Chevron USA, Inc. - 13,400,000 13,400,000
--------------------------------------------
32,300,000 31,050,000 63,350,000
--------------------------------------------
TOTAL MUNICIPAL SECURITIES 703,472,731 822,188,151 1,525,660,882
--------------------------------------------
CASH EQUIVALENTS - 0.88%
- 10,000,000 10,000,000 ABN AMRO Munitops Certificates Trust
Series 1999-1
3.35%, 12/06/06 (A) (B)
SPA: ABN AMRO Bank N.V. - 10,000,000 10,000,000
- 4,388,088 4,388,088 Clipper Caraval Tax-Exempt Trust
Series 1998-1, Class A-1
3.25%, 01/06/00
Insured: AMBAC - 4,388,088 4,388,088
- 5,000 5,000 Clipper Tax-Exempt Trust
Series A
3.57%, 06/01/05 (A)
SPA: State Street Bank and Trust Co. - 5,000 5,000
--------------------------------------------
TOTAL CASH EQUIVALENTS - 14,393,088 14,393,088
--------------------------------------------
<PAGE>
TAX-EXEMPT MUNICIPAL
TRUST CERTIFICATE - 0.07%
- 1,068,025 1,068,025 Municipal Tax-Exempt Trust Certificate
Class A1
3.10%, 02/07/00
Insured: MBIA - 1,067,897 1,067,897
--------------------------------------------
TOTAL TAX-EXEMPT MUNICIPAL TRUST CERTIFICATE - 1,067,897 1,067,897
--------------------------------------------
REPURCHASE AGREEMENT - 4.66%
Repurchase Agreement with:
- 76,052,840 76,052,840 Goldman Sachs
5.18%, 11/01/99, dated 10/29/99 - 76,052,840 76,052,840
--------------------------------------------
TOTAL REPURCHASE AGREEMENT - 76,052,840 76,052,840
--------------------------------------------
SHARES
- -----------------------------------------
INVESTMENT COMPANY - 0.21%
205,069 - 205,069 Dreyfus Tax Exempt Cash
Management Fund 205,069 - 205,069
3,289,768 - 3,289,768 Federated Investors Tax-Free
Obligations Fund 3,289,768 - 3,289,768
---------------------------------------------
TOTAL INVESTMENT COMPANY 3,494,837 - 3,494,837
---------------------------------------------
TOTAL INVESTMENTS - 99.28%
(Cost $706,967,568, $913,701,976, and $1,620,669,544) 706,967,568 913,701,976 1,620,669,544
---------------------------------------------
NET OTHER ASSETS AND LIABILITIES - 0.72% 9,227,149 2,505,018 11,732,167
--------------------------------------------
NET ASSETS - 100.00% $716,194,717 $ 916,206,994 $1,632,401,711
=============================================
</TABLE>
(A) Variable rate demand notes are payable upon not more than one,
seven or thirty business days notice. Put bonds and notes have
demand features which mature within one year. The interest rate
shown reflects the rate in effect at October 31, 1999.
(B) Securities exempt from registration pursuant to Rule 144A under
the Securities Act of 1933, as amended. These securities may only
be resold in an exempt transaction to qualified institutional
buyers. At October 31, 1999, these securities amounted to
$10,000,000 or 0.61% of the Fund.
(C) Original Issue Discount
AMBAC American Municipal Bond Assurance Corp.
BAN Bond Anticipation Notes
CFC Cooperative Finance Corp.
FGIC Federal Guaranty Insurance Corp.
FNMA Federal National Mortgage Association
FSA Financial Security Assurance
GNMA Government National Mortgage Association
GO General Obligation
HEFA Health and Edcuation Facilities Authority
HEFB Health and Edcuation Facilities Board
HFA Health Facilities Authority
HFDC Health Facilities Development Corp.
IDA Industrial Development Authority
IDB Industrial Development Board
IDC Industrial Development Corporation
IDR Industrial Development Revenue
LOC Letter of Credit
MBIA Municipal Bond Insurance Association
PCR Polution Control Revenue
SPA Stand-by Purchase Agreement
TRAN Tax and Revenue Anticipation Notes
See Notes to Pro Forma Financial Statements
<PAGE>
GALAXY TAX-EXEMPT FUND
BOSTON 1784 TAX-FREE MONEY MARKET FUND
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
OCTOBER 31, 1999
<TABLE>
<CAPTION>
---------------------------------------------------------------
BOSTON 1784
TAX-FREE PRO FORMA
GALAXY TAX- MONEY MARKET PRO FORMA COMBINED
EXEMPT FUND FUND ADJUSTMENTS (NOTE 1)
---------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments
Investments at cost $ 706,967,568 $ 837,649,136 $ - $1,544,616,704
Repurchase agreements - 76,052,840 - 76,052,840
---------------------------------------------------------------
Total Investments at Value 706,967,568 913,701,976 - 1,620,669,544
Cash 4,912 68,621 - 73,533
Receivable for shares sold 8,157,742 - - 8,157,742
Interest and dividends receivable 3,631,404 5,389,322 - 9,020,726
---------------------------------------------------------------
Total Assets 718,761,626 919,159,919 - 1,637,921,545
LIABILITIES:
Dividends payable 1,322,859 2,456,260 - 3,779,119
Payable for shares repurchased 864,706 - - 864,706
Advisory fee payable 245,591 316,384 - 561,975
Payable to Fleet affiliates 14,450 - - 14,450
Administration fee payable 49,577 51,550 - 101,127
Trustees' fees and expenses payable 12,955 2,089 - 15,044
Accrued expenses and other payables 56,771 126,642 - 183,413
---------------------------------------------------------------
Total Liabilities 2,566,909 2,952,925 - 5,519,834
NET ASSETS $ 716,194,717 $ 916,206,994 $ - $1,632,401,711
===============================================================
NET ASSETS CONSISTS OF:
Paid-in capital $ 716,345,741 $ 916,321,280 $ - $1,632,667,021
(Overdistributed) net investment income (19,453) (310) - (19,763)
Accumulated net realized (loss) on investments sold (131,571) (113,976) - (245,547)
---------------------------------------------------------------
TOTAL NET ASSETS $ 716,194,717 $ 916,206,994 $ - $1,632,401,711
===============================================================
Net Assets by Class:
Retail A Shares $ 160,057,310 N/A $ - $ 160,057,310
===============================================================
Trust Shares / Shares 556,137,407 916,206,994 (125,520,358) 1,346,824,043
===============================================================
BKB Shares N/A N/A 125,520,358 125,520,358
===============================================================
Shares of beneficial interest outstanding:
Retail A Shares 160,114,754 N/A - 160,114,754
===============================================================
Trust Shares / Shares 556,230,987 916,321,280 (125,536,015) 1,347,016,252
===============================================================
BKB Shares N/A N/A 125,536,015 125,536,015
===============================================================
Net Asset Value, Retail A Shares $ 1.00 N/A $ 1.00
===============================================================
Net Asset Value, Trust Shares / Shares $ 1.00 $ 1.00 $ 1.00
===============================================================
Net Asset Value, BKB Shares N/A N/A $ 1.00
===============================================================
</TABLE>
<PAGE>
GALAXY TAX-EXEMPT FUND
BOSTON 1784 TAX-FREE MONEY MARKET FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS (UNAUDITED)
OCTOBER 31, 1999
<TABLE>
<CAPTION>
----------------------------------------------------------------
BOSTON 1784
TAX-FREE PRO FORMA
GALAXY TAX- MONEY MARKET PRO FORMA COMBINED
EXEMPT FUND FUND ADJUSTMENTS (NOTE 1)
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income:
Interest Income $ 18,296,350 $ 34,682,484 $ - $ 52,978,834
Dividend Income 113,526 - - 113,526
----------------------------------------------------------------
Total Investment Income 18,409,876 34,682,484 - 53,092,360
----------------------------------------------------------------
Expenses:
Investment Advisory Fees 2,322,782 4,050,083 5,223 (a) 6,378,088
Administrative Fees 435,865 667,594 (6,942) (a) 1,096,517
Custodian Fee 22,075 50,279 (32,386) (b) 39,968
Fund Accounting Fee 90,473 - 47,929 (a) 138,402
Professional Fees 42,306 85,402 (72,319) (b) 55,389
Trustee Fees 14,425 28,817 (17,211) (b) 26,031
Reports to Shareholders 13,365 69,346 (64,213) (b) 18,498
Miscellaneous Expenses 74,037 58,261 - 132,298
----------------------------------------------------------------
Subtotal 3,015,328 5,009,782 (139,919) 7,885,191
Transfer Agent Fee
Retail A Shares 66,023 - - 66,023
Trust Shares / Shares 57 142,668 (142,662) (a) 63
BKB Shares - - 19,375 (a) 19,375
Shareholder Services Fee
Retail A Shares 169,840 - - 169,840
Trust Shares / Shares - - - -
BKB Shares - - 138,709 (a) 138,709
----------------------------------------------------------------
Total Expenses Before Waivers/Reimbursements 3,251,248 5,152,450 (124,497) 8,279,201
Less Waiver/Reimbursements
Fund Level Waivers - - (422,261) (c) (422,261)
Class Specific Waivers/Reimbursements
Retail A Shares (745) - - (745)
Trust Shares / Shares (1,354) - - (1,354)
BKB Shares - - (97,096) (c) (97,096)
----------------------------------------------------------------
Total Waivers/Reimbursements (2,099) - (519,357) (521,456)
Net Expenses 3,249,149 5,152,450 (643,854) 7,757,745
----------------------------------------------------------------
Net Investment Income 15,160,727 29,530,034 643,854 45,334,615
----------------------------------------------------------------
Net Realized Gain on Investments - 22,596 - 22,596
----------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $ 15,160,727 $ 29,552,630 $ 643,854 $ 45,357,211
================================================================
</TABLE>
(a) Reflects adjustment to the acquiring fund contractual fee level.
(b) Reflects expected savings when the two funds become one.
(c) Reflects adjustment to the acquiring fund's voluntary expense limitation.
See Notes to Pro Forma Financial Statements
<PAGE>
Galaxy Tax Exempt Fund
Boston 1784 Tax-Free Money Market Fund
Notes to Pro Forma Combining Financial Statements (unaudited)
1. Basis of Combination
The Galaxy Fund, a Massachusetts business trust (the "Trust"), is registered
under the Investment Company Act of 1940, as amended, (the "1940 Act") as an
open-end management investment company. As of October 31, 1999, the Trust
offered twenty-nine managed investment portfolios. The unaudited Pro Forma
Combining Portfolio of Investments and the unaudited Pro Forma Statement of
Assets and Liabilities assumes the exchange described in the next paragraph
occurred as of October 31, 1999 and the unaudited Pro Forma Combining Statement
of Operations assumes the exchange occurred as of November 1, 1998. These
statements have been derived from books and records utilized in calculating the
net asset value of each fund at October 31, 1999 and for the twelve-month period
then ended.
The pro forma statements give effect to the proposed transfer of substantially
all of the assets and stated liabilities of the Boston 1784 Tax-Free Money
Market Fund in exchange for Trust and BKB shares of Galaxy Tax Exempt Fund.
Under generally accepted accounting principles, the historical cost of
investment securities will be carried forward to the surviving entity and the
results of operations of the Boston 1784 Tax-Free Money Market Fund for
pre-combination periods will not be restated. The pro forma statements do not
reflect the expenses of either fund in carrying out its obligations under the
proposed Agreement and Plan of Reorganization.
The unaudited Pro Forma Combining Financial Statements should be read in
conjunction with the historical financial statements of the funds incorporated
by reference in the Statement of Additional Information.
For the twelve-month period ended October 31, 1999, the Galaxy Tax Exempt Fund's
investment advisory fee was computed based on the annual rate of 0.40% of its
average daily net assets. The administration fee was computed based on the
annual rate of 0.09% of the first $2.5 billion of the Trust's combined average
daily net assets, 0.085% of the next $2.5 billion, 0.075% of the next $7
billion, 0.065% of the next $3 billion, 0.06% of the next $3 billion, and
0.0575% of the combined average daily net assets in excess of $18 billion, and
was allocated to each fund based on the relative net assets of the Trust.
The Trust has adopted a shareholder services plan (the "Services Plan") with
respect to Retail A, BKB and Trust Shares of the funds to compensate certain
institutions providing administrative and support services to their customers
who own such shares. Currently, the Services Plan has not been implemented for
the Trust shares. Under the Services Plan, aggregate payments may not exceed
0.25% of the average daily net assets of Retail A or BKB shareholders who are
customers of such institutions. Currently, the Trust, under the direction of the
Board of Trustees, is limiting such payments to 0.10% of the average daily net
asset of Retail A or BKB shareholders who are customers of such institutions.
2. Portfolio Valuation
The Galaxy Tax Exempt Fund values its securities utilizing the amortized cost
valuation method permitted in accordance with Rule 2a-7 under the 1940 Act. This
method involves valuing a portfolio security initially at cost and thereafter
assuming a constant amortization to maturity of any discount or premium. The
Boston 1784 Tax-Free Money Market Fund utilizes the same method for determining
portfolio valuation.
<PAGE>
Galaxy Tax Exempt Fund
Boston 1784 Tax-Free Money Market Fund
Notes to Pro Forma Combining Financial Statements (unaudited)
3. Capital Shares
The pro forma net asset value per share assumes the issuance of additional
shares of the Tax Exempt Fund that would have been issued at October 31, 1999 in
connection with the proposed reorganization. The pro forma number of shares
outstanding of 1,632,667,021 consists of 916,321,280 shares assumed issued in
the reorganization plus 716,345,741 shares of the Galaxy Tax Exempt Fund at
October 31, 1999.
<PAGE>
GALAXY U.S. TREASURY FUND
BOSTON 1784 U.S. TREASURY MONEY MARKET FUND
PRO FORMA COMBINING PORTFOLIO OF INVESTMENTS (UNAUDITED)
OCTOBER 31, 1999
<TABLE>
<CAPTION>
PAR VALUE DESCRIPTION VALUE (NOTE 2)
- -----------------------------------------------------------------------------------------------------------------------------------
BOSTON 1784 BOSTON 1784
U.S. TREASURY U.S. TREASURY
GALAXY U.S. MONEY MARKET PRO FORMA GALAXY U.S. MONEY MARKET PRO FORMA
TREASURY FUND FUND COMBINED TREASURY FUND FUND COMBINED
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 84.61%
U.S. TREASURY BILLS - 32.56% (A)
$ 30,000,000 $ - $ 30,000,000 4.72%, 11/04/99 $ 29,988,212 $ - $ 29,988,212
85,000,000 - 85,000,000 4.59%, 11/12/99 84,880,741 - 84,880,741
60,000,000 - 60,000,000 4.63%, 11/18/99 59,868,958 - 59,868,958
- 4,000,000 4,000,000 4.80%, 11/26/99 - 3,986,833 3,986,833
65,000,000 - 65,000,000 4.80%, 12/02/99 64,731,226 - 64,731,226
110,000,000 - 110,000,000 4.57%, 12/09/99 109,463,302 - 109,463,302
40,000,000 - 40,000,000 4.56%, 12/16/99 39,772,000 - 39,772,000
- 5,000,000 5,000,000 4.62%, 12/23/99 - 4,967,283 4,967,283
45,000,000 - 45,000,000 4.68%, 12/23/99 44,696,125 - 44,696,125
15,000,000 - 15,000,000 4.80%, 01/27/00 14,820,200 - 14,820,200
- 5,000,000 5,000,000 4.86%, 02/03/00 - 4,938,117 4,938,117
- 5,000,000 5,000,000 5.03%, 02/17/00 - 4,926,425 4,926,425
- 2,500,000 2,500,000 4.88%, 03/02/00 - 2,458,698 2,458,698
- 2,500,000 2,500,000 4.89%, 03/09/00 - 2,456,239 2,456,239
------------------------------------------------------------
448,220,764 23,733,595 471,954,359
------------------------------------------------------------
FEDERAL HOME LOAN BANK - 22.30%
135,477,000 - 135,477,000 5.16%, 11/01/99 (A) 135,477,000 - 135,477,000
20,000,000 - 20,000,000 5.17%, 11/10/99 (A) 19,974,150 - 19,974,150
- 5,000,000 5,000,000 5.00%, 12/29/99 - 5,000,000 5,000,000
45,000,000 - 45,000,000 5.16%, 03/08/00 44,986,371 - 44,986,371
- 5,000,000 5,000,000 5.10%, 03/09/00 (A) - 4,999,724 4,999,724
- 5,000,000 5,000,000 5.74%, 04/14/00 (A) - 4,872,124 4,872,124
- 4,000,000 4,000,000 5.35%, 06/08/00 - 3,997,907 3,997,907
35,000,000 - 35,000,000 5.23%, 07/28/00 (B) 34,984,508 - 34,984,508
- 5,000,000 5,000,000 5.67%, 07/28/00 (B) - 5,000,000 5,000,000
25,000,000 - 25,000,000 5.71%, 08/09/00 24,987,865 - 24,987,865
25,000,000 - 25,000,000 5.92%, 10/04/00 (B) 24,984,123 - 24,984,123
9,000,000 - 9,000,000 5.92%, 10/13/00 8,992,150 - 8,992,150
- 5,000,000 5,000,000 5.69%, 04/16/01 (B) - 5,000,000 5,000,000
------------------------------------------------------------
294,386,167 28,869,755 323,255,922
------------------------------------------------------------
U.S. TREASURY NOTES - 20.59%
80,000,000 - 80,000,000 5.88%, 11/15/99 80,030,650 - 80,030,650
100,000,000 7,500,000 107,500,000 5.63%, 11/30/99 100,057,723 7,503,822 107,561,545
40,000,000 - 40,000,000 7.75%, 11/30/99 40,089,872 - 40,089,872
20,000,000 - 20,000,000 5.63%, 12/31/99 20,014,960 - 20,014,960
20,000,000 - 20,000,000 7.75%, 12/31/99 20,087,963 - 20,087,963
- 2,500,000 2,500,000 5.38%, 01/31/00 - 2,503,848 2,503,848
- 14,000,000 14,000,000 5.50%, 03/31/00 - 14,033,181 14,033,181
- 5,000,000 5,000,000 5.50%, 05/31/00 - 5,000,574 5,000,574
- 5,000,000 5,000,000 5.38%, 06/30/00 - 5,001,829 5,001,829
- 4,000,000 4,000,000 5.38%, 07/31/00 - 4,002,829 4,002,829
------------------------------------------------------------
260,281,168 38,046,083 298,327,251
------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 3.75% (A)
- 4,760,000 4,760,000 5.34%, 11/12/99 - 4,752,321 4,752,321
- 15,000,000 15,000,000 5.34%, 12/02/99 - 14,931,929 14,931,929
- 10,000,000 10,000,000 5.34%, 12/08/99 - 9,945,836 9,945,836
- 5,000,000 5,000,000 5.29%, 12/13/99 - 4,969,492 4,969,492
- 5,000,000 5,000,000 5.24%, 12/17/99 - 4,966,778 4,966,778
- 5,000,000 5,000,000 5.62%, 01/20/00 - 4,938,444 4,938,444
- 5,000,000 5,000,000 5.59%, 02/07/00 - 4,926,092 4,926,092
- 5,000,000 5,000,000 5.66%, 02/14/00 - 4,918,917 4,918,917
------------------------------------------------------------
- 54,349,809 54,349,809
------------------------------------------------------------
FEDERAL FARM CREDIT BANK - 2.41% (B)
30,000,000 - 30,000,000 5.24%, 09/01/00 29,992,500 - 29,992,500
- 5,000,000 5,000,000 5.65%, 05/07/01 - 4,998,600 4,998,600
------------------------------------------------------------
29,992,500 4,998,600 34,991,100
------------------------------------------------------------
<PAGE>
STUDENT LOAN MARKETING ASSOCATION - 1.51% (B)
- 4,000,000 4,000,000 5.80%, 08/03/00 MTN - 3,998,492 3,998,492
- 3,950,000 3,950,000 5.41%, 03/07/01 - 3,937,668 3,937,668
- 10,000,000 10,000,000 5.63%, 03/12/01 - 9,996,102 9,996,102
- 4,000,000 4,000,000 5.63%, 05/18/01 - 3,999,344 3,999,344
------------------------------------------------------------
- 21,931,606 21,931,606
------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION - 1.49% (A)
- 5,000,000 5,000,000 5.24%, 11/05/99 - 4,997,128 4,997,128
- 4,000,000 4,000,000 5.31%, 12/10/99 - 3,977,207 3,977,207
- 10,000,000 10,000,000 5.59%, 02/01/00 - 9,859,956 9,859,956
- 2,815,000 2,815,000 5.52%, 06/06/00 - 2,725,847 2,725,847
------------------------------------------------------------
- 21,560,138 21,560,138
------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS 1,032,880,599 193,489,586 1,226,370,185
------------------------------------------------------------
REPURCHASE AGREEMENTS - 14.66%
Repurchase Agreement with:
- 92,407,025 92,407,025 Goldman Sachs
5.18%, 11/01/99, dated 10/29/99 - 92,407,025 92,407,025
- 40,000,000 40,000,000 Greenwich
5.21%, 11/01/99, dated 10/29/99 - 40,000,000 40,000,000
- 40,000,000 40,000,000 J.P. Morgan
5.22%, 11/01/99, dated 10/29/99 - 40,000,000 40,000,000
- 40,000,000 40,000,000 Prudential
5.20%, 11/01/99, dated 10/29/99 - 40,000,000 40,000,000
------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS - 212,407,025 212,407,025
------------------------------------------------------------
TOTAL INVESTMENTS - 99.27%
(Cost $1,032,880,599, $405,896,611, and $1,438,777,210) 1,032,880,599 405,896,611 1,438,777,210
------------------------------------------------------------
NET OTHER ASSETS AND LIABILITIES - .73% 11,274,822 (730,940) 10,543,882
------------------------------------------------------------
NET ASSETS - 100.00% $ 1,044,155,421 $405,165,671 $1,449,321,092
============================================================
</TABLE>
(A) Discount yield at time of purchase.
(B) Interest is reseset at various time intervals. The interest rate shown
reflects the rate in effect at October 31, 1999.
MTN - Medium Term Note
See Notes to Pro Forma Financial Statements
<PAGE>
GALAXY U.S. TREASURY FUND
BOSTON 1784 U.S. TREASURY MONEY MARKET FUND
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
OCTOBER 31, 1999
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
BOSTON 1784
U.S. TREASURY PRO FORMA
GALAXY U.S. MONEY MARKET PRO FORMA COMBINED
TREASURY FUND FUND ADJUSTMENTS (NOTE 1)
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments
Investments at cost $ 1,032,880,599 $193,489,586 $ - $ 1,226,370,185
Repurchase agreements - 212,407,025 - 212,407,025
----------------------------------------------------------------------------
Total Investments at Value 1,032,880,599 405,896,611 - 1,438,777,210
Cash 2,457 54,214 - 56,671
Receivable for shares sold 11,004,159 - - 11,004,159
Interest and dividends receivable 7,710,134 1,122,970 - 8,833,104
----------------------------------------------------------------------------
Total Assets 1,051,597,349 407,073,795 - 19,893,934
LIABILITIES:
Dividends payable 1,606,561 1,604,827 - 3,211,388
Payable for shares repurchased 5,251,150 - - 5,251,150
Advisory fee payable 343,565 129,287 - 472,852
Payable to Fleet affiliates 53,437 - - 53,437
Administration fee payable 104,476 22,905 - 127,381
Trustees' fees and expenses payable 27,746 763 - 28,509
Accrued expenses and other payables 54,993 150,342 - 205,335
----------------------------------------------------------------------------
Total Liabilities 7,441,928 1,908,124 - 9,350,052
NET ASSETS $ 1,044,155,421 $405,165,671 $ - $ 1,449,321,092
============================================================================
NET ASSETS CONSISTS OF:
Paid-in capital $ 1,043,838,884 $405,158,651 - $ 1,448,997,535
Undistributed (overdistributed)
net investment income 316,537 (1,228) - 315,309
Accumulated net realized gain
on investments sold - 8,248 - 8,248
----------------------------------------------------------------------------
TOTAL NET ASSETS $ 1,044,155,421 $405,165,671 $ - $ 1,449,321,092
============================================================================
Net Assets by Class:
Retail A Shares $ 584,363,843 N/A $ - $ 584,363,843
============================================================================
Trust Shares / Shares 459,791,578 405,165,671 (372,752,417) 492,204,832
============================================================================
BKB Shares N/A N/A 372,752,417 372,752,417
============================================================================
Shares of beneficial interest outstanding:
Retail A Shares 584,187,785 N/A - 584,187,785
============================================================================
Trust Shares / Shares 459,651,099 405,158,651 (372,745,959) 492,063,791
============================================================================
BKB Shares N/A N/A 372,745,959 372,745,959
============================================================================
Net Asset Value, Retail A Shares $ 1.00 N/A $ 1.00
============================================================================
Net Asset Value, Trust Shares / Shares $ 1.00 $ 1.00 $ 1.00
============================================================================
Net Asset Value, BKB Shares N/A N/A $ 1.00
============================================================================
</TABLE>
<PAGE>
GALAXY U.S. TREASURY FUND
BOSTON 1784 U.S. TREASURY MONEY MARKET FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS (UNAUDITED)
OCTOBER 31, 1999
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
BOSTON 1784
U.S. TREASURY PRO FORMA
GALAXY U.S. MONEY MARKET PRO FORMA COMBINED
TREASURY FUND FUND ADJUSTMENTS (NOTE 1)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income:
Interest Income $ 49,150,173 $ 19,737,357 $ - $ 68,887,530
-----------------------------------------------------------------------------
Total Investment Income 49,150,173 19,737,357 - 68,887,530
-----------------------------------------------------------------------------
Expenses:
Investment Advisory Fees 4,011,663 1,596,359 (199,702) (a) 5,408,320
Administrative Fees 779,542 263,007 (53,606) (a) 988,943
Custodian Fee 23,118 22,434 (16,518) (b) 29,034
Fund Accounting Fee 122,360 - 18,184 (a) 140,544
Professional Fees 62,770 32,876 (32,876) (b) 62,770
Trustee Fees 23,514 10,830 (10,830) (b) 23,514
Reports to Shareholders 125,657 26,300 (26,300) (b) 125,657
Miscellaneous Expenses 95,241 65,584 - 160,825
-----------------------------------------------------------------------------
Subtotal 5,243,865 2,017,390 (321,648) 6,939,607
Transfer Agent Fee
Retail A Shares 382,324 - - 382,324
Trust Shares / Shares 24,239 388,519 (388,519) (a) 24,239
BKB Shares - - 163,966 (a) 163,966
Shareholder Services Fee
Retail A Shares 590,338 - - 590,338
Trust Shares / Shares - 399,094 (399,094) (a) -
BKB Shares - - 367,164 (a) 367,164
-----------------------------------------------------------------------------
Total Expenses Before Waivers/
Reimbursements 6,240,766 2,805,003 (578,131) 8,467,638
Less Waiver/Reimbursements
Fund Level Waivers - (210,739) 210,739 (c) -
Class Specific Waivers/Reimbursements
Retail A Shares - - - -
Trust Shares / Shares - - - -
BKB Shares - - - -
-----------------------------------------------------------------------------
Total Waivers/Reimbursements - (210,739) 210,739 -
-----------------------------------------------------------------------------
Net Expenses 6,240,766 2,594,264 (367,392) 8,467,638
-----------------------------------------------------------------------------
Net Investment Income 42,909,407 17,143,093 367,392 60,419,892
-----------------------------------------------------------------------------
Net Realized Gain on Investments 10,820 5,293 - 16,113
-----------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $ 42,920,227 $ 17,148,386 $ 367,392 $ 60,436,005
=============================================================================
</TABLE>
(a) Reflects adjustment to the acquiring fund contractual fee level.
(b) Reflects expected savings when the two funds become one.
(c) Reflects adjustment to the acquiring fund's voluntary expense
limitation.
See Notes to Pro Forma Financial Statements
<PAGE>
Galaxy U.S. Treasury Fund
Boston 1784 U.S. Treasury Money Market Fund
Notes to Pro Forma Combining Financial Statements (unaudited)
1. Basis of Combination
The Galaxy Fund, a Massachusetts business trust (the "Trust"), is registered
under the Investment Company Act of 1940, as amended, (the "1940 Act") as an
open-end management investment company. As of October 31, 1999, the Trust
offered twenty-nine managed investment portfolios. The unaudited Pro Forma
Combining Portfolio of Investments and the unaudited Pro Forma Statement of
Assets and Liabilities assumes the exchange described in the next paragraph
occurred as of October 31, 1999 and the unaudited Pro Forma Combining Statement
of Operations assumes the exchange occurred as of November 1, 1998. These
statements have been derived from books and records utilized in calculating the
net asset value of each fund at October 31, 1999 and for the twelve-month period
then ended.
The pro forma statements give effect to the proposed transfer of substantially
all of the assets and stated liabilities of the Boston 1784 U.S. Treasury Money
Market Fund in exchange for Trust and BKB shares of Galaxy U.S. Treasury Fund.
Under generally accepted accounting principles, the historical cost of
investment securities will be carried forward to the surviving entity and the
results of operations of the Boston 1784 U.S. Treasury Money Market Fund for
pre-combination periods will not be restated. The pro forma statements do not
reflect the expenses of either fund in carrying out its obligations under the
proposed Agreement and Plan of Reorganization.
The unaudited Pro Forma Combining Financial Statements should be read in
conjunction with the historical financial statements of the funds incorporated
by reference in the Statement of Additional Information.
For the twelve-month period ended October 31, 1999, the Galaxy U.S. Treasury
Fund's investment advisory fee was computed based on the annual rate of 0.40% of
the first $750 million of its average daily net assets plus 0.35% of the net
asset in excess of $750 million. The administration fee was computed based on
the annual rate of 0.09% of the first $2.5 billion of the Trust's combined
average daily net assets, 0.085% of the next $2.5 billion, 0.075% of the next $7
billion, 0.065% of the next $3 billion, 0.06% of the next $3 billion, and
0.0575% of the combined average daily net assets in excess of $18 billion, and
was allocated to each fund based on the relative net assets of the Trust.
The Trust has adopted a shareholder services plan (the "Services Plan") with
respect to Retail A, BKB and Trust Shares of the funds to compensate certain
institutions providing administrative and support services to their customers
who own such shares. Currently, the Services Plan has not been implemented for
the Trust shares. Under the Services Plan, aggregate payments may not exceed
0.25% of the average daily net assets of Retail A or BKB shareholders who are
customers of such institutions. Currently, the Trust, under the direction of the
Board of Trustees, is limiting such payments to 0.10% of the average daily net
asset of Retail A or BKB shareholders who are customers of such institutions.
2. Portfolio Valuation
The Galaxy U.S. Treasury Fund values its securities utilizing the amortized cost
valuation method permitted in accordance with Rule 2a-7 under the 1940 Act. This
method involves valuing a portfolio security initially at cost and thereafter
assuming a constant amortization to maturity of any discount or premium. The
Boston 1784 U.S. Treasury Money Market Fund utilizes the same method for
determining portfolio valuation.
<PAGE>
Galaxy U.S. Treasury Fund
Boston 1784 U.S. Treasury Money Market Fund
Notes to Pro Forma Combining Financial Statements (unaudited) (continued)
3. Capital Shares
The pro forma net asset value per share assumes the issuance of additional
shares of the Galaxy U.S. Treasury Fund that would have been issued at October
31, 1999 in connection with the proposed reorganization. The pro forma number of
shares outstanding of 1,448,997,535 consists of 405,158,651 shares assumed
issued in the reorganization plus 1,043,838,884 shares of the Galaxy U.S.
Treasury Fund at October 31, 1999.
<PAGE>
<TABLE>
<CAPTION>
GALAXY SHORT-TERM BOND FUND
BOSTON 1784 SHORT-TERM INCOME FUND
PRO FORMA COMBINING PORTFOLIO OF INVESTMENTS (UNAUDITED)
OCTOBER 31, 1999
PAR VALUE DESCRIPTION VALUE (NOTE 2)
- ------------------------------------------------------------------------------------------------------------------------------------
GALAXY BOSTON 1784 PRO FORMA GALAXY BOSTON 1784
SHORT-TERM SHORT-TERM COMBINED SHORT-TERM SHORT-TERM PRO FORMA
BOND FUND INCOME FUND BOND FUND INCOME FUND COMBINED
- ------------------------------------------------------------------------------------------------------------------------------------
CORPORATE NOTES AND BONDS - 42.34%
FINANCE - 18.36%
<S> <C> <C> <C> <C> <C> <C>
$ - $ 5,000,000 $ 5,000,000 Aristar, Inc.
6.00%, 05/15/02 $ - $ 4,888,115 $ 4,888,115
- 5,000,000 5,000,000 BankAmerica Capital III (C)
6.75%, 01/15/27 - 4,660,710 4,660,710
2,000,000 - 2,000,000 Caterpillar Financial Services Corp., MTN
5.47%, 09/12/01 1,960,000 1,960,000
- 4,000,000 4,000,000 CIT Group, Inc., MTN
6.50%, 06/14/02 - 3,965,000 3,965,000
- 780,000 780,000 Equitable Cos, Inc.
6.75%, 12/01/00 - 785,109 785,109
- 5,000,000 5,000,000 Finova Capital Corp.
6.50%, 07/28/02 - 4,931,250 4,931,250
1,600,000 1,600,000 General Electric Capital Corp.
Series A, MTN
6.33%, 09/17/01 1,598,000 - 1,598,000
770,000 - 770,000 General Electric Capital Corp., MTN
6.81%, 11/03/03 772,926 - 772,926
- 5,000,000 5,000,000 Heller Financial, Inc.
6.46%, 10/27/00 - 5,025,800 5,025,800
- 2,500,000 2,500,000 Nationsbank Capital Trust III (C)
6.73%, 01/15/27 - 2,450,025 2,450,025
- 5,000,000 5,000,000 Salomon Smith Barney Holdings
7.50%, 05/01/02 - 5,068,750 5,068,750
1,500,000 - 1,500,000 Wells Fargo Company, (C)
5.71%, 10/31/01 1,500,015 - 1,500,015
------------------------------------------
5,830,941 31,774,759 37,605,700
------------------------------------------
AUTOMOBILE FINANCE - 11.32%
1,000,000 - 1,000,000 Associates Corp. of North America
Senior Note
5.50%, 02/15/02 975,000 - 975,000
- 5,000,000 5,000,000 Associates Corp. of North America
Senior Note
5.75%, 11/01/03 - 4,781,250 4,781,250
1,250,000 - 1,250,000 Ford Motor Credit Co.
6.85%, 08/15/00 1,256,051 - 1,256,051
250,000 - 250,000 Ford Motor Credit Co.
6.25%, 11/08/00 249,778 - 249,778
1,200,000 - 1,200,000 Ford Motor Credit Co.
5.75%, 01/25/01 1,191,000 - 1,191,000
500,000 - 500,000 Ford Motor Credit Co.
7.00%, 09/25/01 503,750 - 503,750
- 5,000,000 5,000,000 Ford Motor Credit Co.
6.00%, 01/14/03 - 4,875,000 4,875,000
500,000 - 500,000 General Motors Acceptance Corp.
