GALAXY FUND II, 497, 1998-08-03

GALAXY FUND II
497, 1998-08-03

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<PAGE>
GALAXY FUND II

LARGE COMPANY INDEX FUND
SMALL COMPANY INDEX FUND
UTILITY INDEX FUND
U.S. TREASURY INDEX FUND

PROSPECTUS

JULY 29, 1998

<PAGE>
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS
OR THEIR DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE
FUNDS OR BY THEIR DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.

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

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HIGHLIGHTS............................................................ 2
EXPENSE SUMMARY....................................................... 4
FINANCIAL HIGHLIGHTS.................................................. 5
INVESTMENT OBJECTIVES AND POLICIES.................................... 10
The Indexing Approach............................................... 10
The Large Company Index Fund........................................ 11
The Small Company Index Fund........................................ 11
The Utility Index Fund.............................................. 12
The U.S. Treasury Index Fund........................................ 12
OTHER INVESTMENT PRACTICES AND RISK CONSIDERATIONS.................... 13
Temporary Cash Balances............................................. 13
Securities Lending.................................................. 14
Stock Index Futures Contracts....................................... 14
INVESTMENT LIMITATIONS................................................ 15
INVESTMENT RISKS...................................................... 15
PRICING OF SHARES..................................................... 16
DIVIDENDS AND DISTRIBUTIONS........................................... 16
TAXES................................................................. 17
MANAGEMENT OF THE FUNDS............................................... 18
Investment Adviser.................................................. 18
Administrator And Sub-Administrator................................. 18
Distributor......................................................... 19
Custodian And Transfer Agent........................................ 19
HOW TO PURCHASE AND REDEEM SHARES..................................... 19
Purchase Procedures--Customers Of Institutions...................... 19

<CAPTION>
PAGE
----
<S> <C>
Purchase Procedures--Direct Investors............................... 20
Other Purchase Information.......................................... 20
Redemption Procedures--Customers Of Institutions.................... 21
Redemption Procedures--Direct Investors............................. 21
Other Redemption Information........................................ 23
DESCRIPTION OF SHARES................................................. 23
Agreements for Sub-Account Services................................. 23
PERFORMANCE REPORTING................................................. 24
INVESTOR PROGRAMS..................................................... 25
Exchange Privilege.................................................. 25
Retirement Plans.................................................... 26
Automatic Investment Program........................................ 26
Systematic Withdrawal Plan.......................................... 26
Payroll Deduction Program........................................... 27
College Investment Program.......................................... 27
Direct Deposit Program.............................................. 27
INFORMATION SERVICES.................................................. 27
Galaxy II Information Center--24 Hour Information Service........... 27
Voice Response System............................................... 28
Galaxy II Shareholder Services...................................... 28
MISCELLANEOUS......................................................... 28
</TABLE>

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- --------------------------------------------------------------------------------
<PAGE>
GALAXY FUND II--THE INDEXED FUNDS

4400 Computer Drive For an application and information
P.O. Box 5108 regarding purchases, redemptions,
Westboro, Massachusetts 01581-5108 exchanges and other shareholder services
or for current performance, call
1-800-628-0414.

Galaxy Fund II ("Galaxy II") is a no-load, open-end investment company which
offers five investment options. This Prospectus describes four of those options
(the "Funds"). The Funds use a strategy called indexing, seeking to provide
investment results that, before deduction of operating expenses, match the price
and yield performance of particular sets of securities or market segments. The
Funds and their market segments are:

The LARGE COMPANY INDEX FUND--U.S. publicly traded common stocks with large
stock market capitalizations, as represented by the Standard & Poor's 500
Composite Stock Price Index (the "S&P 500").

The SMALL COMPANY INDEX FUND--U.S. publicly traded common stocks with
smaller stock market capitalizations, as represented by the Standard & Poor's
SmallCap 600 Stock Price Index (the "S&P SmallCap 600 Index").

The UTILITY INDEX FUND--U.S. publicly traded common stocks of companies in
the utility industry, as represented by the Standard & Poor's Utilities
Composite Stock Price Index (the "S&P Utilities Index").

The U.S. TREASURY INDEX FUND--U.S. Treasury notes and bonds, as represented
by the U.S. Treasury component (the "U.S. Treasury Index") of the Salomon
Brothers Broad Investment-Grade Bond Index.

Shares of the Funds are offered without any sales charge or redemption fee.
Each Fund will incur management fees.

SHARES OF THE FUNDS ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, FLEET FINANCIAL GROUP, INC. OR ANY OF ITS AFFILIATES, FLEET
INVESTMENT ADVISORS INC., OR ANY FLEET BANK. SHARES OF THE FUNDS ARE NOT
FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL VARY AS A RESULT OF MARKET CONDITIONS OR OTHER FACTORS SO THAT SHARES
OF THE FUNDS, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
AN INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL AMOUNT INVESTED.

THESE SECURITIES 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 PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

This Prospectus sets forth concisely certain information about Galaxy II
that you should know before making an investment decision. You are encouraged to
read this Prospectus carefully and retain it for future reference. Additional
information about Galaxy II is contained in a Statement of Additional
Information bearing the same date and is available free of charge by calling
Galaxy II at 1-800-628-0414 or by writing to Galaxy II, c/o First Data Investor
Services Group, Inc., 4400 Computer Drive, P.O. Box 5108, Westboro,
Massachusetts 01581. The Statement of Additional Information has been filed with
the Securities and Exchange Commission and, as amended from time to time, is
incorporated by reference into this Prospectus.

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

JULY 29, 1998
<PAGE>
HIGHLIGHTS

<TABLE>
<S> <C>
Q: What is Galaxy Fund II?

A: Galaxy Fund II ("Galaxy II") is an open-end investment company (commonly known as a
mutual fund) that offers investors the opportunity to invest in different investment
portfolios, each having separate investment objectives and policies. This Prospectus
describes Galaxy II's Large Company Index, Small Company Index, Utility Index and U.S.
Treasury Index Funds. A Prospectus for the Municipal Bond Fund may be obtained by
calling 1-800-628-0414.

Q: Who advises the Funds?

A: The Funds are managed by Fleet Investment Advisors Inc. ("Fleet"), an indirect
wholly-owned subsidiary of Fleet Financial Group, Inc. Fleet Financial Group, Inc. is a
financial services company with total assets as of June 30, 1998 of approximately
$100.7 billion. See "Management of the Funds--Investment Adviser."

Q: What advantages do the Funds offer?

A: The Funds offer investors the opportunity to invest in a variety of investment
portfolios without having to become involved with the detailed accounting and
safekeeping procedures normally associated with direct investments in securities.

Q: How does one buy and redeem shares?

A: The Funds are distributed by First Data Distributors, Inc. ("FD Distributors"). Shares
of the Funds are sold to individuals or corporations, who submit a purchase application
to Galaxy II, purchasing either for their own accounts or for the accounts of others
("Direct Investors"). Shares may also be purchased by FIS Securities, Inc., Fleet
Securities, Inc., Fleet Enterprises, Inc., Fleet Financial Group, Inc., its affiliates,
their correspondent banks and other qualified banks, savings and loan associations and
broker/dealers ("Institutions") on behalf of their customers ("Customers"). Share
purchase and redemption information for both Direct Investors and Customers is provided
in this Prospectus under "How to Purchase and Redeem Shares." Except as provided below
in "Investor Programs," the minimum initial investment for Direct Investors and the
minimum initial aggregate investment for Institutions purchasing on behalf of their
Customers is $2,500. The minimum investment for subsequent purchases is $100. The
minimum investment requirement with respect to Individual Retirement Accounts ("IRAs"),
Simplified Employee Pension Plan accounts ("SEPs"), Multi-Employee Pension Plan
accounts ("MERPs") and Keogh Plan accounts is $500 (including spousal IRA accounts).
There are no minimum investment requirements for investors participating in the
Automatic Investment Program described below. Institutions may require Customers to
maintain certain minimum investments in Fund shares. See "How to Purchase and Redeem
Shares--Other Purchase Information" below.

Q: When are dividends paid?

A: The net investment income of the Small Company Index and Large Company Index Funds is
declared and paid annually. The net investment income of the Utility Index Fund is
declared and paid quarterly. The net investment income of the U.S. Treasury Index Fund
is declared daily and paid monthly. Net realized capital gains of the Funds are
distributed at least annually. See "Dividends and Distributions."
</TABLE>

2
<PAGE>
<TABLE>
<S> <C>
Q: What potential risks are presented by the Funds' investment practices?

A: A Fund's ability to match its performance with an index may be affected by, among other
things, changes in the securities markets, the manner in which the index is calculated
and the timing of purchases and redemptions of the Fund's shares. Galaxy II expects the
investments of each Fund to decline in value whenever the market, as represented by the
securities in the index, declines.

LARGE COMPANY INDEX FUND: The Fund should exhibit price volatility similar to that of
the S&P 500.

SMALL COMPANY INDEX FUND: Since it invests in smaller companies, the Fund may have
greater price volatility and less liquidity than the Large Company Index Fund.

UTILITY INDEX FUND: Historically, utility stocks have been one of the least volatile
sectors of the U.S. stock market when measured by statistics such as standard deviation
of return. Consequently, the Utility Index Fund may have less price volatility than
either the Large Company or Small Company Index Funds, although there can be no
assurance of this. The Utility Index Fund is subject to industry risk and market risk.
Industry risk is the possibility that a particular group of related stocks in a
particular industry will decline in price due to industry-specific developments. The
Fund will concentrate its investments in the utility industry. As a result, the Fund's
investments may be subject to greater risk and market fluctuation than a fund that has
securities representing a broader range of investment alternatives.

U.S. TREASURY INDEX FUND: While the "full faith and credit" of the U.S. Government
guarantees the stated interest rate and principal at maturity of U.S. Treasury notes
and bonds, the market value of these securities will fluctuate due to changing interest
rates. The U.S. Treasury Index Fund is subject to moderate levels of interest rate
risk.

It is impossible to eliminate risk from investments in common stocks and bonds. You
should consider your investment in the Funds to be long-term. The Funds are not
designed to provide you with a means to speculate on short-term movements in the stock
market.

Q: What shareholder privileges are offered by the Funds?

A: Direct Investors and Customers of Institutions may, after appropriate prior
authorization, exchange shares of a Fund having a value of at least $100 for shares of
any of the other funds or portfolios offered by Galaxy II or otherwise advised by Fleet
or its affiliates in which the Direct Investor or Customer maintains an existing
account, provided that such other shares may legally be sold in the state of the
investor's residence. Galaxy II offers IRAs, SEPs and Keogh Plan accounts, which can be
established by contacting FD Distributors (call 1-800-628-0414). Shares of the Funds
are available for purchase in connection with MERPs, and detailed information
concerning eligibility and other matters and the form of application is available from
Fleet Brokerage Securities, Inc. (call 1-800-221-8210). Galaxy II also offers an
Automatic Investment Program, which allows a Direct Investor to purchase Fund shares
each month as well as other shareholder privileges. See "Investor Programs."
</TABLE>

3
<PAGE>
EXPENSE SUMMARY

The following table illustrates expenses and fees that you would incur,
either directly or indirectly, as a shareholder of each Fund. The expenses and
fees for each Fund are based on the fees and expenses incurred by the Fund
during the last fiscal year, restated to reflect the fees and expenses which
each Fund expects to incur during the current fiscal year.

<TABLE>
<CAPTION>
LARGE SMALL U.S.
COMPANY COMPANY UTILITY TREASURY
INDEX INDEX INDEX INDEX
SHAREHOLDER TRANSACTION EXPENSES FUND FUND FUND FUND
- -------------------------------------------------- ------ ------ -------- ---------
<S> <C> <C> <C> <C>
Sales Load Imposed on Purchases................... None None None None
Sales Load Imposed on Reinvested Dividends........ None None None None
Redemption Fees................................... None None None None
Exchange Fees..................................... None None None None
</TABLE>

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
- --------------------------------------------------

<S> <C> <C> <C> <C>
Advisory and Administration Fees.................. 0.40% 0.40% 0.40% 0.40%
12b-1 Fees........................................ None None None None
Other Expenses.................................... 0.08% 0.01% 0.00% 0.02%
------ ------ -------- ---------
Total Fund Operating Expenses..................... 0.48% 0.41% 0.40% 0.42%
Account Maintenance Fee (per year per account
after waivers)................................... $ 0.00(*) $ 0.00(*) $ 0.00(*) $ 0.00(*)
</TABLE>

- ---------

(*) First Data Investor Services Group, Inc. ("Investor Services Group"), the
Funds' sub-administrator, has agreed until further notice to waive receipt
of the annual account maintenance fee of $10.00 otherwise payable by
shareholders of each Fund to defray the costs of maintaining shareholder
accounts. See "Dividends and Distributions" for more information about this
fee.