5.63%, 02/15/01 495,000 - 495,000
- 2,000,000 2,000,000 General Motors Acceptance Corp.
7.88%, 03/07/01 - 2,032,500 2,032,500
2,000,000 - 2,000,000 General Motors Acceptance Corp.
7.13%, 05/01/01 2,017,500 - 2,017,500
- 5,000,000 5,000,000 General Motors Acceptance Corp., MTN
5.48%, 12/16/02 - 4,812,500 4,812,500
------------------------------------------
6,688,079 16,501,250 23,189,329
------------------------------------------
INDUSTRIAL - 5.47%
- 5,000,000 5,000,000 McKesson Corp.
6.60%, 03/01/00 - 5,006,250 5,006,250
1,000,000 - 1,000,000 Pepsi Bottling Holdings, Inc.
5.38%, 02/17/04 (A) 942,500 - 942,500
- 5,000,000 5,000,000 Praxair, Inc.
6.70%, 04/15/01 - 4,968,750 4,968,750
<PAGE>
300,000 - 300,000 Xerox Corp.
5.50%, 11/15/03 285,750 - 285,750
------------------------------------------
1,228,250 9,975,000 11,203,250
------------------------------------------
CONSUMER CYCLICALS - 4.86%
- 5,000,000 5,000,000 Campbell Soup Co.
6.15%, 12/01/02 - 4,975,000 4,975,000
- 5,000,000 5,000,000 Wal-Mart Stores, Inc.
6.15%, 08/10/01 - 4,975,000 4,975,000
------------------------------------------
- 9,950,000 9,950,000
------------------------------------------
TECHNOLOGY - 0.97%
2,000,000 - 2,000,000 International Business
Machines Corp., MTN
5.80%, 05/15/01 1,985,000 - 1,985,000
------------------------------------------
TRANSPORTATION - 0.89%
1,820,000 - 1,820,000 Norfolk Southern Corp.
6.70%, 05/01/00 1,826,825 - 1,826,825
------------------------------------------
UTILITIES - 0.47%
1,000,000 - 1,000,000 Sprint Capital Corp.
5.88%, 05/01/04 961,250 - 961,250
------------------------------------------
TOTAL CORPORATE NOTES AND BONDS 18,520,345 68,201,009 86,721,354
------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 24.46%
U.S. TREASURY NOTES - 11.82%
- 4,000,000 4,000,000 7.75%, 11/30/99 - 4,009,280 4,009,280
- 1,200,000 1,200,000 7.13%, 02/29/00 - 1,207,428 1,207,428
- 6,000,000 6,000,000 6.38%, 09/30/01 - 6,057,960 6,057,960
2,125,000 - 2,125,000 6.25%, 10/31/01 2,142,786 - 2,142,786
- 2,000,000 2,000,000 6.25%, 01/31/02 - 2,015,960 2,015,960
- 2,000,000 2,000,000 6.63%, 03/31/02 - 2,032,920 2,032,920
1,000,000 - 1,000,000 5.88%, 09/30/02 1,000,070 - 1,000,070
- 2,000,000 2,000,000 5.50%, 03/31/03 - 1,972,440 1,972,440
500,000 - 500,000 4.25%, 11/15/03 469,700 - 469,700
1,200,000 - 1,200,000 6.00%, 08/15/04 1,203,324 - 1,203,324
- 2,000,000 2,000,000 7.25%, 08/15/04 - 2,098,640 2,098,640
------------------------------------------
4,815,880 19,394,628 24,210,508
------------------------------------------
FEDERAL HOME LOAN BANK - 4.09%
1,000,000 - 1,000,000 5.63%, 03/19/01 994,100 - 994,100
2,000,000 - 2,000,000 6.23%, 09/19/01 1,999,680 - 1,999,680
- 5,500,000 5,500,000 5.25%, 04/25/02 - 5,375,205 5,375,205
------------------------------------------
2,993,780 5,375,205 8,368,985
------------------------------------------
FEDERAL HOME LOAN
MORTGAGE CORPORATION - 3.88%
1,059,133 - 1,059,133 5.50%, 08/01/00, Pool # M80285 1,053,933 - 1,053,933
- 5,000,000 5,000,000 5.00%, 02/15/01 - 4,937,150 4,937,150
- 120,579 120,579 8.00%, 01/01/02, Pool # 200064 - 122,575 122,575
1,000,000 - 1,000,000 6.25%, 07/15/04 992,500 - 992,500
103,018 - 103,018 7.00%, 05/01/19, Pool # D29158 103,572 - 103,572
745,138 - 745,138 6.50%, 11/15/23, Pool # 002008 738,149 - 738,149
------------------------------------------
2,888,154 5,059,725 7,947,879
------------------------------------------
FEDERAL NATIONAL
MORTGAGE ASSOCIATION - 1.96%
- 2,000,000 2,000,000 5.75%, 04/15/03 - 1,964,420 1,964,420
- 371,961 371,961 8.95%, 05/25/03 - 380,356 380,356
797,869 - 797,869 6.50%, 03/01/12, Pool # 313409 784,066 - 784,066
920,101 - 920,101 6.00%, 01/01/14, Pool # 482523 885,597 - 885,597
------------------------------------------
1,669,663 2,344,776 4,014,439
------------------------------------------
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION - 1.74%
1,421,991 - 1,421,991 6.50%, 09/15/13, Pool # 476201 1,396,652 - 1,396,652
893,628 - 893,628 7.00%, 11/15/13, Pool # 780921 896,693 - 896,693
234,235 - 234,235 7.00%, 04/15/29, Pool # 458548 229,768 - 229,768
982,495 - 982,495 7.00%, 04/15/29, Pool # 458549 963,759 - 963,759
<PAGE>
83,701 - 83,701 7.00%, 05/15/29, Pool # 483358 82,102 - 82,102
------------------------------------------
3,568,974 - 3,568,974
------------------------------------------
FEDERAL FARM CREDIT BANK - 0.97%
2,000,000 - 2,000,000 6.10%, 09/24/01, MTN 1,995,320 - 1,995,320
------------------------------------------
TOTAL U.S. GOVERNMENT
AND AGENCY OBLIGATIONS
17,931,771 32,174,334 50,106,105
------------------------------------------
ASSET- BACKED AND MORTGAGED-BACKED SECURITIES - 20.69%
- 5,000,000 5,000,000 Auto Leasing Investors
Series 1997, Class A-2
5.93%, 08/14/00 - 4,992,150 4,992,150
- 5,500,000 5,500,000 BankAmerica Manufactured Housing Contract Trust
Series 1997-2, Class A5
6.39%, 12/10/12 - 5,466,560 5,466,560
- 552,035 552,035 Centrex Auto Trust
Series 1996-A
6.75%, 10/15/04 - 556,241 556,241
4,000,000 4,000,000 Chemical Master Credit Card Trust I
Series 1995-2, Class A
6.23%, 06/15/03 3,997,480 - 3,997,480
- 181,791 181,791 CIT RV Owners Trust
Series 1995A, Class A
6.25%, 01/15/11 - 181,829 181,829
- 5,000,000 5,000,000 Citibank Credit Card Master Trust I
Series 1999-1, Class A
5.50%, 02/15/06 - 4,770,000 4,770,000
- 2,000,000 2,000,000 Crown Home Equity Loan Trust
Series 1996-1, Class A3
6.81%, 06/25/11 - 1,947,200 1,947,200
1,500,000 - 1,500,000 Discover Card Master Trust I
Series 1999-1, Class A
5.30%, 08/15/04 1,455,930 - 1,455,930
- 592,840 592,840 Federal Deposit Insurance Corp.
REMIC, Series 1996-C1, Class 1A, CMO
6.75%, 05/25/26 - 587,789 587,789
- 504,858 504,858 Fleetwood Credit Grantor Trust
Series 1995-B, Class A
6.55%, 05/16/11 - 502,798 502,798
975,000 - 975,000 Ford Credit Auto Owner Trust
Series 1999-D, Class A3
6.20%, 04/15/02 973,781 - 973,781
- 203,852 203,852 Green Tree Recreational, Equipment
& Consumer Trust
Series 1996-A, Class A1
5.55%, 02/15/18 - 202,674 202,674
1,000,000 - 1,000,000 MBNA Master Credit Card Trust II
Series1995-F, Class A
6.60%, 01/15/03 1,002,500 - 1,002,500
1,433,003 - 1,433,003 Norwest Asset Securities Corp.
Series 1997-17, Class A1, CMO
6.75%, 11/25/27 1,431,212 1,431,212
- 5,000,000 5,000,000 PNC Student Loan Trust I
Series 1997-2, Class A5
6.53%, 01/25/03 - 4,940,250 4,940,250
- 56,646 56,646 Prudential Home Mortgage Securities
Series 1993-31, Class A7, CMO
6.00%, 08/25/00 - 56,422 56,422
1,096,874 - 1,096,874 Prudential Home Mortgage Securities
Series 1996-7, Class A-1, CMO
6.75%, 06/25/11 1,094,132 - 1,094,132
763,262 - 763,262 Prudential Home Mortgage Securities
Series 1993-38, Class A3, CMO
6.15%, 09/25/23 750,615 - 750,615
- 153,430 153,430 Reliance Auto Receivables Corp.
Series 1996-A, Class A
6.10%, 07/15/02 - 153,440 153,440
1,031,250 - 1,031,250 Ryland Mortgage Securities Corp.
Series 1993-3, Class A, CMO
6.71%, 08/25/08 1,028,672 - 1,028,672
250,000 - 250,000 Sears Credit Account Master Trust
Series 1996-2, Class A
6.50%, 10/15/03 250,000 - 250,000
<PAGE>
- 1,000,000 1,000,000 Sears Credit Account Master Trust
Series 1996-4, Class A
6.45%, 10/16/06 - 997,810 997,810
- 36,429 36,429 University Support Services, Inc. (C)
Series 1993-A, Class B
8.87%, 08/20/08 - 36,793 36,793
- 5,000,000 5,000,000 WFS Financial Owner Trust
Series 1997-C, Class A4
6.15%, 09/20/02 5,003,800 5,003,800
TOTAL ASSET-BACKED AND
------------------------------------------
MORTGAGE-BACKED SECURITIES 11,984,322 30,395,756 42,380,078
------------------------------------------
MUNICIPAL BONDS - 3.76%
- 4,000,000 4,000,000 Carondelet Health System
Daniel Freeman Hospitals
6.25%, 07/01/001
Insured: MBIA - 3,985,000 3,985,000
- 2,500,000 2,500,000 New York State Dormitory Authority
Pension Obligation
6.55%, 04/01/00 - 2,498,400 2,498,400
- 1,235,000 1,235,000 Pennsylvania State Housing Financing Agency
Single Family Mortgage, Series 52-C
7.00%, 10/01/06
Insured: FHA - 1,228,825 1,228,825
------------------------------------------
TOTAL MUNICIPAL BONDS - 7,712,225 7,712,225
------------------------------------------
COMMERCIAL PAPER (B) - 0.49%
1,000,000 - 1,000,000 BMW US Capital Corp.
5.29%, 11/26/99 996,333 - 996,333
------------------------------------------
TOTAL COMMERCIAL PAPER 996,333 - 996,333
------------------------------------------
REPURCHASE AGREEMENT - 7.51%
Repurchase Agreement with:
6,805,000 - 6,805,000 Chase Manhattan Bank
5.20%, 11/01/99, dated 10/29/99 6,805,000 - 6,805,000
8,578,845 8,578,845 Lehman Brothers
5.18%, 11/01/99, dated 10/29/99 - 8,578,845 8,578,845
------------------------------------------
TOTAL REPURCHASE AGREEMENT 6,805,000 8,578,845 15,383,845
------------------------------------------
TOTAL INVESTMENTS - 99.25%
(Cost $56,802,042, $148,776,981, and $205,579,023)
56,237,771 147,062,169 203,299,940
==========================================
NET OTHER ASSETS AND
LIABILITIES - 0.75% 665,307 874,145 1,539,452
==========================================
NET ASSETS - 100.00% $ 56,903,078 $147,936,314 $204,839,392
==========================================
</TABLE>
(A) -- Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may not beresold, in transactions exempt from
registration, to qualified institutional buyers. At October 31, 1999, these
securities amounted to $942,500 or 0.46% of net assets.
(B) -- Discount yield at time of purchase.
(C) -- Floating rate note. Interest Rate Shown reflects rate in effect at
October 31, 1999.
CMO -- Collateralized Mortgage Obligation
FHA -- Federal Housing Authority
MBIA -- Municipal Bond Insurance Association
MTN -- Medium Term Note
REMIC -- Real Estate Mortgage Investment Conduit
See Notes to Pro Forma Financial Statements
<PAGE>
<TABLE>
<CAPTION>
GALAXY SHORT-TERM BOND FUND
BOSTON 1784 SHORT-TERM INCOME FUND
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES (unaudited)
OCTOBER 31, 1999
GALAXY BOSTON 1784 PRO FORMA
SHORT-TERM SHORT-TERM PRO FORMA COMBINED
BOND FUND INCOME FUND ADJUSTMENTS (NOTE 1)
-------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments
Investments at cost $ 49,997,042 $ 140,198,136 $ - $ 190,195,178
Repurchase agreements 6,805,000 8,578,845 - 15,383,845
Net unrealized (depreciation) (564,271) (1,714,812) - (2,279,083)
-------------------------------------------------------------
Total Investments at Value 56,237,771 147,062,169 - 203,299,940
Receivable for investments sold 1,100,890 - - 1,100,890
Receivable for shares sold 190,590 - - 190,590
Interest and dividends receivable 582,081 1,699,776 - 2,281,857
-------------------------------------------------------------
Total Assets 58,111,332 148,761,945 - 206,873,277
LIABILITIES:
Dividends payable 245,054 685,056 - 930,110
Payable for investments purchased 869,810 - - 869,810
Payable for shares redeemed 16,730 - - 16,730
Advisory fee payable 26,462 63,224 - 89,686
Payable to Fleet affiliates 8,388 - - 8,388
Administration fee payable 15,764 8,237 - 24,001
Trustees' fees and expenses payable 2,943 300 - 3,243
Payable to Custodian 5,597 34,111 - 39,708
Accrued expenses and other payables 17,506 34,703 - 52,209
-------------------------------------------------------------
Total Liabilities 1,208,254 825,631 - 2,033,885
NET ASSETS $ 56,903,078 $ 147,936,314 $ - $ 204,839,392
==============================================================
NET ASSETS CONSISTS OF:
Paid-in capital $ 63,130,207 $ 161,614,261 $ - $ 224,744,468
Undistributed (overdistributed) net investment income 201,761 (966) - 200,795
Accumulated net realized (loss) on investments sold (5,864,619) (11,962,169) - (17,826,788)
Net unrealized (depreciation) of investments (564,271) (1,714,812) - (2,279,083)
-------------------------------------------------------------
TOTAL NET ASSETS $ 56,903,078 $ 147,936,314 $ - $ 204,839,392
=============================================================
Net Assets by Class:
Retail A Shares $ 24,652,827 N/A N/A $ 24,652,827
===================================================================
Retail B Shares 812,314 N/A N/A 812,314
===================================================================
Trust Shares / Shares 31,437,937 147,936,314 (26,184,728) 153,189,523
===================================================================
BKB Shares N/A N/A 26,184,728 26,184,728
===================================================================
Shares of beneficial interest outstanding:
Retail A Shares 2,499,555 N/A - 2,499,555
===================================================================
Retail B Shares 82,355 N/A - 82,355
===================================================================
Trust Shares / Shares 3,187,772 14,884,495 (2,536,464) 15,535,803
===================================================================
BKB Shares N/A N/A 2,655,652 2,655,652
===================================================================
Net Asset Value, Retail A Shares $ 9.86 N/A $ 9.86
===================================================================
Net Asset Value, Retail B Shares $ 9.86 N/A $ 9.86
===================================================================
Net Asset Value, Trust Shares / Shares $ 9.86 $ 9.94 $ 9.86
===================================================================
Net Asset Value, BKB Shares N/A N/A $ 9.86
===================================================================
</TABLE>
See Notes to Pro Forma Financial Statements
<PAGE>
<TABLE>
<CAPTION>
GALAXY SHORT-TERM BOND FUND
BOSTON 1784 SHORT-TERM INCOME FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS (unaudited)
OCTOBER 31, 1999
GALAXY BOSTON 1784 PRO FORMA
SHORT-TERM SHORT-TERM PRO FORMA COMBINED
BOND FUND INCOME FUND ADJUSTMENTS (NOTE 1)
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income:
Interest Income $ 3,628,243 $ 10,020,625 $ - $ 13,648,868
-------------------------------------------------------------
Total Investment Income 3,628,243 10,020,625 - 13,648,868
-------------------------------------------------------------
Expenses:
Investment Advisory Fees 457,152 847,756 423,613 (a) 1,728,521
Administrative Fees 45,886 111,813 790 (a) 158,489
Custodian Fee 21,969 8,868 (4,000)(b) 26,837
Fund Accounting Fee 45,674 1,672 18,450 (a) 65,796
Professional Fees 16,519 13,615 (9,423)(b) 20,711
Trustee Fees 1,832 4,859 - 6,691
Reports to Shareholders 9,774 10,286 - 20,060
Miscellaneous Expenses 34,248 5,897 - 40,145
-------------------------------------------------------------
Subtotal 633,054 1,004,766 429,430 2,067,250
Transfer Agent Fee
Retail A Shares 29,872 - - 29,872
Retail B Shares 2,168 - - 2,168
Trust Shares / Shares 5,640 70,201 45,229 (a) 121,070
BKB Shares - - 19,241 (a) 19,241
Shareholder Services Fee & 12B-1 Fee
Retail A Shares 37,626 - - 37,626
Retail B Shares 6,900 - - 6,900
Trust Shares / Shares - 423,872 (423,872)(a) -
BKB Shares - - 45,015 (a) 45,015
-------------------------------------------------------------
Total Expenses before reimbursement/waiver 715,260 1,498,839 115,043 2,329,142
Less Waiver/Reimbursements
Fund Level Waivers (121,931) - (339,008)(c) (460,939)
Class Specific Waivers/Reimbursements
Retail A Shares - - - -
Retail B Shares (786) - - (786)
Trust Shares / Shares - (423,872) 423,872 (c) -
BKB Shares - - (45,015)(c) (45,015)
-------------------------------------------------------------
Total Waivers/Reimbursements (122,717) (423,872) 39,849 (506,740)
Net Expenses 592,543 1,074,967 154,892 1,822,402
-------------------------------------------------------------
Net Investment Income 3,035,700 8,945,658 (154,892) 11,826,466
-------------------------------------------------------------
Net Realized Gain on Investments 51,351 89,126 - 140,477
Net Change in Unrealized (Depreciation) on Investments (1,554,809) (4,612,795) - (6,167,604)
-------------------------------------------------------------
Net Realized and Unrealized (Loss) on Investments (1,503,458) (4,523,669) - (6,027,127)
-------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $ 1,532,242 $ 4,421,989 $ (154,892) $ 5,799,339
=============================================================
</TABLE>
(a) Reflects adjustment to the acquiring fund contractual fee level.
(b) Reflects expected savings when the two funds become one.
(c) Reflects adjustment to the acquiring fund's voluntary expense limitation.
See Notes to Pro Forma Financial Statements
<PAGE>
Galaxy Short-Term Bond Fund
Boston 1784 Short-Term Income Fund
Notes to Pro Forma Combining Financial Statements (unaudited)
1. Basis of Combination
The Galaxy Fund, a Massachusetts business trust (the "Trust"), is registered
under the Investment Company Act of 1940, as amended, (the "1940 Act") as an
open-end management investment company. As of October 31, 1999, the Trust
offered twenty-nine managed investment portfolios. The unaudited Pro Forma
Combining Portfolio of Investments and the unaudited Pro Forma Statement of
Assets and Liabilities assumes the exchange described in the next paragraph
occurred as of October 31, 1999 and the unaudited Pro Forma Combining Statement
of Operations assumes the exchange occurred as of November 1, 1998. These
statements have been derived from books and records utilized in calculating the
net asset value of each fund at October 31, 1999 and for the twelve-month period
then ended.
The pro forma statements give effect to the proposed transfer of substantially
all of the assets and stated liabilities of the Boston 1784 Short-Term Income
Fund in exchange for Trust and BKB shares of Galaxy Short-Term Bond Fund. Under
generally accepted accounting principles, the historical cost of investment
securities will be carried forward to the surviving entity and the results of
operations of the Boston 1784 Short-Term Income Fund for pre-combination periods
will not be restated. The pro forma statements do not reflect the expenses of
either fund in carrying out its obligations under the proposed Agreement and
Plan of Reorganization.
The unaudited Pro Forma Combining Financial Statements should be read in
conjunction with the historical financial statements of the funds incorporated
by reference in the Statement of Additional Information.
For the twelve-month period ended October 31, 1999, the Galaxy Short-Term Bond
Fund's investment advisory fee was computed based on the annual rate of 0.75% of
its average daily net assets. The administration fee was computed based on the
annual rate of 0.09% of the first $2.5 billion of the Trust's combined average
daily net assets, 0.085% of the next $2.5 billion, 0.075% of the next $7
billion, 0.065% of the next $3 billion, 0.06% of the next $3 billion, and
0.0575% of the combined average daily net assets in excess of $18 billion, and
was allocated to each fund based on the relative net assets of the Trust.
The Trust has adopted a shareholder services plan (the "Services Plan") with
respect to Retail A, BKB and Trust Shares of the funds to compensate certain
institutions providing administrative and support services to their customers
who own such shares. Currently, the Services Plan has not been implemented for
the Trust shares. Under the Services Plan, aggregate payments may not exceed
0.30% of the average daily net assets of Retail A or BKB shareholders who are
customers of such institutions. Currently, the Trust, under the direction of the
Board of Trustees, is limiting such payments to 0.15% of the average daily net
asset of Retail A or BKB shareholders who are customers of such institutions.
The Trust has adopted a distribution and services plan (the "12b-1 Plan") with
respect to Retail B shares of the fund. Payments to the Distributor or others
for distribution services (those primarily intended to result in the sale of
Retail B shares) may not exceed 0.65% of the average daily net assets of Retail
B shares. Payments to institutions providing services to their customers owning
Retail B shares for shareholder liaison and administrative support services may
not exceed 0.15% and 0.15%, respectively, of the average daily net assets
attributable to shareholders who are customers of such institutions. The Trust
is currently limiting payments for shareholder liaison and administrative
support to 0.15% of the average daily net assets attributable to shareholders
that are customers of such institutions.
<PAGE>
Galaxy Short-Term Bond Fund
Boston 1784 Short-Term Income Fund
Notes to Pro Forma Combining Financial Statements (unaudited) (continued)
2. Portfolio Valuation
The Galaxy Short-Term Bond Fund's investment securities are valued by an
independent pricing service approved by the Trust's Board of Trustees. When, in
the judgement of the service, quoted bid prices are readily available and are
representative of the bid side of the market, investments are valued at the mean
between quoted bid and asked prices. Other investments are carried at fair value
as determined by the service based on methods which include consideration of
yields or prices of bonds of comparable quality, coupon maturity and type;
indications as to values from dealers and general market conditions. Short-term
obligations that mature in 60 days or less are valued at amortized cost, which
approximated fair value. All other securities and other assets are appraised at
their fair value as determined in good faith under consistently applied
procedures established by and under the general supervision of the Board of
Trustees. Boston 1784 Short-Term Income Fund uses similar rules for determining
portfolio valuation.
3. Capital Shares
The pro forma net asset value per share assumes the issuance of additional
shares of the Galaxy Short-Term Bond Fund that would have been issued at October
31, 1999 in connection with the proposed reorganization. The pro forma number of
shares outstanding of 20,773,365 consists of 15,003,683 shares assumed issued in
the reorganization plus 5,769,682 shares of the Galaxy Short-Term Bond Fund at
October 31, 1999.
<PAGE>
GALAXY HIGH QUALITY BOND FUND
BOSTON 1784 INCOME FUND
PRO FORMA COMBINING PORTFOLIO OF INVESTMENTS (UNAUDITED)
OCTOBER 31, 1999
<TABLE>
<CAPTION>
PAR VALUE DESCRIPTION VALUE (NOTE 2)
- ------------------------------------------------------------------------------------------------------------------------------------
GALAXY GALAXY HIGH
HIGH QUALITY BOSTON 1784 PRO FORMA QUALITY BOSTON 1784 PRO FORMA
BOND FUND INCOME FUND COMBINED BOND FUND INCOME FUND COMBINED
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 34.95%
U.S. TREASURY BONDS - 18.56%
$ 4,450,000 $ - $ 4,450,000 12.00%, 08/15/13 $ 6,100,683 $ - $ 6,100,683
4,000,000 - 4,000,000 13.25%, 05/15/14 5,929,720 - 5,929,720
700,000 - 700,000 7.50%, 11/15/16 772,212 - 772,212
6,760,000 - 6,760,000 8.88%, 08/15/17 8,428,841 - 8,428,841
3,550,000 - 3,550,000 9.00%, 11/15/18 4,506,619 - 4,506,619
- 5,000,000 5,000,000 8.13%, 08/15/19 - 5,731,250 5,731,250
5,500,000 - 5,500,000 8.75%, 05/15/20 6,884,460 - 6,884,460
6,000,000 4,260,000 10,260,000 7.88%, 02/15/21 6,935,460 4,921,493 11,856,953
200,000 - 200,000 8.13%, 05/15/21 237,120 - 237,120
3,500,000 - 3,500,000 8.13%, 08/15/21 4,152,680 - 4,152,680
- 8,750,000 8,750,000 8.00%, 11/15/21 - 10,270,138 10,270,138
- 700,000 700,000 6.00%, 02/15/26 - 663,229 663,229
5,975,000 - 5,975,000 6.38%, 08/15/27 5,947,276 - 5,947,276
7,340,000 - 7,340,000 6.13%, 11/15/27 7,087,504 - 7,087,504
4,250,000 - 4,250,000 5.50%, 08/15/28 3,774,723 - 3,774,723
4,440,000 20,785,000 25,225,000 5.25%, 11/15/28 3,816,802 17,854,523 21,671,325
6,895,000 4,050,000 10,945,000 5.25%, 02/15/29 5,973,000 3,505,883 9,478,883
1,750,000 - 1,750,000 6.13%, 08/15/29 1,743,857 - 1,743,857
-----------------------------------------
72,290,957 42,946,516 115,237,473
-----------------------------------------
U.S. TREASURY NOTES - 5.21%
- 1,510,000 1,510,000 5.63%, 11/30/99 - 1,511,148 1,511,148
5,000,000 - 5,000,000 6.63%, 06/30/01 5,064,750 - 5,064,750
675,000 8,605,000 9,280,000 6.25%, 10/31/01 680,650 8,673,754 9,354,404
2,000,000 - 2,000,000 7.50%, 11/15/01 2,063,620 - 2,063,620
2,100,000 - 2,100,000 6.25%, 02/28/02 2,118,732 - 2,118,732
- 1,000,000 1,000,000 5.50%, 02/28/03 - 986,790 986,790
- 80,000 80,000 5.50%, 05/31/03 - 78,774 78,774
- 1,030,000 1,030,000 5.75%, 08/15/03 - 1,021,616 1,021,616
1,530,000 - 1,530,000 6.00%, 08/15/04 1,534,238 - 1,534,238
- 2,215,000 2,215,000 7.00%, 07/15/06 - 2,311,773 2,311,773
600,000 - 600,000 5.63%, 05/15/08 578,910 - 578,910
755,000 3,000,000 3,755,000 6.00%, 08/15/09 754,358 2,995,560 3,749,918
- 2,000,000 2,000,000 6.13%, 08/15/29 - 1,991,720 1,991,720
-----------------------------------------
12,795,258 19,571,135 32,366,393
-----------------------------------------
FEDERAL NATIONAL
MORTGAGE ASSOCIATION - 4.50%
- 4,000,000 4,000,000 0.00%, 08/15/01 - 3,597,956 3,597,956
- 475,000 475,000 5.75%, 04/15/03 - 466,550 466,550
3,000,000 - 3,000,000 8.50%, 02/01/05 3,017,430 - 3,017,430
- 10,000,000 10,000,000 5.75%, 06/15/05 - 9,664,200 9,664,200
3,199,000 - 3,199,000 6.38%, 06/15/09 3,123,600 - 3,123,600
2,050,000 - 2,050,000 6.16%, 08/07/28 1,854,041 - 1,854,041
- 5,700,000 5,700,000 6.25%, 05/15/29 - 5,244,000 5,244,000
- 1,000,000 1,000,000 6.38%, 06/15/29 - 976,430 976,430
-----------------------------------------
7,995,071 19,949,136 27,944,207
-----------------------------------------
U.S. GOVERNMENT-BACKED BONDS - 2.05%
2,000,000 - 2,000,000 Private Export Funding Corp., Series H
6.45%, 09/30/04 1,987,500 - 1,987,500
4,000,000 - 4,000,000 Private Export Funding Corp., Series B
6.49%, 07/15/07 3,935,000 - 3,935,000
1,800,000 - 1,800,000 A.I.D. State of Israel
Series 7-A
5.45%, 02/15/01 1,784,484 - 1,784,484
5,000,000 - 5,000,000 A.I.D. Israel
Series 8-C
6.63%, 08/15/03 5,038,300 - 5,038,300
-----------------------------------------
12,745,284 - 12,745,284
-----------------------------------------
<PAGE>
FEDERAL HOME LOAN
MORTGAGE CORPORATION - 1.86%
1,000,000 - 1,000,000 6.25%, 07/15/04 992,500 - 992,500
- 5,000,000 5,000,000 8.53%, 02/02/05 - 5,029,150 5,029,150
- 3,500,000 3,500,000 5.75%, 03/15/09 - 3,263,750 3,263,750
2,280,000 - 2,280,000 6.63%, 09/15/09 2,268,600 - 2,268,600
-----------------------------------------
3,261,100 8,292,900 11,554,000
-----------------------------------------
FEDERAL HOME LOAN BANK - 1.70%
- 4,000,000 4,000,000 5.25%, 04/25/02 - 3,909,240 3,909,240
- 1,070,000 1,070,000 5.13%, 09/15/03 - 1,024,471 1,024,471
- 6,000,000 6,000,000 5.80%, 09/02/08 - 5,647,380 5,647,380
-----------------------------------------
- 10,581,091 10,581,091
-----------------------------------------
U.S. TREASURY STRIP - 1.07%
9,000,000 - 9,000,000 4.86%, 05/15/08 Interest only, (A) (B) 5,247,180 - 5,247,180
- 5,000,000 5,000,000 0.00%, 02/15/19 (H) - 1,423,650 1,423,650
-----------------------------------------
5,247,180 1,423,650 6,670,830
-----------------------------------------
TOTAL U.S. GOVERNMENT
AND AGENCY OBLIGATIONS 114,334,850 102,764,428 217,099,278
-----------------------------------------
CORPORATE NOTES AND BONDS - 30.77%
CONSUMER CYCLICALS - 9.86%
1,650,000 - 1,650,000 Coca-Cola Enterprises, Inc.
7.13%, 08/01/17 1,592,250 - 1,592,250
1,900,000 - 1,900,000 Colgate-Palmolive Co., Series C, MTN
5.27%, 12/01/03 1,801,086 - 1,801,086
- 5,000,000 5,000,000 DaimlerChrysler
7.20%, 09/01/09 - 5,012,500 5,012,500
- 6,395,000 6,395,000 Ford Motor Corp.
7.38%, 10/28/09 - 6,458,950 6,458,950
- 4,000,000 4,000,000 Fort James Corp.
6.88%, 09/15/07 - 3,850,000 3,850,000
- 3,600,000 3,600,000 Fortune Brands, Inc.
6.25%, 04/01/08 - 3,433,500 3,433,500
5,050,000 - 5,050,000 Hershey Foods Corp.
7.20%, 08/15/27 4,949,000 - 4,949,000
1,650,000 - 1,650,000 McDonald's Corp., MTN
5.95%, 01/15/08 1,561,313 - 1,561,313
- 700,000 700,000 McKesson Corp.
6.30%, 03/01/05 - 644,875 644,875
2,000,000 - 2,000,000 Minnesota Mining & Manufacturing Co.
Debenture
6.38%, 02/15/28 1,772,500 - 1,772,500
- 2,195,000 2,195,000 News America, Inc.
7.25%, 05/18/18 - 2,000,194 2,000,194
- 3,500,000 3,500,000 Outdoor Systems
8.88%, 06/15/07 - 3,570,000 3,570,000
1,800,000 - 1,800,000 Pepsi Bottling Holdings, Inc.
5.38%, 02/17/04 (D) 1,696,500 - 1,696,500
250,000 - 250,000 Procter & Gamble Co.
8.50%, 08/10/09 279,063 - 279,063
3,000,000 - 3,000,000 Sara Lee Corp., MTN
7.40%, 03/22/02 3,048,750 - 3,048,750
- 3,300,000 3,300,000 Staples, Inc.
7.13%, 08/15/07 - 3,238,125 3,238,125
3,000,000 - 3,000,000 Sysco Corp.
7.00%, 05/01/06 3,007,500 - 3,007,500
3,675,000 - 3,675,000 Sysco Corp.
6.50%, 08/01/28 3,289,125 - 3,289,125
- 4,965,000 4,965,000 Time Warner Entertainment Co.
10.15%, 05/01/12 - 5,982,825 5,982,825
1,450,000 - 1,450,000 Time Warner Entertainment Co.
8.38%, 03/15/23 1,547,875 - 1,547,875
2,500,000 - 2,500,000 Wal-Mart Stores, Inc.
6.88%, 08/10/09 2,512,500 - 2,512,500
-----------------------------------------
27,057,462 34,190,969 61,248,431
-----------------------------------------
FINANCE - 8.26%
- 805,000 805,000 Aristar, Inc.
7.25%, 06/15/06 - 788,900 788,900
2,000,000 - 2,000,000 Associates Corp. of North America
6.63%, 05/15/01 2,002,500 - 2,002,500
2,000,000 - 2,000,000 Associates Corp. of North America, MTN
7.40%, 05/03/02 2,027,500 - 2,027,500
<PAGE>
4,000,000 - 4,000,000 Bank One Milwaukee
National Association, MTN
6.35%, 03/19/01 4,000,000 - 4,000,000
1,500,000 - 1,500,000 Caterpillar Financial Services Corp.
Series F, MTN
5.47%, 09/12/01 1,470,000 - 1,470,000
- 3,000,000 3,000,000 Dime Bancorp, Inc.
7.00%, 07/25/01 - 2,988,750 2,988,750
- 5,000,000 5,000,000 First Security Corp.
6.88%, 11/15/06 - 4,743,750 4,743,750
- 6,000,000 6,000,000 First Union Corp.
6.55%, 10/15/35 - 5,790,000 5,790,000
- 3,525,000 3,525,000 First USA Bank
7.65%, 08/01/03 - 3,586,688 3,586,688
1,285,000 - 1,285,000 General Electric Capital Corp., MTN
6.33%, 09/17/01 1,283,394 - 1,283,394
250,000 - 250,000 General Electric Capital Corp.
8.30%, 09/20/09 271,875 - 271,875
1,165,000 - 1,165,000 Goldman Sachs Group
6.65%, 05/15/09 1,109,663 - 1,109,663
- 2,770,000 2,770,000 Heller Financial
5.88%, 11/01/00 - 2,768,781 2,768,781
2,000,000 - 2,000,000 Key Bank of North America
7.13%, 08/15/06 1,972,500 - 1,972,500
- 5,000,000 5,000,000 Morgan (JP), MTN
6.00%, 01/15/09 - 4,556,250 4,556,250
3,500,000 - 3,500,000 National Rural Utilities
5.50%, 01/15/05 3,259,375 - 3,259,375
1,025,000 - 1,025,000 National Rural Utilities Cooperative Finance Corp.
6.20%, 02/01/08 969,906 - 969,906
3,000,000 - 3,000,000 Suntrust Bank, Atlanta, MTN
7.25%, 09/15/06 3,007,500 - 3,007,500
1,300,000 - 1,300,000 Suntrust Bank of Central Florida, MTN
6.90%, 07/01/07 1,285,375 - 1,285,375
- 3,400,000 3,400,000 U.S. West Capital Corp.
6.88%, 08/15/01 - 3,391,500 3,391,500
-----------------------------------------
22,659,588 28,614,619 51,274,207
-----------------------------------------
UTILITIES - 6.92%
- 3,300,000 3,300,000 AT&T Corp.
6.00%, 03/15/09 - 3,052,500 3,052,500
- 600,000 600,000 Cable & Wireless Communication
6.63%, 03/06/05 - 602,250 602,250
500,000 - 500,000 Emerson Electric Co.
5.85%, 03/15/09 463,125 - 463,125
- 3,380,000 3,380,000 Enron Oil & Gas
6.00%, 12/15/08 - 3,071,700 3,071,700
1,950,000 - 1,950,000 GTE Corp., Debenture
6.46%, 04/15/08 1,869,563 - 1,869,563
6,500,000 - 6,500,000 GTE Florida, Inc., Series A, Debenture
6.31%, 12/15/02 6,418,750 - 6,418,750
- 3,395,000 3,395,000 Hydro-Quebec (E)
8.63%, 05/20/02 - 3,530,671 3,530,671
3,000,000 - 3,000,000 MCI WorldCom, Inc.
6.13%, 04/15/02 2,951,250 - 2,951,250
- 3,940,000 3,940,000 National Rural Utilities
5.75%, 11/01/08 - 3,590,325 3,590,325
5,000,000 - 5,000,000 PacifiCorp, MTN
6.38%, 05/15/08 4,750,000 - 4,750,000
2,750,000 - 2,750,000 Potomac Electric Power Co.
First Mortgage
6.25%, 10/15/07 2,657,187 - 2,657,187
1,000,000 - 1,000,000 Sprint Capital Corp.
5.88%, 05/01/04 961,250 - 961,250
2,250,000 - 2,250,000 Sprint Capital Corp.
6.90%, 05/01/19 2,106,562 - 2,106,562
1,500,000 - 1,500,000 Tele-Communications, Inc.
7.25%, 08/01/05 1,509,375 - 1,509,375
3,300,000 - 3,300,000 Telecom De Puerto Rico
6.15%, 05/15/02 (D) 3,238,926 - 3,238,926
2,250,000 - 2,250,000 Telecom De Puerto Rico
6.65%, 05/15/06 (D) 2,174,062 - 2,174,062
-----------------------------------------
29,100,050 13,847,446 42,947,496
-----------------------------------------
INDUSTRIAL - 3.26%
- 5,070,000 5,070,000 Burlington North
9.25%, 10/01/06 - 5,538,975 5,538,975
2,000,000 - 2,000,000 Illinois Tool Works
5.75%, 03/01/09 1,835,000 - 1,835,000
- 2,750,000 2,750,000 Northrop Grumman Corp.
7.00%, 03/01/06 - 2,667,500 2,667,500
<PAGE>
- 3,340,000 3,340,000 Trans-Canada Pipelines (G)
9.13%, 04/20/06 - 3,603,025 3,603,025
- 5,000,000 5,000,000 Weyerhauser Co.
7.50%, 03/01/13 - 5,043,750 5,043,750
1,650,000 - 1,650,000 Xerox Corp.
5.50%, 11/15/03 1,571,625 - 1,571,625
-----------------------------------------
3,406,625 16,853,250 20,259,875
-----------------------------------------
HEALTH CARE - 1.08%
800,000 - 800,000 Abbott Laboratories
6.40%, 12/01/06 787,000 - 787,000
- 3,190,000 3,190,000 American Home Products
7.70%, 02/15/00 - 3,205,950 3,205,950
3,000,000 - 3,000,000 Becton Dickinson & Co., Debenture
6.70%, 08/01/28 2,703,750 - 2,703,750
-----------------------------------------
3,490,750 3,205,950 6,696,700
-----------------------------------------
AUTOMOBILE FINANCE - 0.56%
3,500,000 - 3,500,000 Ford Motor Credit Co.
6.70%, 07/16/04 3,465,000 - 3,465,000
-----------------------------------------
TECHNOLOGY - 0.55%
2,500,000 - 2,500,000 International Business Machines Corp.
7.25%, 11/01/02 2,546,875 - 2,546,875
- 1,000,000 1,000,000 Lucent Technologies
5.50%, 11/15/08 908,750 908,750
-----------------------------------------
2,546,875 908,750 3,455,625
-----------------------------------------
ENERGY - 0.28%
- 1,900,000 1,900,000 Atlantic Richfield
5.90%, 04/15/09 - 1,745,625 1,745,625
-----------------------------------------
TOTAL CORPORATE NOTES AND BONDS 91,726,350 99,366,609 191,092,959
-----------------------------------------
MORTGAGE-BACKED SECURITIES - 20.23%
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION - 9.46%
246,675 - 246,675 6.50%, 03/15/13, Pool # 458165 242,358 - 242,358
75,943 - 75,943 6.50%, 03/15/13, Pool # 463723 74,589 - 74,589
250,340 - 250,340 6.50%, 04/15/13, Pool # 466013 245,879 - 245,879
279,576 - 279,576 6.50%, 04/15/13, Pool # 473476 274,594 - 274,594
300,284 - 300,284 6.50%, 05/15/13, Pool # 433742 294,933 - 294,933
136,908 - 136,908 6.50%, 05/15/13, Pool # 476292 134,469 - 134,469
46,926 - 46,926 6.50%, 10/15/13, Pool # 434026 46,090 - 46,090
341,920 - 341,920 6.50%, 10/15/13, Pool # 434017 335,827 - 335,827
1,971,733 - 1,971,733 6.50%, 10/15/13, Pool # 471586 1,936,597 - 1,936,597
382,752 - 382,752 6.50%, 10/15/13, Pool # 464249 375,931 - 375,931
126,581 - 126,581 6.50%, 10/15/13, Pool # 484576 124,325 - 124,325
1,108,232 - 1,108,232 6.50%, 11/15/13, Pool # 454228 1,088,140 - 1,088,140
770,765 - 770,765 6.50%, 11/15/13, Pool # 477529 757,030 - 757,030
824,926 - 824,926 6.50%, 11/15/13, Pool # 490795 809,970 - 809,970
922,537 - 922,537 6.63%, 07/20/22, Pool # 008022 (C) 930,038 - 930,038
1,351,881 - 1,351,881 7.00%, 11/15/22, Pool # 330551 1,335,199 - 1,335,199
- 1,128,389 1,128,389 7.00%, 10/15/23, Pool # 369348 - 1,106,521 1,106,521
- 108,388 108,388 8.00%, 06/15/25, Pool # 410041 - 110,759 110,759
- 208,283 208,283 8.00%, 10/15/25, Pool # 399781 - 212,838 212,838
- 78,657 78,657 8.00%, 01/15/26, Pool # 417061 - 80,377 80,377
- 109,653 109,653 8.00%, 02/15/26, Pool # 423487 - 112,051 112,051
- 2,578,601 2,578,601 7.50%, 04/15/26, Pool # 345614 - 2,585,048 2,585,048
- 43,700 43,700 8.00%, 05/15/26, Pool # 423253 - 44,656 44,656
- 91,356 91,356 8.00%, 05/15/26, Pool # 432681 - 93,354 93,354
- 374,106 374,106 8.00%, 06/15/26, Pool # 345638 - 382,287 382,287
- 4,550,469 4,550,469 7.00%, 06/15/26, Pool # 780518 - 4,465,148 4,465,148
- 50,380 50,380 7.50%, 02/15/27, Pool # 433448 - 50,506 50,506
- 1,018,961 1,018,961 8.00%, 03/15/27, Pool # 442009 - 1,041,246 1,041,246
- 8,472,818 8,472,818 6.50%, 05/15/28, Pool # 447920 - 8,094,168 8,094,168
- 9,427,143 9,427,143 6.50%, 06/15/28, Pool # 465536 - 9,005,844 9,005,844
- 977,119 977,119 6.50%, 06/15/28, Pool # 476350 - 933,452 933,452
969,745 - 969,745 6.50%, 01/15/29, Pool # 482909 926,708 - 926,708
3,324,955 - 3,324,955 7.00%, 01/15/29, Pool # 499333 3,261,548 - 3,261,548
742,694 - 742,694 7.00%, 02/15/29, Pool # 470018 728,531 - 728,531
3,473,928 - 3,473,928 7.00%, 02/15/29, Pool # 486937 3,407,680 - 3,407,680
4,699,758 - 4,699,758 7.00%, 02/15/29, Pool # 492173 4,610,134 - 4,610,134
24,372 - 24,372 6.50%, 03/15/29, Pool # 464613 23,291 - 23,291
3,530,962 - 3,530,962 6.00%, 03/15/29, Pool # 464632 3,277,156 - 3,277,156
2,034,553 - 2,034,553 6.50%, 03/15/29, Pool # 503051 1,944,260 - 1,944,260
<PAGE>
1,926,550 - 1,926,550 6.50%, 04/15/29, Pool # 483349 1,841,050 - 1,841,050
1,398,994 - 1,398,994 7.50%, 09/15/29, Pool # 466158 1,402,491 - 1,402,491
-----------------------------------------
30,428,818 28,318,255 58,747,073
-----------------------------------------
FEDERAL NATIONAL
MORTGAGE ASSOCIATION - 6.02%
778,864 778,864 6.50%, 05/01/06, Pool # 348137 773,801 - 773,801
- 2,930,132 2,930,132 6.50%, 05/01/11, Pool # 250554 - 2,872,437 2,872,437
- 852,734 852,734 6.00%, 03/01/13, Pool # 417118 - 819,418 819,418
- 840,404 840,404 6.00%, 04/01/13, Pool # 412825 - 807,569 807,569
- 1,822,717 1,822,717 6.00%, 05/01/13, Pool # 423188 - 1,751,503 1,751,503
- 9,658,539 9,658,539 6.00%, 06/01/13, Pool # 251811 - 9,281,180 9,281,180
- 1,707,538 1,707,538 6.00%, 06/01/13, Pool # 431718 - 1,640,825 1,640,825
- 5,000,000 5,000,000 7.00%, 09/18/14, Series 1997-6, Class K, CMO - 4,866,150 4,866,150
- 1,492,069 1,492,069 6.00%, 12/25/16, Series G-2, Class G, CMO - 1,410,960 1,410,960
2,183,829 - 2,183,829 6.75%, 04/25/21, Pool #0096-4 2,185,860 - 2,185,860
2,617,283 - 2,617,283 8.50%, 12/01/25, Pool # 313420 2,711,322 - 2,711,322
- 4,373,939 4,373,939 6.50%, 06/01/28, Pool # 431718 - 4,190,758 4,190,758
4,000,000 - 4,000,000 8.00%, 10/01/29, Pool # 252875 4,075,000 - 4,075,000
-----------------------------------------
9,745,983 27,640,800 37,386,783
-----------------------------------------
FEDERAL HOME LOAN
MORTGAGE CORPORATION - 3.97%
- 463,480 463,480 7.75%, 09/01/05, Pool # 140661 - 473,616 473,616
3,000,000 - 3,000,000 6.00%, 04/15/22, Pool # 2118QC 2,850,930 - 2,850,930
- 17,306,818 17,306,818 6.00%, 11/01/28, Pool # C00680 - 16,157,223 16,157,223
5,000,000 - 5,000,000 8.50%, 10/01/29, Pool # G01072 5,179,650 - 5,179,650
-----------------------------------------
8,030,580 16,630,839 24,661,419
-----------------------------------------
STRUCTURED MORTGAGE PRODUCT - 0.78%
- 995,241 995,241 General Motors Acceptance Corp.
Commercial Mortgage Securities, Inc., CMO
6.97%, 07/15/32 - 991,171 991,171
1,149,671 - 1,149,671 Prudential Home Mortgage Securities
Series 1993-38, Class A-3, CMO
6.15%, 09/25/23 1,130,621 - 1,130,621
2,799,428 - 2,799,428 Rural Housing Trust
Series 1987-1, Class 1-D, CMO
6.33%, 04/01/26 2,743,877 - 2,743,877
-----------------------------------------
3,874,498 991,171 4,865,669
-----------------------------------------
TOTAL MORTGAGE-BACKED SECURITIES 52,079,879 73,581,065 125,660,944
-----------------------------------------
ASSET-BACKED SECURITIES - 7.13%
- 3,503,221 3,503,221 AFC Home Equity Loan Trust
Series 1996-3, Class 1A4
7.54%, 12/25/27 - 3,560,743 3,560,743
2,216,766 - 2,216,766 Chase Manhattan Auto Owner Trust
Series 1998-C, Class A3
5.80%, 01/15/02 2,211,224 - 2,211,224
6,000,000 - 6,000,000 Citibank Credit Card Master Trust I
Series 1998-6 -
5.85%, 04/10/03 5,951,220 - 5,951,220
1,000,000 - 1,000,000 Citibank Credit Card Master Trust I
. Series 1999-1, Class A
5.50%, 02/15/06 952,810 - 952,810
- 757,286 757,286 Fleetwood Credit Corp.
Series 1995-B, Class A
6.55%, 05/15/11 - 754,196 754,196
3,500,000 - 3,500,000 Ford Credit Auto Owner Trust
Series 1999-D, Class A5
6.52%, 09/15/03 3,498,880 - 3,498,880
- 5,000,000 5,000,000 Green Tree Financial Corp.
Series 1995-5, Class M1
7.65%, 09/15/26 - 4,938,900 4,938,900
850,000 - 850,000 Green Tree Financial Corp.
Series 1998-1, Class A4
6.04%, 11/01/29 835,652 - 835,652
5,050,000 - 5,050,000 MBNA Master Credit Card Trust
Series 1998-J, Class A
5.25%, 02/15/06 4,800,630 - 4,800,630
- 2,492,354 2,492,354 Merrill Lynch Mortgage Investors, Inc.
Series 1989-H, Class B
10.00%, 01/15/10 - 2,495,469 2,495,469
- 5,000,000 5,000,000 Merrill Lynch Mortgage Investors, Inc.
Series 1994-G, Class A3
8.35%, 05/15/14 - 5,445,900 5,445,900
<PAGE>
- 5,000,000 5,000,000 Nomura Asset Securities Corp.
Series 1996-MD5, Class A-1B
7.12%, 04/13/36 - 4,934,350 4,934,350
- 4,040,000 4,040,000 Oakwood Mortgage Investors, Inc.
Series 1995-B, Class A3
6.90%, 01/15/21 - 3,913,750 3,913,750
-----------------------------------------
TOTAL ASSET-BACKED SECURITIES 18,250,416 26,043,308 44,293,724
-----------------------------------------
FOREIGN BOND - 1.38%
1,500,000 - 1,500,000 Heinz (H.J.) Co. (E)
5.75%, 02/03/03 1,454,400 - 1,454,400
- 3,395,000 3,395,000 Province of Ontario (F)
7.38%, 01/27/03 - 3,458,656 3,458,656
4,000,000 - 4,000,000 Province of Quebec (F)
5.75%, 02/15/09 3,640,000 - 3,640,000
-----------------------------------------
TOTAL FOREIGN BOND 5,094,400 3,458,656 8,553,056
-----------------------------------------
REPURCHASE AGREEMENT - 2.81%
Repurchase Agreement with:
4,220,000 - 4,220,000 Chase Manhattan Bank
5.20%, 11/01/99, dated 10/29/99 4,220,000 - 4,220,000
- 13,228,281 13,228,281 Lehman Brothers
5.18%, 11/01/99, dated 10/29/99 - 13,228,281 13,228,281
-----------------------------------------
TOTAL REPURCHASE AGREEMENT 4,220,000 13,228,281 17,448,281
-----------------------------------------
TOTAL INVESTMENTS - 97.27%
(Cost $294,952,306, $327,765,508 and $622,717,814) 285,705,895 318,442,347 604,148,242
=========================================
NET OTHER ASSETS AND LIABILITIES - 2.73% 1,860,432 15,059,521 16,919,953
=========================================
NET ASSETS - 100.00% $ 287,566,327 $ 333,501,868 $ 621,068,195
=========================================
</TABLE>
(A) Discount yield at time of purchase.
(B) Stripped securities represent the splitting of cash flows into
interest and principal. Holders, as indicated, are entitled to
that portion of the payment representing the interest only or
principal only.
(C) Floating rate note. Interest Rate Shown reflects rate in effect
at October 31, 1999.
(D) Securities exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may only be resold, in
transactions exempt from registration, to qualified institutional
buyers. At October 31, 1999, these securities amounted to
$7,109,488 or 1.14% of net assets.
(E) Euro-Dollar Bond
(F) U.S. Dollar Denominated
(G) Yankee Bond
(H) Zero Coupon Bond
CMO Collateralized Mortgage Obligation
MTN Medium Term Note
See Notes to Pro Forma Financial Statements
<PAGE>
GALAXY HIGH QUALITY BOND FUND
BOSTON 1784 INCOME FUND
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
<TABLE>
<CAPTION>
------------------------------------------------------------
GALAXY PRO FORMA
HIGH QUALITY BOSTON 1784 PRO FORMA COMBINED
BOND FUND INCOME FUND ADJUSTMENTS (NOTE 1)
------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments
Investments at cost $ 290,732,306 $314,537,227 $ - $ 605,269,533
Repurchase agreements 4,220,000 13,228,281 - 17,448,281
Net unrealized (depreciation) (9,246,411) (9,323,161) - (18,569,572)
------------------------------------------------------------
Total Investments at Value 285,705,895 318,442,347 - 604,148,242
Cash 15,546 287,318 - 302,864
Receivable for investments sold 1,961,287 12,337,553 - 14,298,840
Receivable for shares sold 1,095,375 5,767 - 1,101,142
Interest and dividends receivable 4,505,548 4,596,370 - 9,101,918
------------------------------------------------------------
Total Assets 293,283,651 335,669,355 - 628,953,006
LIABILITIES:
Dividends payable 1,359,916 1,731,909 - 3,091,825
Payable for investments purchased 3,717,395 182,188 - 3,899,583
Payable for shares redeemed 437,303 22 - 437,325
Advisory fee payable 131,993 193,572 - 325,565
Payable to Fleet affiliates 345 - - 345
Administration fee payable 49,443 18,467 - 67,910
Trustees' fees and expenses payable 7,331 666 - 7,997
Accrued expenses and other payables 13,598 40,663 - 54,261
------------------------------------------------------------
Total Liabilities 5,717,324 2,167,487 - 7,884,811
NET ASSETS $ 287,566,327 $333,501,868 $ - $ 621,068,195
============================================================
NET ASSETS CONSISTS OF:
Paid-in capital $ 298,199,551 $346,101,274 $ - $ 644,300,825
Undistributed net investment income 280,469 421,480 - 701,949
Accumulated net realized (loss) on investments sold (1,667,282) (3,697,725) - (5,365,007)
Net unrealized (depreciation) of investments (9,246,411) (9,323,161) - (18,569,572)
------------------------------------------------------------
TOTAL NET ASSETS $ 287,566,327 $333,501,868 $ - $ 621,068,195
============================================================
Net Assets by Class:
Retail A Shares $ 42,905,576 N/A $ - $ 42,905,576
============================================================
Retail B Shares 6,550,339 N/A - 6,550,339
============================================================
Trust Shares / Shares 237,771,762 333,501,868 (10,672,060) 560,601,570
============================================================
Prime A Shares 16,084 N/A - 16,084
============================================================
Prime B Shares 322,566 N/A - 322,566
============================================================
BKB Shares N/A N/A 10,672,060 10,672,060
============================================================
Shares of beneficial interest outstanding:
Retail A Shares 4,187,138 N/A - 4,187,138
============================================================
Retail B Shares 639,249 N/A - 639,249
============================================================
Trust Shares / Shares 23,203,752 34,329,410 (2,833,819) 54,699,343
============================================================
Prime A Shares 1,569 N/A - 1,569
============================================================
Prime B Shares 31,509 N/A - 31,509
============================================================
BKB Shares N/A N/A 1,041,177 1,041,177
============================================================
Net Asset Value - Retail A Shares $ 10.25 N/A $ 10.25
============================================================
Net Asset Value - Retail B Shares $ 10.25 N/A $ 10.25
============================================================
Net Asset Value - Trust Shares / Shares $ 10.25 $ 9.71 $ 10.25
============================================================
Net Asset Value - Prime A Shares $ 10.25 N/A $ 10.25
============================================================
Net Asset Value - Prime B Shares $ 10.24 N/A $ 10.24
============================================================
Net Asset Value - BKB Shares N/A N/A $ 10.25
============================================================
</TABLE>
See Notes to Pro Forma Financial Statements
<PAGE>
GALAXY HIGH QUALITY BOND FUND
BOSTON 1784 INCOME FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS (UNAUDITED)
OCTOBER 31, 1999
<TABLE>
<CAPTION>
------------------------------------------------------------------------
GALAXY PRO FORMA
HIGH QUALITY BOSTON 1784 PRO FORMA COMBINED
BOND FUND INCOME FUND ADJUSTMENTS (NOTE 1)
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income:
Interest Income $ 17,710,263 $ 22,375,877 $ - $ 40,086,140
------------------------------------------------------------------------
Total Investment Income 17,710,263 22,375,877 - 40,086,140
------------------------------------------------------------------------
Expenses:
Investment Advisory Fees 2,106,150 2,624,175 36,178 (a) 4,766,503
Administrative Fees 211,269 233,792 (8,019) (a) 437,042
Custodian Fee 36,686 20,122 (16,000) (b) 40,808
Fund Accounting Fee 78,661 3,484 27,723 (a) 109,868
Professional Fees 32,362 28,677 (25,000) (b) 36,039
Trustee Fees 6,754 10,100 - 16,854
Reports to Shareholders 32,573 23,569 (20,000) (b) 36,142
Miscellaneous Expenses 58,011 19,158 - 77,169
------------------------------------------------------------------------
Subtotal 2,562,466 2,963,077 (5,118) 5,520,425
Transfer Agent Fee
Retail A Shares 72,862 - - 72,862
Retail B Shares 11,912 - - 11,912
Trust Shares / Shares 297,298 73,422 10,729 (a) 381,449
Prime A Shares 93 - - 93
Prime B Shares 359 - - 359
BKB Shares - - 8,937 (a) 8,937
Shareholder Services Fee & 12B-1 Fee
Retail A Shares 66,090 - - 66,090
Retail B Shares 52,195 - - 52,195
Trust Shares / Shares - 886,536 (886,536) (a) -
Prime A Shares 63 - - 63
Prime B Shares 2,172 - - 2,172
BKB Shares - - 17,022 (a) 17,022
------------------------------------------------------------------------
Total Expenses before reimbursement/waiver 3,065,510 3,923,035 (854,966) 6,133,579
Less Waiver/Reimbursements
Fund Level Waivers (561,640) (199,564) (509,863) (c) (1,271,067)
Class Specific Waivers/Reimbursements
Retail A Shares (6,772) - 6,772 (c) -
Retail B Shares (5,765) - - (5,765)
Trust Shares / Shares - (886,536) 886,536 (c) -
Prime A Shares (92) - - (92)
Prime B Shares (356) - - (356)
BKB Shares - - (11,348) (c) (11,348)
------------------------------------------------------------------------
Total Waivers/Reimbursements (574,625) (1,086,100) 372,097 (1,288,628)
Net Expenses 2,490,885 2,836,935 (482,869) 4,844,952
------------------------------------------------------------------------
Net Investment Income 15,219,378 19,538,942 482,869 35,241,188
------------------------------------------------------------------------
Net Realized (Loss) on Investments (1,517,657) (3,606,496) - (5,124,153)
Net Change in Unrealized (Depreciation) on Investments (21,199,859) (20,713,046) - (41,912,905)
------------------------------------------------------------------------
Net Realized and Unrealized (Loss) on Investments (22,717,516) (24,319,542) - (47,037,058)
------------------------------------------------------------------------
Net (Decrease) in Net Assets Resulting from Operations $ (7,498,138) $ (4,780,600) $ 482,869 $ (11,795,870)
========================================================================
</TABLE>
(a) Reflects adjustment to the acquiring fund contractual fee level.
(b) Reflects expected savings when the two funds become one.
(c) Reflects adjustment to the acquiring fund's voluntary expense limitation.
See Notes to Pro Forma Financial Statements
<PAGE>
Galaxy High Quality Bond Fund
Boston 1784 Income Fund
Notes to Pro Forma Combining Financial Statements (unaudited)
1. Basis of Combination
The Galaxy Fund, a Massachusetts business trust (the "Trust"), is registered
under the Investment Company Act of 1940, as amended, (the "1940 Act") as an
open-end management investment company. As of October 31, 1999, the Trust
offered twenty-nine managed investment portfolios. The unaudited Pro Forma
Combining Portfolio of Investments and the unaudited Pro Forma Statement of
Assets and Liabilities assumes the exchange described in the next paragraph
occurred as of October 31, 1999 and the unaudited Pro Forma Combining Statement
of Operations assumes the exchange occurred as of November 1, 1998. These
statements have been derived from books and records utilized in calculating the
net asset value of each fund at October 31, 1999 and for the twelve-month period
then ended.
The pro forma statements give effect to the proposed transfer of substantially
all of the assets and stated liabilities of the Boston 1784 Income Fund in
exchange for Trust and BKB shares of Galaxy High Quality Bond Fund. Under
generally accepted accounting principles, the historical cost of investment
securities will be carried forward to the surviving entity and the results of
operations of the Boston 1784 Income Fund for pre-combination periods will not
be restated. The pro forma statements do not reflect the expenses of either fund
in carrying out its obligations under the proposed Agreement and Plan of
Reorganization.
The unaudited Pro Forma Combining Financial Statements should be read in
conjunction with the historical financial statements of the funds incorporated
by reference in the Statement of Additional Information.
For the twelve-month period ended October 31, 1999, the Galaxy High Quality Bond
Fund's investment advisory fee was computed based on the annual rate of 0.75% of
its average daily net assets. The administration fee was computed based on the
annual rate of 0.09% of the first $2.5 billion of the Trust's combined average
daily net assets, 0.085% of the next $2.5 billion, 0.075% of the next $7
billion, 0.065% of the next $3 billion, 0.06% of the next $3 billion, and
0.0575% of the combined average daily net assets in excess of $18 billion, and
was allocated to each fund based on the relative net assets of the Trust.
The Trust has adopted a shareholder services plan (the "Services Plan") with
respect to Retail A, BKB and Trust Shares of the funds to compensate certain
institutions providing administrative and support services to their customers
who own such shares. Currently, the Services Plan has not been implemented for
the Trust shares. Under the Services Plan, aggregate payments may not exceed
0.30% of the average daily net assets of Retail A or BKB shareholders who are
customers of such institutions. Currently, the Trust, under the direction of the
Board of Trustees, is limiting such payments to 0.15% of the average daily net
asset of Retail A or BKB shareholders who are customers of such institutions.
The Trust has adopted a distribution and services plan (the "12b-1 Plan") with
respect to Retail B shares of the fund. Payments to the Distributor or others
for distribution services (those primarily intended to result in the sale of
Retail B shares) may not exceed 0.65% of the average daily net assets of Retail
B shares. Payments to institutions providing services to their customers owning
Retail B shares for shareholder liaison and administrative support services may
not exceed 0.15% and 0.15%, respectively, of the average daily net assets
attributable to shareholders who are customers of such institutions. The Trust
is currently limiting payments for shareholder liaison and administrative
support to 0.15% of the average daily net assets attributable to shareholders
that are customers of such institutions.
The Trust has adopted a distribution plan (the "Prime A Plan") with respect to
Prime A shares of the fund. Payments to the Distributor or others for
distribution services (those primarily intended to result in the sale of Prime A
shares) may not exceed 0.30% of the average daily net assets of Prime A shares.
The Trust is currently limiting payments under the Prime A Plan to 0.25% of the
average daily net assets of Prime A shares.
<PAGE>
Galaxy High Quality Bond Fund
Boston 1784 Income Fund
Notes to Pro Forma Combining Financial Statements (unaudited) (continued)
The Trust has adopted a distribution and services plan (the "Prime B Plan") with
respect to Prime B shares of the fund. Payments to the Distributor or others for
distribution services (those primarily intended to result in the sale of Prime B
shares) may not exceed 0.75% of the average daily net assets of Prime B shares.
Payments to institutions providing services to their customers owning Prime B
shares for shareholder liaison and administrative support services may not
exceed 0.25% and 0.25%, respectively, of the average daily net assets
attributable to shareholders who are customers of such institutions. The Trust
is currently limiting payments for shareholder liaison and administrative
support to 0.25% of the average daily net assets attributable to shareholders
that are customers of such institutions.
2. Portfolio Valuation
The Galaxy High Quality Bond Fund's investment securities are valued by an
independent pricing service approved by the Trust's Board of Trustees. When, in
the judgement of the service, quoted bid prices are readily available and are
representative of the bid side of the market, investments are valued at the mean
between quoted bid and asked prices. Other investments are carried at fair value
as determined by the service based on methods which include consideration of
yields or prices of bonds of comparable quality, coupon maturity and type;
indications as to values from dealers and general market conditions. Short-term
obligations that mature in 60 days or less are valued at amortized cost, which
approximated fair value. All other securities and other assets are appraised at
their fair value as determined in good faith under consistently applied
procedures established by and under the general supervision of the Board of
Trustees. Boston 1784 Income Fund uses similar rules for determining portfolio
valuation.
3. Capital Shares
The pro forma net asset value per share assumes the issuance of additional
shares of the Galaxy High Quality Bond Fund that would have been issued at
October 31, 1999 in connection with the proposed reorganization. The pro forma
number of shares outstanding of 60,599,985 consists of 32,536,768 shares assumed
issued in the reorganization plus 28,063,217 shares of the Galaxy High Quality
Bond Fund at October 31, 1999.
<PAGE>
GALAXY INTERMEDIATE GOVERNMENT INCOME FUND
BOSTON 1784 U.S. GOVERNMENT MEDIUM-TERM INCOME FUND
PRO FORMA COMBINING PORTFOLIO OF INVESTMENTS (unaudited)
OCTOBER 31, 1999
<TABLE>
<CAPTION>
PAR VALUE DESCRIPTION VALUE (NOTE 2)
- -----------------------------------------------------------------------------------------------------------------------------------
GALAXY BOSTON 1784 GALAXY BOSTON 1784
INTERMEDIATE U.S. GOV'T INTERMEDIATE U.S. GOV'T
GOV'T INCOME MEDIUM-TERM PRO FORMA GOV'T INCOME MEDIUM-TERM PRO FORMA
FUND INCOME FUND COMBINED FUND INCOME FUND COMBINED
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 62.27%
U.S. TREASURY NOTES - 15.57%
$ - $8,400,000 $ 8,400,000 6.38%, 05/15/00 $ - $ 8,442,588 $ 8,442,588
2,500,000 - 2,500,000 6.38%, 03/31/01 2,520,725 - 2,520,725
- 2,000,000 2,000,000 8.00%, 05/15/01 - 2,064,660 2,064,660
- 463,000 463,000 6.63%, 07/31/01 - 469,125 469,125
- 1,000,000 1,000,000 5.63%, 09/30/01 - 996,280 996,280
- 5,500,000 5,500,000 6.25%, 10/31/01 - 5,543,945 5,543,945
- 1,600,000 1,600,000 7.50%, 11/15/01 - 1,650,272 1,650,272
- 2,000,000 2,000,000 6.25%, 01/31/02 - 2,015,960 2,015,960
2,540,000 - 2,540,000 6.50%, 05/31/02 2,578,227 - 2,578,227
- 1,000,000 1,000,000 6.00%, 07/31/02 - 1,003,140 1,003,140
15,000,000 15,000,000 5.50%, 02/28/03 - 14,801,850 14,801,850
19,420,000 19,420,000 5.50%, 05/31/03 - 19,122,486 19,122,486
- 2,000,000 2,000,000 5.25%, 08/15/03 - 1,950,960 1,950,960
- 2,000,000 2,000,000 5.88%, 11/15/05 - 1,978,200 1,978,200
7,720,000 7,800,000 15,520,000 7.00%, 07/15/06 8,062,150 8,140,782 16,202,932
3,000,000 - 3,000,000 6.50%, 10/15/06 3,053,460 - 3,053,460
- 770,000 770,000 6.25%, 02/15/07 - 772,995 772,995
- 500,000 500,000 6.63%, 05/15/07 - 512,610 512,610
- 2,000,000 2,000,000 6.13%, 08/15/07 - 1,990,560 1,990,560
-----------------------------------------------
16,214,562 71,456,413 87,670,975
-----------------------------------------------
U.S. GOVERNMENT-BACKED BONDS - 11.32%
4,830,000 - 4,830,000 A.I.D. State of Israel
Series 2-D
5.63%, 09/15/03 4,703,116 - 4,703,116
6,450,000 - 6,450,000 A.I.D. State of Israel
Series 8-B
6.05%, 08/15/00 6,450,258 - 6,450,258
5,000,000 - 5,000,000 A.I.D. State of Israel
Series 8-B
6.38%, 08/15/01 5,014,750 - 5,014,750
5,000,000 - 5,000,000 A.I.D. State of Israel
Series 8-C
6.63%, 08/15/03 5,038,300 - 5,038,300
- 11,340,000 11,340,000 Global Industries Ltd.
7.25%, 07/15/22 - 11,518,945 11,518,945
- 5,000,000 5,000,000 Private Export Funding Corp.
6.31%, 09/30/04 - 4,900,000 4,900,000
- 3,800,000 3,800,000 Private Export Funding Corp.
7.11%, 04/15/07 - 3,892,078 3,892,078
6,200,000 - 6,200,000 Private Export Funding Corp.
Series B
6.49%, 07/15/07 6,099,250 - 6,099,250
- 1,740,000 1,740,000 Private Export Funding Corp.
Series WW
6.62%, 10/01/05 - 1,726,950 1,726,950
- 2,500,000 2,500,000 Private Export Funding Corp.
Series XX
5.50%, 03/15/01 - 2,478,125 2,478,125
- 3,762,729 3,762,729 Secunda Atlantic
Title XI
6.70%, 04/01/18 - 3,596,567 3,596,567
5,432,567 - 5,432,567 Small Business Administration
Participation Certificates
Series SBIC-PS 1955-10B
7.25%, 05/10/05 5,351,079 - 5,351,079
- 1,347,133 1,347,133 Sulphur Carriers Inc.