Fleet National Bank ("FNB"), the Funds' administrator, is responsible for
the payment of all of the expenses of the Funds, other than certain limited
expenses (such as brokerage fees and commissions, interest on borrowings, taxes,
annual sub-account fees payable with respect to shares of the Funds held by
defined contribution plans, and such extraordinary, non-recurring expenses as
may arise). For a further description of the various costs and expenses shown
above, see "Management of the Funds."

EXAMPLE: YOU WOULD PAY THE FOLLOWING EXPENSES ON A $1,000 INVESTMENT IN EACH
FUND OVER VARIOUS TIME PERIODS. IT ASSUMES THAT YOUR INVESTMENT GROWS 5% PER
YEAR AND THAT YOU REDEEM YOUR INVESTMENT AT THE END OF EACH TIME PERIOD.

<TABLE>
<CAPTION>
3 5
1 YEAR YEARS YEARS 10 YEARS
------ ------ ------ --------
<S> <C> <C> <C> <C>
Large Company Index Fund..................... $ 5 $ 15 $ 26 $ 59
Small Company Index Fund..................... $ 4 $ 12 $ 22 $ 50
Utility Index Fund........................... $ 4 $ 12 $ 22 $ 49
U.S. Treasury Index Fund..................... $ 4 $ 13 $ 23 $ 51
</TABLE>

4
<PAGE>
These expense figures do not reflect the annual account maintenance fee for
each Fund of $10.00 that would otherwise be payable by shareholders had not
Investor Services Group agreed to waive until further notice receipt of this
fee.

THESE EXAMPLES ARE NOT REPRESENTATIONS OF PAST OR FUTURE EXPENSES OR
PERFORMANCE. ACTUAL EXPENSES MAY BE MORE OR LESS THAN SHOWN IN THESE EXAMPLES.
For example, certain shareholders who redeem by wire will incur a charge,
currently $5.00 per wire redemption. Also, each Fund's actual performance may be
better or worse than the 5% growth per year assumed in the examples.

FINANCIAL HIGHLIGHTS

The following Financial Highlights have been audited by
PricewaterhouseCoopers LLP, independent accountants, whose report is contained
in Galaxy II's Annual Report to Shareholders and is incorporated by reference
into the Statement of Additional Information. Further information about the
performance of the Funds is also contained in Galaxy II's Annual Report to
Shareholders which may be obtained without charge by calling Galaxy II at
1-800-628-0414.

5
<PAGE>
LARGE COMPANY INDEX FUND
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992
-------- -------- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
period....................... $ 23.09 $ 20.06 $ 15.76 $ 14.36 $ 14.59 $ 13.04 $ 12.10
-------- -------- -------- -------- ------------ ------------ ------------
Income from Investment
Operations:
Net investment income(2).... 0.40 0.43 0.38 0.37 0.36 0.34 0.31
Net realized and unrealized
gain (loss) on investments
and futures contracts...... 10.23 3.41 4.57 1.73 (0.20) 1.55 0.95
-------- -------- -------- -------- ------------ ------------ ------------
Total from Investment
Operations:.............. 10.63 3.84 4.95 2.10 0.16 1.89 1.26
-------- -------- -------- -------- ------------ ------------ ------------
Less Dividends:
Dividends from net
investment income.......... (0.44) (0.38) (0.31) (0.37) (0.36) (0.34) (0.31)
Dividends from net realized
capital gains.............. (1.36) (0.43) (0.34) (0.33) (0.03) -- (0.01)
-------- -------- -------- -------- ------------ ------------ ------------
Total Dividends:.......... (1.80) (0.81) (0.65) (0.70) (0.39) (0.34) (0.32)
-------- -------- -------- -------- ------------ ------------ ------------
Net increase (decrease) in net
asset value.................. 8.83 3.03 4.30 1.40 (0.23) 1.55 0.94
-------- -------- -------- -------- ------------ ------------ ------------
Net Asset Value, End of
period....................... $ 31.92 $ 23.09 $ 20.06 $ 15.76 $ 14.36 $ 14.59 $ 13.04
-------- -------- -------- -------- ------------ ------------ ------------
-------- -------- -------- -------- ------------ ------------ ------------
Total Return.................. 47.29% 19.32% 31.80% 15.07% 1.02% 14.68% 10.43%
Ratios/Supplemental Data:
Net Assets, End of period
(in 000's)................... $626,740 $421,652 $240,689 $147,597 $143,828 $133,426 $ 87,118
Ratios to average net assets:
Net investment income
including reimbursement.... 1.44% 2.19% 2.11% 2.48% 2.41% 2.57% 2.79%
Operating expenses including
reimbursement.............. 0.40% 0.40% 0.40% 0.40% 0.40% 0.40% 0.40%
Operating expenses excluding
reimbursement.............. 0.40% 0.40% 0.41% 0.41% 0.40% 0.40% 0.40%
Portfolio turnover rate....... 3% 11% 5% 7% 4% 0% 0%
Average commission rate
paid(3)...................... $ 0.0390 $ 0.0387 $ 0.0203 N/A N/A N/A N/A

<CAPTION>
PERIOD ENDED
MARCH 31,
------------
1991(1)
------------
<S> <C>
Net Asset Value, Beginning of
period....................... $ 10.00
------------
Income from Investment
Operations:
Net investment income(2).... 0.15
Net realized and unrealized
gain (loss) on investments
and futures contracts...... 2.10
------------
Total from Investment
Operations:.............. 2.25
------------
Less Dividends:
Dividends from net
investment income.......... (0.15)
Dividends from net realized
capital gains.............. --
------------
Total Dividends:.......... (0.15)
------------
Net increase (decrease) in net
asset value.................. 2.10
------------
Net Asset Value, End of
period....................... $ 12.10
------------
------------
Total Return.................. 22.60%(5)
Ratios/Supplemental Data:
Net Assets, End of period
(in 000's)................... $17,215
Ratios to average net assets:
Net investment income
including reimbursement.... 3.45%(4)
Operating expenses including
reimbursement.............. 0.40%(4)
Operating expenses excluding
reimbursement.............. 0.40%(4)
Portfolio turnover rate....... 0%(5)
Average commission rate
paid(3)...................... N/A
</TABLE>

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6
<PAGE>
SMALL COMPANY INDEX FUND
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------------------------------------------------------------------------
1998(6) 1997 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of period.... $ 22.64 $ 22.30 $ 17.62 $ 17.49 $ 17.42 $ 15.39 $ 13.08
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from Investment Operations:
Net investment income(2).............. 0.27 0.38 0.32 0.32 0.26 0.25 0.20
Net realized and unrealized gain on
investments and futures contracts.... 7.64 1.76 5.07 0.91 0.39 2.07 2.40
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from Investment Operations:... 7.91 2.14 5.39 1.23 0.65 2.32 2.60
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Less Dividends:
Dividends from net investment
income............................... (0.33) (0.34) (0.38) (0.32) (0.25) (0.24) (0.22)
Dividends from net realized capital
gains................................ (9.49) (1.46) (0.33) (0.78) (0.33) (0.05) (0.07)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Dividends:.................... (9.82) (1.80) (0.71) (1.10) (0.58) (0.29) (0.29)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net asset
value.................................. (1.91) 0.34 4.68 0.13 0.07 2.03 2.31
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value, End of period.......... $ 20.73 $ 22.64 $ 22.30 $ 17.62 $ 17.49 $ 17.42 $ 15.39
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Return........................ 41.22% 9.60% 30.85% 7.60% 3.64% 15.20% 20.04%
Ratios/Supplemental Data:
Net Assets, End of period
(in 000's)............................. $ 399,162 $ 309,474 $ 291,724 $ 235,295 $ 255,347 $ 213,669 $ 116,290
Ratios to average net assets:
Net investment income including
reimbursement........................ 0.97% 1.59% 1.52% 1.72% 1.55% 1.80% 2.26%
Operating expenses including
reimbursement........................ 0.40% 0.40% 0.40% 0.40% 0.40% 0.40% 0.40%
Operating expenses excluding
reimbursement........................ 0.40% 0.40% 0.41% 0.40% 0.40% 0.40% 0.40%
Portfolio turnover rate................. 99% 8% 14% 10% 17% 5% 6%
Average commission rate
paid(3)................................ $ 0.0297 $ 0.0480 $ 0.0225 N/A N/A N/A N/A

<CAPTION>
PERIOD
ENDED
MARCH 31,
----------
1991(1)
----------
<S> <C>
Net Asset Value, Beginning of period.... $ 10.00
----------
Income from Investment Operations:
Net investment income(2).............. 0.15
Net realized and unrealized gain on
investments and futures contracts.... 3.01
----------
Total from Investment Operations:... 3.16
----------
----------
Less Dividends:
Dividends from net investment
income............................... (0.08)
Dividends from net realized capital
gains................................ --
----------
Total Dividends:.................... (0.08)
----------
Net increase (decrease) in net asset
value.................................. 3.08
----------
Net Asset Value, End of period.......... $ 13.08
----------
----------
Total Return........................ 31.83%(5)
Ratios/Supplemental Data:
Net Assets, End of period
(in 000's)............................. $ 16,334
Ratios to average net assets:
Net investment income including
reimbursement........................ 2.98%(4)
Operating expenses including
reimbursement........................ 0.40%(4)
Operating expenses excluding
reimbursement........................ 0.40%(4)
Portfolio turnover rate................. 1%(5)
Average commission rate
paid(3)................................ N/A
</TABLE>

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

(1) The Fund commenced operations on October 1, 1990.
(2) Net investment income per share before reimbursement by the
sub-administrator for the fiscal years ended March 31, 1998, 1997, 1996 and
1995 was $0.27, $0.38, $0.31 and $0.31, respectively.
(3) Required disclosure for fiscal years beginning on or after September 1,
1995.
(4) Annualized.
(5) Not Annualized.
(6) At a Special Meeting of Shareholders of the Small Company Index Fund held
on May 9, 1997, shareholders approved a change in the Fund's target index
from the Russell Special Small Company Index to the Standard & Poor's
SmallCap 600 Stock Price Index.

7
<PAGE>
UTILITY INDEX FUND
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, PERIOD ENDED
-------------------------------------------------------- MARCH 31,
1998(6) 1997 1996 1995 1994 1993(1)
-------------------------------------------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of period.... $ 11.42 $ 12.03 $ 9.88 $ 9.99 $ 10.93 $ 10.00
-------- -------- -------- -------- ------------ ------------
Income from Investment Operations:
Net investment income(2).............. 0.54 0.49 0.44 0.47 0.43 0.06
Net realized and unrealized gain
(loss) on investments................ 3.71 (0.09) 2.15 (0.03) (0.93) 0.93
-------- -------- -------- -------- ------------ ------------
Total from Investment Operations:... 4.25 0.40 2.59 0.44 (0.50) 0.99
-------- -------- -------- -------- ------------ ------------
Less Dividends:
Dividends from net investment
income............................... (0.60) (0.46) (0.44) (0.46) (0.43) (0.06)
Dividends from net realized capital
gains................................ (0.82) (0.55) -- (0.08) (0.01) --
Dividends in excess of net realized
capital gains........................ -- -- -- (0.01) -- --
Return of capital..................... (0.07) -- -- -- -- --
-------- -------- -------- -------- ------------ ------------
Total Dividends:.................... (1.49) (1.01) (0.44) (0.55) (0.44) (0.06)
-------- -------- -------- -------- ------------ ------------
Net increase (decrease) in net asset
value.................................. 2.76 (0.61) 2.15 (0.11) (0.94) 0.93
-------- -------- -------- -------- ------------ ------------
Net Asset Value, End of period.......... $ 14.18 $ 11.42 $ 12.03 $ 9.88 $ 9.99 $ 10.93
-------- -------- -------- -------- ------------ ------------
-------- -------- -------- -------- ------------ ------------
Total Return............................ 39.07% 3.46% 26.61% 4.67% 4.83% 9.85%(5)
Ratios/Supplemental Data:
Net Assets, End of period (in 000's).... $ 55,864 $ 45,582 $ 56,383 $ 52,831 $ 68,445 $38,151
Ratios to average net assets:
Net investment income including
reimbursement........................ 4.24% 3.96% 3.79% 4.62% 4.08% 4.66%(4)
Operating expenses including
reimbursement........................ 0.40% 0.40% 0.40% 0.40% 0.40% 0.40%(4)
Operating expenses excluding
reimbursement(7)..................... 0.40% 0.40% 0.41% 0.41% 0.40% 0.40%(4)
Portfolio turnover rate................. 72% 170% 12% 5% 19% 0%(5)
Average commission rate paid(3)......... $ 0.0497 $ 0.0572 $ 0.0230 N/A N/A N/A
</TABLE>

- ---------

(1) The Fund commenced operations on January 5, 1993.
(2) Net investment income per share before reimbursement by the
sub-administrator for the fiscal years ended March 31, 1998, 1997, 1996 and
1995 was $0.54, $0.49, $0.44 and $0.47, respectively.
(3) Required disclosure for fiscal years beginning on or after September 1,
1995.
(4) Annualized.
(5) Not Annualized.
(6) At a Special Meeting of Shareholders of the Utility Index Fund held on May
9, 1997, shareholders approved a change in the Fund's target index from the
Russell 1000 Utility Index to the Standard & Poor's Utilities Composite
Stock Price Index.