Title XI, Series 2009
8.30%, 10/15/09 - 1,421,670 1,421,670
<PAGE>
- 4,000,000 4,000,000 Tennessee Valley Authority
Principal Strips
0.00%, 04/15/42, (A) - 1,551,880 1,551,880
--------------------------------------------
32,656,753 31,086,215 63,742,968
--------------------------------------------
U.S. TREASURY BONDS - 11.09%
500,000 - 500,000 11.13%, 08/15/03 583,745 - 583,745
1,200,000 - 1,200,000 11.88%, 11/15/03 1,442,772 - 1,442,772
2,350,000 - 2,350,000 12.00%, 08/15/13 3,221,709 - 3,221,709
- 700,000 700,000 11.25%, 02/15/15 - 1,021,195 1,021,195
1,050,000 - 1,050,000 7.50%, 11/15/16 1,158,318 - 1,158,318
6,735,000 - 6,735,000 8.88%, 08/15/17 8,397,669 - 8,397,669
3,000,000 - 3,000,000 8.50%, 02/15/20 3,666,540 - 3,666,540
3,000,000 - 3,000,000 8.75%, 05/15/20 3,755,160 - 3,755,160
1,500,000 - 1,500,000 8.75%, 08/15/20 1,879,605 - 1,879,605
3,500,000 - 3,500,000 7.88%, 02/15/21 4,045,685 - 4,045,685
6,750,000 - 6,750,000 8.13%, 08/15/21 8,008,740 - 8,008,740
4,000,000 - 4,000,000 6.88%, 08/15/25 4,222,160 - 4,222,160
- 6,100,000 6,100,000 6.00%, 02/15/26 - 5,779,567 5,779,567
1,500,000 - 1,500,000 6.38%, 08/15/27 1,493,040 - 1,493,040
800,000 - 800,000 6.13%, 11/15/27 772,480 - 772,480
2,000,000 - 2,000,000 5.50%, 08/15/28 1,776,340 - 1,776,340
3,000,000 2,800,000 5,800,000 5.25%, 11/15/28 2,578,920 2,405,228 4,984,148
1,000,000 3,000,000 4,000,000 5.25%, 02/15/29 866,280 2,596,950 3,463,230
2,750,000 - 2,750,000 6.13%, 08/15/29 2,740,348 - 2,740,348
--------------------------------------------
50,609,511 11,802,940 62,412,451
--------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 8.22%
4,500,000 - 4,500,000 5.72%, 01/09/01, MTN 4,483,305 - 4,483,305
- 4,000,000 4,000,000 0.00%, 08/15/01, MTN, (A) - 3,597,956 3,597,956
- 12,400,000 12,400,000 5.75%, 04/15/03 - 12,179,404 12,179,404
- 805,000 805,000 5.13%, 02/13/04 - 766,119 766,119
- 1,000,000 1,000,000 6.58%, 03/01/06 - 961,420 961,420
- 5,250,000 5,250,000 6.00%, 05/15/08 - 5,017,005 5,017,005
565,000 10,000,000 10,565,000 6.38%, 06/15/09 551,683 9,764,300 10,315,983
2,050,000 - 2,050,000 6.16%, 08/07/28 1,854,041 - 1,854,041
7,000,000 - 7,000,000 8.00%, 09/01/29 7,131,250 - 7,131,250
--------------------------------------------
14,020,279 32,286,204 46,306,483
--------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION - 5.08%
5,500,000 - 5,500,000 5.20%, 11/15/99, (D) 5,488,878 - 5,488,878
- 3,500,000 3,500,000 5.75%, 07/15/03 - 3,428,950 3,428,950
- 200,113 200,113 7.00%, 07/15/03 - 200,445 200,445
5,000,000 - 5,000,000 6.25%, 07/15/04 4,962,500 - 4,962,500
- 1,000,000 1,000,000 8.53%, 02/02/05 - 1,005,830 1,005,830
- 1,000,000 1,000,000 7.34%, 11/03/06 - 1,000,140 1,000,140
5,000,000 - 5,000,000 5.13%, 10/15/08 4,478,950 - 4,478,950
360,000 - 360,000 6.63%, 09/15/09 358,200 - 358,200
- 1,098,306 1,098,306 7.00%, 12/01/10, REMIC - 1,097,615 1,097,615
1,080,000 1,080,000 Series 1663, Class AD, REMIC
6.75%. 02/15/20 - 1,047,435 1,047,435
5,500,000 - 5,500,000 7.50%, 06/01/28 5,520,625 - 5,520,625
--------------------------------------------
20,809,153 7,780,415 28,589,568
--------------------------------------------
FEDERAL HOME LOAN BANK - 3.59%
- 5,000,000 5,000,000 5.50%, 04/14/00 - 4,995,000 4,995,000
- 7,000,000 7,000,000 5.69%, 04/16/01, FRN - 6,978,930 6,978,930
- 5,000,000 5,000,000 5.25%, 04/25/02 - 4,886,550 4,886,550
- 3,000,000 3,000,000 6.58%, 01/07/03 - 3,002,970 3,002,970
- 350,000 350,000 7.66%, 07/20/04 - 366,349 366,349
--------------------------------------------
- 20,229,799 20,229,799
--------------------------------------------
FEDERAL FARM CREDIT BANK - 3.09%
7,100,000 - 7,100,000 5.13%, 11/15/99, (D) 7,085,836 - 7,085,836
- 10,000,000 10,000,000 5.63%, 05/17/01, FRN - 9,957,500 9,957,500
- 350,000 350,000 7.35%, 03/24/05, MTN - 363,314 363,314
--------------------------------------------
7,085,836 10,320,814 17,406,650
--------------------------------------------
<PAGE>
AGENCY OF HOUSING AND URBAN DEVELOPMENT - 2.05%
- 2,000,000 2,000,000 Series 1995-A
8.24%, 08/01/02 - 2,083,000 2,083,000
- 4,000,000 4,000,000 Series 1997-A
6.21%, 08/01/01 - 4,004,176 4,004,176
- 5,500,000 5,500,000 Series 1997-A
6.36%, 08/01/04 - 5,464,223 5,464,223
--------------------------------------------
- 11,551,399 11,551,399
--------------------------------------------
STUDENT LOAN MARKETING ASSOCIATION - 1.51%
- 6,000,000 6,000,000 5.63%, 05/18/01, FRN - 5,974,500 5,974,500
- 2,529,602 2,529,602 5.69%, 10/25/05, FRN - 2,513,792 2,513,792
--------------------------------------------
- 8,488,292 8,488,292
--------------------------------------------
U.S. TREASURY STRIPS (A) - 0.75%
- 1,000,000 1,000,000 0.00%, 08/15/10 - 500,490 500,490
5,000,000 - 5,000,000 1.78%, 11/15/17
interest only, (B) 1,541,750 - 1,541,750
- 3,000,000 3,000,000 0.00%, 02/15/19 - 854,190 854,190
- 5,000,000 5,000,000 0.00%, 05/15/20 - 1,317,600 1,317,600
--------------------------------------------
1,541,750 2,672,280 4,214,030
--------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS 142,937,844 207,674,771 350,612,615
--------------------------------------------
MORTGAGE-BACKED SECURITIES - 23.27%
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 11.80%
- 41,308 41,308 8.50%, 10/15/04, Pool # 4216 - 42,961 42,961
- 51,508 51,508 8.50%, 01/15/06, Pool # 7946 - 53,567 53,567
5,495,246 - 5,495,246 6.50%, 07/15/09, Pool # 780357 5,423,094 - 5,423,094
21,304 - 21,304 6.50%, 06/15/13, Pool # 462795 20,925 - 20,925
414,344 - 414,344 6.50%, 07/15/13, Pool # 468077 406,960 - 406,960
959,475 - 959,475 6.50%, 09/15/13, Pool # 464192 942,377 - 942,377
351,748 - 351,748 6.50%, 09/15/13, Pool # 476619 345,480 - 345,480
457,093 - 457,093 6.50%, 09/15/13, Pool # 487907 448,947 - 448,947
472,617 - 472,617 7.00%, 09/15/13, Pool # 484233 474,238 - 474,238
94,473 - 94,473 6.50%, 10/15/13, Pool # 464249 92,789 - 92,789
1,873,752 - 1,873,752 6.50%, 10/15/13, Pool # 477500 1,840,362 - 1,840,362
482,995 - 482,995 6.50%, 10/15/13, Pool # 481575 474,388 - 474,388
486,459 - 486,459 6.50%, 11/15/13, Pool # 475712 477,639 - 477,639
475,436 - 475,436 6.50%, 11/15/13, Pool # 492010 466,816 - 466,816
85,632 - 85,632 5.50%, 12/15/13, Pool # 495780 80,869 - 80,869
408,100 - 408,100 5.50%, 01/15/14, Pool # 464491 385,397 - 385,397
484,005 - 484,005 5.50%, 02/15/14, Pool # 464568 457,079 - 457,079
483,020 - 483,020 5.50%, 03/15/14, Pool # 487579 456,149 - 456,149
359,336 - 359,336 5.50%, 03/15/14, Pool # 501523 339,346 - 339,346
66,431 - 66,431 5.50%, 04/15/14, Pool # 496599 62,736 - 62,736
533,479 - 533,479 5.50%, 04/15/14, Pool # 505596 503,801 - 503,801
467,912 - 467,912 5.50%, 04/15/14, Pool # 506448 441,882 - 441,882
630,496 - 630,496 5.50%, 05/15/14, Pool # 480524 595,421 - 595,421
492,037 - 492,037 5.50%, 05/15/14, Pool # 505667 464,665 - 464,665
582,528 - 582,528 5.50%, 06/15/14, Pool # 434398 550,122 - 550,122
450,431 - 450,431 5.50%, 06/15/14, Pool # 507142 425,373 - 425,373
- 722,957 722,957 9.00%, 11/15/17, Pool # 780171 - 768,590 768,590
734,432 - 734,432 6.63%, 07/20/21, Pool # 008809 740,858 - 740,858
2,604,637 - 2,604,637 6.38%, 04/20/22, Pool # 008956 2,630,266 - 2,630,266
- 665,452 665,452 7.00%, 10/15/23, Pool # 360196 - 652,556 652,556
- 1,321,273 1,321,273 7.50%, 02/15/27, Pool # 443052 - 1,324,576 1,324,576
1,468,557 - 1,468,557 6.50%, 12/15/28, Pool # 495775 1,403,382 - 1,403,382
3,976,386 - 3,976,386 7.00%, 12/15/28, Pool # 483886 3,900,557 - 3,900,557
321,134 - 321,134 7.00%, 01/15/29, Pool # 499333 315,011 - 315,011
3,318,610 - 3,318,610 7.00%, 02/15/29, Pool # 486937 3,255,324 - 3,255,324
3,373,092 - 3,373,092 6.00%, 03/15/29, Pool # 464632 3,130,634 - 3,130,634
- 19,544,718 19,544,718 6.50%, 03/15/29, Pool # 498475 - 18,671,264 18,671,264
3,432,582 - 3,432,582 6.00%, 04/15/29, Pool # 499445 3,185,848 - 3,185,848
994,653 - 994,653 6.50%, 04/15/29, Pool # 506494 950,511 - 950,511
5,995,679 - 5,995,679 7.50%, 09/15/29, Pool # 508805 6,010,668 - 6,010,668
3,197,398 - 3,197,398 7.50%, 09/15/29, Pool # 508811 3,205,392 - 3,205,392
--------------------------------------------
44,905,306 21,513,514 66,418,820
--------------------------------------------
<PAGE>
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 5.70%
- 175,970 8.00%, 07/01/07, Pool # 125136 180,313 180,313
2,156,109 - 2,156,109 5.00%, 05/01/09, Pool # 326584 2,023,125 - 2,023,125
1,789 - 1,789 8.00%, 12/01/09, Pool # 313180 1,828 - 1,828
1,459,918 - 1,459,918 6.00%, 04/01/11, Pool # 398072 1,416,120 - 1,416,120
- 1,465,066 1,465,066 6.50%, 05/01/11, Pool #250554 - 1,436,219 1,436,219
- 5,765,548 5,765,548 6.00%, 04/01/13, Pool # 251656 - 5,540,287 5,540,287
- 4,292,282 4,292,282 6.00%, 04/01/13, Pool # 418044 - 4,124,582 4,124,582
- 132,948 132,948 6.00%, 06/01/13, Pool # 421167 - 127,754 127,754
536,742 - 536,742 6.00%, 06/01/14, Pool # 484967 516,276 - 516,276
3,315,163 - 3,315,163 6.00%, 06/01/14, Pool # 495200 3,188,756 - 3,188,756
700,238 - 700,238 6.00%, 06/01/14, Pool # 500131 673,538 - 673,538
- 4,776,299 4,776,299 7.79%, 02/01/19, Pool # 160103 - 5,206,166 5,206,166
- 1,420,798 1,420,798 10.00%, 10/01/20, Pool # 190942 - 1,531,790 1,531,790
- 1,782,476 1,782,476 10.00%, 12/01/20, Pool # 303416 - 1,921,723 1,921,723
2,183,829 - 2,183,829 6.75%, 04/25/21, Pool # 0096-4 2,185,860 - 2,185,860
1,000,000 - 1,000,000 8.00%, 09/01/29, Pool # 515880 1,018,750 - 1,018,750
1,000,100 - 1,000,100 8.00%, 09/01/29, Pool # 518157 1,018,852 - 1,018,852
--------------------------------------------
12,043,105 20,068,834 32,111,939
--------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION - 4.63%
- 54,874 54,874 7.00%, 10/01/03, Pool # N97059 - 54,874 54,874
5,000,000 - 5,000,000 6.70%, 07/15/06, Pool # 1233-G 4,998,400 - 4,998,400
6,770,733 - 6,770,733 5.00%, 12/01/13, Pool # E73815 6,255,616 - 6,255,616
5,000,000 - 5,000,000 6.00%, 04/15/22, Pool # 2118QC 4,751,550 - 4,751,550
4,348,579 - 4,348,579 6.50%, 10/15/23, Pool # 001990 4,309,137 - 4,309,137
5,508,000 - 5,508,000 8.50%, 10/01/29, Pool # G01072 5,705,902 - 5,705,902
--------------------------------------------
26,020,605 54,874 26,075,479
--------------------------------------------
STRUCTURED MORTGAGE PRODUCT - 1.14%
- 1,482,100 1,482,100 FDIC REMIC Trust
Series 1996, Class 1-A, CMO
6.75%, 05/25/26 - 1,469,472 1,469,472
1,828,124 - 1,828,124 Prudential Home Mortgage Securities
Series 1996-7, Class A-1, CMO
6.75%, 06/25/11 1,823,554 - 1,823,554
3,110,809 - 3,110,809 Rural Housing Trust
Series 1987-1, Class 1-D, CMO
6.33%, 04/01/26 3,049,079 - 3,049,079
- 52,558 52,558 Ryland Acceptance Corp. Four
Series 32, Class B, CMO
8.60%, 05/01/16 - 52,285 52,285
--------------------------------------------
4,872,633 1,521,757 6,394,390
--------------------------------------------
TOTAL MORTGAGE-BACKED SECURITIES 87,841,649 43,158,979 131,000,628
--------------------------------------------
CORPORATE NOTES AND BONDS - 7.89%
BANKING - 2.40%
7,500,000 - 7,500,000 Bank One Milwaukee
National Association, MTN
6.35%, 03/19/01 7,500,000 - 7,500,000
6,000,000 - 6,000,000 NationsBank Texas
National Association, MTN
6.35%, 03/15/01 5,992,500 - 5,992,500
--------------------------------------------
13,492,500 - 13,492,500
--------------------------------------------
UTILITIES - 1.66%
5,125,000 - 5,125,000 Baltimore Gas & Electric
6.50%, 02/15/03 5,080,156 - 5,080,156
1,975,000 - 1,975,000 Emerson Electric Co.
5.85%, 03/15/09 1,829,344 - 1,829,344
2,500,000 - 2,500,000 Potomac Electric Power Co.
First Mortgage
6.25%, 10/15/07 2,415,625 - 2,415,625
--------------------------------------------
9,325,125 - 9,325,125
--------------------------------------------
<PAGE>
CONSUMER CYCLICALS - 1.52%
5,000,000 - 5,000,000 Pepsi Bottling Holdings, Inc.
5.38%, 02/17/04 (C) 4,712,500 - 4,712,500
2,500,000 - 2,500,000 Stanford Jr. University
5.85%, 03/15/09 2,285,050 - 2,285,050
1,575,000 - 1,575,000 Wal-Mart Stores, Inc.
6.88%, 08/10/09 1,582,875 - 1,582,875
--------------------------------------------
8,580,425 - 8,580,425
--------------------------------------------
FINANCE - 1.34%
1,000,000 - 1,000,000 American Express
6.75%, 06/23/04 991,250 - 991,250
1,650,000 - 1,650,000 National Rural Utilities
5.50%, 01/15/05 1,536,563 - 1,536,563
5,000,000 - 5,000,000 Pitney Bowes Credit Corp.
Series C, MTN
6.78%, 07/16/01 5,043,750 - 5,043,750
--------------------------------------------
7,571,563 - 7,571,563
--------------------------------------------
AUTOMOBILE FINANCE - 0.97%
2,100,000 - 2,100,000 Ford Motor Credit Co.
6.25%, 11/08/00 2,098,131 - 2,098,131
910,000 - 910,000 Ford Motor Credit Co.
6.55%, 09/10/02 903,175 - 903,175
2,500,000 - 2,500,000 Ford Motor Credit Co.
6.70%, 07/16/04 2,475,000 - 2,475,000
--------------------------------------------
5,476,306 - 5,476,306
--------------------------------------------
TOTAL CORPORATE NOTES AND BONDS 44,445,919 - 44,445,919
--------------------------------------------
ASSET-BACKED SECURITIES - 4.20%
2,891,434 - 2,891,434 Chase Manhattan Auto Owner Trust
Series 1998-C, Class A3
5.80%, 01/15/02 2,884,205 - 2,884,205
6,000,000 - 6,000,000 Chemical Master Credit Card Trust I
Series 1996-1, Class A
5.55%, 09/15/03 5,938,080 - 5,938,080
6,000,000 - 6,000,000 Ford Credit Auto Owner Trust
Series 1999-D, Class A4
6.40%, 10/15/02 5,996,220 - 5,996,220
850,000 - 850,000 Green Tree Financial Corp.
Series 1998-1, Class A4
6.04%, 11/01/29 835,652 - 835,652
2,500,000 - 2,500,000 MBNA Master Credit Card Trust
Series 1998-J, Class A
5.25%, 02/15/06 2,376,550 - 2,376,550
360,000 - 360,000 Premier Auto Trust
Series 1999-2, Class A4
5.59%, 02/09/04 351,785 - 351,785
1,400,000 - 1,400,000 Premier Auto Trust
Series 1999-3, Class A4
6.43%, 03/08/04 1,401,470 - 1,401,470
4,000,000 - 4,000,000 Standard Credit Card Master Trust
Series 1993-2, Class A
5.95%, 10/07/04 3,888,720 - 3,888,720
--------------------------------------------
TOTAL ASSET-BACKED SECURITIES 23,672,682 - 23,672,682
--------------------------------------------
FOREIGN BONDS - 0.65%
4,000,000 - 4,000,000 Province of Quebec
5.75%, 02/15/09, (E) 3,640,000 - 3,640,000
--------------------------------------------
TOTAL FOREIGN BONDS 3,640,000 - 3,640,000
--------------------------------------------
<PAGE>
REPURCHASE AGREEMENTS - 1.68%
Repurchase Agreement with:
387,000 - 387,000 Chase Manhattan Bank
5.20%, 11/01/99, dated 10/29/99 387,000 - 387,000
- 9,097,504 9,097,504 Lehman Brothers
5.18%, 11/01/99, dated 10/29/99 - 9,097,504 9,097,504
--------------------------------------------
TOTAL REPURCHASE AGREEMENTS 387,000 9,097,504 9,484,504
--------------------------------------------
TOTAL INVESTMENTS - 99.96%
(Cost $309,092,373, $263,748,177, and $572,840,550) 302,925,094 259,931,254 562,856,348
============================================
NET OTHER ASSETS AND LIABILITIES - 0.04% (10,507,415) 10,729,605 222,190
============================================
NET ASSETS - 100.00% $292,417,679 $270,660,859 $563,078,538
============================================
</TABLE>
(A) Zero Coupon Security
(B) Stripped securities represent the splitting of cash flows into interest
and principal. Holders, as indicated, are entitled to that portion of
the payment representing interest only or principal only.
(C) Securities exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may only be resold, in transactions exempt
from registration, to qualified institutional buyers. At October 31,
1999, these securities amounted to $4,712,500 or 0.84% of net assets
(D) Discount yield at time of purchase
(E) U.S. Dollar Denominated
CMO - Collateralized Mortgage Obligation
FRN - Floating Rate Note. Interest rate shown reflects rate in effect at
October 31, 1999.
MTN - Medium Term Note
REMIC - Real Estate Mortgage Investment Conduit
See Notes to Pro Forma Financial Statements
<PAGE>
GALAXY INTERMEDIATE GOVERNMENT INCOME FUND
BOSTON 1784 US GOVERNMENT MEDIUM-TERM INCOME FUND
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
OCTOBER 31, 1999
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
GALAXY BOSTON 1784 U.S.
INTERMEDIATE GOV'T MEDIUM- PRO FORMA
GOV'T INCOME TERM INCOME PRO FORMA COMBINED
FUND FUND ADJUSTMENTS (NOTE 1)
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments
Investments at cost $ 308,705,373 $ 254,650,673 $ - $ 563,356,046
Repurchase agreements 387,000 9,097,504 - 9,484,504
Net unrealized (depreciation) (6,167,279) (3,816,923) - (9,984,202)
---------------------------------------------------------------------------------
Total Investments at Value 302,925,094 259,931,254 - 562,856,348
Cash 67,201 228,966 - 296,167
Receivable for investments sold 11,427,453 7,758,125 - 19,185,578
Receivable for shares sold 804,171 - - 804,171
Interest and dividends receivable 3,114,903 4,218,952 - 7,333,855
---------------------------------------------------------------------------------
Total Assets 318,338,822 272,137,297 - 590,476,119
LIABILITIES:
Dividends payable 1,432,135 1,186,721 - 2,618,856
Payable for investments purchased 23,848,199 - - 23,848,199
Payable for shares repurchased 392,997 21 - 393,018
Advisory fee payable 137,278 156,402 - 293,680
Payable to Fleet affiliates 12,733 - - 12,733
Administration fee payable 44,438 14,962 - 59,400
Trustees' fees and expenses payable 9,749 517 - 10,266
Accrued expenses and other payables 43,614 117,815 - 161,429
---------------------------------------------------------------------------------
Total Liabilities 25,921,143 1,476,438 - 27,397,581
NET ASSETS $ 292,417,679 $ 270,660,859 $ - $ 563,078,538
=================================================================================
NET ASSETS CONSISTS OF:
Paid-in capital $ 325,568,322 $ 281,491,027 $ - $ 607,059,349
Undistributed net investment income 418,658 74,349 - 493,007
Accumulated net realized (loss)
on investments sold (27,402,022) (7,087,594) - (34,489,616)
Net unrealized (depreciation) of
investments (6,167,279) (3,816,923) - (9,984,202)
---------------------------------------------------------------------------------
TOTAL NET ASSETS $ 292,417,679 $ 270,660,859 $ - $ 563,078,538
=================================================================================
Net Assets by Class:
Retail A Shares $ 56,453,630 N/A $ - $ 56,453,630
=================================================================================
Retail B Shares 1,084,478 N/A - 1,084,478
=================================================================================
Trust Shares / Shares 234,879,571 270,660,859 (15,968,991) 489,571,439
=================================================================================
BKB Shares N/A N/A 15,968,991 15,968,991
=================================================================================
Shares of beneficial interest outstanding:
Retail A Shares 5,728,355 N/A - 5,728,355
=================================================================================
Retail B Shares 110,102 N/A - 110,102
=================================================================================
Trust Shares / Shares 23,833,798 29,079,361 (3,222,319) 49,690,840
=================================================================================
BKB Shares N/A N/A 1,621,217 1,621,217
=================================================================================
Net Asset Value - Retail A Shares $ 9.86 N/A $ 9.86
=================================================================================
Net Asset Value - Retail B Shares $ 9.85 N/A $ $ 9.85
=================================================================================
Net Asset Value - Trust Shares / Shares $ 9.85 $ 9.31 $ $ 9.85
=================================================================================
Net Asset Value - BKB Shares N/A N/A $ $ 9.85
=================================================================================
</TABLE>
See Notes to Pro Forma Financial Statements
<PAGE>
GALAXY INTERMEDIATE GOVERNMENT INCOME FUND
BOSTON 1784 US GOVERNMENT MEDIUM-TERM INCOME FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS (UNAUDITED)
OCTOBER 31, 1999
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
GALAXY BOSTON 1784
INTERMEDIATE U.S.GOV'T PRO FORMA
GOV'T INCOME MEDIUM-TERM PRO FORMA COMBINED
FUND INCOME FUND ADJUSTMENTS (NOTE 1)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income:
Interest Income $ 19,014,124 $ 16,745,073 $ - $ 35,759,197
----------------------------------------------------------------------------
Total Investment Income 19,014,124 16,745,073 - 35,759,197
----------------------------------------------------------------------------
Expenses:
Investment Advisory Fees 2,282,992 2,042,413 27,044 (a) 4,352,449
Administrative Fees 229,022 181,888 (11,833) (a) 399,077
Custodian Fee 32,652 15,511 (10,000) (b) 38,163
Fund Accounting Fee 71,627 2,748 33,603 (a) 107,978
Professional Fees 25,060 22,994 (18,927) (b) 29,127
Trustee Fees 7,562 7,566 (5,650) (b) 9,478
Reports to Shareholders 31,528 19,135 (15,000) (b) 35,663
Miscellaneous Expenses 42,370 24,439 - 66,809
----------------------------------------------------------------------------
Subtotal 2,722,813 2,316,694 (763) 5,038,744
Transfer Agent Fee
Retail A Shares 84,722 - - 84,722
Retail B Shares 2,690 - - 2,690
Trust Shares / Shares 49,447 67,121 (68,144) (a) 48,424
BKB Shares - - 10,660 (a) 10,660
Shareholder Services Fee & 12b-1 Fee
Retail A Shares 87,475 - - 87,475
Retail B Shares 4,739 - - 4,739
Trust Shares / Shares - 690,000 (690,000) (a) -
BKB Shares - - 24,426 (a) 24,426
----------------------------------------------------------------------------
Total Expenses before
reimbursement/waiver 2,951,886 3,073,815 (723,821) 5,301,880
Less Waiver/Reimbursements
Fund Level Waivers (608,798) (175,772) (376,083) (c) (1,160,653)
Class Specific Waivers/Reimbursements
Retail A Shares - - - -
Retail B Shares (1,761) - - (1,761)
Trust Shares / Shares - (690,000) 690,000 (c) -
BKB Shares - - (13,027) (c) (13,027)
----------------------------------------------------------------------------
Total Waivers/Reimbursements (610,559) (865,772) 300,890 (1,175,441)
Net Expenses 2,341,327 2,208,043 (422,931) 4,126,439
----------------------------------------------------------------------------
Net Investment Income 16,672,797 14,537,030 422,931 31,632,758
----------------------------------------------------------------------------
Net Realized (Loss) on Investments (3,699,849) (524,660) - (4,224,509)
Net Change in Unrealized (Depreciation)
of Investments (15,849,529) (16,055,599) - (31,905,128)
----------------------------------------------------------------------------
Net Realized and Unrealized (Loss) on Investments (19,549,378) (16,580,259) - (36,129,637)
----------------------------------------------------------------------------
Net (Decrease) in Net Assets Resulting from
Operations $ (2,876,581) $ (2,043,229) $ 422,931 $ (4,496,879)
============================================================================
</TABLE>
(a) Reflects adjustment to the acquiring fund contractual fee level.
(b) Reflects expected savings when the two funds become one.
(c) Reflects adjustment to the acquiring fund's voluntary expense
limitation.
See Notes to Pro Forma Financial Statements
<PAGE>
Galaxy Intermediate Government Income Fund
Boston 1784 U.S. Government Medium-Term Income Fund
Notes to Pro Forma Combining Financial Statements (unaudited)
1. Basis of Combination
The Galaxy Fund, a Massachusetts business trust (the "Trust"), is registered
under the Investment Company Act of 1940, as amended, (the "1940 Act") as an
open-end management investment company. As of October 31, 1999, the Trust
offered twenty-nine managed investment portfolios. The unaudited Pro Forma
Combining Portfolio of Investments and the unaudited Pro Forma Statement of
Assets and Liabilities assumes the exchange described in the next paragraph
occurred as of October 31, 1999 and the unaudited Pro Forma Combining Statement
of Operations assumes the exchange occurred as of November 1, 1998. These
statements have been derived from books and records utilized in calculating the
net asset value of each fund at October 31, 1999 and for the twelve-month period
then ended.
The pro forma statements give effect to the proposed transfer of substantially
all of the assets and stated liabilities of the Boston 1784 U.S. Government
Medium-Term Income Fund in exchange for Trust and BKB shares of Galaxy
Intermediate Government Income Fund. Under generally accepted accounting
principles, the historical cost of investment securities will be carried forward
to the surviving entity and the results of operations of the Boston 1784 U.S.
Government Medium-Term Income Fund for pre-combination periods will not be
restated. The pro forma statements do not reflect the expenses of either fund in
carrying out its obligations under the proposed Agreement and Plan of
Reorganization.
The unaudited Pro Forma Combining Financial Statements should be read in
conjunction with the historical financial statements of the funds incorporated
by reference in the Statement of Additional Information.
For the twelve-month period ended October 31, 1999, the Galaxy Intermediate
Government Income Fund's investment advisory fee was computed based on the
annual rate of 0.75% of its average daily net assets. The administration fee was
computed based on the annual rate of 0.09% of the first $2.5 billion of the
Trust's combined average daily net assets, 0.085% of the next $2.5 billion,
0.075% of the next $7 billion, 0.065% of the next $3 billion, 0.06% of the next
$3 billion, and 0.0575% of the combined average daily net assets in excess of
$18 billion, and was allocated to each fund based on the relative net assets of
the Trust.
The Trust has adopted a shareholder services plan (the "Services Plan") with
respect to Retail A, BKB and Trust Shares of the funds to compensate certain
institutions providing administrative and support services to their customers
who own such shares. Currently, the Services Plan has not been implemented for
the Trust shares. Under the Services Plan, aggregate payments may not exceed
0.30% of the average daily net assets of Retail A or BKB shareholders who are
customers of such institutions. Currently, the Trust, under the direction of the
Board of Trustees, is limiting such payments to 0.15% of the average daily net
assets of Retail A or BKB shareholders who are customers of such institutions.
The Trust has adopted a distribution and services plan (the "12b-1 Plan") with
respect to Retail B shares of the fund. Payments to the Distributor or others
for distribution services (those primarily intended to result in the sale of
Retail B shares) may not exceed 0.65% of the average daily net assets of Retail
B shares. Payments to institutions providing services to their customers owning
Retail B shares for shareholder liaison and administrative support services may
not exceed 0.15% and 0.15%, respectively, of the average daily net assets
attributable to shareholders who are customers of such institutions. The Trust
is currently limiting payments for shareholder liaison and administrative
support to 0.15% of the average daily net assets attributable to shareholders
that are customers of such institutions.
<PAGE>
Galaxy Intermediate Government Income Fund
Boston 1784 U.S. Government Medium-Term Income Fund
Notes to Pro Forma Combining Financial Statements (unaudited) (continued)
2. Portfolio Valuation
The Galaxy Intermediate Government Income Fund's investment securities are
valued by an independent pricing service approved by the Trust's Board of
Trustees. When, in the judgement of the service, quoted bid prices are readily
available and are representative of the bid side of the market, investments are
valued at the mean between quoted bid and asked prices. Other investments are
carried at fair value as determined by the service based on methods which
include consideration of yields or prices of bonds of comparable quality, coupon
maturity and type; indications as to values from dealers and general market
conditions. Short-term obligations that mature in 60 days or less are valued at
amortized cost, which approximated fair value. All other securities and other
assets are appraised at their fair value as determined in good faith under
consistently applied procedures established by and under the general supervision
of the Board of Trustees. Boston 1784 U.S. Government Medium-Term Income Fund
uses similar rules for determining portfolio valuation.
3. Capital Shares
The pro forma net asset value per share assumes the issuance of additional
shares of the Galaxy Intermediate Government Income Fund that would have been
issued at October 31, 1999 in connection with the proposed reorganization. The
pro forma number of shares outstanding of 57,150,514 consists of 27,478,259
shares assumed issued in the reorganization plus 29,672,255 shares of the Galaxy
Intermediate Government Income Fund at October 31, 1999.
<PAGE>
GALAXY RHODE ISLAND MUNICIPAL BOND FUND
BOSTON 1784 RHODE ISLAND TAX-EXEMPT INCOME FUND
PRO FORMA COMBINING PORTFOLIO OF INVESTMENTS (UNAUDITED)
OCTOBER 31, 1999
<TABLE>
<CAPTION>
PAR VALUE DESCRIPTION VALUE (NOTE 2)
- ------------------------------------------------------------------------------------------------------------------------------------
GALAXY RHODE BOSTON 1784 GALAXY RHODE BOSTON 1784
ISLAND RHODE ISLAND ISLAND RHODE ISLAND
MUNICIPAL TAX EXEMPT PRO FORMA MUNICIPAL TAX EXEMPT PRO FORMA
BOND FUND INCOME FUND COMBINED BOND FUND INCOME FUND COMBINED
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MUNICIPAL SECURITIES - 95.89%
GUAM - 0.85%
$ - $ 1,000,000 $ 1,000,000 Guam Power Authority
Revenue, Series A
5.25%, 10/01/11 $ - $ 993,750 $ 993,750
-------------------------------------------
PUERTO RICO - 12.86%
250,000 - 250,000 Puerto Rico Commonwealth, GO
6.00%, 07/01/16
Insured: MBIA 260,000 - 260,000
- 1,000,000 1,000,000 Puerto Rico Commonwealth, GO
5.75%, 07/01/17
Insured: FSA - 1,002,500 1,002,500
- 3,500,000 3,500,000 Puerto Rico Commonwealth, GO
Capital Appreciation, Public Improvement
4.85%, 07/01/14 (B) - 1,505,000 1,505,000
500,000 - 500,000 Puerto Rico Commonwealth, GO
Public Improvement
5.50%, 07/01/12 505,000 - 505,000
500,000 - 500,000 Puerto Rico Commonwealth
Special Tax Revenue, Series A
Infrastructure Finance Authority
5.00%, 07/01/16
Insured: AMBAC 461,250 - 461,250
500,000 - 500,000 Puerto Rico Electric Power Authority
Revenue, Series EE
5.25%, 07/01/15
Insured: MBIA 480,625 - 480,625
- 3,000,000 3,000,000 Puerto Rico Electric Power Authority
Revenue, Series FF
5.25%, 07/01/14
Insured: MBIA - 2,902,500 2,902,500
- 3,000,000 3,000,000 Puerto Rico Electric Power Authority
Revenue, Series Z
5.50%, 07/01/16 - 2,906,250 2,906,250
- 360,000 360,000 Puerto Rico Industrial Tourist Educational
Medical & Environmental Control Facilities
International American University, Series A
5.25%, 10/01/12
Insured: MBIA - 356,400 356,400
- 1,550,000 1,550,000 Puerto Rico Industrial Tourist Educational
Medical & Environmental Control Facilities
International American University, Series A
5.38%, 10/01/13
Insured: MBIA - 1,524,812 1,524,812
- 350,000 350,000 Puerto Rico Industrial Tourist Educational
Medical & Environmental Control Facilities
International American University, Series A
5.50%, 10/01/14
Insured: MBIA - 346,937 346,937
400,000 - 400,000 Puerto Rico Municipal
Finance Agency, Series A
6.00%, 07/01/14
Insured: FSA 416,000 - 416,000
315,000 - 315,000 Puerto Rico Municipal
Finance Agency, Series A
5.50%, 07/01/17
Insured: FSA 307,912 - 307,912
- 2,000,000 2,000,000 Puerto Rico Public Building Authority
Public Education and Health Facilities, Series M
5.75%, 07/01/15
Insured: CGTD - 2,005,000 2,005,000
-------------------------------------------
2,430,787 12,549,399 14,980,186
-------------------------------------------
<PAGE>
RHODE ISLAND - 81.53%
- 1,080,000 1,080,000 Bristol County Water Authority
Revenue, General, Series A
5.20%, 12/01/13
Insured: MBIA - 1,031,400 1,031,400
- 1,000,000 1,000,000 Bristol County Water Authority
Revenue, General, Series A
5.20%, 12/01/14
Insured: MBIA - 945,000 945,000
500,000 - 500,000 Bristol County Water Authority
Revenue, General, Series A
5.00%, 07/01/16
Insured: MBIA 447,500 - 447,500
200,000 - 200,000 Burrillville, GO
5.85%, 05/01/14 207,750 - 207,750
Insured: FGIC
- 1,505,000 1,505,000 Central Falls Detention Facility
Corporate Detention Facility
Donald W. Wyatt Detention Center
Revenue, Series A
5.25%, 01/15/13 - 1,420,343 1,420,343
- 1,000,000 1,000,000 Central Falls Detention Facility
Corporate Detention Facility
Donald W. Wyatt Detention Center
Revenue, Series A
5.38%, 01/15/18 - 913,750 913,750
- 1,000,000 1,000,000 Central Falls Detention Facility
Corporate Detention Facility
Donald W. Wyatt Detention Center
Revenue, Series A
5.38%, 01/15/18
Insured: FSA - 933,750 933,750
- 1,000,000 1,000,000 Convention Center Authority, Series A
5.50%, 05/15/13
Insured: AMBAC - 1,002,500 1,002,500
500,000 - 500,000 Convention Center Authority, Series A
6.38%, 05/15/23
Insured: MBIA 525,000 - 525,000
- 1,000,000 1,000,000 Cranston, GO
6.10%, 06/15/10
Insured: MBIA - 1,060,000 1,060,000
- 1,500,000 1,500,000 Cranston, GO
6.10%, 06/15/15
Insured: MBIA - 1,573,125 1,573,125
- 1,305,000 1,305,000 Cranston, GO
5.50%, 07/15/15 - 1,283,794 1,283,794
Insured: MBIA
- 500,000 500,000 Cumberland, GO
5.10%, 09/01/14 - 470,000 470,000
Insured: MBIA
- 1,000,000 1,000,000 Exeter West Greenwich
Regional School District, GO
5.40%, 11/15/10
Insured: MBIA - 1,007,500 1,007,500
- 500,000 500,000 Kent County Water Authority
Revenue, Series A
6.00%, 07/15/08
Insured: MBIA - 523,125 523,125
500,000 - 500,000 Lincoln, GO
5.50%, 08/15/10
Insured: MBIA 507,500 - 507,500
- 1,100,000 1,100,000 North Providence, GO
6.00%, 07/01/12
Insured: MBIA - 1,159,125 1,159,125
- 500,000 500,000 North Providence, GO
6.05%, 07/01/13
Insured: MBIA - 526,250 526,250
300,000 - 300,000 Pawtucket, GO
5.63%, 04/15/07
Insured: FGIC 310,875 - 310,875
400,000 - 400,000 Pawtucket, GO
5.75%, 04/15/11
Insured: FGIC 411,000 - 411,000
- 1,085,000 1,085,000 Providence, GO
5.10%, 01/15/06
Insured: FSA - 1,098,562 1,098,562
500,000 - 500,000 Providence, GO
5.70%, 01/15/06
Insured: MBIA 517,500 - 517,500
500,000 - 500,000 Providence, GO
5.45%, 01/15/10
Insured: FSA 503,750 - 503,750
<PAGE>
- 1,825,000 1,825,000 Providence, GO, Series A
5.70%, 07/15/12
Insured: FSA - 1,859,219 1,859,219
- 380,000 380,000 Providence, HDC, FHA
Barbara Jordan Apartments
6.50%, 07/01/09
Insured: MBIA, FHA - 396,150 396,150
- 500,000 500,000 Providence Public Building Authority
Revenue, Series A
5.40%, 12/15/11
Insured: FSA - 496,875 496,875
- 1,035,000 1,035,000 Providence Public Building Authority
School & Public Facilities Projects, Series A
5.38%, 12/15/11
Insured: AMBAC - 1,025,944 1,025,944
- 500,000 500,000 Providence Public Building Authority
School & Public Facilities Projects, Series A
5.13%, 12/15/14
Insured: AMBAC - 463,750 463,750
- 1,500,000 1,500,000 Providence Public Building Authority
School & Public Facilities Projects, Series A
5.25%, 12/15/14
Insured: FSA - 1,413,750 1,413,750
- 1,000,000 1,000,000 Rhode Island Building Authority
State Public Projects, Revenue, Series A
5.25%, 02/01/10 - 991,250 991,250
- 435,000 435,000 Rhode Island Clean Water
Protection Finance Agency
PCR, Series A
5.88%, 10/01/15
Insured: MBIA - 445,331 445,331
500,000 - 500,000 Rhode Island Clean Water
Protection Finance Agency
PCR, Series A
5.25%, 10/01/16
Insured: AMBAC 463,125 - 463,125
150,000 - 150,000 Rhode Island Clean Water
Protection Finance Agency
Safe Drinking Water
Providence, Series A
6.20%, 01/01/06
Insured: AMBAC 159,000 - 159,000
- 500,000 500,000 Rhode Island Clean Water
Protection Finance Agency
Safe Drinking Water
Providence, Series A
6.50%, 01/01/09
Insured: AMBAC - 535,000 535,000
100,000 - 100,000 Rhode Island Clean Water
Protection Finance Agency
Safe Drinking Water
Providence, Series A
6.70%, 01/01/15
Insured: AMBAC 106,875 - 106,875
<PAGE>
250,000 - 250,000 Rhode Island Clean Water
Protection Finance Agency
Wastewater Treatment
System, Cranston
5.80%, 09/01/22
Insured: MBIA 242,187 - 242,187
- 500,000 500,000 Rhode Island Depositors
Economic Protection Corp.
SP OB, Series A
6.50%, 08/01/07
Insured: FSA - 543,125 543,125
- 1,000,000 1,000,000 Rhode Island Depositors
Economic Protection Corp.
SP OB, Series A
5.75%, 08/01/14 - 1,016,250 1,016,250
Insured: FSA
- 1,000,000 1,000,000 Rhode Island Depositors
Economic Protection Corp.
SP OB, Series B
5.80%, 08/01/12
Insured: MBIA - 1,038,750 1,038,750
500,000 - 500,000 Rhode Island Depositors
Economic Protection Corp.
SP OB, Series A
5.75%, 08/01/21 496,875 - 496,875
250,000 - 250,000 Rhode Island Depositors
Economic Protection Corp.
SP OB, Series B
5.25%, 08/01/21
Insured: MBIA 247,187 - 247,187
200,000 - 200,000 Rhode Island State, GO, Series A
6.10%, 06/15/03
Insured: FGIC 210,250 - 210,250
150,000 - 150,000 Rhode Island State, GO, Series A
6.25%, 06/15/07
Unrefunded
Insured: FGIC 158,063 - 158,063
- 3,000,000 3,000,000 Rhode Island State, GO, Series A
Consolidated Capital Development Loan
5.00%, 07/15/07
Insured: FGIC - 3,003,750 3,003,750
- 2,580,000 2,580,000 Rhode Island State, GO, Series A
Consolidated Capital Development Loan
5.25%, 09/01/08 2,612,250 2,612,250
- 1,000,000 1,000,000 Rhode Island State, GO, Series A
Consolidated Capital Development Loan
5.25%, 07/15/10
Insured: FGIC - 998,750 998,750
- 1,530,000 1,530,000 Rhode Island State, GO, Series A
Consolidated Capital Development Loan
5.00%, 08/01/11 - 1,470,713 1,470,713
- 1,250,000 1,250,000 Rhode Island State, GO, Series A
Consolidated Capital Development Loan
5.20%, 09/01/11
Insured: FGIC - 1,223,437 1,223,437
- 1,735,000 1,735,000 Rhode Island State, GO, Series A
Consolidated Capital Development Loan
5.13%, 07/15/12
Insured: FGIC - 1,672,106 1,672,106
- 1,665,000 1,665,000 Rhode Island State, GO, Series A
Consolidated Capital Development Loan
5.00%, 09/01/12 - 1,581,750 1,581,750
- 3,000,000 3,000,000 Rhode Island State, GO, Series A
Consolidated Capital Development Loan
5.13%, 07/15/13
Insured: FGIC - 2,835,000 2,835,000
- 2,680,000 2,680,000 Rhode Island State, GO, Series A
Consolidated Capital Development Loan
5.00%, 09/01/14 - 2,458,900 2,458,900
- 500,000 500,000 Rhode Island State, GO, Series A
Consolidated Capital Development Loan
5.50%, 09/01/15
Insured: FGIC - 486,875 486,875
- 2,425,000 2,425,000 Rhode Island State, GO, Series A
Consolidated Capital Development Loan
5.00%, 09/01/16 - 2,194,625 2,194,625
250,000 - 250,000 Rhode Island State EDC
Airport, Series B
5.25%, 07/01/11
Insured: FSA 245,625 - 245,625
- 1,620,000 1,620,000 Rhode Island State EDC
Airport, Series B
5.00%, 07/01/15
Insured: FSA - 1,462,050 1,462,050
500,000 - 500,000 Rhode Island State EDC
Airport, Series B
5.00%, 07/01/18
Insured: FSA 436,250 - 436,250
250,000 - 250,000 Rhode Island State EDC
Airport, Series B
5.00%, 07/01/23
Insured: FSA 214,063 - 214,063
750,000 - 750,000 Rhode Island State EDC
University of Rhode Island
Steam Generation Facility Project
5.00%, 11/01/19
Insured: FSA 653,438 - 653,438
- 1,215,000 1,215,000 Rhode Island State HEBC
Higher Education Facility
Brown University
4.75%, 09/01/14 - 1,095,019 1,095,019
- 1,000,000 1,000,000 Rhode Island State HEBC
Higher Education Facility
Brown University
5.00%, 09/01/15 - 912,500 912,500
<PAGE>
- 1,000,000 1,000,000 Rhode Island State HEBC
Higher Education Facility
Brown University
5.00%, 09/01/16 - 902,500 902,500
- 1,000,000 1,000,000 Rhode Island State HEBC
Higher Education Facility
Brown University
5.00%, 09/01/17 895,000 895,000
500,000 - 500,000 Rhode Island State HEBC
Higher Education Facility
Brown University
6.00%, 09/01/20 507,500 - 507,500
1,000,000 - 1,000,000 Rhode Island State HEBC
Higher Education Facility
Brown University
5.00%, 09/01/23 858,750 - 858,750
275,000 - 275,000 Rhode Island State HEBC
Higher Education Facility
Bryant College, SP OB
6.50%, 06/01/05
Insured: MBIA 290,813 - 290,813
- 400,000 400,000 Rhode Island State HEBC
Higher Education Facility
New England Institute
5.90%, 03/01/10
Insured: Connie Lee - 405,000 405,000
475,000 - 475,000 Rhode Island State HEBC
Higher Education Facility
New England Institute
6.00%, 03/01/15
Insured: Connie Lee 482,719 - 482,719
300,000 - 300,000 Rhode Island State HEBC
Higher Education Facility
Providence College
5.60%, 11/01/09
Insured: MBIA 304,500 - 304,500
500,000 2,000,000 2,500,000 Rhode Island State HEBC
Higher Education Facility
Rhode Island School of Design
5.63%, 06/01/16
Insured: MBIA 490,625 1,960,000 2,450,625
- 2,000,000 2,000,000 Rhode Island State HEBC
Higher Education Facility
Roger Williams
5.13%, 11/15/14
Insured: AMBAC - 1,845,000 1,845,000
- 1,000,000 1,000,000 Rhode Island State HEBC
Higher Education Facility
Roger Williams
5.25%, 11/15/16
Insured: Connie Lee - 925,000 925,000
- 1,000,000 1,000,000 Rhode Island State HEBC
Higher Education Facility
Roger Williams
5.00%, 11/15/18
Insured: AMBAC - 870,000 870,000
325,000 - 325,000 Rhode Island State HEBC
Higher Education Facility
Roger Williams
6.50%, 11/15/24
Insured: Connie Lee 349,375 - 349,375
260,000 - 260,000 Rhode Island State HEBC
Higher Education Facility
Salve Regina
6.25%, 03/15/13
Insured: Connie Lee 270,725 - 270,725
- 180,000 180,000 Rhode Island State HEBC
Higher Education Facility
Unrefunded
6.50%, 11/15/08
Insured: Connie Lee - 189,000 189,000
175,000 - 175,000 Rhode Island State HEBC
Higher Education Facility
Unrefunded
6.50%, 11/15/24
Insured: Connie Lee 185,063 - 185,063
- 500,000 500,000 Rhode Island State HEBC
Kent Memorial Hospital
7.00%, 07/01/10
Insured: MBIA - 524,375 524,375
<PAGE>
- 2,000,000 2,000,000 Rhode Island State HEBC
Landmark Medical Center
5.60%, 10/01/12
Insured: FSA - 2,005,000 2,005,000
500,000 - 500,000 Rhode Island State HEBC
Miriam Hospital
Series B
6.60%, 04/01/19 539,375 - 539,375
- 1,045,000 1,045,000 Rhode Island State HEBC
Roger Williams Hospital
5.40%, 07/01/13 - 940,500 940,500
- 1,000,000 1,000,000 Rhode Island State HEBC
Roger Williams Hospital
5.50%, 07/01/18 - 850,000 850,000
300,000 - 300,000 Rhode Island State HEBC
Saint Antoine
6.75%, 11/15/18
LOC: Allied Irish Banks NY 328,500 - 328,500
300,000 - 300,000 Rhode Island State HMFC
Homeownership Opportunity
Series 17-A
6.25%, 04/01/17 303,375 - 303,375
- 885,000 885,000 Rhode Island State HMFC
Homeownership Opportunity
Series E-1, AMT
7.50%, 10/01/11
Insured: FHA - 917,081 917,081
- 2,000,000 2,000,000 Rhode Island State HMFC
Homeownership Opportunity
Series 13
6.70%, 10/01/15 - 2,052,500 2,052,500
500,000 1,500,000 2,000,000 Rhode Island State HMFC
Homeownership Opportunity
Series 19-A
5.70%, 04/01/15 488,125 1,460,625 1,948,750
500,000 500,000 1,000,000 Rhode Island State HMFC
Homeownership Opportunity
Series 22-A
5.55%, 04/01/17 476,875 475,625 952,500
- 2,240,000 2,240,000 Rhode Island State HMFC
Homeownership Opportunity
Series 27-B, AMT
5.15%, 10/01/12
Insured: GNMA/FNMA - 2,102,800 2,102,800
500,000 - 500,000 Rhode Island State HMFC
Homeownership Opportunity
Series 29-A
5.05%, 10/01/15
Insured: FHA 452,500 - 452,500
- 2,000,000 2,000,000 Rhode Island State HMFC
Homeownership Opportunity
Series 30-A
4.90%, 10/01/14
Insured: GNMA/FNMA - 1,832,500 1,832,500
500,000 - 500,000 Rhode Island State HMFC
Multifamily Housing
Series A
5.60%, 07/01/10
Insured: AMBAC 505,000 - 505,000
500,000 - 500,000 Rhode Island State HMFC
Multifamily Housing
Series A
6.15%, 07/01/17
Insured: AMBAC 509,375 - 509,375
250,000 1,000,000 1,250,000 Rhode Island State HMFC
Rental Housing Program
Series A
5.65%, 10/01/07 251,562 1,003,750 1,255,312
- 500,000 500,000 Rhode Island State
Industrial Facilities Corp., Revenue, AMT
CRE Corp. Project
6.50%, 03/01/14
LOC: Fleet Bank - 510,000 510,000
500,000 2,250,000 2,750,000 Rhode Island State
Industrial Facilities Corp., Revenue
Marine Terminal, Mobil Oil Refining
6.00%, 11/01/14 527,500 2,370,938 2,898,438
- 1,000,000 1,000,000 Rhode Island State
Turnpike and Bridge Authority, Revenue
5.00%, 12/01/11 - 930,000 930,000
- 2,130,000 2,130,000 Rhode Island State
Turnpike and Bridge Authority, Revenue
5.35%, 12/01/17 - 1,956,938 1,956,938
<PAGE>
100,000 - 100,000 South Kingstown, GO, Series B
5.50%, 06/15/10
Insured: FSA 101,625 - 101,625
- 1,180,000 1,180,000 Warwick, GO
Series A
5.00%, 03/01/15
Insured: FGIC - 1,084,125 1,084,125
- 1,205,000 1,205,000 Warwick, GO
Series A
5.00%, 03/01/16
Insured: FGIC - 1,093,538 1,093,538
140,000 - 140,000 Westerly, GO
6.00%, 09/15/14
Insured: AMBAC 146,650 - 146,650
300,000 - 300,000 Woonsocket, GO
4.75%, 12/15/16
Insured: FGIC 262,125 - 262,125
-------------------------------------------
15,696,470 79,283,138 94,979,608
-------------------------------------------
TEXAS - 0.24%
450,000 - 450,000 Lubbock Independent
School District, GO
Capital Appreciation
6.10%, 02/15/09 (A) 275,062 - 275,062
-------------------------------------------
WASHINGTON - 0.41%
1,000,000 - 1,000,000 Seattle, GO, Series E
4.85%, 12/15/12 (A) 478,750 - 478,750
-------------------------------------------
TOTAL MUNICIPAL SECURITIES 18,881,069 92,826,287 111,707,356
-------------------------------------------
REPURCHASE AGREEMENT - 2.51%
Repurchase Agreement with
- 2,923,403 2,923,403 Lehman Brothers
5.18%, 11/01/99, dated 10/29/99 - 2,923,403 2,923,403
-------------------------------------------
TOTAL REPURCHASE AGREEMENT - 2,923,403 2,923,403
-------------------------------------------
SHARES
- -------------------------------------------
INVESTMENT COMPANY - 0.23%
270,234 - 270,234 Federated Tax-Free Obligations Fund 270,234 - 270,234
-------------------------------------------
TOTAL INVESTMENT COMPANY 270,234 - 270,234
-------------------------------------------
TOTAL INVESTMENTS - 98.63%
(Cost $19,614,554, $99,711,194, and $119,325,748) 19,151,303 95,749,690 114,900,993
===========================================
NET OTHER ASSETS AND LIABILITIES - 1.37% 681,961 917,840 1,599,801
===========================================
NET ASSETS - 100.00% $ 19,833,264 $ 96,667,530 $ 116,500,794
===========================================
</TABLE>
(A) -- Zero Coupon Bond. Rate shown reflects effective yield
to maturity at time of purchase.
(B) -- Zero Coupon Bond. Rate shown reflects effective yield
at time of issue.
AMBAC -- American Municipal Bond Assurance Corp.
AMT -- Alternate Minimum Tax
CGTD -- Commonwealth Guaranteed
Connie Lee -- College Construction Loan Association
EDC -- Economic Development Corp.
FGIC -- Federal Guaranty Insurance Corp.
FHA -- Federal Housing Authority
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance Company
GNMA -- Government National Mortgage Association
GO -- General Obligation
HDC -- Housing Development Corp.
HEBC -- Health and Educational Building Corp.
HMFC -- Housing and Mortgage Finance Corp.
MBIA -- Municipal Bond Investors Assurance
PCR -- Pollution Control Revenue
SP OB -- Special Obligation
See Notes to Pro Forma Financial Statements
<PAGE>
GALAXY RHODE ISLAND MUNICIPAL BOND FUND
BOSTON 1784 RHODE ISLAND TAX-EXEMPT INCOME FUND
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
OCTOBER 31, 1999
<TABLE>
<CAPTION>
-------------------------------------------------------------------
GALAXY RHODE BOSTON 1784
ISLAND RHODE ISLAND PRO FORMA
MUNICIPAL TAX EXEMPT PRO FORMA COMBINED
BOND FUND INCOME FUND ADJUSTMENTS (NOTE 1)
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments
Investments at cost $ 19,614,554 $ 96,787,791 $ - $ 116,402,345
Repurchase agreements - 2,923,403 - 2,923,403
Net unrealized (depreciation) (463,251) (3,961,504) - (4,424,755)
-------------------------------------------------------------------
Total Investments at Value 19,151,303 95,749,690 - 114,900,993
Cash 5,418 2 - 5,420
Receivable for investments sold 446,626 - - 446,626
Receivable for shares sold 34,486 - - 34,486
Interest and dividends receivable 297,353 1,370,966 - 1,668,319
-------------------------------------------------------------------
Total Assets 19,935,186 97,120,658 - 117,055,844
LIABILITIES:
Dividends payable 76,995 376,508 - 453,503
Advisory fee payable 6,258 54,527 - 60,785
Administration fee payable 4,649 5,354 - 10,003
Trustees' fees and expenses payable 976 188 - 1,164
Accrued expenses and other payables 13,044 16,551 - 29,595
-------------------------------------------------------------------
Total Liabilities 101,922 453,128 - 555,050
NET ASSETS $ 19,833,264 $ 96,667,530 $ - $ 116,500,794
===================================================================
NET ASSETS CONSISTS OF:
Paid-in capital $ 20,383,782 $ 100,225,868 $ - $ 120,609,650
(Overdistributed) net investment income (11,177) (12) - (11,189)
Accumulated net realized gain (loss) on investments sold (76,090) 403,178 - 327,088
Net unrealized (depreciation) of investments (463,251) (3,961,504) - (4,424,755)
-------------------------------------------------------------------
TOTAL NET ASSETS $ 19,833,264 $ 96,667,530 $ - $ 116,500,794
===================================================================
Net Assets by Class:
Retail A Shares $ 19,833,264 N/A $ - $ 19,833,264
===================================================================
Trust Shares / Shares N/A 96,667,530 (15,466,805) 81,200,725
===================================================================
BKB Shares N/A N/A 15,466,805 15,466,805
===================================================================
Shares of beneficial interest outstanding:
Retail A Shares 1,914,494 N/A - 1,914,494
===================================================================
Trust Shares / Shares N/A 9,736,602 (1,898,694) 7,837,908
===================================================================
BKB Shares N/A N/A 1,492,935 1,492,935
===================================================================
Net Asset Value - Retail A Shares $ 10.36 N/A $ 10.36
===================================================================
Net Asset Value - Trust Shares / Shares N/A $ 9.93 $ 10.36
===================================================================
Net Asset Value - BKB Shares N/A N/A $ 10.36
===================================================================
</TABLE>
See Notes to Pro Forma Financial Statements
<PAGE>
GALAXY RHODE ISLAND MUNICIPAL BOND FUND
BOSTON 1784 RHODE ISLAND TAX-EXEMPT INCOME FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS (UNAUDITED)
OCTOBER 31, 1999
<TABLE>
<CAPTION>
-------------------------------------------------------------------
GALAXY RHODE BOSTON 1784
ISLAND RHODE ISLAND PRO FORMA
MUNICIPAL TAX EXEMPT PRO FORMA COMBINED
BOND FUND INCOME FUND ADJUSTMENTS (NOTE 1)
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income:
Interest Income $ 1,121,025 $ 5,073,612 $ - $ 6,194,637
Dividend Income 10,674 - - 10,674
--------------------------------------------------------------------
Total Investment Income 1,131,699 5,073,612 - 6,205,311
--------------------------------------------------------------------
Expenses:
Investment Advisory Fees 162,771 715,825 9,659 (a) 888,255
Administrative Fees 16,327 63,753 1,364 (a) 81,444
Custodian Fee 10,832 6,077 - 16,909
Fund Accounting Fee 32,039 969 18,796 (a) 51,804
Professional Fees 13,776 8,157 (5,756) (b) 16,177
Trustee Fees 403 2,547 (1,000) (b) 1,950
Amortization of Deferred Organization Cost 3,439 - - 3,439
Reports to Shareholders 2,977 6,880 (3,000) (b) 6,857
Miscellaneous Expenses 12,600 14,003 - 26,603
--------------------------------------------------------------------
Subtotal 255,164 818,211 20,063 1,093,438
Transfer Agent Fee
Retail A Shares 5,100 - - 5,100
Trust Shares / Shares - 26,920 (26,905) (a) 15
BKB Shares - - 3,114 (a) 3,114
Shareholder Services Fee & 12B-1 Fee
Retail A Shares - - - -
Trust Shares / Shares - 241,826 (241,826) (a) -
BKB Shares - - - -
--------------------------------------------------------------------
Total Expenses before reimbursement/waiver 260,264 1,086,957 (245,554) 1,101,667
Less Waiver/Reimbursements
Fund Level Waivers (86,559) (71,275) (79,034) (c) (236,868)
Class Specific Waivers/Reimbursements
Retail A Shares - - - -
Trust Shares / Shares - (241,826) 241,826 (c) -
BKB Shares - - - -
--------------------------------------------------------------------
Total Waivers/Reimbursements (86,559) (313,101) 162,792 (236,868)
Net Expenses 173,705 773,856 (82,762) 864,799
--------------------------------------------------------------------
Net Investment Income 957,994 4,299,756 82,762 5,340,512
--------------------------------------------------------------------
Net Realized Gain/(Loss) on Investments (76,090) 403,437 - 327,347
Net Change in Unrealized (Depreciation) on Investments (1,483,777) (7,495,685) - (8,979,462)
--------------------------------------------------------------------
Net Realized and Unrealized (Loss) on Investments (1,559,867) (7,092,248) - (8,652,115)
--------------------------------------------------------------------
Net (Decrease) in Net Assets Resulting from Operations $ (601,873) $ (2,792,492) $ 82,762 $ (3,311,603)
====================================================================
</TABLE>
(a) Reflects adjustment to the acquiring fund contractual fee level.
(b) Reflects expected savings when the two funds become one.
(c) Reflects adjustment to the acquiring fund's voluntary expense limitation.
See Notes to Pro Forma Financial Statements
<PAGE>
Galaxy Rhode Island Municipal Bond Fund
Boston 1784 Rhode Island Tax-Exempt Income Fund
Notes to Pro Forma Combining Financial Statements (unaudited)
1. Basis of Combination
The Galaxy Fund, a Massachusetts business trust (the "Trust"), is registered
under the Investment Company Act of 1940, as amended, (the "1940 Act") as an
open-end management investment company. As of October 31, 1999, the Trust
offered twenty-nine managed investment portfolios. The unaudited Pro Forma
Combining Portfolio of Investments and the unaudited Pro Forma Statement of
Assets and Liabilities assumes the exchange described in the next paragraph
occurred as of October 31, 1999 and the unaudited Pro Forma Combining Statement
of Operations assumes the exchange occurred as of November 1, 1998. These
statements have been derived from books and records utilized in calculating the
net asset value of each fund at October 31, 1999 and for the twelve-month period
then ended.
The pro forma statements give effect to the proposed transfer of substantially
all of the assets and stated liabilities of the Boston 1784 Rhode Island
Tax-Exempt Income Fund in exchange for Trust and BKB shares of Galaxy Rhode
Island Municipal Bond Fund. Under generally accepted accounting principles, the
historical cost of investment securities will be carried forward to the
surviving entity and the results of operations of the Boston 1784 Rhode Island
Tax-Exempt Income Fund for pre-combination periods will not be restated. The pro
forma statements do not reflect the expenses of either fund in carrying out its
obligations under the proposed Agreement and Plan of Reorganization.
The unaudited Pro Forma Combining Financial Statements should be read in
conjunction with the historical financial statements of the funds incorporated
by reference in the Statement of Additional Information.
For the twelve-month period ended October 31, 1999, the Galaxy Rhode Island
Municipal Bond Fund's investment advisory fee was computed based on the annual
rate of 0.75% of its average daily net assets. The administration fee was
computed based on the annual rate of 0.09% of the first $2.5 billion of the
Trust's combined average daily net assets, 0.085% of the next $2.5 billion,
0.075% of the next $7 billion, 0.065% of the next $3 billion, 0.06% of the next
$3 billion, and 0.0575% of the combined average daily net assets in excess of
$18 billion, and was allocated to each fund based on the relative net assets of
the Trust.
The Trust has adopted a shareholder services plan (the "Services Plan") with
respect to Retail A, BKB and Trust Shares of the funds to compensate certain
institutions providing administrative and support services to their customers
who own such shares. Currently, the Services Plan has not been implemented for
the Trust shares. Under the Services Plan, aggregate payments may not exceed
0.30% of the average daily net assets of Retail A or BKB shareholders who are
customers of such institutions. Currently, the Trust, under the direction of the
Board of Trustees, is limiting such payments to 0.15% of the average daily net
assets of Retail A or BKB shareholders who are customers of such institutions.
No fees were charged under the Services Plan with respect to the Galaxy Rhode
Island Municipal Bond fund for the twelve-month period ended October 31, 1999.
<PAGE>
Galaxy Rhode Island Municipal Bond Fund
Boston 1784 Rhode Island Tax-Exempt Income Fund
Notes to Pro Forma Combining Financial Statements (unaudited) (continued)
2. Portfolio Valuation
The Galaxy Rhode Island Municipal Bond Fund's investment securities are valued
by an independent pricing service approved by the Trust's Board of Trustees.
When, in the judgement of the service, quoted bid prices are readily available
and are representative of the bid side of the market, investments are valued at
the mean between quoted bid and asked prices. Other investments are carried at
fair value as determined by the service based on methods which include
consideration of yields or prices of bonds of comparable quality, coupon
maturity and type; indications as to values from dealers and general market
conditions. Short-term obligations that mature in 60 days or less are valued at
amortized cost, which approximated fair value. All other securities and other
assets are appraised at their fair value as determined in good faith under
consistently applied procedures established by and under the general supervision
of the Board of Trustees. Boston 1784 Rhode Island Tax-Exempt Income Fund uses
similar rules for determining portfolio valuation.
3. Capital Shares
The pro forma net asset value per share assumes the issuance of additional
shares of the Galaxy Rhode Island Municipal Bond Fund that would have been
issued at October 31, 1999 in connection with the proposed reorganization. The
pro forma number of shares outstanding of 11,245,337 consists of 9,330,843
shares assumed issued in the reorganization plus 1,914,494 shares of the Galaxy
Rhode Island Municipal Bond Fund at October 31, 1999.