8
<PAGE>
U.S. TREASURY INDEX FUND
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
PERIOD
ENDED
YEAR ENDED MARCH 31, MARCH 31,
--------------------------------------------------------------------- ----------
1998 1997 1996 1995 1994 1993 1992(1)
--------- --------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of period.... $ 9.99 $ 10.24 $ 9.91 $ 10.38 $ 11.01 $ 10.39 $ 10.00
--------- --------- --------- --------- --------- --------- ----------
Income from Investment Operations:
Net investment income(2).............. 0.63 0.64 0.66 0.65 0.58 0.63 0.51
Net realized and unrealized gain
(loss) on investments................ 0.51 (0.25) 0.33 (0.29) (0.29) 0.75 0.38
--------- --------- --------- --------- --------- --------- ----------
Total from Investment Operations.... 1.14 0.39 0.99 0.36 0.29 1.38 0.89
--------- --------- --------- --------- --------- --------- ----------
Less Dividends:
Dividends from net investment
income............................... (0.63) (0.64) (0.65) (0.66) (0.58) (0.63) (0.50)
Dividends in excess of net investment
income............................... -- -- (0.01) (0.01) -- -- --
Distributions from net realized
capital gains........................ -- -- -- -- (0.34) (0.13) --
Dividends in excess of net realized
capital gains........................ -- -- -- (0.16) -- -- --
--------- --------- --------- --------- --------- --------- ----------
Total Dividends:.................... (0.63) (0.64) (0.66) (0.83) (0.92) (0.76) (0.50)
--------- --------- --------- --------- --------- --------- ----------
Net increase (decrease) in net asset
value.................................. 0.51 (0.25) (0.33) (0.47) (0.63) 0.62 0.39
--------- --------- --------- --------- --------- --------- ----------
Net Asset Value, End of period.......... $ 10.50 $ 9.99 $ 10.24 $ 9.91 $ 10.38 $ 11.01 $ 10.39
--------- --------- --------- --------- --------- --------- ----------
--------- --------- --------- --------- --------- --------- ----------
Total Return............................ 11.72% 3.91% 10.09% 3.81% 2.40% 13.69% 8.99%(4)
Ratios/Supplemental Data:
Net Assets, End of period (in 000's).... $ 118,368 $ 111,313 $ 124,944 $ 104,251 $ 138,225 $ 145,353 $ 102,830
Ratios to average net assets:
Net investment income including
reimbursement........................ 6.12% 6.31% 6.35% 6.43% 5.21% 5.87% 6.40%(3)
Operating expenses including
reimbursement........................ 0.40% 0.40% 0.40% 0.40% 0.40% 0.40% 0.40%(3)
Operating expenses excluding
reimbursement........................ 0.40% 0.40% 0.41% 0.41% 0.40% 0.40% 0.40%(3)
Portfolio turnover rate................. 79% 39% 35% 50% 75% 35% 57%(4)
</TABLE>

- ---------

(1) The Fund commenced operations on June 4, 1991.
(2) Net investment income per share before reimbursement by the
sub-administrator for the fiscal years ended March 31, 1998, 1997, 1996 and
1995 was $0.63, $0.64, $0.66 and $0.65, respectively.
(3) Annualized.
(4) Not Annualized.

9
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES

Galaxy II offers four indexed investment options:

The LARGE COMPANY INDEX FUND seeks to provide investment results that,
before deduction of operating expenses, match the price and yield performance of
U.S. publicly traded common stocks with large stock market capitalizations, as
represented by the S&P 500.

The SMALL COMPANY INDEX FUND seeks to provide investment results that,
before deduction of operating expenses, match the price and yield performance of
U.S. publicly traded common stocks with smaller stock market capitalizations, as
represented by the S&P SmallCap 600 Index.

The UTILITY INDEX FUND seeks to provide investment results that, before the
deduction of operating expenses, match the price and yield performance of U.S.
publicly traded common stocks of companies engaged in the utility industry, as
represented by the S&P Utilities Index.

The U.S. TREASURY INDEX FUND seeks to provide investment results that,
before deduction of operating expenses, match the price and yield performance of
U.S. Treasury notes and bonds, as represented by the U.S. Treasury Index.

The investment objective of a Fund may not be changed without the approval
of the holders of a "majority" of the outstanding voting shares of that Fund.
The term "majority" is defined in the Investment Company Act of 1940, as amended
(the "1940 Act"). There can be no assurance that the investment objective of any
Fund will be achieved.

Risk considerations related to the Funds' investments are described under
"Other Investment Practices" and "Investment Risks."

THE INDEXING APPROACH

The Funds are not managed in a traditional sense, that is, by making
discretionary judgments based on analysis of economic, financial and market
conditions. Instead, the Funds seek to match the investment performance of their
respective market segments, as represented by their respective indexes, through
the use of sophisticated computer models to determine which stocks or bonds
should be purchased or sold, while keeping transaction and administrative costs
to a minimum. Each Fund will attempt to be fully invested in securities of its
respective index and will invest at least 80% of its net assets in those
securities. The Fund's investment adviser, Fleet Investment Advisors Inc.
("Fleet"), generally selects securities for the Funds on the basis of their
weightings in the respective indexes. A Fund will only purchase a security that
is included in its respective index at the time of such purchase. With respect
to the remaining portion of its net assets, each Fund has the ability to hold
temporary cash balances and, if appropriate, in the case of the Large Company
Index Fund, the Small Company Index Fund and the Utility Index Fund (the "Stock
Funds") to use stock index futures contracts to increase efficiency. Each Fund
also may lend securities constituting up to 33 1/3% of its total assets.

While there can be no guarantee that each Fund's investment results will
precisely match the results of its corresponding index, Fleet believes that,
before deduction of operating expenses, there will be a very high correlation
between the returns generated by the Funds and their respective indexes. Each
Fund will attempt to achieve a correlation between the performance of its
portfolio and that of its respective index of at least 0.95 before deduction of
operating expenses. A correlation of 1.00 would indicate perfect correlation,
which would be achieved when a Fund's net asset value, including the value of
its dividend and

10
<PAGE>
capital gains distributions, increases or decreases in exact proportion to
changes in its respective index. Each Fund's ability to correlate its
performance with its respective index, however, may be affected by, among other
things, changes in securities markets, the manner in which Standard & Poor's
("S&P") or Salomon Brothers Inc. ("Salomon") calculate their respective indexes,
and the timing of purchases and redemptions. Fleet monitors the correlation of
the performance of the Funds in relation to their indexes under the supervision
of the Board of Trustees. In the unlikely event that a high correlation is not
achieved, the Board of Trustees will take appropriate steps based on the reasons
for the lower than expected correlation.

The inclusion of a security in any of the Funds' indexes in no way implies
an opinion by S&P or Salomon as to its attractiveness as an investment. S&P and
Salomon are not sponsors of, or in any way affiliated with, the Funds.

Fleet believes that the indexing approach should involve less turnover, and
thus lower brokerage costs, transfer taxes and operating expenses, than in more
traditionally managed funds, although there is no assurance that this will be
the case. Ordinarily, a Fund will buy or sell securities only to reflect changes
in an index (including mergers or changes in the composition of an index) or to
accommodate cash flows into and out of the Fund. The costs and other expenses
incurred in securities transactions, apart from any difference between the
investment results of a Fund and that of its respective index, may cause the
return of a Fund to be lower than the return of its respective index. The Funds
may invest in less than all of the securities included in their respective
indexes, which may result in a return that does not match that of the indexes,
after taking expenses into account.

THE LARGE COMPANY INDEX FUND

The S&P 500 is composed of approximately 500 common stocks, most of which
are listed on the New York Stock Exchange (the "NYSE"). S&P chooses the stocks
for the S&P 500 on a statistical basis. As of December 31, 1997, the stocks in
the S&P 500 had an average market capitalization of $15,313,000,000 and
accounted for approximately 73% of the total market value of all U.S. common
stocks. Normally, the Large Company Index Fund will hold all 500 stocks in the
S&P 500 and will hold each stock in approximately the same percentage as that
stock represents in the S&P 500. "Market capitalization" for a company is the
market price per share of stock multiplied by the number of shares outstanding.
Fleet believes that the S&P 500 is an appropriate benchmark for the Fund because
it is diversified, it is familiar to many investors and it is widely accepted as
a reference for common stock investments.

THE SMALL COMPANY INDEX FUND

The S&P SmallCap 600 Index is comprised of approximately 600 U.S. common
stocks with small market capitalizations. Like the S&P 500, the weighting of
stocks in the S&P SmallCap 600 Index is based on each stock's relative total
market capitalization. As of December 31, 1997, stocks in the S&P SmallCap 600
Index accounted for about 3% of the total market value of all publicly traded
U.S. common stocks. The average capitalization of stocks included in the S&P
SmallCap 600 Index as of December 31, 1997 was approximately $587 million,
although the capitalization of some companies included in the S&P SmallCap 600
Index is significantly higher.

Normally, the Small Company Index Fund will hold all 600 stocks in the S&P
SmallCap 600 Index and will hold each stock in approximately the same percentage
as that stock represents in the S&P SmallCap 600 Index. From time to time,
however, when deemed advisable by Fleet, the Fund will not hold all of the

11
<PAGE>
issues in the S&P SmallCap 600 Index but instead will use a statistical
technique known as "portfolio optimization." Through portfolio optimization,
each stock is considered for inclusion in the Fund based on its contribution to
the market capitalization, industry representation and fundamental exposures of
the Fund and their similarity to these financial characteristics in the S&P
SmallCap 600 Index. These fundamental exposures include dividend yield,
price-earnings multiples and average growth rates.

When utilized, the portfolio optimization program is expected to provide an
effective method of substantially duplicating the dividend income and capital
gains produced by the S&P SmallCap 600 Index. Since the Fund does not hold every
stock in the S&P SmallCap 600 Index when utilizing portfolio optimization, it is
not expected to track the S&P SmallCap 600 Index with the same degree of
accuracy as when it holds all 600 stocks in the Index, although the Fund will
seek a correlation of at least 0.95, before deduction of operating expenses.

THE UTILITY INDEX FUND

The S&P Utilities Index is an index of U.S. common stocks designed to
measure the performance of the utility sector of the S&P 500. The S&P Utilities
Index is comprised of approximately 40 stocks. The weighting of stocks in the
S&P Utilities Index is based on each stock's relative market capitalization. As
of December 31, 1997, the S&P Utilities Index included 37 companies, reflecting
the various segments of the utility industry in the following percentages (on a
market capitalization basis):

<TABLE>
<CAPTION>
% OF
SECTOR INDEX
- ------------------------------------------------------------------------------------ ---------
<S> <C>
Electric............................................................................ 77.56%
Gas and Water....................................................................... 22.44%
</TABLE>

Like the S&P 500 and S&P SmallCap 600 Index, the weighting of stocks in the
S&P Utilities Index is based on each stock's relative market capitalization.
Normally, the Utility Index Fund will hold every stock in the S&P Utilities
Index and will hold each stock in approximately the same percentage as that
stock represents in the S&P Utilities Index. From time to time, however, the
Fund may be unable to hold each stock in approximately the same percentage as
that stock represents in the S&P Utility Index because of the Fund's fundamental
diversification policy described in Investment Limitation No. 2 below. See
"Investment Limitations."

THE U.S. TREASURY INDEX FUND

The U.S. Treasury Index is composed of all U.S. Treasury notes and bonds
with remaining maturities of at least one year and outstanding principal of at
least $25 million. Securities in the Index are weighted by market value, that
is, the price per bond or note multiplied by the number of bonds or notes
outstanding. Salomon updates the roster of securities represented in the Index
once each month, adding new notes and

12
<PAGE>
bonds issued in the past month and removing those notes and bonds that no longer
meet the index's criteria. The following table further describes the U.S.
Treasury Index Fund as of December 31, 1997:

<TABLE>
<CAPTION>
U.S. TREASURY
INDEX FUND
--------------
<S> <C>
Number of Issues.............................................................. 26
Total Market Value............................................................ $ 113,952,205
Minimum Maturity.............................................................. 1.1 Years
Maximum Maturity.............................................................. 29.6 Years
Weighted Average Maturity..................................................... 8.5 Years
Percent of Market Value with remaining
Maturity of:
1-3 years................................................................. 35.4%
3-7 years................................................................. 28.6%
7-10 years................................................................ 8.1%
10-20 years............................................................... 11.4%
Over 20 years............................................................. 15.1%
Cash equivalent reserve....................................................... 1.4%
</TABLE>

The U.S. Treasury Index Fund will not hold all of the issues in its index
because of the costs involved. Instead, each security will be considered for
inclusion in the Fund based on its contribution to the total market value,
average coupon rate and average weighted maturity of the Fund and its similarity
to these financial characteristics of the Fund's index.