<PAGE>
GALAXY ASSET ALLOCATION FUND
BOSTON 1784 ASSET ALLOCATION FUND
PRO FORMA COMBINING PORTFOLIO OF INVESTMENTS (UNAUDITED)
OCTOBER 31, 1999
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE (NOTE 2)
- ------------------------------------------------------------------------------------------------------------------------------------
BOSTON 1784 BOSTON 1784
GALAXY ASSET ASSET GALAXY ASSET ASSET
ALLOCATION ALLOCATION PRO FORMA ALLOCATION ALLOCATION PRO FORMA
FUND FUND COMBINED FUND FUND COMBINED
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCKS - 52.60%
TECHNOLOGY - 13.26%
- 3,200 3,200 ADC Telecommunications, Inc. $ - $ 152,600 $ 152,600
100,000 - 100,000 America On Line, Inc. 12,968,750 - 12,968,750
- 7,300 7,300 Analog Devices, Inc. - 387,812 387,812
180,000 - 180,000 Automatic Data Processing, Inc. 8,673,750 - 8,673,750
230,000 15,000 245,000 Boston Scientific Corp. 4,628,750 301,875 4,930,625
240,000 8,700 248,700 Cisco Systems, Inc. 17,760,000 643,800 18,403,800
130,000 - 130,000 Comcast Corp. 5,476,250 - 5,476,250
150,000 - 150,000 Dell Computer Corp 6,018,750 - 6,018,750
- 700 700 Doubleclick, Inc. - 98,000 98,000
- 4,800 4,800 DST Systems, Inc. - 305,700 305,700
- 4,000 4,000 Electronic Data Systems - 234,000 234,000
180,000 - 180,000 EMC Corp. 13,140,000 - 13,140,000
90,000 - 90,000 Hewlett-Packard Co. 6,665,625 - 6,665,625
140,000 4,100 144,100 Intel Corp. 10,841,250 317,493 11,158,743
- 2,800 2,800 International Business Machines Corp. - 275,450 275,450
160,000 17,000 177,000 Lucent Technologies, Inc. 10,280,000 1,092,250 11,372,250
50,000 4,350 54,350 Microsoft Corp. 4,628,125 402,647 5,030,772
- 3,200 3,200 Motorola, Inc. - 311,800 311,800
- 4,100 4,100 Nippon Telegraph & Telephone Corp., ADR - 317,237 317,237
- 1,150 1,150 Nokia Corp., ADR - 132,897 132,897
- 4,401 4,401 NTL, Inc. - 331,688 331,688
- 1,100 1,100 STMicroelectronics N.V., New York Shares - 99,962 99,962
- 2,150 2,150 Texas Instruments, Inc. - 192,962 192,962
- 4,800 4,800 Vitesse Semiconductor Corp. - 220,200 220,200
- 675 675 Yahoo, Inc. - 120,867 120,867
--------------------------------------------
101,081,250 5,939,240 107,020,490
--------------------------------------------
CONSUMER STAPLES - 12.69%
- 1,500 1,500 Allergan, Inc. - 161,062 161,062
- 1,950 1,950 Amgen, Inc. - 155,512 155,512
190,000 - 190,000 Becton Dickinson & Co. 4,821,250 - 4,821,250
130,000 - 130,000 Bestfoods 7,637,500 - 7,637,500
- 2,400 2,400 Cardinal Health, Inc. - 103,500 103,500
250,000 3,100 253,100 Coca-Cola Enterprises, Inc. 6,390,625 182,900 6,573,525
- 4,400 4,400 Colgate Palmolive Co. - 266,200 266,200
- 3,900 3,900 Costco Wholesale Corp. - 313,219 313,219
165,000 4,400 169,400 CVS Corp. 7,167,188 191,125 7,358,313
250,000 12,000 262,000 Elan Corp. Plc, ADR 6,437,500 309,000 6,746,500
120,000 - 120,000 Forest Laboratories, Inc. 5,505,000 - 5,505,000
80,000 6,900 86,900 Genzyme Corp. 3,060,000 263,925 3,323,925
110,000 - 110,000 Gillette Co. 3,980,625 - 3,980,625
- 9,350 9,350 Johnson & Johnson Co. - 979,412 979,412
100,000 - 100,000 Lilly (Eli) & Co. 6,887,500 - 6,887,500
200,000 - 200,000 McDonald's Corp. 8,250,000 - 8,250,000
- 3,950 3,950 Mediaone Group, Inc. - 280,697 280,697
- 600 600 Medimmune, Inc. - 67,200 67,200
- 8,000 8,000 Medtronic, Inc. - 277,000 277,000
120,000 12,700 132,700 Merck & Co., Inc. 9,547,500 1,010,444 10,557,944
- 6,400 6,400 Nestle S.A., ADR - 617,428 617,428
180,000 - 180,000 PepsiCo, Inc. 6,243,750 - 6,243,750
180,000 7,200 187,200 Pfizer, Inc. 7,110,000 284,400 7,394,400
50,000 6,750 56,750 Procter & Gamble Co. 5,243,750 707,906 5,951,656
- 1,700 1,700 Schering-Plough Corp. - 84,150 84,150
<PAGE>
- 17,500 17,500 Sysco Corp., ADR - 672,656 672,656
80,000 2,700 82,700 Warner-Lambert Co. 6,385,000 215,494 6,600,494
--------------------------------------------
94,667,188 7,143,230 101,810,418
--------------------------------------------
FINANCE - 8.88%
- 3,000 3,000 AFLAC, Inc. - 153,375 153,375
- 1,300 1,300 American Express Co. - 200,200 200,200
151,250 15,525 166,775 American International Group, Inc. 15,569,297 1,598,105 17,167,402
89,998 - 89,998 Associates First Capital Corp. 3,284,927 - 3,284,927
- 9,800 9,800 AXA Financial, Inc. - 314,212 314,212
- 3,900 3,900 Bank of America Corp. - 251,063 251,063
42,000 - 42,000 Bank One Corp. 1,577,625 - 1,577,625
85,000 - 85,000 Chase Manhattan Corp. 7,426,875 - 7,426,875
260,000 10,500 270,500 Citigroup, Inc. 14,072,500 568,312 14,640,812
130,000 3,000 133,000 Fannie Mae 9,197,500 212,250 9,409,750
120,000 - 120,000 Hartford Financial - -
- - Services Group, Inc. 6,217,500 - 6,217,500
100,000 - 100,000 Washington Mutual, Inc. 3,593,750 - 3,593,750
120,000 26,700 146,700 Wells Fargo & Co. 5,745,000 1,278,262 7,023,262
- 3,300 3,300 XLCapital Ltd. - 177,168 177,168
--------------------------------------------
66,684,974 4,752,947 71,437,921
--------------------------------------------
ENERGY - 4.35%
160,000 - 160,000 Anadarko Petrolum Co. 4,930,000 - 4,930,000
- 2,500 2,500 Apache Corp. - 97,500 97,500
- 14,500 14,500 Baker Hughes, Inc. - 405,094 405,094
- 2,500 2,500 Burlington Resources, Inc. - 87,188 87,188
40,000 - 40,000 Chevron Corp. 3,652,500 - 3,652,500
- 3,400 3,400 Exxon Corp. - 251,812 251,812
200,000 - 200,000 Halliburton Co. 7,537,500 - 7,537,500
- 1,600 1,600 Kerr-McGee Corp. - 86,000 86,000
80,000 6,000 86,000 Mobil Corp. 7,720,000 579,000 8,299,000
150,000 9,500 159,500 Schlumberger, Ltd. 9,084,375 575,344 9,659,719
--------------------------------------------
32,924,375 2,081,938 35,006,313
--------------------------------------------
CONSUMER CYCLICAL - 4.24%
100,000 - 100,000 Black & Decker (The), Corp. 4,300,000 - 4,300,000
- 2,650 2,650 Circuit City Stores, Inc. - 113,122 113,122
- 2,150 2,150 Clear Channel Communications, Inc. - 172,806 172,806
- 9,600 9,600 Comcast Corp. - 404,400 404,400
80,000 - 80,000 Dayton Hudson Corp. 5,170,000 - 5,170,000
- 4,400 4,400 Estee Lauder Cos. - 205,150 205,150
- 1,500 1,500 Gannett Co. - 115,687 115,687
220,000 3,300 223,300 Home Depot, Inc. 16,610,000 249,150 16,859,150
- 6,000 6,000 Kroger Co. - 124,875 124,875
- 6,100 6,100 Mattel, Inc. - 81,587 81,587
- 2,400 2,400 New York Times Co. - 96,600 96,600
- 2,650 2,650 Omnicom Group, Inc. - 233,200 233,200
- 5,200 5,200 Time Warner, Inc. - 362,375 362,375
- 6,650 6,650 Tyco International Ltd. - 265,584 265,584
- 9,500 9,500 WalMart Stores, Inc. - 538,531 538,531
200,000 - 200,000 Walgreen Co. 5,037,500 - 5,037,500
--------------------------------------------
31,117,500 2,963,067 34,080,567
--------------------------------------------
CAPITAL GOODS AND CONSTRUCTION - 3.09%
50,000 3,050 53,050 AlliedSignal, Inc. 2,846,875 173,659 3,020,534
170,000 - 170,000 Boeing Co. 7,830,625 - 7,830,625
- 6,900 6,900 Dii Group Inc. - 248,400 248,400
90,000 7,850 97,850 General Electric Co. 12,200,625 1,064,166 13,264,791
- 1,200 1,200 Mannesmann AG ADR - 185,027 185,027
- 5,500 5,500 Molex, Inc. - 200,750 200,750
- 2,650 2,650 Southdown, Inc. - 128,028 128,028
--------------------------------------------
22,878,125 2,000,030 24,878,155
--------------------------------------------
<PAGE>
UTILITIES - 2.94%
- 4,100 4,100 AES Corp. - 231,394 231,394
- 3,350 3,350 ALLTEL Corp. - 278,888 278,888
- 5,050 5,050 Century Telephone Enterprises, Inc. - 204,209 204,209
- 4,700 4,700 El Paso Energy Corp. - 192,700 192,700
- 2,100 2,100 Nextlink Communications, Inc. - 125,606 125,606
180,000 2,900 182,900 MCI WorldCom, Inc. 15,446,250 248,856 15,695,106
125,000 11,400 136,400 SBC Communications, Inc. 6,367,187 580,688 6,947,875
--------------------------------------------
21,813,437 1,862,341 23,675,778
--------------------------------------------
TRANSPORTATION - 1.67%
100,000 - 100,000 AMR Corp. 6,350,000 - 6,350,000
- 1,500 1,500 FDX Corp. - 64,594 64,594
- 4,100 4,100 General Motors Corp. - 298,531 298,531
400,000 - 400,000 Southwest Airlines Co. 6,725,000 - 6,725,000
--------------------------------------------
13,075,000 363,125 13,438,125
--------------------------------------------
BASIC MATERIALS - 1.33%
- 900 900 Alcoa, Inc. - 54,675 54,675
- 2,100 2,100 Georgia Pacific Corp. - 83,344 83,344
100,000 - 100,000 Sonoco Products Co. 2,400,000 - 2,400,000
200,000 - 200,000 Tyco International, Ltd. 7,987,500 - 7,987,500
- 2,500 2,500 Weyerhaeuser Co. - 149,219 149,219
--------------------------------------------
10,387,500 287,238 10,674,738
--------------------------------------------
BROADCASTING - 0.15%
- 12,000 12,000 AT&T Corp., Liberty Media Group - 476,250 476,250
- 5,100 5,100 SBS Broadcasting - 186,788 186,788
- 5,600 5,600 Rogers Communications - 112,700 112,700
- 2,600 2,600 Telewest Communications PLC, ADR - 114,400 114,400
- 2,700 2,700 Telewest Communications PLC Rights - - -
- 400 400 United Global Communications, Inc. - 34,800 34,800
- 2,950 2,950 Univision Communications - 250,934 250,934
--------------------------------------------
1,175,872 1,175,872
--------------------------------------------
TOTAL COMMON STOCKS 394,629,349 28,569,028 423,198,377
--------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 22.10%
PAR VALUE
- --------------------------------------------
U.S. TREASURY BONDS - 8.13%
$ 1,500,000 $ - $ 1,500,000 7.63%, 02/15/07 1,547,310 - 1,547,310
4,200,000 - 4,200,000 12.00%, 08/15/13 5,757,948 - 5,757,948
6,450,000 - 6,450,000 7.50%, 11/15/16 7,115,382 - 7,115,382
6,220,000 - 6,220,000 8.88%, 08/15/17 7,755,531 - 7,755,531
2,500,000 - 2,500,000 8.88%, 02/15/19 3,143,800 - 3,143,800
1,000,000 - 1,000,000 8.13%, 08/15/19 1,178,090 - 1,178,090
750,000 - 750,000 8.50%, 02/15/20 916,635 - 916,635
6,000,000 - 6,000,000 8.75%, 05/15/20 7,510,320 - 7,510,320
6,200,000 - 6,200,000 7.88%, 02/15/21 7,166,642 - 7,166,642
5,900,000 - 5,900,000 8.13%, 08/15/21 7,000,232 - 7,000,232
3,250,000 - 3,250,000 7.63%, 11/15/22 3,691,968 - 3,691,968
2,850,000 300,000 3,150,000 7.13%, 02/15/23 3,072,613 323,244 3,395,857
3,500,000 150,000 3,650,000 6.13%, 11/15/27 3,379,600 144,746 3,524,346
2,775,000 1,390,000 4,165,000 5.25%, 11/15/28 2,385,501 1,194,024 3,579,525
2,245,000 200,000 2,445,000 5.25%, 02/15/29 1,944,799 173,130 2,117,929
--------------------------------------------
63,566,371 1,835,144 65,401,515
--------------------------------------------
<PAGE>
U.S. TREASURY NOTES - 5.22%
- 200,000 200,000 5.50%, 04/15/00 - 200,076 200,076
- 25,000 25,000 6.25%, 05/31/00 - 25,118 25,118
- 400,000 400,000 6.13%, 07/31/00 - 401,764 401,764
- 590,000 590,000 6.13%, 09/30/00 - 592,679 592,679
- 245,000 245,000 5.63%, 11/30/00 - 244,897 244,897
2,000,000 - 2,000,000 4.50%, 01/31/01 1,971,800 - 1,971,800
3,000,000 - 3,000,000 5.63%, 02/28/01 2,997,630 - 2,997,630
5,000,000 - 5,000,000 5.63%, 05/15/01 4,991,500 - 4,991,500
1,500,000 - 1,500,000 6.25%, 10/31/01 1,512,555 - 1,512,555
1,000,000 - 1,000,000 6.25%, 08/31/02 1,009,410 - 1,009,410
2,555,000 - 2,555,000 5.88%, 09/30/02 2,555,179 - 2,555,179
- 275,000 275,000 5.75%, 11/30/02 - 273,686 273,686
4,445,000 - 4,445,000 5.75%, 08/15/03 4,411,796 - 4,411,796
1,800,000 - 1,800,000 4.25%, 11/15/03 1,690,920 - 1,690,920
7,160,000 - 7,160,000 6.00%, 08/15/04 7,179,833 - 7,179,833
5,175,000 - 5,175,000 6.50%, 10/15/06 5,267,219 - 5,267,219
1,500,000 - 1,500,000 7.00%, 07/15/06 1,566,480 - 1,566,480
1,085,000 - 1,085,000 6.13%, 08/15/07 1,080,562 - 1,080,562
2,870,000 - 2,870,000 6.00%, 08/15/09 2,867,561 - 2,867,561
- 1,100,000 1,100,000 7.25%, 05/15/16 - 1,184,436 1,184,436
--------------------------------------------
39,102,445 2,922,656 42,025,101
--------------------------------------------
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION - 2.79%
- 220,186 220,186 6.00%, 04/15/13, Pool # 471839 - 211,523 211,523
229,436 - 229,436 6.50%, 05/15/13, Pool # 473566 225,347 - 225,347
193,212 - 193,212 6.50%, 06/15/13, Pool # 476470 189,769 - 189,769
311,661 - 311,661 6.50%, 08/15/13, Pool # 486453 306,108 - 306,108
83,245 - 83,245 6.50%, 11/15/13, Pool # 454228 81,736 - 81,736
473,495 - 473,495 6.50%, 11/15/13, Pool # 454234 464,910 - 464,910
196,542 - 196,542 6.50%, 11/15/13, Pool # 477529 193,040 - 193,040
1,002,783 - 1,002,783 6.50%, 11/15/13, Pool # 483663 984,914 - 984,914
249,086 - 249,086 6.50%. 11/15/13, Pool # 493623 244,570 - 244,570
2,873,046 - 2,873,046 7.00%, 11/15/13, Pool # 780921 2,882,901 - 2,882,901
389,041 - 389,041 9.00%, 12/15/17, Pool # 780201 410,435 - 410,435
- 90,544 90,544 7.50%, 06/15/23, Pool # 346618 - 90,770 90,770
541,201 - 541,201 7.50%, 01/15/26, Pool # 417191 542,890 - 542,890
2,486,853 - 2,486,853 6.50%, 12/15/28, Pool # 495775 2,376,487 - 2,376,487
194,123 - 194,123 6.50%, 01/15/29, Pool # 482909 185,508 - 185,508
2,425,432 - 2,425,432 6.00%, 03/15/29, Pool # 476986 2,251,092 - 2,251,092
942,292 - 942,292 6.50%, 03/15/29, Pool # 464613 900,473 - 900,473
1,056,881 - 1,056,881 6.50%, 04/15/29, Pool # 473682 1,011,127 - 1,011,127
926,137 - 926,137 6.50%, 04/15/29, Pool # 483349 886,042 - 886,042
1,789,867 - 1,789,867 6.50%, 04/15/29, Pool # 488234 1,710,433 - 1,710,433
996,483 - 996,483 7.00%, 04/15/29, Pool # 498082 977,480 - 977,480
997,445 - 997,445 7.00%, 05/15/29, Pool # 507929 978,423 - 978,423
1,548,822 - 1,548,822 7.50%, 09/15/29, Pool # 466164 1,552,694 - 1,552,694
999,133 - 999,133 7.50%, 09/15/29, Pool # 478707 1,001,631 - 1,001,631
101,489 - 101,489 7.50%, 09/15/29, Pool # 510409 101,743 - 101,743
632,814 - 632,814 7.50%, 09/15/29, Pool # 510424 634,396 - 634,396
999,257 - 999,257 7.50%, 09/15/29, Pool # 511482 1,001,755 - 1,001,755
--------------------------------------------
22,095,904 302,293 22,398,197
--------------------------------------------
FEDERAL NATIONAL
MORTGAGE ASSOCIATION - 2.41%
1,000,000 - 1,000,000 6.74%, 09/19/01, MTN 1,009,690 - 1,009,690
- 235,000 235,000 5.75%, 04/15/03 - 230,819 230,819
1,000,000 - 1,000,000 6.50%, 08/15/04 1,002,480 - 1,002,480
1,000,000 - 1,000,000 6.49%, 01/19/06, MTN 979,410 - 979,410
- 500,000 500,000 7.24%, 01/04/07, MTN - 499,805 499,805
625,394 - 625,394 6.00%, 01/01/09, Pool # 269929 608,383 - 608,383
2,055,000 - 2,055,000 6.38%, 06/15/09 2,006,564 - 2,006,564
- 345,311 345,311 6.50%, 03/01/11, Pool # 343824 - 338,512 338,512
730,000 - 730,000 7.00%, 03/25/13 728,403 - 728,403
- 1,121,268 1,121,268 6.00%, 06/01/13, Pool # 429577 - 1,077,460 1,077,460
162,697 - 162,697 6.00%, 06/01/14, Pool # 484967 156,493 - 156,493
1,799,658 - 1,799,658 6.00%, 06/01/14, Pool # 499193 1,731,037 - 1,731,037
789,001 - 789,001 6.00%, 06/01/14, Pool # 500131 758,916 - 758,916
<PAGE>
963,453 - 963,453 7.00%, 08/01/14, Pool # 492806 961,941 - 961,941
225,359 - 225,359 6.50%, 01/01/26, Pool # 303676 217,330 - 217,330
- 862,219 862,219 6.50%, 05/01/28, Pool # 427837 - 826,109 826,109
6,170,000 - 6,170,000 8.00%, 09/01/29 6,285,688 - 6,285,688
--------------------------------------------
16,446,335 2,972,705 19,419,040
--------------------------------------------
FEDERAL HOME LOAN
MORTGAGE CORPORATION - 2.20%
730,000 - 730,000 5.00%, 11/16/99 (B) 728,424 - 728,424
2,000,000 - 2,000,000 5.00%, 01/15/04 1,895,860 - 1,895,860
4,800,000 - 4,800,000 6.25%, 07/15/04 4,764,000 - 4,764,000
1,000,000 - 1,000,000 7.05%, 06/08/05 989,460 - 989,460
- 500,000 500,000 5.75%, 03/15/09 - 466,250 466,250
5,920,000 - 5,920,000 6.63%, 09/15/09 5,890,400 - 5,890,400
- 2,403,725 2,403,725 6.00%, 11/01/28, Gold, Pool # C00680 - 2,244,059 2,244,059
708,072 - 708,072 7.00%, 04/01/29, Gold, Pool # C00756 695,680 - 695,680
--------------------------------------------
14,963,824 2,710,309 17,674,133
--------------------------------------------
FEDERAL HOME LOAN BANK - 0.77%
5,975,000 - 5,975,000 5.88%, 08/15/01 5,947,873 - 5,947,873
- 250,000 250,000 5.80%, 09/02/08 - 235,308 235,308
--------------------------------------------
5,947,873 235,308 6,183,181
--------------------------------------------
FEDERAL FARM CREDIT BANK - 0.56%
4,500,000 - 4,500,000 5.88%, 07/02/01 4,483,125 - 4,483,125
--------------------------------------------
U.S. GOVERNMENT BACKED - 0.02%
- 500,000 500,000 Tennessee Valley Authority, Strip Principal
4.22%, 04/15/42 (D) - 193,985 193,985
--------------------------------------------
TOTAL U.S. GOVERNMENT
AND AGENCY OBLIGATIONS 166,605,877 11,172,400 177,778,277
--------------------------------------------
CORPORATE NOTES AND BONDS - 13.99%
200,000 - 200,000 American Telephone & Telegraph Corp.
7.00%, 05/15/05 199,000 - 199,000
3,250,000 - 3,250,000 Associates Corp. of North America
Senior Note
6.63%, 05/15/01 3,254,062 - 3,254,062
- 350,000 350,000 Atlantic Richfield
5.90%, 04/15/09 - 321,563 321,563
1,000,000 - 1,000,000 Bank One Milwakee, MTN
6.35%, 03/19/01 1,000,000 - 1,000,000
1,200,000 - 1,200,000 Becton Dickinson & Co.
7.15%, 10/01/09 1,192,986 - 1,192,986
675,000 - 675,000 Becton Dickinson & Co., Debenture
7.00%, 08/01/27 631,125 - 631,125
1,900,000 - 1,900,000 Becton Dickinson & Co., Senior Debenture
6.70%, 08/01/28 1,712,375 - 1,712,375
- 250,000 250,000 Burlington Northern Santa Fe
9.25%, 10/01/06 - 273,125 273,125
200,000 - 200,000 Burlington Northern Santa Fe
6.88%, 02/15/16 185,750 - 185,750
- 200,000 200,000 Cable & Wireless Communication, Yankee
6.38%, 03/06/03 (C) - 200,250 200,250
1,000,000 - 1,000,000 Caterpillar Financial Services Corp.
Series F, MTN
5.47%, 09/12/01 980,000 - 980,000
1,700,000 - 1,700,000 Caterpillar Financial
Services Corp., MTN
6.00%, 05/23/02 1,672,375 - 1,672,375
<PAGE>
1,200,000 - 1,200,000 Citicorp, Senior MTN
8.63%, 11/01/04 1,200,000 - 1,200,000
- 300,000 300,000 Citicorp, MTN
6.38%, 11/15/08 - 282,750 282,750
2,000,000 - 2,000,000 Coca-Cola Enterprises, Inc.
6.38%, 08/01/01 1,992,500 - 1,992,500
1,000,000 - 1,000,000 Coca-Cola Enterprises, Inc.
7.13%, 08/01/17 965,000 - 965,000
2,300,000 - 2,300,000 Colgate-Palmolive Co.
Series C, MTN
5.27%, 12/01/03 2,180,262 - 2,180,262
1,400,000 - 1,400,000 Commercial Credit Co.
6.50%, 08/01/04 1,370,250 - 1,370,250
- 245,000 245,000 DaimlerChrysler, N.A. Holding Corp.
7.20%, 09/01/09 - 245,613 245,613
3,500,000 - 3,500,000 Diageo Capital, Plc
6.00%, 03/27/03 3,399,550 - 3,399,550
3,000,000 - 3,000,000 Diageo Capital, Plc
6.13%, 08/15/05 2,880,000 - 2,880,000
1,000,000 - 1,000,000 Emerson Electric Co.
5.85%, 03/15/09 926,250 - 926,250
- 315,000 315,000 Enron Oil and Gas Resources, Inc.
6.00%, 12/15/08 - 286,268 286,268
- 315,000 315,000 First Union Corp.
7.50%, 07/15/06 - 315,394 315,394
- 265,000 265,000 First USA Bank
7.65%, 08/01/03 - 269,638 269,638
- 250,000 250,000 Ford Motor Co.
7.25%, 10/01/08 - 250,313 250,313
250,000 - 250,000 Ford Motor Credit Co.
6.25%, 11/08/00 249,777 - 249,777
1,000,000 - 1,000,000 Ford Motor Credit Co.
Senior Note
6.50%, 02/28/02 996,250 - 996,250
1,615,000 - 1,615,000 Ford Motor Credit Co.
6.55%, 09/10/02 1,602,887 - 1,602,887
3,195,000 - 3,195,000 Ford Motor Credit Co.
Senior Note
5.75%, 02/23/04 3,055,219 - 3,055,219
405,000 - 405,000 Ford Motor Credit Co.
6.70%, 07/16/04 400,950 - 400,950
- 100,000 100,000 Ford Motor Credit Co.
6.75%, 05/15/05 - 98,000 98,000
- 425,000 425,000 Ford Motor Credit Co.
7.38%, 10/28/09 - 429,250 429,250
- 360,000 360,000 Fort James Corp.
6.88%, 09/15/07 - 346,500 346,500
800,000 - 800,000 G.E. Capital Corp., Series A, MTN
6.33%, 09/17/01 799,000 - 799,000
385,000 - 385,000 G.E. Capital Corp., Series A, MTN
6.81%, 11/03/03 386,463 - 386,463
4,000,000 - 4,000,000 General Motors Acceptance Corp.
6.88%, 07/15/01 4,020,000 - 4,020,000
1,000,000 - 1,000,000 General Motors Acceptance Corp.
7.00%, 09/15/02 1,006,250 - 1,006,250
- 200,000 200,000 General Motors Acceptance Corp.
6.63%, 10/01/02 - 199,250 199,250
250,000 - 250,000 GTE Corp.
6.46%, 04/15/08 239,687 - 239,687
1,000,000 - 1,000,000 GTE North, Inc., Series H
5.65%, 11/15/08 902,500 - 902,500
1,200,000 - 1,200,000 Goldman Sachs Group, Inc.
6.65%, 05/15/09 1,143,000 - 1,143,000
3,000,000 - 3,000,000 Heinz (H.J.) Co., Euro Bond
5.75%, 02/03/03 2,908,800 - 2,908,800
750,000 - 750,000 Heinz (H.J.) Co.
6.88%, 01/15/03 756,562 - 756,562
500,000 - 500,000 Hershey Foods Corp.
6.70%, 10/01/05 501,250 - 501,250
<PAGE>
2,300,000 - 2,300,000 Hershey Foods Corp.
7.20%, 08/15/27 2,254,000 - 2,254,000
1,000,000 - 1,000,000 Hertz Corp., Senior Note
7.00%, 04/15/01 1,005,000 - 1,005,000
- 220,000 220,000 Hydro-Quebec, Euro-Dollar
8.63%, 05/20/02 (C) - 228,792 228,792
750,000 - 750,000 Illinois Tool Works
5.75%, 03/01/09 688,125 - 688,125
1,000,000 - 1,000,000 International Business
Machines Corp.
7.50%, 06/15/13 1,045,000 - 1,045,000
2,000,000 - 2,000,000 International Business
Machines Corp.
6.22%, 08/01/27 1,962,500 - 1,962,500
2,000,000 - 2,000,000 International Business
Machines Credit Corp., MTN
6.64%, 10/29/01 2,007,500 - 2,007,500
500,000 - 500,000 International Paper Co.
7.00%, 06/01/01 500,625 - 500,625
1,500,000 - 1,500,000 Lockheed Martin Corp.
6.85%, 05/15/01 1,492,500 - 1,492,500
- 415,000 415,000 Lucent Technologies, Inc.
5.50%, 11/15/08 - 377,131 377,131
500,000 - 500,000 May Department Stores Co.
6.88%, 11/01/05 495,625 - 495,625
2,025,000 - 2,025,000 McDonald's Corp., Senior MTN
5.95%, 01/15/08 1,916,156 - 1,916,156
500,000 - 500,000 McDonald's Corp.
8.88%, 04/01/11 573,125 - 573,125
3,550,000 - 3,550,000 MCI WorldCom, Inc.
6.13%, 04/15/02 3,492,312 - 3,492,312
500,000 - 500,000 Mead Corp.
6.84%, 03/01/37 500,000 - 500,000
290,000 - 290,000 Merck & Co.
6.40%, 03/01/28 264,262 - 264,262
2,500,000 - 2,500,000 Minnesota Mining & Manufacturing
6.38%, 02/15/28 2,215,625 - 2,215,625
- 400,000 400,000 Morgan (JP) & Co., Inc., MTN, Series A
6.00%, 01/15/09 - 364,500 364,500
1,000,000 - 1,000,000 National City Bank of Kentucky
6.30%, 02/15/11 911,250 - 911,250
1,000,000 - 1,000,000 National Rural Utilities
Cooperative Finance Corp.
6.38%, 10/15/04 978,750 - 978,750
2,500,000 - 2,500,000 National Rural Utilities
Cooperative Finance Corp.
6.13%, 05/15/05 2,387,500 - 2,387,500
1,025,000 300,000 1,325,000 National Rural Utilities
Cooperative Finance Corp.
5.75%, 11/01/08 936,594 273,375 1,209,969
1,400,000 - 1,400,000 National Rural Utilities
Cooperative Finance Corp.
Collateral Trust
5.50%, 01/15/05 1,303,750 - 1,303,750
1,000,000 - 1,000,000 NationsBank Corp.
7.00%, 09/15/01 1,007,500 - 1,007,500
- 375,000 375,000 News America, Inc.
7.25%, 05/18/18 - 341,719 341,719
500,000 - 500,000 Northern Telecom, Ltd.
6.00%, 09/01/03 486,250 - 486,250
- 250,000 250,000 Northrop-Grumman Corp.
7.0%, 03/01/06 - 242,500 242,500
- 220,000 220,000 Ontario Province
7.38%, 01/27/03 (C) - 224,125 224,125
1,620,000 - 1,620,000 PepsiCo, Inc., MTN
5.75%, 01/15/08 1,500,525 - 1,500,525
1,590,000 - 1,590,000 Pitney Bowes Credit Corp.
6.63%, 06/01/02 1,599,938 - 1,599,938
<PAGE>
380,000 - 380,000 Pitney Bowes, Inc.
5.95%, 02/01/05 366,225 - 366,225
1,800,000 - 1,800,000 Potomac Electric Power Co.
6.50%, 09/15/05 1,743,750 - 1,743,750
2,000,000 - 2,000,000 Potomac Electric Power Co.
6.25%, 10/15/07 1,932,500 - 1,932,500
- 25,000 25,000 Private Export Funding Corp.
8.40%, 07/31/01 - 25,875 25,875
325,000 - 325,000 Rite Aid Corp.
6.70%, 12/15/01 264,875 - 264,875
- 500,000 500,000 Sears Roebuck & Co.
6.25%, 01/15/04 - 483,125 483,125
1,000,000 - 1,000,000 Service Corp. International
7.38%, 04/15/04 861,250 - 861,250
3,500,000 - 3,500,000 Sherwin-Williams Co.
6.50%, 02/01/02 3,495,625 - 3,495,625
1,900,000 - 1,900,000 Sherwin-Williams Co.
6.85%, 02/01/07 1,866,750 - 1,866,750
1,000,000 - 1,000,000 Southwest Airlines Co.
8.75%, 10/15/03 1,066,250 - 1,066,250
1,500,000 - 1,500,000 Sprint Capital Corp.
5.88%, 05/01/04 1,441,875 - 1,441,875
- 200,000 200,000 Staples, Inc.
7.13%, 08/15/07 - 196,250 196,250
1,000,000 - 1,000,000 Suntrust Bank of Atlanta, MTN
7.25%, 09/15/06 1,002,500 - 1,002,500
300,000 - 300,000 Suntrust Bank of Central Florida, MTN
6.90%, 07/01/07 296,625 - 296,625
1,000,000 - 1,000,000 Sysco Corp.
7.25%, 04/15/07 1,017,500 - 1,017,500
1,250,000 - 1,250,000 Sysco Corp.
6.50%, 08/01/28 1,118,750 - 1,118,750
3,250,000 - 3,250,000 Tele-Communication, Inc., Senior Note
7.25%, 08/01/05 3,270,313 - 3,270,313
- 200,000 200,000 Tele-Communication, Inc.
9.80%, 02/01/12 - 240,250 240,250
1,000,000 - 1,000,000 Texaco Capital, Inc.
8.50%, 02/15/03 1,055,000 - 1,055,000
500,000 - 500,000 Texas Utilities Electric Co.
7.38%, 11/01/99 500,000 - 500,000
- 210,000 210,000 Time Warner Entertainment
10.15%, 05/01/12 - 253,050 253,050
- 310,000 310,000 Trans-Canada Pipelines, Yankee
9.13%, 04/20/06 (C) - 334,413 334,413
2,000,000 - 2,000,000 United Telecommunications, Inc.
9.50%, 04/01/03 2,147,500 - 2,147,500
- 275,000 275,000 U.S. West Capital Funding, Inc.
6.88%, 08/15/01 - 274,313 274,313
2,000,000 - 2,000,000 Wachovia Bank, N.A.
6.30%, 03/15/01 1,995,000 - 1,995,000
- 260,000 260,000 Wal-Mart Stores, Inc., Euro Bond
6.75%, 05/24/02 - 261,131 261,131
2,000,000 - 2,000,000 Wal-Mart Stores, Inc.
6.75%, 05/15/02 2,012,500 - 2,012,500
575,000 - 575,000 Wal-Mart Stores, Inc.
6.88%, 08/10/09 577,875 - 577,875
600,000 - 600,000 Xerox Corp.
8.13%, 04/15/02 618,000 - 618,000
--------------------------------------------
TOTAL CORPORATE NOTES AND BONDS 104,885,155 7,638,463 112,523,618
--------------------------------------------
ASSET-BACKED SECURITIES - 2.44%
2,950,000 - 2,950,000 Chemical Master Credit Card
Trust 1, Class A
5.55%, 09/15/03 2,919,556 - 2,919,556
1,000,000 - 1,000,000 Citibank Credit Card Master Trust 1
Series 1999-1, Class A
<PAGE>
5.50%, 02/15/06 952,810 - 952,810
4,500,000 - 4,500,000 Discover Card Master Trust 1
Series 1999-1, Class A
5.30%, 08/15/04 4,367,790 - 4,367,790
2,500,000 - 2,500,000 Ford Credit Auto Owner Trust
Series 1999-D, Class A-4
6.40%, 10/15/02 2,498,425 - 2,498,425
- 218,953 218,953 General Motors Acceptance Corp.
Commercial Mortage Securities, Inc.
Series 1999-C3, Class A1A, CMO
6.97%, 05/15/08 - 218,058 218,058
25,000 - 25,000 Green Tree Financial Corp.
Series 1999-5, Class A-2
6.77%, 04/01/31 24,984 - 24,984
1,975,000 - 1,975,000 MBNA Master Credit Card Trust
Series 1998-J, Class A
5.25%, 02/15/06 1,877,474 - 1,877,474
2,500,000 - 2,500,000 MBNA Master Credit Card Trust
Series 1999-I, Class A
6.40%, 01/18/05 2,490,625 - 2,490,625
- 600,000 600,000 PNC Student Loan Trust 1
Series 1997-2, Class A6
6.57%, 01/25/04 - 590,214 590,214
440,000 - 440,000 Premier Auto Trust
Series 1999-2, Class A-4
5.59%, 02/09/04 429,959 - 429,959
1,400,000 - 1,400,000 Premier Auto Trust
Series 1999-3, Class A-4
6.43%, 03/08/04 1,401,470 - 1,401,470
365,625 - 365,625 Prudential Home Mortgage Securities
Class 1996-7, Series A-1, CMO
6.75%, 06/25/11 364,711 - 364,711
553,898 - 553,898 Rural Housing Trust
Series 1987-1, Class 1-D, CMO
6.33%, 04/01/26 542,906 - 542,906
- 500,000 500,000 Sears Credit Account Master Trust
Series 1996-4, Class A
6.45%, 10/16/06 - 498,905 498,905
- 500,000 500,000 Sears Credit Account Master Trust
Series 1997-1, Class A
6.20%, 07/16/07 - 494,560 494,560
--------------------------------------------
TOTAL ASSET-BACKED SECURITIES 17,870,710 1,801,737 19,672,447
--------------------------------------------
FOREIGN BONDS - 0.48%
2,500,000 - 2,500,000 Quebec Province
5.75%, 02/15/09 (C) 2,276,525 - 2,276,525
1,570,000 - 1,570,000 Quebec Province
7.50%, 09/15/29 (C) 1,575,888 - 1,575,888
--------------------------------------------
TOTAL FOREIGN BONDS 3,852,413 - 3,852,413
--------------------------------------------
CONVERTIBLE PREFERRED STOCK - 0.18%
SHARES
- --------------------------------------------
30,000 - 30,000 Loral Space and
Communications, Ltd.,
Series C, 6.00% (A) 1,438,125 - 1,438,125
--------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCK 1,438,125 - 1,438,125
--------------------------------------------
<PAGE>
PREFERRED STOCK - 0.02%
- 8,000 8,000 Hartford Capital II, Series B
8.35%, 10/30/26 - 198,500 198,500
--------------------------------------------
TOTAL PREFERRED STOCK - 198,500 198,500
--------------------------------------------
REPURCHASE AGREEMENT - 0.50%
PAR VALUE
- --------------------------------------------
Repurchase Agreement with:
$ - $ 4,039,766 $ 4,039,766 Lehman Brothers
5.18%, 11/01/99, dated 10/29/99 - 4,039,766 4,039,766
--------------------------------------------
TOTAL REPURCHASE AGREEMENT - 4,039,766 4,039,766
--------------------------------------------
COMMERCIAL PAPER (B) - 7.43%
29,764,000 - 29,764,000 BP Amoco Capital
5.35%, 11/01/99 29,764,000 - 29,764,000
30,000,000 - 30,000,000 Koch Industries, Inc.