The U.S. Treasury Index Fund is authorized to engage in the "Other
Investment Practices" (except the use of stock index futures contracts)
described below. Because the U.S. Treasury Index Fund expects to generate income
generally exempt from state and local income taxes, it will engage in such
investment practices only when deemed by Fleet to be in the best interests of
the Fund's shareholders. See "Taxes."

OTHER INVESTMENT PRACTICES AND RISK CONSIDERATIONS

TEMPORARY CASH BALANCES

Each Fund will hold very small temporary cash balances to efficiently manage
transactional expenses. These cash balances generally are expected, under normal
conditions, not to exceed 2% of its net assets at any time (excluding amounts
used as margin and segregated assets with respect to futures transactions and
collateral for securities loans and repurchase agreements). The Funds may invest
these temporary cash balances in short-term securities of the U.S. Government or
its agencies and instrumentalities ("U.S. Government securities"), high quality
commercial paper (rated A-1 or better by Standard & Poor's Ratings Group or P-1
or better by Moody's Investors Service, Inc.), certificates of deposit and time
deposits of banking institutions having total assets in excess of $1 billion,
and repurchase agreements collateralized by U.S. Government securities. The
Funds may also hold these investments in connection with "U.S. Treasury rolls,"
which are not subject to the 2% limitation above.

In repurchase agreements, a Fund purchases portfolio securities subject to a
seller's agreement to repurchase them at a mutually specified date (generally
within one to seven days) and price. Repurchase agreements will be entered into
only with financial institutions, such as banks and broker-dealers, which

13
<PAGE>
are deemed creditworthy by Fleet under guidelines approved by Galaxy II's Board
of Trustees. No Fund will enter into repurchase agreements with Fleet or any of
its affiliates. The seller under a repurchase agreement will be required to
maintain the value of the securities which are subject to the agreement and held
by a Fund at not less than the agreed upon repurchase price. Repurchase
agreements involve certain risks in the event of default or insolvency of the
other party, including possible delays or restrictions upon the subject Fund's
ability to dispose of the underlying securities.

In U.S. Treasury rolls, a Fund sells outstanding U.S. Treasury securities
and buys back on a delayed settlement basis the same U.S. Treasury securities.
During the period prior to the delayed settlement date, the assets from the sale
of the U.S. Treasury securities are invested in cash equivalent instruments such
as those described above. U.S. Treasury rolls entail the risk that a Fund could
suffer an opportunity loss if the counterparty to the roll failed to perform its
obligations on the settlement date, and if market conditions changed adversely.
Each Fund intends, however, to enter into U.S. Treasury rolls only with U.S.
Government securities dealers recognized by the Federal Reserve Bank or with
member banks of the Federal Reserve System. For financial reporting and tax
purposes, the Funds propose to treat U.S. Treasury rolls as two separate
transactions, one involving the purchase of a security and a separate
transaction involving a sale. The Funds do not currently intend to enter into
U.S. Treasury rolls that are accounted for as a financing.

SECURITIES LENDING

Each Fund may realize additional net investment income and help offset some
of its expenses by lending securities constituting up to 33 1/3% of its total
assets to qualified brokers, dealers and other financial organizations, which
percentage limitation is a fundamental policy of each Fund. These loans will be
collateralized by cash, letters of credit or U.S. Government Securities, which
are maintained at all times in an amount at least equal to the current market
value of the loaned securities, plus any dividends and interest accrued thereon.
The Fund involved continues to be entitled to the interest and dividends payable
on the loaned security and receives interest on the amount of the loan. Any gain
or loss in the market price of the securities loaned that might occur during the
term of the loan would be for the account of the Fund. As with any loan, there
are risks of delay in recovery and in some cases even loss of rights in
collateral should the borrower of the securities fail financially or breach its
agreement with the Fund.

STOCK INDEX FUTURES CONTRACTS

The Stock Funds each may invest in stock index futures contracts that are
traded on a national exchange in order to hedge its positions or for other
permissible purposes. While there is some risk that the use of these instruments
may reduce the correlation between the performance of these Funds and the
indexes, Fleet believes that, under certain circumstances, the cost savings
associated with stock index futures contracts can be greater than the risks
involved. A Fund may not use stock index futures contracts as a temporary
defensive or stock-index arbitrage trading strategy. A Fund may not enter into
futures contracts other than for bona fide hedging purposes if the aggregate
initial margin deposits on its non-hedging futures contracts exceed 5% of the
Fund's net asset value, after taking into account unrealized profits and
unrealized losses on futures contracts it has entered into. When a Fund enters
into a long position in a stock index future, it must set aside with the Fund's
custodian an amount of cash or liquid securities equal to the total market value
of the underlying futures contract, less amounts held in the Fund's commodity
brokerage account.

14
<PAGE>
INVESTMENT LIMITATIONS

The Funds have adopted certain limitations on their investments, other than
investments in U.S. Government securities. Some of these limitations are:

(1) With respect to 75% of its total assets, a Fund will not invest more
than 5% of its total assets in the securities of any one issuer;

(2) A Fund will not invest more than 25% of its total assets in issuers
conducting their principal business activities in any one industry, except
that the Utility Index Fund will invest in excess of 25% of its respective
assets in the securities of companies within the utility industry;

(3) A Fund will not purchase more than 10% of the voting securities of
any one issuer; and

(4) A Fund will not borrow money except for temporary or emergency
reasons. Total borrowings cannot exceed 33 1/3% of a Fund's total assets and
all borrowings must be repaid before a Fund can purchase any securities. A
Fund may not borrow for leverage.

These investment restrictions, and certain of those contained in the Funds'
Statement of Additional Information, can be changed for a Fund only with the
approval of the holders of a majority of the outstanding shares of that Fund.

INVESTMENT RISKS

A Fund's ability to match its performance with an index may be affected by,
among other things, changes in the securities markets, the manner in which the
index is calculated and the timing of purchases and redemptions of the Fund's
shares. Galaxy II expects the investments of each Fund to decline in value
whenever the market, as represented by the securities in its index, declines.

The Large Company Index Fund should exhibit price volatility similar to that
of the S&P 500. The Small Company Index Fund, since it invests in smaller
companies, may have greater price volatility and less liquidity than the Large
Company Index Fund. Historically, utility stocks have been one of the least
volatile sectors of the U.S. stock market when measured by statistics such as
standard deviation of return. Consequently, the Utility Index Fund may have less
price volatility than either the Large Company or Small Company Index Funds,
although there can be no assurance of this.

It is impossible to eliminate risk from investments in common stocks. The
average annual total return of the U.S. stock market, as measured by Ibbotson
Associates, from 1926 to 1994 was 12.16%. Returns in individual calendar years
ranged from a low of -43.3% (in 1931) to a high of 53.9% (in 1933). You should
consider your investment in the Stock Funds to be long-term. These Funds are not
designed to provide you with a means to speculate on short-term movements in the
stock market.

The Utility Index Fund is subject to industry risk. Industry risk is the
possibility that a particular group of related stocks, such as those stocks in a
particular industry, will decline in price due to industry-specific
developments. For the utility industry, these developments could include:

- changing regulations which could limit profits, dividends, or access to
new markets;

- unexpected increases in fuel, environmental compliance, safety, or other
operating costs, including high interest costs on borrowings needed for
capital improvement projects;

15
<PAGE>
- increasing competition, particularly among providers of gas utilities,
with the need to make large investments in technology to meet this
competition; and

- restriction to relatively mature markets, particularly among water
companies, which constrain potential for growth.

The Fund will concentrate its investments in the utility industry. As a
result, the Fund's investments may be subject to greater risk and market
fluctuation than a fund that has securities representing a broader range of
investment alternatives.

The Fund's policy of concentrating its investments in the utility industry
is a fundamental policy of the Fund and cannot be changed without approval of a
majority of the Fund's outstanding voting securities.

While the "full faith and credit" of the U.S. Government guarantees the
stated interest rate and principal at maturity of U.S. Treasury notes and bonds,
the market value of these securities will fluctuate due to changing interest
rates. In general, bond prices rise when interest rates fall, and bond prices
fall when interest rates rise. Longer-term bonds are typically affected more
dramatically than shorter-term bonds. The following table illustrates the
changes caused by a 2% change in interest rates on the market prices of
non-callable bonds with various maturities:

<TABLE>
<CAPTION>
2% 2%
INCREASE DECREASE
IN IN
INTEREST INTEREST
MATURITY RATES RATES
- ---------------------------------------- -------- --------
<S> <C> <C>
1 year.................................. -2% +2%
5 years................................. -8% +9%
10 years................................ -14% +17%
30 years................................ -25% +39%
</TABLE>

As of March 31, 1998, the weighted average maturity of the U.S. Treasury
Index Fund was 8.923 years. Thus, the U.S. Treasury Index Fund is subject to
moderate levels of interest rate risk.

PRICING OF SHARES

On every day the New York Stock Exchange (the "NYSE") is open, First Data
Investor Services Group, Inc. ("Investor Services Group"), Galaxy II's
sub-administrator, calculates the net asset value per share of each Fund
separately, as of the close of regular trading on the NYSE (currently, 4:00 p.m.
Eastern Time). In calculating net asset value, investments are valued based on
their market values, but when market quotations are not readily available,
investments are valued based on fair value as determined in good faith in
accordance with procedures established by Galaxy II's Board of Trustees. Bonds
and other fixed income securities may be valued on the basis of prices provided
by a pricing service when such prices are believed to reflect the market value
of such securities. The prices provided by a pricing service may be determined
without regard to bid or last sale prices of each security but take into account
institutional size transactions in similar groups of securities as well as any
developments relating to specific securities.

DIVIDENDS AND DISTRIBUTIONS

Each Fund intends to distribute substantially all of its net investment
income and its net realized capital gains to its shareholders each year.

16
<PAGE>
Dividend declaration and payment frequencies are:

<TABLE>
<CAPTION>
NET INVESTMENT REALIZED
INCOME CAPITAL GAINS
-------------------- -------------
<S> <C> <C>
Large Company Index Fund................................. Annually Annually
Small Company Index Fund................................. Annually Annually
Utility Index Fund....................................... Quarterly Annually
U.S. Treasury Index Fund................................. Declaration-Daily Annually
Payment-Monthly
</TABLE>

Dividends and distributions may be made on a more frequent basis to comply
with the distribution requirements of the Internal Revenue Code of 1986, as
amended (the "Code").

You will receive all dividends and capital gains distributions as additional
shares of the Fund that paid the dividend or distribution at its then current
net asset value, unless you elect to receive cash. You may elect to receive cash
by so specifying on your account application or by notifying Investor Services
Group, Galaxy II's transfer agent, in writing. Shareholders electing to reinvest
dividends in the U.S. Treasury Index Fund will receive confirmation of their
dividends on regular, quarterly statements. As with all purchases and
redemptions, you pay no sales commissions or fees of any kind on shares acquired
through reinvestment of dividends and distributions.

Investor Services Group has agreed to waive until further notice receipt of
the $10.00 annual account maintenance fee otherwise automatically charged to
each Fund account at the time a dividend is credited to the account. The Board
of Trustees reserves the right to change the annual account maintenance fee.

TAXES

Dividends paid from Fund income other than net capital gains will be taxable
to you as ordinary income. Distributions derived from net realized long-term
capital gains will be taxable to you as long-term capital gains, regardless of
how long you have held shares of a Fund. You will be taxable on distributions
regardless of whether they are paid in cash or reinvested in additional shares.

As a general rule, your gain or loss on a sale or redemption of Fund shares
(including an exchange of Fund shares for shares of another fund) will be a
long-term capital gain or loss if you have held your shares for more than 12
months and a short-term capital gain or loss if you have held your shares for 12
months or less. If you hold shares for six months or less and during that time
receive a capital gain dividend on those shares, any loss recognized on the sale
or exchange of those shares will be treated as a long-term capital loss to the
extent of the capital gain dividend.

Most states do not tax mutual fund dividends attributable to interest on
U.S. Treasury securities. Some states attempt to limit this exemption to
distributions by mutual funds that primarily invest in such securities and that
satisfy certain reporting and diversification requirements. The U.S. Treasury
Index Fund intends to be such a fund and to satisfy such requirements and thus
expects that its dividends attributable to interest on its U.S. Treasury notes
and bonds will, as a general rule, be substantially free of state and local
income tax. However, all income from the Fund is subject to federal taxes.

17
<PAGE>
dividends and distributions that were, or were deemed to be, received from a
Fund during that tax year. You should consult your tax adviser with regard to
your tax situation, including any state and local tax liabilities.

MANAGEMENT OF THE FUNDS

The Board of Trustees sets strategic and policy directions for Galaxy II and
oversees management. The Board selects and supervises the Funds' investment
adviser and Galaxy II's officers who are responsible for the day-to-day
management of Galaxy II's affairs.

INVESTMENT ADVISER

Fleet Investment Advisors Inc. ("Fleet"), with principal offices at 75 State
Street, Boston, Massachusetts 02109, serves as investment adviser to the Funds.
Fleet also provides investment management and advisory services to individual
and institutional clients, and manages the other investment portfolio of Galaxy
II, the investment portfolios of The Galaxy Fund and certain of the investment
portfolios of The Galaxy VIP Fund. Fleet is an indirect wholly-owned subsidiary
of Fleet Financial Group, Inc., a registered bank holding company with total
assets as of June 30, 1998 of approximately $100.7 billion. Fleet is also an
indirect wholly-owned subsidiary of Fleet National Bank, the Funds'
administrator. To fulfill its responsibilities, Fleet employs the personnel,
software and support systems needed to manage indexed portfolios.

Fleet receives a fee from each Fund at the annual rate of 0.10% of the
average daily net assets of the Fund, which was the rate of Fleet's compensation
during the fiscal year ended March 31, 1998.

Fleet is authorized to allocate purchase and sale orders for portfolio
securities to certain financial institutions, including, to the extent permitted
by law or order of the Securities and Exchange Commission ("SEC"), financial
institutions that are affiliated with Fleet or that have sold shares of the
Funds, if Fleet believes that the quality of the transaction and the commission
are comparable to what they would be with other qualified brokerage firms.

ADMINISTRATOR AND SUB-ADMINISTRATOR

Fleet National Bank ("FNB") provides Galaxy II with office facilities and
support personnel and generally assists in all aspects of administration and
operation of Galaxy II. FNB, with principal offices at 50 Kennedy Plaza,
Providence, Rhode Island 02903-2305, is an indirect wholly-owned subsidiary of
Fleet Financial Group, Inc. FNB pays all of the expenses of the Funds, except
the fees and expenses of those Trustees who are not interested persons of Galaxy
II, brokerage fees and commissions, interest on borrowings, taxes, annual
sub-account fees payable with respect to shares of the Funds held by defined
contribution plans, and such extraordinary, nonrecurring expenses as may arise,
including litigation to which Galaxy II may be a party. FNB receives a fee from
each Fund at an annual rate of 0.30% of the average daily net assets of the
Fund, which was the rate of FNB's compensation during the fiscal year ended
March 31, 1998. From time to time, the Administrator may waive voluntarily all
or a portion of the administration fee payable to it by the Funds.

FNB has entered into a sub-administration agreement with First Data Investor
Services Group, Inc. ("Investor Services Group"), located at 4400 Computer
Drive, P.O. Box 5108, Westboro, Massachusetts 01581, a wholly-owned subsidiary
of First Data Corporation, to provide administrative services to Galaxy II

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and to serve as shareholder servicing agent. FNB bears the fees of Investor
Services Group for providing such services.

DISTRIBUTOR

First Data Distributors, Inc. ("FD Distributors"), a wholly-owned subsidiary
of Investor Services Group, is responsible for the marketing and distribution of
the shares of each Fund. FD Distributors is a registered broker/dealer with
principal offices located at 4400 Computer Drive, P.O. Box 5108, Westboro,
Massachusetts 01581. FD Distributors does not receive any compensation from
Galaxy II or the Funds for its services.

CUSTODIAN AND TRANSFER AGENT

The Chase Manhattan Bank (the "Custodian"), located at 1 Chase Manhattan
Plaza, New York, New York 10081, a wholly-owned subsidiary of The Chase
Manhattan Corporation, serves as the custodian of the Funds' assets, and
Investor Services Group serves as the Funds' transfer and dividend disbursing
agent. Services performed by both entities for the Funds are described in the
Statement of Additional Information. Communications to Investor Services Group
should be directed to Investor Services Group at 4400 Computer Drive, P.O. Box
5108, Westboro, Massachusetts 01581.

HOW TO PURCHASE AND REDEEM SHARES

FD Distributors has established several procedures to enable different types
of investors to purchase shares of the Funds. Shares may be purchased by
individuals or corporations who submit a purchase application to Galaxy II,
purchasing directly either for their own accounts or for the accounts of others
("Direct Investors"). Shares may also be purchased by FIS Securities, Inc.,
Fleet Securities, Inc., Fleet Enterprises, Inc., Fleet Financial Group, Inc.,
its affiliates, their correspondent banks and other qualified banks, savings and
loan associations and broker/dealers ("Institutions") on behalf of their
customers ("Customers"). Purchases by Direct Investors may take place only on
days on which FD Distributors, the Custodian and Investor Services Group are
open for business ("Business Days"). If an Institution accepts a purchase order
from a Customer on a non-Business Day, the order will not be executed until it
is received and accepted by FD Distributors on a Business Day in accordance with
FD Distributors' procedures.

PURCHASE PROCEDURES--CUSTOMERS OF INSTITUTIONS

Purchase orders are placed by Customers of Institutions through their
Institution. The Institution is responsible for transmitting Customer purchase
orders to FD Distributors and for wiring required funds in payment to the
Custodian on a timely basis. FD Distributors is responsible for transmitting
such orders to Investor Services Group for execution. Shares purchased by
Institutions on behalf of their Customers will normally be held of record by the
Institution and beneficial ownership of the shares will be recorded by the
Institution and reflected in the account statements provided to their Customers.
Investor Services Group may establish an account of record for each Customer of
an Institution reflecting beneficial ownership of shares. Depending on the terms
of the arrangement between a particular Institution and Investor Services Group,
confirmations of share purchases and redemptions and pertinent account
statements will either be sent by Investor Services Group directly to a Customer
with a copy to the Institution, or will be furnished directly to the Customer by
the Institution. Other procedures for the purchase of shares established by
Institutions in connection with the requirements of their Customer accounts may
apply. Customers wishing

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<PAGE>
to purchase shares through their Institution should contact such entity directly
for appropriate purchase instructions.

PURCHASE PROCEDURES--DIRECT INVESTORS

PURCHASES BY MAIL. Shares may be purchased by completing a purchase
application and mailing it, together with a check payable to each Fund in which
a Direct Investor wishes to invest, to:

Galaxy Fund II
4400 Computer Drive
P.O. Box 5108
Westboro, MA 01581

ALL INITIAL PURCHASE ORDERS PLACED BY MAIL MUST BE ACCOMPANIED BY A PURCHASE
APPLICATION. APPLICATIONS MAY BE OBTAINED BY CALLING FD DISTRIBUTORS AT
1-800-628-0414.

Subsequent investments in an existing account in any Fund may be made at any
time by sending a check for a minimum of $100 payable to the Fund in which the
additional investment is being made to Galaxy II at the above address along with
either (a) the detachable form that regularly accompanies confirmation of a
prior transaction, (b) a subsequent order form that may be obtained from FD
Distributors, or (c) a letter stating the amount of the investment, the name of
the Fund and the account number in which the investment is to be made. If a
Direct Investor's check does not clear, the purchase will be cancelled.

OTHER PURCHASE INFORMATION

PURCHASES BY WIRE. Investors may also purchase shares by arranging to
transmit federal funds by wire to Fleet National Bank as agent for Investor
Services Group. Prior to making any purchase by wire, an investor must telephone
FD Distributors at 1-800-628-0414 to place an order and for instructions.

Direct Investors making initial investments by wire must promptly complete a
purchase application and forward it to Galaxy Fund II, 4400 Computer Drive, P.O.
Box 5108, Westboro, Massachusetts 01581. Applications may be obtained by calling
FD Distributors at 1-800-628-0414.

Except as provided in "Investor Programs" below, the minimum initial
investment by a Direct Investor, or initial aggregate investment by an
Institution investing on behalf of its Customers, is $2,500. The minimum
investment for subsequent purchases is $100. The minimum investment requirement
with respect to IRAs, SEPs, MERPs and Keogh Plans (see below under "Retirement
Plans") is $500 (including spousal IRA accounts). There are no minimum
investment requirements for investors participating in the Automatic Investment
Program described below. Customers may agree with a particular Institution to
change the minimum initial and minimum subsequent purchase requirements with
respect to their accounts.

Galaxy II or FD Distributors each reserves the right to reject any purchase
order, in whole or in part, or to waive any minimum investment requirement. The
issuance of shares to Direct Investors and Institutions is recorded on the books
of Galaxy II and share certificates will not be issued.

EFFECTIVE TIME OF PURCHASES. Purchase order for shares received and
accepted by FD Distributors from an Institution or a Direct Investor on a
Business Day prior to the close of regular trading hours on

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the NYSE (currently, 4:00 p.m. Eastern Time) will be executed at the net asset
value per share determined on that date, provided that the Custodian receives
the purchase price in federal funds or other immediately available funds prior
to 4:00 p.m. on the fifth Business Day following the receipt of such order. Such
order will be executed on the day on which the purchase price is received in
proper form. If funds are not received by such date and time, the order will not
be accepted and notice thereof will be given promptly to the Institution or
Direct Investor submitting the order. Payment for orders which are not received
or accepted will be returned. If an Institution accepts a purchase order from a
Customer on a non-Business Day, the order will not be executed until it is
received and accepted by FD Distributors on a Business Day in accordance with
the above procedures. On a Business Day when the NYSE closes early due to a
partial holiday or otherwise, Galaxy II will advance the time at which purchase
orders must be received in order to be processed on that Business Day.

REDEMPTION PROCEDURES--CUSTOMERS OF INSTITUTIONS

Customers of Institutions may redeem all or a portion of their shares in
accordance with procedures governing their accounts at Institutions. It is the
responsibility of the Institutions to transmit redemption orders to FD
Distributors and credit their Customers' accounts with the redemption proceeds
on a timely basis. No charge for wiring redemption payments to Institutions is
imposed by Galaxy II, although Institutions may charge a Customer's account for
redemption services. Information relating to such redemption services and
charges, if any, is available from the Institutions.

Payments for redemption orders received by FD Distributors on a Business Day
will normally be wired on the third Business Day to the Institutions.

DIRECT INVESTORS MAY REDEEM ALL OR A PORTION OF THEIR SHARES IN ACCORDANCE
WITH ANY OF THE PROCEDURES DESCRIBED BELOW.

REDEMPTION PROCEDURES--DIRECT INVESTORS

REDEMPTION BY MAIL. Shares may be redeemed by a Direct Investor by
submitting a written request for redemption to:

Galaxy Fund II
4400 Computer Drive
P.O. Box 5108
Westboro, MA 01581

A written redemption request must (i) state the name of the Fund and the
number of shares to be redeemed, (ii) identify the shareholder account number
and social security number or tax identification number, and (iii) be signed by
each registered owner exactly as the shares are registered. A redemption request
for an amount in excess of $50,000, or for any amount where (i) the proceeds are
to be sent elsewhere than the address of record, (ii) the proceeds are to be
sent to an address of record which has changed in the preceding 30 days, or
(iii) the check is to be made payable to someone other than the registered
owner(s), must be accompanied by signature guarantees. The guarantor of a
signature must be a bank that is a member of the Federal Deposit Insurance
Corporation, a trust company, a member firm of a national securities exchange or
any other eligible guarantor institution. FD Distributors will not accept
guarantees from notaries public. FD Distributors may require additional
supporting documents for redemptions made by corporations, executors,
administrators, trustees and guardians. A redemption

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<PAGE>
request will not be deemed to be properly received until FD Distributors
receives all required documents in proper form. The Funds ordinarily will make
payment for shares redeemed by mail within five Business Days after proper
receipt by FD Distributors of the redemption request. Questions with respect to
the proper form for redemption requests should be directed to FD Distributors at
1-800-628-0414.

REDEMPTION BY TELEPHONE. Direct Investors may redeem shares by calling
1-800-628-0414 and instructing FD Distributors to mail a check for redemption
proceeds of up to $50,000 to the address of record. A redemption request for an
amount in excess of $50,000, or for any amount where (i) the proceeds are to be
sent elsewhere than the address of record, (ii) the proceeds are to be sent to
an address of record which has changed in the preceding 30 days, or (iii) the
check is to be made payable to someone other than the registered owner(s), must
be accompanied by signature guarantees. (See "Redemption by Mail" above for
details regarding signature guarantees.)

REDEMPTION BY WIRE. Direct Investors who have so indicated on the account
application, or have subsequently arranged in writing to do so, may redeem
shares by instructing FD Distributors by wire or telephone to wire the
redemption proceeds of $1,000 or more directly to a Direct Investor's account at
any commercial bank in the United States. FD Distributors charges a $5.00 fee
for each wire redemption and the fee is deducted from the redemption proceeds.
The redemption proceeds must be paid to the same bank and account as designated
on the account application or in written instructions subsequently received by
FD Distributors. To request redemption of shares by wire, Direct Investors
should call 1-800-628-0414.

In order to arrange for redemption by wire after an account has been opened
or to change the bank or account designated to receive redemption proceeds, a
written request must be sent to Galaxy II at the address listed above under
"Redemption by Mail." Such requests must be signed by the investor and
accompanied by a signature guarantee (see "Redemption by Mail" above for details
regarding signature guarantees). Further documentation may be requested from
corporations, executors, administrators, trustees, or guardians. If, due to
temporary adverse conditions, investors are unable to effect telephone
transactions, investors are encouraged to follow the procedures for transactions
by wire or mail which are described above.