5.35%, 11/01/99 30,000,000 - 30,000,000
--------------------------------------------
TOTAL COMMERCIAL PAPER 59,764,000 - 59,764,000
--------------------------------------------
TOTAL INVESTMENTS - 99.74%
(Cost $628,948,450, $44,343,972, and $673,292,422) 749,045,629 53,419,894 802,465,523
--------------------------------------------
NET OTHER ASSETS AND LIABILITIES - 0.26% 1,838,765 225,881 2,064,646
--------------------------------------------
NET ASSETS - 100.00% $ 750,884,394 $ 53,645,775 $804,530,169
============================================
</TABLE>
(A) -- Securities exempt from registration pursuant to Rule 144A under the
Securities Act of 1933, as amended. These securities may only be resold, in
transactions exempt from registration, to qualified institutional buyers. At
October 31, 1999, these securities amounted to $1,438,125, or 0.18% of net
assets.
(B) -- Discount yield at time of purchase.
(C) -- U.S. Dollar Demoninated
(D) -- Zero Coupon Bond. Yield shown reflects yield in effect at October 31,
1999
ADR -- American Depositary Receipt
CMO -- Collateralized Mortgage Obligation
MTN -- Medium Term Note
See Notes to Pro Forma Financial Statements
<PAGE>
GALAXY ASSET ALLOCATION FUND
BOSTON 1784 ASSET ALLOCATION FUND
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
OCTOBER 31, 1999
<TABLE>
<CAPTION>
-----------------------------------------------------------
GALAXY BOSTON 1784
ASSET ASSET PRO FORMA
ALLOCATION ALLOCATION PRO FORMA COMBINED
FUND FUND ADJUSTMENTS (NOTE 1)
-----------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments
Investments at cost $628,948,450 $ 40,304,206 $ - $669,252,656
Repurchase agreements - 4,039,766 - 4,039,766
Net unrealized appreciation 120,097,179 9,075,922 - 129,173,101
-----------------------------------------------------------
Total Investments at Value 749,045,629 53,419,894 - 802,465,523
Cash 3,145 3,489 - 6,634
Receivable for investments sold 12,820,671 32,975 - 12,853,646
Receivable for shares sold 678,348 - - 678,348
Interest and dividends receivable 4,764,568 302,802 - 5,067,370
-----------------------------------------------------------
Total Assets 767,312,361 53,759,160 - 821,071,521
LIABILITIES:
Payable for investments purchased 13,926,364 55,342 - 13,981,706
Payable for shares repurchased 1,585,754 - - 1,585,754
Advisory fee payable 467,232 32,889 - 500,121
Payable to Fleet affiliates 198,664 - - 198,664
Administration fee payable 121,085 2,895 - 123,980
Trustees' fees and expenses payable 17,145 105 - 17,250
Accrued expenses and other payables 111,723 22,154 - 133,877
-----------------------------------------------------------
Total Liabilities 16,427,967 113,385 - 16,541,352
NET ASSETS $750,884,394 $ 53,645,775 $ - $804,530,169
===========================================================
NET ASSETS CONSISTS OF:
Paid-in capital in excess of par value $615,868,022 $ 42,959,245 - $658,827,267
Undistributed net investment income 2,165,168 97,617 - 2,262,785
Accumulated net realized gain on investments sold 12,754,025 1,512,991 - 14,267,016
Net unrealized appreciation of investments 120,097,179 9,075,922 - 129,173,101
-----------------------------------------------------------
TOTAL NET ASSETS $750,884,394 $ 53,645,775 $ - $804,530,169
===========================================================
Net Assets by Class:
Retail A Shares $389,077,216 N/A $ - $389,077,216
===========================================================
Retail B Shares 91,199,117 N/A - 91,199,117
===========================================================
Trust Shares / Shares 269,850,784 53,645,775 (28,217,678) 295,278,881
===========================================================
Prime A Shares 237,778 N/A - 237,778
===========================================================
Prime B Shares 519,499 N/A - 519,499
===========================================================
BKB Shares N/A N/A 28,217,678 28,217,678
===========================================================
Shares of beneficial interest outstanding:
Retail A Shares 21,935,139 N/A - 21,935,139
===========================================================
Retail B Shares 5,153,727 N/A - 5,153,727
===========================================================
Trust Shares / Shares 15,222,769 3,462,534 (2,028,349) 16,656,954
===========================================================
Prime A Shares 13,412 N/A - 13,412
===========================================================
Prime B Shares 29,328 N/A - 29,328
===========================================================
BKB Shares N/A N/A 1,591,522 1,591,522
===========================================================
Net Asset Value, Retail A Shares $ 17.74 N/A $ 17.74
===========================================================
Net Asset Value, Retail B Shares $ 17.70 N/A $ 17.70
===========================================================
Net Asset Value, Trust Shares / Shares $ 17.73 $ 15.49 $ 17.73
===========================================================
Net Asset Value, Prime A Shares $ 17.73 N/A $ 17.73
===========================================================
Net Asset Value, Prime B Shares $ 17.71 N/A $ 17.71
===========================================================
Net Asset Value, BKB Shares N/A N/A $ 17.73
===========================================================
</TABLE>
See Notes to Pro Forma Financial Statements
<PAGE>
GALAXY ASSET ALLOCATION FUND
BOSTON 1784 ASSET ALLOCATION FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS (UNAUDITED)
OCTOBER 31, 1999
<TABLE>
<CAPTION>
---------------------------------------------------------------
GALAXY BOSTON 1784
ASSET ASSET PRO FORMA
ALLOCATION ALLOCATION PRO FORMA COMBINED
FUND FUND ADJUSTMENTS (NOTE 1)
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income:
Interest Income $ 21,285,878 $ 1,590,780 $ - $ 22,876,658
Dividend Income 3,132,775 233,198 - 3,365,973
---------------------------------------------------------------
Total Investment Income 24,418,653 1,823,978 - 26,242,631
---------------------------------------------------------------
Expenses:
Investment Advisory Fees 5,338,301 393,291 8,432 (a) 5,740,024
Administrative Fees 533,921 35,031 (42,647) (a) 526,305
Custodian Fee 80,573 22,752 (22,752) (b) 80,573
Fund Accounting Fee 135,247 527 (527) (a) 135,247
Professional Fees 47,338 4,327 (4,327) (b) 47,338
Trustee Fees 20,029 1,459 (1,459) (b) 20,029
Reports to Shareholders 151,125 3,584 - 154,709
Miscellaneous Expenses 139,893 1,216 - 141,109
---------------------------------------------------------------
Subtotal 6,446,427 462,187 (63,280) 6,845,334
Transfer Agent Fee
Retail A Shares 515,481 - - 515,481
Retail B Shares 133,280 - - 133,280
Trust Shares / Shares 535,703 58,849 43,491 (a) 638,043
Prime A Shares 244 - - 244
Prime B Shares 530 - - 530
BKB Shares - - 17,424 (a) 17,424
Shareholder Services Fee & 12B-1 Fee
Retail A Shares 1,052,992 - - 1,052,992
Retail B Shares 705,311 - - 705,311
Trust Shares / Shares - 132,867 (132,867) (a) -
Prime A Shares 438 - - 438
Prime B Shares 3,017 - - 3,017
BKB Shares - - 83,872 (a) 83,872
---------------------------------------------------------------
Total Expenses Before Waivers/Reimbursements 9,393,423 653,903 (51,360) 9,995,966
Less Waiver/Reimbursements
Fund Level Waivers - - - -
Class Specific Waivers/Reimbursements
Retail A Shares - - - -
Retail B Shares - - - -
Trust Shares / Shares - (132,867) 132,867 (c) -
Prime A Shares (241) - - (241)
Prime B Shares (523) - - (523)
BKB Shares - - (83,872) (c) (83,872)
---------------------------------------------------------------
Total Waivers/reimbursements (764) (132,867) 48,995 (84,636)
---------------------------------------------------------------
Net Expenses 9,392,659 521,036 (2,365) 9,911,330
---------------------------------------------------------------
Net Investment Income 15,025,994 1,302,942 2,365 16,331,301
---------------------------------------------------------------
Net Realized Gain on Investments 12,946,175 1,590,135 - 14,536,310
Net Change in Unrealized Appreciation on Investments 30,773,026 2,517,550 - 33,290,576
---------------------------------------------------------------
Net Realized and Unrealized Gain on Investments 43,719,201 4,107,685 - 47,826,886
---------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $ 58,745,195 $ 5,410,627 $ 2,365 $ 64,158,187
===============================================================
</TABLE>
(a) Reflects adjustment to the acquiring fund contractual fee level.
(b) Reflects expected savings when the two funds become one.
(c) Reflects adjustment to the acquiring fund's voluntary expense limitation.
See Notes to Pro Forma Financial Statements
<PAGE>
Galaxy Asset Allocation Fund
Boston 1784 Asset Allocation Fund
Notes to Pro Forma Combining Financial Statements (unaudited)
1. Basis of Combination
The Galaxy Fund, a Massachusetts business trust (the "Trust"), is registered
under the Investment Company Act of 1940, as amended, (the "1940 Act") as an
open-end management investment company. As of October 31, 1999, the Trust
offered twenty-nine managed investment portfolios. The unaudited Pro Forma
Combining Portfolio of Investments and the unaudited Pro Forma Statement of
Assets and Liabilities assumes the exchange described in the next paragraph
occurred as of October 31, 1999 and the unaudited Pro Forma Combining Statement
of Operations assumes the exchange occurred as of November 1, 1998. These
statements have been derived from books and records utilized in calculating the
net asset value of each fund at October 31, 1999 and for the twelve-month period
then ended.
The pro forma statements give effect to the proposed transfer substantially all
of the assets and stated liabilities of the Boston 1784 Asset Allocation Fund in
exchange for Trust and BKB shares of Galaxy Asset Allocation Fund. Under
generally accepted accounting principles, the historical cost of investment
securities will be carried forward to the surviving entity and the results of
operations of the Boston 1784 Asset Allocation Fund for pre-combination periods
will not be restated. The pro forma statements do not reflect the expenses of
either fund in carrying out its obligations under the proposed Agreement and
Plan of Reorganization.
The unaudited Pro Forma Combining Financial Statements should be read in
conjunction with the historical financial statements of the funds incorporated
by reference in the Statement of Additional Information.
For the twelve-month period ended October 31, 1999, the Galaxy Asset Allocation
Fund's investment advisory fee was computed based on the annual rate of 0.75% of
its average daily net assets. The administration fee was computed based on the
annual rate of 0.09% of the first $2.5 billion of the Trust's combined average
daily net assets, 0.085% of the next $2.5 billion, 0.075% of the next $7
billion, 0.065% of the next $3 billion, 0.06% of the next $3 billion, and
0.0575% of the combined average daily net assets in excess of $18 billion, and
was allocated to each fund based on the relative net assets of the Trust.
The Trust has adopted a shareholder services plan (the "Services Plan") with
respect to Retail A, BKB and Trust Shares of the funds to compensate certain
institutions providing administrative and support services to their customers
who own such shares. Currently, the Services Plan has not been implemented for
the Trust shares. Under the Services Plan, aggregate payments may not exceed
0.50% of the average daily net assets of Retail A or BKB shareholders who are
customers of such institutions. Currently, the Trust, under the direction of the
Board of Trustees, is limiting such payments to 0.30% of the average daily net
asset of Retail A or BKB shareholders who are customers of such institutions.
The Trust has adopted a distribution and services plan (the "12b-1 Plan") with
respect to Retail B shares of the fund. Payments to the Distributor or others
for distribution services (those primarily intended to result in the sale of
Retail B shares) may not exceed 0.65% of the average daily net assets of Retail
B shares. Payments to institutions providing services to their customers owning
Retail B shares for shareholder liaison and administrative support services may
not exceed 0.25% and 0.25%, respectively, of the average daily net assets
attributable to shareholders who are customers of such institutions. The Trust
is currently limiting payments for shareholder liaison and administrative
support to 0.30% of the average daily net assets attributable to shareholders
that are customers of such institutions.
The Trust has adopted a distribution plan (the "Prime A Plan") with respect to
Prime A shares of the fund. Payments to the Distributor or others for
distribution services (those primarily intended to result in the sale of Prime A
shares) may not exceed 0.30% of the average daily net assets of Prime A shares.
The Trust is currently limiting payments under the Prime A Plan to 0.25% of the
average daily net assets of Prime A shares.
<PAGE>
Galaxy Asset Allocation Fund
Boston 1784 Asset Allocation Fund
Notes to Pro Forma Combining Financial Statements (unaudited) (continued)
The Trust has adopted a distribution and services plan (the "Prime B Plan") with
respect to Prime B shares of the fund. Payments to the Distributor or others for
distribution services (those primarily intended to result in the sale of Prime B
shares) may not exceed 0.75% of the average daily net assets of Prime B shares.
Payments to institutions providing services to their customers owning Prime B
shares for shareholder liaison and administrative support services may not
exceed 0.25% and 0.25%, respectively, of the average daily net assets
attributable to shareholders who are customers of such institutions. The Trust
is currently limiting payments for shareholder liaison and administrative
support to 0.25% of the average daily net assets attributable to shareholders
that are customers of such institutions.
2. Portfolio Valuation
The Galaxy Asset Allocation Fund's investments in securities which are traded on
a recognized stock exchange are valued at the last sale price on the securities
exchange on which such securities are primarily traded, or at the last sales
price on the national securities market. Securities traded on over-the-counter
markets are valued at the last bid price. Short-term obligations that mature in
60 days or less are valued at amortized cost, which approximates fair value. All
other securities and other assets are appraised at their fair value as
determined in good faith under consistently applied procedures established by
and under the general supervision of the Board of Trustees. The Boston 1784
Asset Allocation Fund uses similar rules for determining portfolio valuation.
3. Capital Shares
The pro forma net asset value per share assumes the issuance of additional
shares of the Galaxy Asset Allocation Fund that would have been issued at
October 31, 1999 in connection with the proposed reorganization. The pro forma
number of shares outstanding of 45,380,082 consists of 3,025,707 shares assumed
issued in the reorganization plus 42,354,375 shares of the Galaxy Asset
Allocation Fund at October 31, 1999.
\<PAGE>
GALAXY GROWTH AND INCOME FUND
BOSTON 1784 GROWTH AND INCOME FUND
PRO FORMA COMBINING PORTFOLIO OF INVESTMENTS (UNAUDITED)
OCTOBER 31, 1999
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE (NOTE 2)
- ----------------------------------------------------------------------------------------------------------------------------------
GALAXY BOSTON 1784 BOSTON 1784
GROWTH & GROWTH & PRO FORMA GALAXY GROWTH GROWTH & PRO FORMA
INCOME FUND INCOME FUND COMBINED & INCOME FUND INCOME FUND COMBINED
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCK - 94.33%
TECHNOLOGY - 21.61%
146,300 - 146,300 Avnet, Inc. $ 7,945,919 $ - $ 7,945,919
173,000 400,000 573,000 Cisco Systems, Inc. 12,802,000 29,600,000 42,402,000
269,000 - 269,000 Compaq Computer Corp. 5,111,000 - 5,111,000
92,000 - 92,000 Computer Sciences Corp. 6,319,250 - 6,319,250
226,000 - 226,000 Electronic Data Systems Corp. 13,221,000 - 13,221,000
- 100,000 100,000 Equant NV, ADR - 9,700,000 9,700,000
270,000 - 270,000 Harris Corp. 6,058,125 - 6,058,125
150,000 - 150,000 Hewlett-Packard Co. 11,109,375 - 11,109,375
- 380,000 380,000 Intel Corp. - 29,426,250 29,426,250
105,000 - 105,000 International Business Machines Corp. 10,329,375 - 10,329,375
- 40,000 40,000 JDS Uniphase Corp. (CAD) - 6,688,418 6,688,418
- 500,000 500,000 Medtronic, Inc. - 17,312,500 17,312,500
- 400,000 400,000 Mircosoft Corp. - 37,025,000 37,025,000
122,000 - 122,000 Motorola, Inc. 11,887,375 - 11,887,375
145,000 150,000 295,000 Texas Instruments, Inc. 13,013,750 13,462,500 26,476,250
-----------------------------------------------
97,797,169 143,214,668 241,011,837
-----------------------------------------------
CONSUMER STAPLES - 17.08%
150,000 - 150,000 American Home Products Corp. 7,837,500 - 7,837,500
118,000 - 118,000 Anheuser-Busch Cos., Inc. 8,473,875 - 8,473,875
140,000 - 140,000 Bestfoods 8,225,000 - 8,225,000
- 160,000 160,000 Coca Cola, Inc. - 9,440,000 9,440,000
430,600 - 430,600 Elan Corp. Plc, ADR 11,087,950 - 11,087,950
170,000 - 170,000 Forest Laboratories, Inc. 7,798,750 - 7,798,750
225,000 - 225,000 Genzyme Corp. 8,606,250 - 8,606,250
1,200,000 - 1,200,000 HEALTHSOUTH Corp. 6,900,000 - 6,900,000
162,000 - 162,000 International Flavors & Fragances, Inc. 6,196,500 - 6,196,500
84,000 120,000 204,000 Johnson & Johnson 8,799,000 12,570,000 21,369,000
- 150,000 150,000 Lilly (Eli) & Co. - 10,331,250 10,331,250
180,000 - 180,000 McDonald's Corp. 7,425,000 - 7,425,000
126,000 - 126,000 Merck & Co., Inc. 10,024,875 - 10,024,875
- 105,000 105,000 Outback Steakhouse Co. - 2,415,000 2,415,000
190,000 - 190,000 PepsiCo, Inc. 6,590,625 - 6,590,625
- 375,000 375,000 Pfizer, Inc. - 14,812,500 14,812,500
130,000 - 130,000 Pharmacia & Upjohn, Inc. 7,011,875 - 7,011,875
- 935,000 935,000 PizzaExpress (UK) - 12,375,452 12,375,452
- 100,000 100,000 Reader's Digest Association, Inc. - 3,225,000 3,225,000
265,000 - 265,000 Rite Aid Corp. 2,318,750 - 2,318,750
- 225,000 225,000 Warner-Lambert Co. - 17,957,813 17,957,813
-----------------------------------------------
107,295,950 83,127,015 190,422,965
-----------------------------------------------
CONSUMER CYCLICAL - 15.23%
- 600,000 600,000 Bed Bath & Beyond, Inc. - 19,987,500 19,987,500
- 250,000 250,000 Cintas Corp. - 15,062,500 15,062,500
215,000 - 215,000 Circuit City Stores 9,177,812 - 9,177,812
392,000 - 392,000 Cooper Tire & Rubber Co. 6,590,500 - 6,590,500
90,000 - 90,000 Eastman Kodak Co. 6,204,375 - 6,204,375
98,000 - 98,000 Ford Motor Co. 5,377,750 - 5,377,750
- 250,000 250,000 Guidant Corp. - 12,343,750 12,343,750
- 500,000 500,000 Home Depot, Inc. - 37,750,000 37,750,000
220,000 - 220,000 Lowe's Cos., Inc. 12,100,000 - 12,100,000
635,000 - 635,000 Office Depot, Inc. 7,897,813 - 7,897,813
140,000 - 140,000 Penney (J.C.) Co., Inc. 3,552,500 - 3,552,500
- 110,000 110,000 Schering Plough Corp. - 5,445,000 5,445,000
385,000 - 385,000 Sherwin-Williams Co. 8,614,375 - 8,614,375
- 3,525,000 3,525,000 Wetherspoon (J.D.) Plc (UK) - 19,676,710 19,676,710
-----------------------------------------------
59,515,125 110,265,460 169,780,585
-----------------------------------------------
<PAGE>
FINANCIAL - 11.63%
- 156,250 156,250 American International Group, Inc. - 16,083,984 16,083,984
172,000 - 172,000 Bank of America Corp. 11,072,500 - 11,072,500
200,000 - 200,000 Bank One Corp. 7,512,500 - 7,512,500
96,000 - 96,000 Chase Manhattan Corp. 8,388,000 - 8,388,000
96,000 - 96,000 Chubb Corp. 5,268,000 - 5,268,000
198,000 - 198,000 Citigroup, Inc. 10,716,750 - 10,716,750
- 200,000 200,000 Concord EFS, Inc. - 5,412,500 5,412,500
170,000 - 170,000 Countrywide Credit Industries, Inc. 5,769,375 5,769,375
- 200,000 200,000 Fifth Third Bancorp - 14,762,500 14,762,500
- 500,000 500,000 Firstar Corp. - 14,687,500 14,687,500
110,000 - 110,000 Hartford Financial Services Group, Inc. 5,699,375 - 5,699,375
136,000 - 136,000 Lincoln National Corp. 6,273,000 - 6,273,000
54,000 - 54,000 Morgan (J.P.) & Co., Inc. 7,067,250 - 7,067,250
230,000 - 230,000 Wells Fargo & Co. 11,011,250 - 11,011,250
-----------------------------------------------
78,778,000 50,946,484 129,724,484
-----------------------------------------------
ENERGY - 9.60%
90,000 - 90,000 Atlantic Richfield Co. 8,386,875 - 8,386,875
200,000 - 200,000 Baker Hughes, Inc. 5,587,500 - 5,587,500
172,032 - 172,032 BP Amoco, Plc, ADR 9,934,848 - 9,934,848
- 500,000 500,000 Enron Corp. - 19,968,750 19,968,750
- 150,000 150,000 Exxon Corp. - 11,109,375 11,109,375
225,000 - 225,000 Halliburton Co. 8,479,687 - 8,479,687
160,000 - 160,000 Kerr-McGee Corp. 8,600,000 - 8,600,000
97,000 - 97,000 Mobil Corp. 9,360,500 - 9,360,500
- 100,000 100,000 Murphy Oil Corp. - 5,606,250 5,606,250
144,400 - 144,400 Schlumberger, Ltd. 8,745,225 - 8,745,225
- 300,000 300,000 Williams Cos., Inc. - 11,250,000 11,250,000
-----------------------------------------------
59,094,635 47,934,375 107,029,010
-----------------------------------------------
UTILITIES - 6.42%
159,000 300,000 459,000 American Telephone & Telegraph Corp. 7,433,250 14,025,000 21,458,250
205,500 - 205,500 Century Telephone Enterprises, Inc. 8,309,906 - 8,309,906
199,000 - 199,000 Entergy Corp. 5,957,563 - 5,957,563
122,000 - 122,000 GTE Corp. 9,150,000 - 9,150,000
170,000 40,000 210,000 MCI WorldCom, Inc. 14,588,125 3,432,500 18,020,625
170,000 - 170,000 SBC Communications, Inc. 8,659,375 - 8,659,375
-----------------------------------------------
54,098,219 17,457,500 71,555,719
-----------------------------------------------
CAPITAL GOODS AND CONSTRUCTION - 5.13%
176,500 - 176,500 Boeing Co. 8,130,031 - 8,130,031
64,000 80,000 144,000 General Electric Co. 8,676,000 10,845,000 19,521,000
66,500 - 66,500 Honeywell, Inc. 7,011,594 - 7,011,594
172,000 - 172,000 Hubbell, Inc., Class A 4,794,500 - 4,794,500
272,632 - 272,632 Tyco International Ltd. 10,888,240 - 10,888,240
370,000 - 370,000 Waste Management, Inc. 6,798,750 - 6,798,750
-----------------------------------------------
46,299,115 10,845,000 57,144,115
-----------------------------------------------
BASIC MATERIALS - 4.10%
38,100 - 38,100 Crown Cork & Seal, Inc. 912,019 - 912,019
190,000 - 190,000 Goodrich (B.F.) Co. 4,500,625 - 4,500,625
90,000 - 90,000 Minnesota Mining & Manufacturing Co. 8,555,625 - 8,555,625
- 125,000 125,000 OM Group, Inc. - 4,687,500 4,687,500
300,000 - 300,000 Pall Corp. 6,581,250 - 6,581,250
190,000 - 190,000 Praxair, Inc. 8,882,500 - 8,882,500
- 1,785,000 1,785,000 Rentokil Initial Plc (UK) - 5,950,489 5,950,489
200,000 - 200,000 Sigma Aldrich Corp. 5,700,000 - 5,700,000
-----------------------------------------------
35,132,019 10,637,989 45,770,008
-----------------------------------------------
BROADCASTING - 2.15%
- 60,000 60,000 Qualcomm, Inc. - 13,365,000 13,365,000
- 100,000 100,000 Qwest Communications International - 3,600,000 3,600,000
- 100,000 100,000 Time Warner, Inc. - 6,968,750 6,968,750
-----------------------------------------------
- 23,933,750 23,933,750
-----------------------------------------------
<PAGE>
TRANSPORTATION - 1.38%
101,500 - 101,500 British Airways Plc, ADR 5,265,313 - 5,265,313
318,000 - 318,000 Burlington Northern Santa Fe Corp. 10,136,250 - 10,136,250
-----------------------------------------------
15,401,563 - 15,401,563
-----------------------------------------------
TOTAL COMMON STOCK 553,411,795 498,362,241 1,051,774,036
-----------------------------------------------
CONVERTIBLE PREFERRED STOCKS - 0.77%
135,000 - 135,000 Crown Cork & Seal Co., Inc., 4.50% 2,978,437 - 2,978,437
37,000 - 37,000 Loral Space and Communications, Ltd.,
6.00%
Series C, 6.00% 1,773,688 - 1,773,688
80,000 - 80,000 Loral Space and Communications, Ltd.,
6.00% 3,835,000 - 3,835,000
-----------------------------------------------
TOTAL CONVERTIBLE PREFFERRED STOCKS 8,587,125 - 8,587,125
-----------------------------------------------
PAR VALUE
- --------------------------------
REPURCHASE AGREEMENTS - 4.49%
Repurchase Agreement with:
$41,135,000 $ - $41,135,000 Chase Manhattan Bank
5.20%, 11/01/99, dated 10/29/99 43,135,000 - 43,135,000
- 6,923,306 6,923,306 Lehman Brothers
5.18%, 11/01/99, dated 10/29/99 - 6,923,306 6,923,306
-----------------------------------------------
TOTAL REPURCHASE AGREEMENTS 43,135,000 6,923,306 50,058,306
-----------------------------------------------
TOTAL INVESTMENTS - 99.59%
(COST $504,020,975, $255,271,545, AND $759,292,520) 605,133,920 505,285,547 1,110,419,467
-----------------------------------------------
NET OTHER ASSETS AND LIABILITIES - 0.41% (1,271,845) 5,892,425 4,620,580
-----------------------------------------------
NET ASSETS - 100.00% $ 603,862,075 $ 511,177,972 $1,115,040,047
===============================================
</TABLE>
ADR - American Depositary Receipt
UK - United Kingdom Equity
CAD - Canadian Equity
See Notes to Pro Forma Financial Statements
<PAGE>
GALAXY GROWTH AND INCOME FUND
BOSTON 1784 GROWTH AND INCOME FUND
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
OCTOBER 31, 1999
<TABLE>
<CAPTION>
-------------------------------------------------------------------
GALAXY BOSTON 1784 PRO FORMA
GROWTH & GROWTH & PRO FORMA COMBINED
INCOME FUND INCOME FUND ADJUSTMENTS (NOTE 1)
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments
Investments at cost $ 460,885,975 $248,348,239 $ - $ 709,234,214
Repurchase agreements 43,135,000 6,923,306 - 50,058,306
Net unrealized appreciation 101,112,945 250,014,002 - 351,126,947
------------------------------------------------------------------
Total Investments at Value 605,133,920 505,285,547 - 1,110,419,467
Cash 345 9,795 - 10,140
Receivable for investments sold 2,886,699 12,058,251 - 14,944,950
Receivable for shares sold 250,664 -- - 250,664
Interest and dividends receivable 480,135 199,571 - 679,706
Tax Reclaim Receivable -- 24,578 - 24,578
------------------------------------------------------------------
Tot al Assets 608,751,763 517,577,742 - 1,126,329,505
LIABILITIES:
Payable for investments purchased 3,065,371 5,939,252 - 9,004,623
Payable for shares repurchased 1,263,762 2,591 - 1,266,353
Payable for Forward Contracts -- 5,251 - 5,251
Advisory fee payable 336,545 310,112 - 646,657
Payable to Fleet affiliates 83,093 -- - 83,093
Administration fee payable 71,345 27,305 - 98,650
Trustees' fees and expenses payable 15,235 1,160 - 16,395
Accrued expenses and other payables 54,337 114,099 - 168,436
------------------------------------------------------------------
Total Liabilities 4,889,688 6,399,770 - 11,289,458
NET ASSETS $ 603,862,075 $511,177,972 $ - $ 1,115,040,047
==================================================================
NET ASSETS CONSISTS OF:
Paid-in capital $ 469,231,325 $210,876,791 - $ 680,108,116
Undistributed (overdistributed) net investment income 148,148 (594,738) - (446,590)
Accumulated net realized gain on investments sold 33,369,657 50,881,917 - 84,251,574
Net unrealized appreciation of investments 101,112,945 250,014,002 - 351,126,947
------------------------------------------------------------------
TOTAL NET ASSETS $ 603,862,075 $511,177,972 $ - $ 1,115,040,047
==================================================================
Net Assets by Class:
Retail A Shares $ 232,110,404 N/A $ - $ 232,110,404
==================================================================
Retail B Shares 62,365,649 N/A - 62,365,649
==================================================================
Trust Shares / Shares 309,106,303 511,177,972 (143,641,010) 676,643,265
==================================================================
Prime A Shares 150,276 N/A - 150,276
==================================================================
Prime B Shares 129,443 N/A - 129,443
==================================================================
BKB Shares N/A N/A 143,641,010 143,641,010
==================================================================
Shares of beneficial interest outstanding:
Retail A Shares 14,524,500 N/A - 14,524,500
==================================================================
Retail B Shares 3,921,763 N/A - 3,921,763
==================================================================
Trust Shares / Shares 19,290,157 21,819,394 1,122,988 42,232,539
==================================================================
Prime A Shares 9,392 N/A - 9,392
==================================================================
Prime B Shares 8,107 N/A - 8,107
==================================================================
BKB Shares N/A N/A 8,966,355 8,966,355
==================================================================
Net Asset Value, Retail A Shares $ 15.98 N/A $ 15.98
==================================================================
Net Asset Value, Retail B Shares $ 15.90 N/A $ 15.90
==================================================================
Net Asset Value, Trust Shares / Shares $ 16.02 $ 23.43 $ 16.02
==================================================================
Net Asset Value, Prime A Shares $ 16.00 N/A $ 16.00
==================================================================
Net Asset Value, Prime B Shares $ 15.97 N/A $ 15.97
==================================================================
Net Asset Value, BKB Shares N/A N/A $ 16.02
==================================================================
</TABLE>
See Notes to Pro Forma Financial Statements
<PAGE>
GALAXY GROWTH AND INCOME FUND
BOSTON 1784 GROWTH AND INCOME FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS (UNAUDITED)
OCTOBER 31, 1999
<TABLE>
<CAPTION>
---------------------------------------------------------------
GALAXY BOSTON 1784 PRO FORMA
GROWTH & GROWTH & PRO FORMA COMBINED
INCOME FUND INCOME FUND ADJUSTMENTS (NOTE 1)
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income:
Interest Income $ 2,381,072 $ 965,191 $ - $ 3,346,263
Dividend Income 8,692,757 3,577,457 - 12,270,214
Less: foreign taxes withheld - (73,234) - (73,234)
---------------------------------------------------------------
Total Investment Income 11,073,829 4,469,414 - 15,543,243
---------------------------------------------------------------
Expenses:
Investment Advisory Fees 4,577,393 4,069,436 58,216 (a) 8,705,045
Administrative Fees 456,860 362,599 (21,291) (a) 798,168
Custodian Fee 34,257 59,827 (50,000) (b) 44,084
Fund Accounting Fee 97,808 5,501 35,370 (a) 138,679
Professional Fees 42,945 45,341 (42,252) (b) 46,034
Trustee Fees 15,416 15,359 (11,827) (b) 18,948
Reports to Shareholders 155,349 37,651 (37,651) (b) 155,349
Miscellaneous Expenses 106,323 29,734 - 136,057
---------------------------------------------------------------
Subtotal 5,486,351 4,625,448 (69,435) 10,042,364
Transfer Agent Fee
Retail A Shares 491,381 - - 491,381
Retail B Shares 133,578 - - 133,578
Trust Shares / Shares 462,089 232,079 (75,034) (a) 619,134
Prime A Shares 161 - - 161
Prime B Shares 156 - - 156
BKB Shares - - 82,686 (a) 82,686
Shareholders Service Fee + 12B-1 Fee
Retail A Shares 678,795 - - 678,795
Retail B Shares 566,968 - - 566,968
Trust Shares / Shares - 1,374,828 (1,374,828) (a) -
Prime A Shares 264 - - 264
Prime B Shares 549 - - 549
BKB Shares - - 463,613 (a) 463,613
---------------------------------------------------------------
Total Expenses Before Waivers/Reimbursements 7,820,292 6,232,355 (972,998) 13,079,649
Less Waiver/Reimbursements
Fund Level Waivers - - - -
Class Specific Waivers/Reimbursements
Retail A Shares (252,526) - 84,130 (c) (168,396)
Retail B Shares (493) - - (493)
Trust Shares / Shares (2,565) (1,374,828) 1,374,828 (c) (2,565)
Prime A Shares (154) - - (154)
Prime B Shares (152) - - (152)
BKB Shares - - (463,613) (c) (463,613)
---------------------------------------------------------------
Total Waivers/Reimbursements (255,890) (1,374,828) 995,345 (635,373)
Net Expenses 7,564,402 4,857,527 22,347 12,444,276
---------------------------------------------------------------
Net Investment Income 3,509,427 (388,113) (22,347) 3,098,967
---------------------------------------------------------------
Net Realized Gain on Investments 33,835,048 50,924,849 - 84,759,897
Net Realized (Loss) on forward foreign currency contracts
and foreign currency - (20,734) - (20,734)
Net Change in Unrealized Appreciation on Investments 38,430,506 34,076,738 - 72,507,244
---------------------------------------------------------------
Net Realized and Unrealized Gain on Investments 72,265,554 84,980,853 - 157,246,407
---------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $ 75,774,981 $ 84,592,740 $ (22,347) $160,345,374
===============================================================
</TABLE>
(a) Reflects adjustment to the acquiring fund contractual fee level.
(b) Reflects expected savings when the two funds become one.
(c) Reflects adjustment to the acquiring fund's voluntary expense limitation.
See Notes to Pro Forma Financial Statements
<PAGE>
Galaxy Growth and Income Fund
Boston 1784 Growth and Income Fund
Notes to Pro Forma Combining Financial Statements (unaudited)
1. Basis of Combination
The Galaxy Fund, a Massachusetts business trust (the "Trust"), is registered
under the Investment Company Act of 1940, as amended, (the "1940 Act") as an
open-end management investment company. As of October 31, 1999, the Trust
offered twenty-nine managed investment portfolios. The unaudited Pro Forma
Combining Portfolio of Investments and the unaudited Pro Forma Statement of
Assets and Liabilities assumes the exchange described in the next paragraph
occurred as of October 31, 1999 and the unaudited Pro Forma Combining Statement
of Operations assumes the exchange occurred as of November 1, 1998. These
statements have been derived from books and records utilized in calculating the
net asset value of each fund at October 31, 1999 and for the twelve-month period
then ended.