Galaxy II reserves the right to refuse a wire or telephone redemption if it
believes it is advisable to do so. Procedures for redeeming shares by wire or
telephone may be modified or terminated at any time. In attempting to confirm
that telephone instructions are genuine, Galaxy II will use such procedures as
are considered reasonable, including recording those instructions and requesting
information as to account registration (such as the name in which an account is
registered, the account number, recent transactions in the account, and the
account holder's social security number, address and/or bank). If Galaxy II
fails to follow established procedures for the authentication of telephone
instructions, it may be liable for losses due to unauthorized or fraudulent
telephone transactions.

NO REDEMPTION BY A DIRECT INVESTOR IN ANY FUND WILL BE PROCESSED UNTIL
GALAXY II HAS RECEIVED A COMPLETED APPLICATION WITH RESPECT TO THE DIRECT
INVESTOR'S ACCOUNT. IF ANY PORTION OF THE SHARES TO BE REDEEMED REPRESENTS AN
INVESTMENT MADE BY PERSONAL CHECK, GALAXY II RESERVES THE RIGHT TO DELAY PAYMENT
OF PROCEEDS UNTIL FD DISTRIBUTORS IS REASONABLY SATISFIED THAT THE CHECK HAS
BEEN COLLECTED, WHICH COULD TAKE UP TO 15 DAYS FROM THE PURCHASE DATE. A DIRECT
INVESTOR WHO ANTICIPATES THE NEED FOR MORE IMMEDIATE ACCESS TO HIS OR HER
INVESTMENT SHOULD PURCHASE SHARES BY FEDERAL FUNDS OR BANK WIRE OR BY CERTIFIED
OR CASHIER'S CHECK. BANKS NORMALLY IMPOSE A CHARGE IN CONNECTION WITH THE USE OF
BANK WIRES, AS WELL AS CERTIFIED CHECKS, CASHIER'S CHECKS AND FEDERAL FUNDS.

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<PAGE>
OTHER REDEMPTION INFORMATION

Galaxy II reserves the right to redeem accounts (other than retirement plan
accounts) involuntarily, upon 60 days' written notice, if the account's net
asset value falls below $250 as a result of redemptions. In addition, if an
investor has agreed with a particular Institution to maintain a minimum balance
in his or her account at the Institution with respect to Fund shares, and the
balance in such account falls below that minimum, the Customer may be obliged by
the Institution to redeem all of his or her shares.

Galaxy II may require any information reasonably necessary to ensure that a
redemption has been duly authorized.

Redemption orders are effected at the net asset value per share next
determined after receipt and acceptance of the order by FD Distributors. On a
Business Day when the NYSE closes early due to a partial holiday or otherwise,
Galaxy II will advance the time at which redemptions orders must be received in
order to be processed on that Business Day. Galaxy II reserves the right to wire
redemption proceeds within seven days after receiving the redemption order if,
in its judgment, an earlier payment could adversely affect a Fund.

DESCRIPTION OF SHARES

Each Fund is a series of shares of Galaxy II. Galaxy II was organized on
February 22, 1990 under the laws of the Commonwealth of Massachusetts and is a
business entity commonly known as a "Massachusetts business trust." Galaxy II
offers shares of beneficial interest, par value $.001 per share. Currently, five
series of shares have been authorized for sale to the public, four of whose
shares constitute the interests of the Funds described in this Prospectus. When
matters are submitted for shareholder vote, shareholders of each Fund will have
one vote for each full share held and proportionate, fractional votes for
fractional shares held. Generally, shares of Galaxy II will vote in the
aggregate and not by series, except as otherwise expressly required by law or
when the Board of Trustees determines that the matter to be voted on affects
only the interests of shareholders of a particular series.

Normally, no meetings of shareholders will be held for the purpose of
electing Trustees unless and until such time as less than a majority of the
Trustees holding office have been elected by shareholders, at which time the
Trustees then in office will call a shareholders' meeting for the election of
Trustees. Shareholders of record of no less than two-thirds of the outstanding
shares of Galaxy II may remove a Trustee through a declaration in writing or by
vote cast in person or by proxy at a meeting called for that purpose. A meeting
will be called for the purpose of voting on the removal of a Trustee at the
written request of holders of 10% of Galaxy II's outstanding shares.
Shareholders who satisfy certain criteria will be assisted by Galaxy II in
communicating with other shareholders in seeking the holding of the meeting.

AGREEMENTS FOR SUB-ACCOUNT SERVICES

Galaxy II and Investor Services Group may enter into agreements with one or
more entities, including FNB and other affiliates of Fleet, pursuant to which
such entities agree to perform certain sub-account and administrative functions
("Sub-Account Services") on a per account basis with respect to shares of the
Funds held by defined contribution plans, including maintaining records
reflecting separately with respect to each plan participant's sub-account all
purchases and redemptions of Fund shares and the dollar value of Fund shares in
each sub-account; crediting to each participant's sub-account all dividends and
distributions with respect to that sub-account; and transmitting to each
participant a periodic statement regarding

23
<PAGE>
the sub-account as well as any proxy materials, reports and other material Fund
communications. Such entities are compensated by Investor Services Group for the
Sub-Account Services and in connection therewith the transfer agency fees
payable by the Funds to Investor Services Group have been increased by an amount
equal to these fees. In substance, therefore, the shareholders of the Funds
indirectly bear these fees.

PERFORMANCE REPORTING

From time to time, in advertisements or in reports to shareholders, the
performance of the Funds may be quoted and compared to that of other mutual
funds with similar investment objectives and to stock or other relevant bond
indexes or to rankings prepared by independent services or other financial or
industry publications that monitor the performance of mutual funds. For example,
the performance of the Funds may be compared to data prepared by LIPPER
ANALYTICAL SERVICES, INC., a widely recognized independent service which
monitors the performance of mutual funds, the S&P 500, the Consumer Price Index,
the Dow Jones Industrial Average, a recognized unmanaged index of common stocks
of 30 industrial companies listed on the NYSE, the S&P SmallCap 600 Index, the
S&P Utilities Index or the U.S. Treasury Index.

Performance data as reported in national financial publications including,
but not limited to, MONEY MAGAZINE, FORBES, BARRON'S, THE WALL STREET JOURNAL
and THE NEW YORK TIMES, or publications of a local or regional nature may also
be used in comparing the performance and yields of the Funds.

The standard yield is computed by dividing a Fund's average daily net
investment income per share during a 30-day (or one month) base period
identified in the advertisement by the net asset value per share on the last day
of the period, and annualizing the result on a semi-annual basis. The Funds may
also advertise their "effective yield" which is calculated similarly but, when
annualized, the income earned by an investment in a Fund is assumed to be
reinvested.

The Funds may also advertise their performance using "average annual total
return" figures over various periods of time. Such total return figures reflect
the average percentage change in the value of an investment in a Fund from the
beginning date of the measuring period to the end of the measuring period.
Average total return figures will be given for the most recent one-, five- and
ten-year periods (if applicable), and may be given for other periods as well,
such as from the commencement of a Fund's operations, or on a year-by-year
basis. Each Fund may also use "aggregate total return" figures for various
periods, representing the cumulative change in the value of an investment in a
Fund for the specified period. Both methods of calculating total return assume
that dividends and capital gain distributions made by a Fund during the period
are reinvested in Fund shares.

The performance of the Funds will fluctuate and any quotation of performance
should not be considered as representative of future performance. Since yields
fluctuate, yield data cannot necessarily be used to compare an investment in a
Fund's shares with bank deposits, savings accounts and similar investment
alternatives which often provide an agreed or guaranteed fixed yield for a
stated period of time. Shareholders should remember that performance data are
generally functions of the kind and quality of the instruments held in a
portfolio, portfolio maturity, operating expenses, and market conditions.

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<PAGE>
INVESTOR PROGRAMS

EXCHANGE PRIVILEGE

Direct Investors and Customers of Institutions may, after appropriate prior
authorization, exchange shares of a Fund having a value of at least $100 for
shares of any of the other funds or portfolios offered by Galaxy II or otherwise
advised by Fleet or its affiliates in which the Direct Investor or Customer
maintains an account, provided that such other shares may legally be sold in the
state of the investor's residence. The minimum initial investment to establish a
new account by exchange in another Fund offered by Galaxy II is $2,500, unless
at the time of the exchange the Direct Investor or Customer elects, with respect
to the Fund into which the exchange is being made, to participate in the
Automatic Investment Program described below, in which event there is no minimum
initial investment requirement, or in the College Investment Program described
below, in which event the minimum initial investment is generally $100.

An exchange involves a redemption of all or a portion of the shares of a
Fund and the investment of the redemption proceeds in shares of another fund or
portfolio offered by Galaxy II or otherwise advised by Fleet or its affiliates.
The redemption will be made at the per share net asset value next determined
after the exchange request is received. The shares of the fund or portfolio to
be acquired will be purchased at the per share net asset value next determined
after acceptance of the exchange request plus any applicable sales charge.

Investors may find the exchange privilege useful if their investment
objectives or market outlook should change after they invest in any of the
Funds. For further information regarding Galaxy II's exchange privilege, Direct
Investors should call 1-800-628-0414. Customers of Institutions should call
their Institution for such information. Customers exercising the exchange
privilege with Galaxy II's Municipal Bond Fund or another portfolio otherwise
advised by Fleet or its affiliates should request and review a prospectus for
such Fund or portfolio prior to making an exchange. Telephone 1-800-628-0414 to
request a prospectus and/or to make an exchange.

In order to prevent abuse of this privilege to the disadvantage of other
shareholders, Galaxy II's reserves the right to terminate the exchange privilege
of any shareholder who requests more than three exchanges a year. Galaxy II will
determine whether to do so based on a consideration of both the number of
exchanges that any particular shareholder or group of shareholders has requested
and the time period over which their exchange requests have been made, together
with the level of expenses to Galaxy II which will result from effecting
additional exchange requests. The exchange privilege may be modified or
terminated at any time. At least 60 days' notice of any material modification or
termination will be given to shareholders except where notice is not required
under the regulations of the Securities and Exchange Commission.

Galaxy II does not charge any exchange fee. However, Institutions may charge
such fees with respect to either all exchange requests or with respect to any
request which exceeds the permissible number of free exchanges during a
particular period. Customers of Institutions should contact their Institution
for applicable information.

For federal income tax purposes, an exchange of shares is a taxable event
and, accordingly, a capital gain or loss may be realized by an investor. Before
making an exchange request, the Customer should consult a tax or other financial
adviser to determine the tax consequences.

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<PAGE>
RETIREMENT PLANS

Shares of the Funds are available for purchase in connection with the
following tax-deferred prototype retirement plans:

INDIVIDUAL RETIREMENT ACCOUNTS ("IRAs") (including traditional, Roth and
Education IRAs and "rollovers" from existing retirement plans), a
retirement-savings vehicle for qualifying individuals. The minimum initial
investment for an IRA account is $500 (including a spousal account).

SIMPLIFIED EMPLOYEE PENSION PLANS ("SEPs"), a form of retirement plan for
sole proprietors, partnerships and corporations. The minimum initial investment
for a SEP account is $500.

MULTI-EMPLOYEE PENSION PLANS ("MERPs"), a retirement vehicle established by
employers for their employees which is qualified under Section 401(k) and 403(b)
of the Code. The minimum initial investment for a MERP is $500.

KEOGH PLAN, a retirement vehicle for self-employed individuals. The minimum
initial investment for a Keogh Plan is $500.

Detailed information concerning eligibility and other matters related to
these plans and the form of application is available from FD Distributors (call
1-800-628-0414) with respect to IRAs, SEPs and Keogh Plans and from Fleet
Brokerage Securities, Inc. (call 1-800-221-8210) with respect to MERPs.

AUTOMATIC INVESTMENT PROGRAM

The Automatic Investment Program permits a Direct Investor to purchase Fund
shares each month or each quarter (minimum of $50 per transaction except for
Direct Investors purchasing Fund shares to be held in an Education IRA, in which
event the minimum amount is $40 per month or $125 per quarter). Provided the
Direct Investor's financial institution allows automatic withdrawals, Fund
shares are purchased by transferring funds from a Direct Investor's checking,
bank money market or NOW account designated by the investor. The account
designated will be debited in the specified amount, and Fund shares will be
purchased on a monthly or quarterly basis on any Business Day designated by a
Direct Investor. If the designated day follows a weekend or holiday, the
purchase will be made on the Business Day closest to the designated day. Only an
account maintained at a domestic financial institution which is an Automated
Clearing House member may be so designated.

SYSTEMATIC WITHDRAWAL PLAN

The Systematic Withdrawal Plan permits a Direct Investor to withdraw Fund
shares on a monthly, quarterly, semi-annual or annual basis on any Business Day
designated by a Direct Investor, if the account has a starting value of at least
$10,000. If the designated day falls on a weekend or holiday, the redemption
will be made on the Business Day closest to the designated day. Proceeds of the
redemption will be sent to the shareholder's address of record or financial
institution within three Business Days of the redemption. If withdrawals exceed
purchases and dividends, the number of shares in the account will be reduced.
Investors may terminate the Systematic Withdrawal Plan at any time upon written
notice to Investor Services Group (but not less than five days before a payment
date). There is no charge for this service.

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<PAGE>
PAYROLL DEDUCTION PROGRAM

The Payroll Deduction Program provides Direct Investors with a convenient,
systematic way to purchase Fund shares by deducting a minimum amount of $25 per
pay period from their paycheck. To be eligible for the Program, the payroll
department of a Direct Investor's employer must have the capability to forward
transactions directly through the Automated Clearing House (ACH), or indirectly
through a third party payroll processing company that has access to the ACH. A
Direct Investor must complete and submit a Galaxy II Payroll Deduction
Application to his or her employer's payroll department, which will arrange for
the specified amount to be debited from the Direct Investor's paycheck each pay
period. Shares of the Funds will be purchased within three days after the debit
occurs. If the designated day falls on a weekend or non-Business Day, the
purchase will be made on the Business Day closest to the designated day. A
Direct Investor should allow between two to four weeks for the Payroll Deduction
Program to be established after submitting an application to the employer's
payroll department.

COLLEGE INVESTMENT PROGRAM

The College Investment Program (the "College Program") permits a Direct
Investor to open an account with Galaxy II and purchase Fund shares with a
minimum amount of $100 for initial or subsequent investments, except that if the
Direct Investor purchases shares through the Automatic Investment Program, the
minimum per transaction is $50. The College Program is designed to assist Direct
Investors who want to finance a college savings plan. See "Investor
Programs--Automatic Investment Program" for information on the Automatic
Investment Program. Galaxy II reserves the right to redeem accounts
participating in the College Program involuntarily, upon 60 days' written
notice, if the account's net asset value falls below the applicable minimum
initial investment as a result of redemptions. See "How to Purchase and Redeem
Shares--Other Redemption Information" above for further information.

Direct Investors in the College Program will receive consolidated monthly
statements of their accounts. Detailed information concerning College Program
accounts and applications may be obtained from FD Distributors (call
1-800-628-0414).

DIRECT DEPOSIT PROGRAM

Direct Investors receiving social security benefits are eligible for the
Direct Deposit Program. This Program enables a Direct Investor to purchase Fund
shares by having social security payments automatically deposited into his or
her Fund account. There is no minimum deposit requirement. For instructions on
how to enroll in the Direct Deposit Program, Direct Investors should call FD
Distributors at 1-800-628-0414. Death or legal incapacity will terminate a
Direct Investor's participation in the Program. A Direct Investor may elect at
any time to terminate his or her participation by notifying in writing the
Social Security Administration. Further, Galaxy II may terminate a Direct
Investor's participation upon 30 days' notice to the Direct Investor.

INFORMATION SERVICES

GALAXY II INFORMATION CENTER--24 HOUR INFORMATION SERVICE

The Galaxy II Information Center provides Fund performance and investment
information 24 hours a day, seven days a week. To access the Galaxy II
Information Center, just call 1-800-628-0414.

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<PAGE>
VOICE RESPONSE SYSTEM

The Voice Response System provides Direct Investors automated access to Fund
and account information as well as the ability to make telephone exchanges and
redemptions. These transactions are subject to the terms and conditions
described under Investor Programs. To access the Voice Response System, just
call 1-800-628-0414 from any touch-tone telephone and follow the recorded
instructions.

GALAXY II SHAREHOLDER SERVICES

For account information and recent exchange transactions, Direct Investors
can call Galaxy II Shareholder Services Monday through Friday, between the hours
of 9:00 a.m. to 5:00 p.m. (Eastern Time) at 1-800-628-0414.

Galaxy II also offers a TDD service for the hearing impaired. Just call
1-800-696-6515, 24 hours a day, seven days a week.

Direct Investors residing outside the United States can contact Galaxy II by
calling 1-508-855-5237.

Investment returns and principal values will vary with market conditions so
that an investor's shares, when redeemed, may be worth more or less than their
original cost. Past performance is no guarantee of future results. Unless
otherwise indicated, total return figures include changes in share price and
reinvestment of dividends and capital gains distributions, if any.

MISCELLANEOUS

"Standard & Poor's," "S&P," "Standard & Poor's 500," "S&P 500," "500,"
"Standard & Poor's SmallCap 600 Index" and "S&P SmallCap 600 Index" are service
marks of The McGraw Hill Companies, Inc. and have been licensed to Fleet for use
by Galaxy II.

The Large Company Index Fund, the Small Company Index Fund and the Utility
Index Fund are not sponsored, endorsed, sold or promoted by Standard & Poor's
("S&P"), a division of The McGraw Hill Companies, Inc. S&P makes no
representation or warranty, express or implied, to the shareholders of the Large
Company Index Fund, the Small Company Index Fund or the Utility Index Fund or
any member of the public regarding the advisability of investing in securities
generally or in the Large Company Index Fund, the Small Company Index Fund or
the Utility Index Fund particularly or the ability of the S&P 500, the S&P
SmallCap 600 Index or the S&P Utilities Index to track general stock market
performance. S&P has no obligation to take the needs of Galaxy II or the
shareholders of the Large Company Index Fund, the Small Company Index Fund or
the Utility Index Fund into consideration in determining, composing or
calculating the S&P 500, the S&P SmallCap 600 Index and the S&P Utilities Index.
S&P is not responsible for and has not participated in the determination of the
prices and amount of the shares of the Large Company Index Fund, the Small
Company Index Fund or the Utility Index Fund or the timing of the issuance or
sale of the shares of the Large Company Index Fund, the Small Company Index Fund
or the Utility Index Fund or in the determination or calculation of the equation
by which the shares of the Large Company Index Fund, the Small Company Index
Fund or the Utility Index Fund are to be converted into cash. S&P has no
obligation or liability in connection with the administration, marketing or
trading of the Large Company Index Fund, the Small Company Index Fund or the
Utility Index Fund.

28
<PAGE>
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500,
THE S&P SMALLCAP 600 INDEX OR THE S&P UTILITIES INDEX OR ANY DATA INCLUDED
THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR
INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS
TO BE OBTAINED BY GALAXY II, SHAREHOLDERS OF THE LARGE COMPANY INDEX FUND, THE
SMALL COMPANY INDEX FUND OR THE UTILITY INDEX FUND OR ANY OTHER PERSON OR ENTITY
FROM THE USE OF THE S&P 500, THE S&P SMALLCAP 600 INDEX OR THE S&P UTILITIES
INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO
EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR
CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE
POSSIBILITY OF SUCH DAMAGES.

The Salomon Brothers Broad Investment-Grade Bond Index is a registered
trademark of Salomon Brothers Inc.

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

Inquiries regarding the Funds may be directed to Galaxy II at
1-800-628-0414.

YEAR 2000 RISKS. Like other investment companies, financial and business
organizations and individuals around the world, Galaxy II could be adversely
affected if the computer systems used by Fleet and Galaxy II's other service
providers do not properly process and calculate date-related information and
data from and after January 1, 2000. This is commonly known as the "Year 2000
Problem." Fleet is taking steps to address the Year 2000 Problem with respect to
the computer systems that it uses and to obtain assurance that comparable steps
are being taken by Galaxy II's other major service providers. At this time,
however, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on Galaxy II as a result of the Year 2000 Problem.

29
<PAGE>
GALAXY

FUNDS

Logo

Large Company Index Fund

Small Company Index Fund

Utility Index Fund

U.S. Treasury Index Fund

FN-312 18008 (7/98) pkg 50 July 29, 1998
<PAGE>
GALAXY FUND II

MUNICIPAL BOND FUND

PROSPECTUS

JULY 29, 1998

<PAGE>
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR THE STATEMENT OF ADDITIONAL
INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE OFFERING
MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR
ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN
WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFER MAY NOT LAWFULLY BE MADE.

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

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HIGHLIGHTS............................................................ 2
EXPENSE SUMMARY....................................................... 4
FINANCIAL HIGHLIGHTS.................................................. 5
INVESTMENT OBJECTIVE AND POLICIES..................................... 6
Risk Considerations................................................. 6
Investment Policies................................................. 6
INVESTMENT LIMITATIONS................................................ 8
INVESTMENT RISKS...................................................... 8
WHO SHOULD INVEST..................................................... 9
COMPARING TAX-EXEMPT AND TAXABLE YIELDS............................... 9
PRICING OF SHARES..................................................... 10
HOW TO PURCHASE AND REDEEM SHARES..................................... 10
Purchase Procedures--Customers of Institutions...................... 11
Purchase Procedures--Direct Investors............................... 11
Other Purchase Information.......................................... 11
Redemption Procedures--Customers of Institutions.................... 12
Redemption Procedures--Direct Investors............................. 12
Other Redemption Information........................................ 14
DIVIDENDS, DISTRIBUTIONS AND TAXES.................................... 14
State and Local Taxes............................................... 15

<CAPTION>
PAGE
----
<S> <C>
MANAGEMENT OF THE FUND................................................ 15
Investment Adviser.................................................. 15
Administrator and Sub-Administrator................................. 16
Distributor......................................................... 16
Custodian and Transfer Agent........................................ 17
DESCRIPTION OF SHARES................................................. 17
INVESTOR PROGRAMS..................................................... 17
Exchange Privilege.................................................. 17
Automatic Investment Program........................................ 18
Systematic Withdrawal Plan.......................................... 18
Payroll Deduction Program........................................... 19
College Investment Program.......................................... 19
Direct Deposit Program.............................................. 19
INFORMATION SERVICES.................................................. 20
Galaxy II Information Center--24 Hour Information Service........... 20
Voice Response System............................................... 20
Galaxy II Shareholder Services...................................... 20
PERFORMANCE REPORTING................................................. 20
MISCELLANEOUS......................................................... 21
</TABLE>

The MUNICIPAL BOND FUND (the "Fund") seeks to provide investors with the
highest level of income exempt from regular federal income tax consistent with
prudent investment management and preservation of capital. In seeking its
objective, the Fund will normally invest substantially all of its assets in a
diversified portfolio of municipal securities. Under normal market conditions,
at least 65% of the Fund's municipal securities will be rated A or higher by
major rating agencies. The Fund is a series of shares of Galaxy Fund II ("Galaxy
II"), a no-load, open-end investment company. Currently, there are four other
series of shares offered to the public by Galaxy II.

Shares of the Fund are offered without any sales charge or redemption fee,
although the Fund will incur management fees.

SHARES OF THE FUND ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, FLEET FINANCIAL GROUP, INC. OR ANY OF ITS AFFILIATES, FLEET
INVESTMENT ADVISORS INC., OR ANY FLEET BANK. SHARES OF THE FUND ARE NOT
FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL VARY AS A RESULT OF MARKET CONDITIONS OR OTHER FACTORS SO THAT SHARES
OF THE FUND, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
AN INVESTMENT IN THE FUND INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS
OF PRINCIPAL AMOUNT INVESTED.

This Prospectus sets forth concisely certain information about the Fund that
you should know before making an investment decision. You are encouraged to read
this Prospectus carefully and retain it for future reference. Additional
information about the Fund is contained in a Statement of Additional Information
bearing the same date and is available free of charge by calling Galaxy II at
1-800-628-0414 or by writing to Galaxy II c/o First Data Investor Services
Group, Inc., 4400 Computer Drive, P.O. Box 5108, Westboro, Massachusetts 01581.
The Statement of Additional Information has been filed with the Securities and
Exchange Commission and, as amended from time to time, is incorporated by
reference into this Prospectus.

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

JULY 29, 1998
<PAGE>
HIGHLIGHTS

<TABLE>
<S> <C>
Q: What is Galaxy Fund II?

A: Galaxy Fund II ("Galaxy II") is an open-end investment company (commonly known as a
mutual fund) that offers investors the opportunity to invest in different investment
portfolios, each having separate investment objectives and policies. This Prospectus
describes Galaxy II's Municipal Bond Fund (the "Fund"). A Prospectus for the Large
Company Index, Small Company Index, Utility Index and U.S. Treasury Index Funds may be
obtained by calling 1-800-628-0414.

Q: Who advises the Fund?

A: The Fund is managed by Fleet Investment Advisors Inc. ("Fleet"), an indirect,
wholly-owned subsidiary of Fleet Financial Group, Inc. Fleet is a financial services
company with total assets as of June 30, 1998 of approximately $100.7 billion. See
"Management of the Fund--Investment Adviser."

Q: What advantages does the Fund offer?

A: The Fund offers investors the opportunity to invest in an investment portfolio without
having to become involved with the detailed accounting and safekeeping procedures
normally associated with direct investments in securities.

Q: How does one buy and redeem shares?