The pro forma statements give effect to the proposed transfer of substantially
all of the assets and stated liabilities of the Boston 1784 Growth and Income
Fund in exchange for Trust and BKB shares of Galaxy Growth and Income Fund.
Under generally accepted accounting principles, the historical cost of
investment securities will be carried forward to the surviving entity and the
results of operations of the Boston 1784 Growth and Income Fund for
pre-combination periods will not be restated. The pro forma statements do not
reflect the expenses of either fund in carrying out its obligations under the
proposed Agreement and Plan of Reorganization.
The unaudited Pro Forma Combining Financial Statements should be read in
conjunction with the historical financial statements of the funds incorporated
by reference in the Statement of Additional Information.
For the twelve-month period ended October 31, 1999, the Galaxy Growth and Income
Fund's investment advisory fee was computed based on the annual rate of 0.75% of
its average daily net assets. The administration fee was computed based on the
annual rate of 0.09% of the first $2.5 billion of the Trust's combined average
daily net assets, 0.085% of the next $2.5 billion, 0.075% of the next $7
billion, 0.065% of the next $3 billion, 0.06% of the next $3 billion, and
0.0575% of the combined average daily net assets in excess of $18 billion, and
was allocated to each fund based on the relative net assets of the Trust.
The Trust has adopted a shareholder services plan (the "Services Plan") with
respect to Retail A, BKB and Trust Shares of the funds to compensate certain
institutions providing administrative and support services to their customers
who own such shares. Currently, the Services Plan has not been implemented for
the Trust shares. Under the Services Plan, aggregate payments may not exceed
0.50% of the average daily net assets of Retail A or BKB shareholders who are
customers of such institutions. Currently, the Trust, under the direction of the
Board of Trustees, is limiting such payments to 0.30% of the average daily net
assets of Retail A or BKB shareholders who are customers of such institutions.
The Trust has adopted a distribution and services plan (the "12b-1 Plan") with
respect to Retail B shares of the fund. Payments to the Distributor or others
for distribution services (those primarily intended to result in the sale of
Retail B shares) may not exceed 0.65% of the average daily net assets of Retail
B shares. Payments to institutions providing services to their customers owning
Retail B shares for shareholder liaison and administrative support services may
not exceed 0.25% and 0.25%, respectively, of the average daily net assets
attributable to shareholders who are customers of such institutions. The Trust
is currently limiting payments for shareholder liaison and administrative
support to 0.30% of the average daily net assets attributable to shareholders
that are customers of such institutions.
The Trust has adopted a distribution plan (the "Prime A Plan") with respect to
Prime A shares of the fund. Payments to the Distributor or others for
distribution services (those primarily intended to result in the sale of Prime A
shares) may not exceed 0.30% of the average daily net assets of Prime A shares.
The Trust is currently limiting payments under the Prime A Plan to 0.25% of the
average daily net assets of Prime A shares.
<PAGE>
Galaxy Growth and Income Fund
Boston 1784 Growth and Income Fund
Notes to Pro Forma Combining Financial Statements (unaudited) (continued)
The Trust has adopted a distribution and services plan (the "Prime B Plan") with
respect to Prime B shares of the fund. Payments to the Distributor or others for
distribution services (those primarily intended to result in the sale of Prime B
shares) may not exceed 0.75% of the average daily net assets of Prime B shares.
Payments to institutions providing services to their customers owning Prime B
shares for shareholder liaison and administrative support services may not
exceed 0.25% and 0.25%, respectively, of the average daily net assets
attributable to shareholders who are customers of such institutions. The Trust
is currently limiting payments for shareholder liaison and administrative
support to 0.25% of the average daily net assets attributable to shareholders
that are customers of such institutions.
2. Portfolio Valuation
The Galaxy Growth and Income Fund's investments in securities which are traded
on a recognized stock exchange are valued at the last sale price on the
securities exchange on which such securities are primarily traded, or at the
last sales price on the national securities market. Securities traded on
over-the-counter markets are valued at the last bid price. Short-term
obligations that mature in 60 days or less are valued at amortized cost, which
approximates fair value. All other securities and other assets are appraised at
their fair value as determined in good faith under consistently applied
procedures established by and under the general supervision of the Board of
Trustees. The Boston 1784 Growth and Income Fund uses similar rules for
determining portfolio valuation.
3. Capital Shares
The pro forma net asset value per share assumes the issuance of additional
shares of the Galaxy Growth and Income Fund that would have been issued at
October 31, 1999 in connection with the proposed reorganization. The pro forma
number of shares outstanding of 69,662,656 consists of 31,908,737 shares assumed
issued in the reorganization plus 37,753,919 shares of the Galaxy Growth and
Income Fund at October 31, 1999.
<PAGE>
GALAXY INTERNATIONAL EQUITY FUND
BOSTON 1784 INTERNATIONAL EQUITY FUND
PRO FORMA COMBINING PORTFOLIO OF INVESTMENTS (UNAUDITED)
OCTOBER 31, 1999
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE (NOTE 2)
- -----------------------------------------------------------------------------------------------------------------------------------
BOSTON 1784
GALAXY INT'L INT'L EQUITY PRO FORMA GALAXY INT'L BOSTON 1784 INT'L PRO FORMA
EQUITY FUND FUND COMBINED EQUITY FUND EQUITY FUND COMBINED
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCKS - 93.93%
AUSTRALIA - 1.22%
760,884 - 760,884 Australia & New Zealand $ 5,022,284 $ - $ 5,022,284
- 411,142 411,142 Broken Hill Proprietary Co. - 4,245,813 4,245,813
1,124,169 - 1,124,169 Coca-Cola Amatil, Ltd. 3,470,255 - 3,470,255
----------------------------------------------
8,492,539 4,245,813 12,738,352
----------------------------------------------
BRAZIL - 0.20%
- 100,000 100,000 Aracruz Celulose SA, ADR 2,050,000 2,050,000
----------------------------------------------
CANADA - 2.23%
222,800 - 222,800 BCE, Inc. 13,414,937 - 13,414,937
158,200 - 158,200 Manulife Financial Corp. 1,902,915 - 1,902,915
159,100 - 159,100 Seagram Co., Ltd. 7,887,424 - 7,887,424
----------------------------------------------
23,205,276 - 23,205,276
----------------------------------------------
FINLAND - 2.00%
- 120,348 120,348 Nokia OYJ - 13,813,985 13,813,985
- 70,000 70,000 Sonera - 2,108,218 2,108,218
- 153,000 153,000 UPM-Kymmene OYJ - 4,841,991 4,841,991
----------------------------------------------
- 20,764,194 20,764,194
----------------------------------------------
FRANCE - 9.00%
- 95,000 95,000 Alstom - 2,886,206 2,886,206
- 25,536 25,536 Axa - 3,612,376 3,612,376
- 32,500 32,500 Banque National de Paris - 2,862,735 2,862,735
- 26,189 26,189 Cap Gemini - 3,978,256 3,978,256
50,430 30,500 80,930 Carrefour SA 9,334,999 5,662,703 14,997,702
43,223 - 43,223 Equant 4,205,032 - 4,205,032
- 27,300 27,300 LaFarge - 2,635,088 2,635,088
249,913 - 249,913 Rhodia SA 4,823,226 - 4,823,226
- 100,008 100,008 Sanofi-Synthelabo - 4,425,660 4,425,660
- 131,400 131,400 STMicroelectronics, ADR - 11,940,975 11,940,975
79,490 - 79,490 Suez Lyonnaise 12,833,158 - 12,833,158
- 60,000 60,000 Total Fina - 8,133,279 8,133,279
80,041 - 80,041 Valeo SA 5,749,709 - 5,749,709
139,029 - 139,029 Vivendi 10,535,424 - 10,535,424
----------------------------------------------
47,481,548 46,137,278 93,618,826
----------------------------------------------
GERMANY - 9.67%
- 20,700 20,700 Allianz AG - 6,321,646 6,321,646
253,604 - 253,604 Bayerische Motoren Werke (BMW) AG 8,081,861 - 8,081,861
- 42,200 42,200 Bayerische Vereinsbank - 2,777,847 2,777,847
20,760 - 20,760 Celanese AG 327,515 - 327,515
- 90,000 90,000 Deutsche Bank - 6,474,976 6,474,976
- 60,500 60,500 Epcos AG - 2,476,272 2,476,272
207,600 - 207,600 Hoechst AG 9,137,670 - 9,137,670
116,853 73,600 190,453 Mannesmann AG 18,404,302 11,607,276 30,011,578
263,592 - 263,592 Metallgesellschaft AG 5,489,213 - 5,489,213
- 70,000 70,000 Preussag - 3,802,915 3,802,915
19,895 - 19,895 SAP AG 8,767,396 - 8,767,396
93,070 37,000 130,070 Siemens AG 8,354,604 3,331,321 11,685,925
97,781 - 97,781 Veba AG 5,286,038 - 5,286,038
----------------------------------------------
63,848,599 36,792,253 100,640,852
----------------------------------------------
GREECE - 0.26%
128,360 - 128,360 Hellenic Telecommunications
Organization SA (OTE) 2,719,232 - 2,719,232
----------------------------------------------
HONG KONG - 2.33%
1,496,000 2,548,000 4,044,000 China Telecom, Ltd. 5,122,298 8,725,690 13,847,988
- 2,000,000 2,000,000 Cosco Pacific, Ltd. - 1,480,528 1,480,528
<PAGE>
- 172,800 172,800 HSBC Holdings - 2,074,490 2,074,490
262,000 420,000 682,000 Hutchison Whampoa, Ltd. 2,630,556 4,217,573 6,848,129
----------------------------------------------
7,752,854 16,498,281 24,251,135
----------------------------------------------
HUNGARY - 0.20%
46,270 - 46,270 Gedeon Richter, GDR 2,111,263 - 2,111,263
----------------------------------------------
IRELAND - 0.30%
- 1,194,000 1,194,000 Jefferson Smurfit Group, PLC - 3,082,177 3,082,177
----------------------------------------------
ITALY - 3.56%
3,022,460 - 3,022,460 Banca Nazionale del Lavoro 10,235,972 - 10,235,972
141,700 - 141,700 Banca Popolare di Bergamo 3,047,725 - 3,047,725
1,287,569 - 1,287,569 Unicredito Italiano SPA 6,026,195 - 6,026,195
1,026,881 200,300 1,227,181 Mediaset SPA 10,249,413 2,005,204 12,254,617
630,504 - 630,504 Telecom Italia SPA 5,444,320 - 5,444,320
----------------------------------------------
35,003,625 2,005,204 37,008,829
----------------------------------------------
JAPAN - 31.01%
- 30,000 30,000 Advantest Corp. - 4,524,496 4,524,496
- 12,900 12,900 Aeon Credit Service Co. - 1,883,573 1,883,573
- 30,200 30,200 Aiful Corp. - 4,699,712 4,699,712
- 240,000 240,000 Asahi Bank - 2,134,870 2,134,870
- 95,000 95,000 Credit Saison, Ltd. - 2,340,778 2,340,778
- 656,000 656,000 Daiwa Securities - 7,013,718 7,013,718
1,283,000 - 1,283,000 Fuji Bank, Ltd. 17,595,569 - 17,595,569
265,000 325,000 590,000 Fujitsu, Ltd. 7,980,244 9,803,074 17,783,318
- 16,000 16,000 Funai Electric Ltd. - 7,254,563 7,254,563
- 475,000 475,000 Ind'l Bank of Japan - 6,433,718 6,433,718
80,000 - 80,000 Ito-Yokado Co., Ltd. 6,398,772 - 6,398,772
- 250 250 Japan Telecom - 8,597,502 8,597,502
226,000 - 226,000 Kao Corp. 6,892,491 - 6,892,491
- 52,000 52,000 Matsushita Communications Co. - 8,751,585 8,751,585
107,000 57,000 164,000 Murata Manufacturing Co., Ltd. 13,750,839 7,337,176 21,088,015
- 32,200 32,200 Mycal Card, Inc. - 1,422,863 1,422,863
- 320,000 320,000 NEC Corp. - 6,486,071 6,486,071
649,000 470,000 1,119,000 Nikko Securities 6,099,741 4,424,592 10,524,333
- 35,500 35,500 Nippon System Development - 3,035,062 3,035,062
592 - 592 Nippon Telegraph & Telephone Corp. 9,084,109 - 9,084,109
252,000 135,000 387,000 Nomura Securities Co., Ltd. 4,159,317 2,231,844 6,391,161
1,356 407 1,763 NTT Mobile Communication Network 36,023,017 10,829,875 46,852,892
64,000 - 64,000 Rohm Co., Ltd. 14,362,712 - 14,362,712
- 6,000 6,000 Ryohin Keikaku Co., Ltd. - 1,156,196 1,156,196
- 6,000 6,000 Ryohin Keikaku -- New - 1,156,196 1,156,196
1,566,000 - 1,566,000 Sakura Bank, Ltd. 13,456,757 - 13,456,757
403,000 150,000 553,000 The Sanwa Bank, Ltd. 5,994,562 2,234,870 8,229,432
- 32,500 32,500 Secom - 3,490,394 3,490,394
- 32,500 32,500 Secom - New - 3,465,418 3,465,418
- 144,000 144,000 Shin-Etsu Chemical Co. - 5,948,127 5,948,127
9,338 - 9,338 Shoskoh Fund & Co., Ltd. 5,713,670 - 5,713,670
- 26,800 26,800 Softbank Corp. - 11,147,358 11,147,358
- 48,000 48,000 Sony Corp. - 7,497,406 7,497,406
- 300,000 300,000 Sumitomo Electric - 4,037,464 4,037,464
168,000 - 168,000 Takeda Chemical Industries 9,651,098 - 9,651,098
44,100 - 44,100 Takefuji Corp. 5,709,696 - 5,709,696
82,000 - 82,000 TDK Corp. 8,029,347 - 8,029,347
- 13 13 Yahoo Japan Corp. - 6,868,396 6,868,396
125,000 - 125,000 Yamanouchi Pharmaceutical Co., Ltd. 5,670,375 - 5,670,375
----------------------------------------------
176,572,316 146,206,897 322,779,213
----------------------------------------------
MEXICO - 0.44%
- 53,000 53,000 Telefonos de Mexico, ADR - 4,531,500 4,531,500
----------------------------------------------
NETHERLANDS - 6.77%
- 2,740 2,740 Ahold - 84,400 84,400
- 40,000 40,000 Akzo Nobel - 1,727,504 1,727,504
- 60,500 60,500 ASM Lithography Holdings Common - 4,393,813 4,393,813
- 126 126 Benckiser NV, Series B - 7,470 7,470
- 23,600 23,600 Eqant NV - NY Registered - 2,289,200 2,289,200
123,870 - 123,870 Gucci Group 10,002,503 - 10,002,503
- 55,000 55,000 Heineken - 2,813,366 2,813,366
- 37,500 37,500 ING Groep N.V. - 2,214,499 2,214,499
402,418 - 402,418 Koninklijke Ptt 20,650,039 - 20,650,039
<PAGE>
71,105 - 71,105 Laurus NV 1,581,697 - 1,581,697
- 20,480 20,480 Philips Electronics - 2,106,424 2,106,424
119,332 - 119,332 Royal Dutch Petroleum 7,132,590 - 7,132,590
196,098 - 196,098 Vendex International 5,723,330 - 5,723,330
287,346 - 287,346 VNU NV 9,716,252 - 9,716,252
----------------------------------------------
54,806,411 15,636,676 70,443,087
----------------------------------------------
NEW ZEALAND - 0.56%
1,438,887 - 1,438,887 Telecom Corp. of New Zealand 5,791,211 - 5,791,211
----------------------------------------------
NORWAY - 0.20%
- 54,122 54,122 Tomra Systems - 2,076,292 2,076,292
----------------------------------------------
PHILLIPINES - 0.17%
234,590 - 234,590 Metropolitan Bank & Trust Co. 1,755,040 - 1,755,040
----------------------------------------------
SINGAPORE - 0.42%
- 203,525 203,525 DBS Bank - 2,302,901 2,302,901
- 120,000 120,000 Singapore Press Holdings - 2,058,381 2,058,381
----------------------------------------------
- 4,361,282 4,361,282
----------------------------------------------
SOUTH KOREA - 1.61%
- 55,000 55,000 Housing & Commercial Bank, GDR - 1,465,750 1,465,750
106,700 114,000 220,700 Korea Telecom Corp., ADR 3,761,175 4,018,500 7,779,675
- 117,000 117,000 Pohang Iron & Steel, ADR - 3,904,875 3,904,875
- 42,500 42,500 Samsung Elect, GDR 144A - 3,612,500 3,612,500
----------------------------------------------
3,761,175 13,001,625 16,762,800
----------------------------------------------
SPAIN - 1.41%
69,265 - 69,265 Banco Popular Espnol SA 4,662,367 - 4,662,367
457,884 150,392 608,276 Telefonica de Espana SA 7,531,906 2,481,263 10,013,169
----------------------------------------------
12,194,273 2,481,263 14,675,536
----------------------------------------------
SWEDEN - 1.80%
- 134,000 134,000 Ericsson, Series B - 5,592,190 5,592,190
398,926 - 398,926 Hennes & Mauritz AB, Class B 10,597,609 - 10,597,609
- 425,000 425,000 Nordbanken Holding AB - 2,489,323 2,489,323
----------------------------------------------
10,597,609 8,081,513 18,679,122
----------------------------------------------
SWITZERLAND - 2.97%
18,092 4,000 22,092 Clariant AG 7,918,737 1,754,686 9,673,423
- 4,600 4,600 Holderbk Fin Glarus - 5,678,527 5,678,527
5,831 - 5,831 Novartis AG, Registered 8,724,116 - 8,724,116
- 300 300 Roche Hoding AG-Genussshein - 3,610,654 3,610,654
- 11,000 11,000 UBS AG - Registered - 3,208,484 3,208,484
----------------------------------------------
16,642,853 14,252,351 30,895,204
----------------------------------------------
TAIWAN - 0.48%
- 143,910 143,910 Taiwan Semiconductor ADR - 4,982,884 4,982,884
----------------------------------------------
UNITED KINGDOM - 15.12%
- 300,000 300,000 Allied Zurich - 3,625,452 3,625,452
184,433 - 184,433 AstraZeneca Group, PLC 8,340,722 - 8,340,722
- 2,631 2,631 Bank of Scotland - 32,833 32,833
- 105,044 105,044 Barclays - 3,224,550 3,224,550
616,723 - 616,723 B.A.T. Industries, PLC 4,084,245 - 4,084,245
- 508,000 508,000 BP Amoco - 4,936,337 4,936,337
2,058,624 - 2,058,624 British Aerospace, PLC 12,026,333 - 12,026,333
593,326 - 593,326 British Sky Broadcasting, PLC 6,371,703 - 6,371,703
- 255,878 255,878 British Telecommunications - 4,642,574 4,642,574
- 56,800 56,800 CMG, PLC - 2,209,615 2,209,615
926,084 - 926,084 Diageo, PLC 9,359,272 - 9,359,272
- 250,000 250,000 Dixons Group - 4,431,108 4,431,108
398,541 177,642 576,183 Glaxo Wellcome, PLC 11,762,399 5,245,726 17,008,125
- 388,900 388,900 Hanson, PLC - 3,050,071 3,050,071
465,400 - 465,400 Imperial Chemical Industries, PLC 4,626,988 - 4,626,988
- 250,000 250,000 Imperial Tobacco - 2,651,266 2,651,266
- 151,478 151,478 Lloyds TSB Group, PLC - 2,095,836 2,095,836
- 287,000 287,000 Prudential Corp., PLC - 4,504,135 4,504,135
460,085 - 460,085 Railtrack Group, PLC 9,314,625 - 9,314,625
1,266,999 - 1,266,999 Reed International, PLC 7,391,306 - 7,391,306
- 1,047,000 1,047,000 Shell Transportation & Trading Co., PLC - 8,030,672 8,030,672
<PAGE>
1,322,829 - 1,322,829 Somerfield, PLC 2,771,599 - 2,771,599
- 500,000 500,000 Telewest Communications, PLC - 2,139,510 2,139,510
4,262,925 2,285,045 6,547,970 Vodafone Group, PLC 19,824,886 10,632,485 30,457,371
----------------------------------------------
95,874,078 61,452,170 157,326,248
----------------------------------------------
TOTAL COMMON STOCKS 568,609,902 408,639,653 977,249,555
----------------------------------------------
PREFERRED STOCKS - 0.29%
GERMANY - 0.29%
- 1,120 1,120 Porsche AG - 3,060,054 3,060,054
----------------------------------------------
TOTAL PREFERRED STOCKS - 3,060,054 3,060,054
----------------------------------------------
PAR VALUE
- -----------------------------------
REPURCHASE AGREEMENTS - 5.21%
Repurchase Agreement with:
$ 28,704,000 $ - $ 28,704,000 Chase Manhattan Bank
5.20%, 11/01/99, dated 10/29/99 28,704,000 - 28,704,000
- 25,550,369 25,550,369 Lehman Brothers
5.18%, 11/01/99, dated 10/29/99 - 25,550,369 25,550,369
----------------------------------------------
TOTAL REPURCHASE AGREEMENTS 28,704,000 25,550,369 54,254,369
----------------------------------------------
TOTAL INVESTMENTS - 99.43%
(Cost $449,135,536, $336,365,746, and $785,501,282) 597,313,902 437,250,076 1,034,563,978
----------------------------------------------
NET OTHER ASSETS AND LIABILITIES - 0.57% (3,551,803) 9,433,066 5,881,263
----------------------------------------------
NET ASSETS - 100.00% $ 593,762,099 $ 446,683,142 $1,040,445,241
----------------------------------------------
----------------------------------------------
</TABLE>
ADR - American Depository Receipt
GDR - Global Depository Receipt
See Notes to Pro Forma Financial Statements
<PAGE>
GALAXY INTERNATIONAL EQUITY FUND
BOSTON 1784 INTERNATIONAL EQUITY FUND
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
OCTOBER 31, 1999
<TABLE>
<CAPTION>
PRO FORMA
GALAXY INT'L BOSTON 1784 INT'L PRO FORMA COMBINED
EQUITY FUND EQUITY FUND ADJUSTMENTS (NOTE 1)
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments
Investments at cost $ 420,431,536 $ 310,815,377 $ - $ 731,246,913
Repurchase agreements 28,704,000 25,550,369 - 54,254,369
Net unrealized appreciation 148,178,366 100,884,330 - 249,062,696
--------------------------------------------------------------------
Total Investments at Value 597,313,902 437,250,076 - 1,034,563,978
Cash and Foreign Currency 315 3,882,525 - 3,882,840
Receivable for investments sold - 11,466,193 - 11,466,193
Receivable for shares sold 4,036,525 997,467 - 5,033,992
Interest and dividends receivable 513,995 639,125 - 1,153,120
Tax Reclaim Receivable 231,577 703,389 - 934,966
--------------------------------------------------------------------
Total Assets 602,096,314 454,938,775 - 1,057,035,089
LIABILITIES:
Payable for forward foreign currency contracts 11,600 37,510 - 49,110
Payable for investments purchased 7,674,328 7,625,478 - 15,299,806
Payable for shares repurchased 106,611 - - 106,611
Advisory fee payable 306,628 359,404 - 666,032
Payable to Fleet affiliates 44,754 - - 44,754
Administration fee payable 71,473 23,399 - 94,872
Trustees' fees and expenses payable 12,406 752 - 13,158
Accrued expenses and other payables 106,415 209,090 - 315,505
--------------------------------------------------------------------
Total Liabilities 8,334,215 8,255,633 - 16,589,848
NET ASSETS $ 593,762,099 $ 446,683,142 $ - $ 1,040,445,241
====================================================================
NET ASSETS CONSISTS OF:
Paid-in capital $ 407,277,400 $ 267,950,925 $ - $ 675,228,325
Undistributed (overdistributed) net investment income 3,972,887 (2,700,727) - 1,272,160
Accumulated net realized gain on investments sold 34,334,139 80,523,039 - 114,857,178
Net unrealized appreciation of investments 148,177,673 100,909,905 - 249,087,578
--------------------------------------------------------------------
TOTAL NET ASSETS $ 593,762,099 $ 446,683,142 $ - $ 1,040,445,241
====================================================================
Net Assets by Class:
Retail A Shares $ 89,326,639 N/A $ - $ 89,326,639
====================================================================
Retail B Shares 2,188,744 N/A - 2,188,744
====================================================================
Trust Shares / Shares 501,776,006 446,683,142 $ (35,734,651) 912,724,497
====================================================================
Prime A 12,255 N/A - 12,255
====================================================================
Prime B 458,455 N/A - 458,455
====================================================================
BKB Shares N/A N/A 35,734,651 35,734,651
====================================================================
Shares of beneficial interest outstanding:
Retail A Shares 4,282,082 N/A - 4,282,082
====================================================================
Retail B Shares 105,225 N/A - 105,225
====================================================================
Trust Shares / Shares 23,687,146 27,453,231 (8,050,564) 43,089,813
====================================================================
Prime A Shares 584 N/A - 584
====================================================================
Prime B Shares 21,986 N/A - 21,986
====================================================================
BKB Shares N/A N/A 1,687,188 1,687,188
====================================================================
Net Asset Value, Retail A Shares $ 20.86 N/A $ 20.86
====================================================================
Net Asset Value, Retail B Shares $ 20.80 N/A $ 20.80
====================================================================
Net Asset Value, Trust Shares / Shares $ 21.18 $ 16.27 $ 21.18
====================================================================
Net Asset Value, Prime A Shares $ 20.98 N/A $ 20.98
====================================================================
Net Asset Value, Prime B Shares $ 20.85 N/A $ 20.85
====================================================================
Net Asset Value, BKB Shares N/A N/A $ 21.18
====================================================================
</TABLE>
See Notes to Pro Forma Financial Statements
<PAGE>
GALAXY INTERNATIONAL EQUITY FUND
BOSTON 1784 INTERNATIONAL EQUITY FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS (UNAUDITED)
OCTOBER 31, 1999
<TABLE>
<CAPTION>
PRO FORMA
GALAXY INT'L BOSTON 1784 INT'L PRO FORMA COMBINED
EQUITY EQUITY FUND ADJUSTMENTS (NOTE 1)
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income:
Interest Income $ 713,887 $ 6,179,288 $ - $ 6,893,175
Dividend Income 7,503,713 213,999 - 7,717,712
Less: foreign taxes withheld (875,473) (426,296) - (1,301,769)
-------------------------------------------------------------------
Total Investment Income 7,342,127 5,966,991 - 13,309,118
-------------------------------------------------------------------
Expenses:
Investment Advisory Fees 4,336,206 4,199,395 (624,490)(a) 7,911,111
Administrative Fees 365,677 276,728 (18,551)(a) 623,854
Custodian Fee 498,586 223,866 - 722,452
Fund Accounting Fee 111,998 17,159 17,743 (a) 146,900
Professional Fees 44,453 32,930 (32,930)(b) 44,453
Trustee Fees 14,105 11,719 (11,000)(b) 14,824
Reports to Shareholders 94,558 26,659 (26,659)(b) 94,558
Miscellaneous Expenses 114,870 12,380 - 127,250
-------------------------------------------------------------------
Subtotal 5,580,453 4,800,836 (695,887) 9,685,402
Transfer Agent Fee
Retail A Shares 240,531 - - 240,531
Retail B Shares 6,583 - - 6,583
Trust Shares / Shares 278,950 85,465 - 364,415
Prime A 73 - - 73
Prime B 291 - - 291
BKB Shares - - 13,222 (a) 13,222
Shareholder Services Fee & 12B-1 Fees
Retail A Shares 204,149 - - 204,149
Retail B Shares 7,842 - - 7,842
Trust Shares / Shares - 1,049,849 (1,049,849)(a) -
Prime A - - - -
Prime B 2,177 - - 2,177
BKB Shares - - 100,781 (a) 100,781
-------------------------------------------------------------------
Total Expenses before reimbursement/waiver 6,321,049 5,936,150 (1,631,733) 10,625,466
Less Waiver/Reimbursements
Fund Level Waivers (1,216,531) - (870,004)(c) (2,086,535)
Class Specific Waivers/reimbursements
Retail A Shares - - - -
Retail B Shares (4,614) - - (4,614)
Trust Shares / Shares - (1,049,849) 1,049,849 (c) -
Prime A (71) - - (71)
Prime B (292) - - (292)
BKB Shares - (26,875)(c) (26,875)
-------------------------------------------------------------------
Total Waivers/Reimbursements (1,221,508) (1,049,849) 152,970 (2,118,387)
Net Expenses 5,099,541 4,886,301 (1,478,763) 8,507,079
-------------------------------------------------------------------
Net Investment Income 2,242,586 1,080,690 1,478,763 4,802,039
-------------------------------------------------------------------
Net Realized Gain on Investments 34,349,686 102,165,290 - 136,514,976
Net Realized (Loss) on Forward Foreign Currency
Contracts and Foreign Currency (4,120,655) (3,439,651) - (7,560,306)
Net Change in Unrealized Appreciation on Forward
Foreign Currency Contracts, Foreign Currencies
and Translation of Other Assets and
Liabilities in Foreign Currency - 2,477,204 - 2,477,204
Net Change in Unrealized Appreciation on Investments 94,656,598 30,213,731 - 124,870,329
-------------------------------------------------------------------
Net Realized and Unrealized Gain on Investments 124,885,629 131,416,574 - 256,302,203
-------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $127,128,215 $ 132,497,264 $ 1,478,763 $ 261,104,242
===================================================================
(a) Reflects adjustment to the acquiring fund contractual
fee level.
(b) Reflects expected savings when the two funds become one.
(c) Reflects adjustment to the acquiring fund's voluntary
expense limitation.
</TABLE>
See Notes to Pro Forma Financial Statements
<PAGE>
Galaxy International Equity Fund
Boston 1784 International Equity Fund
Notes to Pro Forma Combining Financial Statements (unaudited)
1. Basis of Combination
The Galaxy Fund, a Massachusetts business trust (the "Trust"), is registered
under the Investment Company Act of 1940, as amended, (the "1940 Act") as an
open-end management investment company. As of October 31, 1999, the Trust
offered twenty-nine managed investment portfolios. The unaudited Pro Forma
Combining Portfolio of Investments and the unaudited Pro Forma Statement of
Assets and Liabilities assumes the exchange described in the next paragraph
occurred as of October 31, 1999 and the unaudited Pro Forma Combining Statement
of Operations assumes the exchange occurred as of November 1, 1998. These
statements have been derived from books and records utilized in calculating the
net asset value of each fund at October 31, 1999 and for the twelve-month period
then ended.
The pro forma statements give effect to the proposed transfer of substantially
all of the assets and stated liabilities of the Boston 1784 International Equity
Fund in exchange for Trust and BKB shares of Galaxy International Equity Fund.
Under generally accepted accounting principles, the historical cost of
investment securities will be carried forward to the surviving entity and the
results of operations of the Boston 1784 International Equity Fund for
pre-combination periods will not be restated. The pro forma statements do not
reflect the expenses of either fund in carrying out its obligations under the
proposed Agreement and Plan of Reorganization.
The unaudited Pro Forma Combining Financial Statements should be read in
conjunction with the historical financial statements of the funds incorporated
by reference in the Statement of Additional Information.
For the twelve-month period ended October 31, 1999, the Galaxy International
Equity Fund's investment advisory fee was computed based on the annual rate of
1.15% of the first $50 million of its average daily net assets, 0.95% of the
next $50 million and 0.85% as average daily net assets in excess of $100
million. The administration fee was computed based on the annual rate of 0.09%
of the first $2.5 billion of the Trust's combined average daily net assets,
0.085% of the next $2.5 billion, 0.075% of the next $7 billion, 0.065% of the
next $3 billion, 0.06% of the next $3 billion, and 0.0575% of the combined
average daily net assets in excess of $18 billion, and was allocated to each
fund based on the relative net assets of the Trust.
The Trust has adopted a shareholder services plan (the "Services Plan") with
respect to Retail A, BKB and Trust Shares of the funds to compensate certain
institutions providing administrative and support services to their customers
who own such shares. Currently, the Services Plan has not been implemented for
the Trust shares. Under the Services Plan, aggregate payments may not exceed
0.50% of the average daily net assets of Retail A or BKB shareholders who are
customers of such institutions. Currently, the Trust, under the direction of the
Board of Trustees, is limiting such payments to 0.30% of the average daily net
asset of Retail A or BKB shareholders who are customers of such institutions.
The Trust has adopted a distribution and services plan (the "12b-1 Plan") with
respect to Retail B shares of the fund. Payments to the Distributor or others
for distribution services (those primarily intended to result in the sale of
Retail B shares) may not exceed 0.65% of the average daily net assets of Retail
B shares. Payments to institutions providing services to their customers owning
Retail B shares for shareholder liaison and administrative support services may
not exceed 0.25% and 0.25%, respectively, of the average daily net assets
attributable to shareholders who are customers of such institutions. The Trust
is currently limiting payments for shareholder liaison and administrative
support to 0.30% of the average daily net assets attributable to shareholders
that are customers of such institutions.
The Trust has adopted a distribution plan (the "Prime A Plan") with respect to
Prime A shares of the fund. Payments to the Distributor or others for
distribution services (those primarily intended to result in the sale of Prime A
shares) may not exceed 0.30% of the average daily net assets of Prime A shares.
The Trust is
<PAGE>
Galaxy International Equity Fund
Boston 1784 International Equity Fund
Notes to Pro Forma Combining Financial Statements (unaudited) (continued)
currently limiting payments under the Prime A Plan to 0.25% of the average daily
net assets of Prime A shares.
The Trust has adopted a distribution and services plan (the "Prime B Plan") with
respect to Prime B shares of the fund. Payments to the Distributor or others for
distribution services (those primarily intended to result in the sale of Prime B
shares) may not exceed 0.75% of the average daily net assets of Prime B shares.
Payments to institutions providing services to their customers owning Prime B
shares for shareholder liaison and administrative support services may not
exceed 0.25% and 0.25%, respectively, of the average daily net assets
attributable to shareholders who are customers of such institutions. The Trust
is currently limiting payments for shareholder liaison and administrative
support to 0.25% of the average daily net assets attributable to shareholders
that are customers of such institutions.
2. Portfolio Valuation
The Galaxy International Equity Fund's investments in securities which are
traded on a recognized stock exchange are valued at the last sale price on the
securities exchange on which such securities are primarily traded, or at the
last sales price on the national securities market. Securities traded on
over-the-counter markets are valued at the last bid price. Short-term
obligations that mature in 60 days or less are valued at amortized cost, which
approximates fair value. All other securities and other assets are appraised at
their fair value as determined in good faith under consistently applied
procedures established by and under the general supervision of the Board of
Trustees. The Boston 1784 International Equity Fund uses similar rules for
determining portfolio valuation.
3. Capital Shares
The pro forma net asset value per share assumes the issuance of additional
shares of the Galaxy International Equity Fund that would have been issued at
October 31, 1999 in connection with the proposed reorganization. The pro forma
number of shares outstanding of 49,186,878 consists of 21,089,855 shares assumed
issued in the reorganization plus 28,097,023 shares of the Galaxy International
Equity Fund at October 31, 1999.