A: The Fund is distributed by First Data Distributors, Inc. ("FD Distributors"). Shares of
the Fund are sold to individuals or corporations who submit a purchase application to
Galaxy II, purchasing either for their own accounts or for the accounts of others
("Direct Investors"). Shares may also be purchased by FIS Securities, Inc., Fleet
Securities, Inc., Fleet Enterprises, Inc., Fleet Financial Group, Inc., its affiliates,
their correspondent banks and other qualified banks, savings and loan associations and
broker/dealers ("Institutions") on behalf of their customers ("Customers"). Share
purchase and redemption information for both Direct Investors and Customers is provided
in this Prospectus under "How to Purchase and Redeem Shares." Except as provided below
in "Investor Programs," the minimum initial investment for Direct Investors and the
minimum initial aggregate investment for Institutions purchasing on behalf of their
Customers is $2,500. The minimum investment for subsequent purchases is $100. There are
no minimum investment requirements for investors participating in the Automatic
Investment Program described below. Institutions may require Customers to maintain
certain minimum investments in Fund shares. See "How to Purchase and Redeem
Shares--Purchase of Shares" below.

Q: When are dividends paid?

A: The net investment income of the Municipal Bond Fund is declared daily and paid
monthly. Net realized capital gains of the Fund are distributed at least annually. See
"Dividends and Distributions."
</TABLE>

2
<PAGE>
<TABLE>
<S> <C>
Q: What potential risks are presented by the Fund's investment practices?

A: The Fund may use municipal bond index futures contracts, interest rate futures
contracts and options thereon to a limited extent. Futures contracts and options pose
some risks, primarily: (i) there may be imperfect correlation between the change in
market value of the securities held by the Fund and the prices of the futures contracts
and options; and (ii) the possible lack of a liquid secondary market for a futures
contract and the resulting inability to close a futures contract prior to its maturity
date. The risk of imperfect correlation is minimized by investing only in those
contracts whose price fluctuations are expected to resemble those of the Fund's
underlying securities. The illiquidity risk will be minimized by entering into such
transactions on a national exchange with an active and liquid secondary market.

Interest rate risk is the potential for fluctuations in bond prices due to changing
interest rates. In general, bond prices rise when interest rates fall, and bond prices
fall when interest rates rise. Longer-term bonds are affected more dramatically than
shorter-term bonds. As the Fund expects to maintain an average dollar-weighted maturity
of 7 to 12 years, it is subject to a moderate amount of interest rate risk.

Market risk is the possibility that market prices of bonds will decline without regard
to fluctuations in prevailing interest rates.

Credit risk is the possibility that a bond issuer will fail to make timely payments of
interest or principal to the Fund. The credit risk of the Fund depends on the credit
quality of its underlying securities. As the Fund expects to maintain high credit
quality (at least 65% of the Fund's municipal securities must be rated A or higher by
Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's Ratings Group ("S&P") or
another nationally recognized statistical rating organization), the Fund's credit risk
is expected to be low.

Call risk is the possibility that, during periods of falling interest rates, a
municipal security with a high stated interest rate will be prepaid, or "called," prior
to its expected maturity date. As a result, the Fund will be required to invest the
unanticipated proceeds at lower interest rates, and the Fund's income may decline. As
the Fund may invest in some callable securities, it may be exposed to call risk.

Manager risk is the possibility that Fleet will fail to execute the Fund's investment
strategy effectively. If this happens, the Fund may fail to meet its stated objective.

Q: What shareholder privileges are offered by the Fund?

A: Direct Investors and Customers of Institutions may, after appropriate prior
authorization, exchange shares of the Fund having a value of at least $100 for shares
of any of the other funds or portfolios offered by Galaxy II or otherwise advised by
Fleet or its affiliates in which the Direct Investor or Customer maintains an existing
account, provided that such other shares may legally be sold in the state of the
investor's residence. Galaxy II also offers an Automatic Investment Program, which
allows a Direct Investor to purchase Fund shares each month, as well as other
shareholder privileges. See "Investor Programs."
</TABLE>

3
<PAGE>
EXPENSE SUMMARY

The following table illustrates expenses and fees that you would incur,
either directly or indirectly, as a shareholder of the Fund. The expenses and
fees for the Fund are for the fiscal year ended March 31, 1998. "Other Expenses"
are based on estimated amounts for the Fund's current fiscal year.

<TABLE>
<CAPTION>
MUNICIPAL
SHAREHOLDER TRANSACTION EXPENSES BOND FUND
- ---------------------------------------- ------------

<S> <C>
Sales Load Imposed on Purchases......... None
Sales Load Imposed on Reinvested
Dividends............................... None
Redemption Fee.......................... None
Exchange Fee............................ None

ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET
ASSETS)
- ----------------------------------------

Advisory and Administration Fees........ 0.60%
12b-1 Fee............................... None
Other Expenses.......................... 0.00%
------
Total Fund Operating Expenses........... 0.60%
------
------
</TABLE>

Fleet National Bank ("FNB"), the Fund's administrator, is responsible for
the payment of all of the expenses of the Fund, other than certain limited
expenses (such as brokerage fees and commissions, interest on borrowings, taxes
and such extraordinary, non-recurring expenses as may arise). For a further
description of the various costs and expenses shown above, see "Management of
the Fund."

THE FOLLOWING EXAMPLE SHOWS WHAT YOU WOULD PAY ON A $1,000 INVESTMENT IN THE
FUND OVER VARIOUS TIME PERIODS. IT ASSUMES THAT YOUR INVESTMENT GROWS 5% PER
YEAR AND THAT YOU REDEEM YOUR INVESTMENT AT THE END OF EACH TIME PERIOD.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Municipal Bond Fund..................... $6 $19 $33 $73
</TABLE>

THIS EXAMPLE IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES OR
PERFORMANCE. ACTUAL EXPENSES MAY BE MORE OR LESS THAN SHOWN IN THE EXAMPLE. For
example, certain shareholders who redeem by wire will incur a charge, currently
$5.00 per wire redemption. Also, the Fund's actual performance may be better or
worse than the 5% growth per year assumed in the example.

4
<PAGE>
FINANCIAL HIGHLIGHTS

The following Financial Highlights have been audited by
PricewaterhouseCoopers LLP, independent accountants, whose report is contained
in Galaxy II's Annual Report to Shareholders and is incorporated by reference
into the Statement of Additional Information. Further information about the
performance of the Fund is also contained in Galaxy II's Annual Report to
Shareholders which may be obtained without charge by calling Galaxy II at
1-800-628-0414.

FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MARCH MARCH MARCH MARCH PERIOD ENDED
31, 31, 31, 31, MARCH 31,
1998 1997 1996 1995 1994(1)
-------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of period.... $ 10.15 $ 10.20 $ 9.94 $ 9.89 $ 10.00
-------- -------- -------- -------- ------------
Income from Investment Operations:
Net investment income(2).............. 0.47 0.47 0.46 0.46 0.43
Net realized and unrealized gain
(loss) on investments................ 0.36 (0.05) 0.26 0.05 (0.11)
-------- -------- -------- -------- ------------
Total from Investment Operations:... 0.83 0.42 0.72 0.51 0.32
-------- -------- -------- -------- ------------
Less Dividends:
Dividends from net investment
income............................... (0.47) (0.47) (0.46) (0.46) (0.43)
Dividends from net realized capital
gains................................
-------- -------- -------- -------- ------------
Total Dividends:.................... (0.47) (0.47) (0.46) (0.46) (0.43)
-------- -------- -------- -------- ------------
Net Increase (decrease) in net asset
value.................................. 0.36 (0.05) 0.26 .05 (0.11)
-------- -------- -------- -------- ------------
Net Asset Value, End of period.......... $ 10.51 $ 10.15 $ 10.20 $ 9.94 $ 9.89
-------- -------- -------- -------- ------------
-------- -------- -------- -------- ------------
Total Return............................ 8.29% 4.15% 7.36% 5.34% 3.10%(4)
Ratios/Supplemental Data:
Net assets, End of period (in
000's)............................... $18,147 $19,921 $22,478 $24,560 $33,352
Ratios to average net assets:
Net investment income including
reimbursement........................ 4.49% 4.57% 4.54% 4.72% 4.35%(3)
Operating expenses including
reimbursement........................ 0.60% 0.60% 0.60% 0.60% 0.60%(3)
Operating expenses excluding
reimbursement........................ 0.60% 0.60% 0.61% 0.63% 0.60%(3)
Portfolio turnover rate................. 28% 7% 2% 47% 56%(4)
</TABLE>

- ---------

(1) The Fund commenced operations on April 15, 1993.
(2) Net investment income per share before reimbursement by the
sub-administrator for the fiscal years ended March 31, 1998, 1997, 1996 and
1995 was $0.47, $0.47, $0.46 and $0.46, respectively.
(3) Annualized.
(4) Not Annualized.

5
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES

The Municipal Bond Fund seeks to provide investors with the highest level of
income exempt from regular federal income tax consistent with prudent investment
management and preservation of capital.

The investment objective of the Fund may not be changed without the approval
of the holders of a "majority" of the outstanding voting shares of the Fund. The
term "majority" is defined in the Investment Company Act of 1940, as amended
(the "1940 Act"). There can be no assurance that the investment objective of the
Fund will be achieved.

RISK CONSIDERATIONS

Risk considerations related to the Fund's investments are described under
"Investment Policies" and "Investment Risks."

INVESTMENT POLICIES

The Fund will normally invest substantially all, but not less than 80%, of
its net assets in municipal securities. Municipal securities are debt
obligations issued by state and local governments and regional governmental
authorities, which provide interest income that is exempt from regular federal
income taxes. These may include municipal leases which may take the form of a
lease or an installment purchase issued by state and local governments to
acquire equipment and facilities. Normally, the Fund will invest at least 65% of
its total assets in municipal securities that are issued as municipal bonds.

Municipal securities purchased by the Fund will consist primarily of issues
which are rated investment grade, i.e. within the four highest rating categories
assigned by S&P ("AAA", "AA", "A", and "BBB") or Moody's ("Aaa", "Aa", "A", and
"Baa") or another nationally recognized statistical rating organization
("NRSRO"). Under normal market conditions, at least 65% of the municipal
securities held by the Fund will be rated at least A or its equivalent by S&P or
Moody's or another NRSRO. In no case will the Fund purchase municipal securities
rated below BBB by S&P or Baa by Moody's or the equivalent by another NRSRO.

Pending investment of proceeds or for other temporary purposes, the Fund may
invest up to 20% of its net assets in the following short-term municipal
securities:

- Short-term municipal notes rated MIG-1 or MIG-2 by Moody's or SP-1+ or
SP-1 by S&P;

- Tax-exempt commercial paper rated P-1 by Moody's or A-1+ by S&P;

- Municipal bonds with an effective maturity of one year or less which are
rated A or higher by Moody's or S&P;

- Unrated short-term obligations from an issuer whose outstanding long-term
obligations are rated A or higher by Moody's or S&P; and

- Tax-exempt funds, including tax-exempt money market funds, subject to the
requirements of applicable law. In no case will the Fund invest more than
10% of its net assets in such investments. These investments will result
in shareholders paying duplicate or multiple fees, as such funds incur
expenses similar to those of the Fund. The Fund will only invest in other
funds when it believes the yields on such funds are beneficial even
including multiple fees.

6
<PAGE>
Under normal market conditions, the Fund expects to maintain a
dollar-weighted average maturity of between 7 and 12 years. There is no limit on
the maturity of any individual security in the Fund.

The Fund may purchase municipal securities on a "when-issued" basis. In
buying such securities, the Fund commits to buy securities at a certain price
even though the securities may not be delivered for up to 45 days. The Fund pays
for the securities and begins earning interest when the securities are actually
delivered. Consequently, it is possible that the market price of the securities
at the time of delivery may be higher or lower than the purchase price.

The Fund is authorized to invest up to 20% of its net assets in "AMT" bonds.
AMT bonds are tax-exempt "private activity" bonds issued after August 7, 1986
whose proceeds are directed at least in part to a private, for-profit
organization. While the income from AMT bonds is exempt from regular federal
income tax, it is a tax preference item for purposes of the "alternative minimum
tax." The alternative minimum tax is a special tax that applies to a limited
number of taxpayers who have certain adjustments or tax preference items.

Although the Fund does not expect to do so, except in unusual circumstances,
it may invest up to 20% of its net assets in the following taxable money market
securities: obligations of the U.S. Government and its agencies or
instrumentalities; bank certificates of deposit and bankers' acceptances; and
repurchase agreements collateralized by these securities.

The Fund may use municipal bond index futures contracts, interest rate
futures contracts and options thereon to a limited extent. Specifically, the
Fund may enter into futures contracts and options thereon provided that initial
margin and premiums required to establish such positions that are not bona fide
hedging positions (as defined by the Commodity Futures Trading Commission) will
not exceed 5% of its net asset value, after taking into account unrealized
profits and losses on any such contracts it has entered into. In addition, the
Fund may enter into futures contracts and options transactions only to the
extent that obligations under such contracts or transactions represent not more
than 20% of the Fund's total assets.

The Fund may use these instruments for several reasons: to maintain cash
reserves while remaining effectively fully invested, to facilitate trading, to
reduce transaction costs, to seek higher investment returns when a futures
contract is priced more attractively than the underlying municipal securities,
or to hedge against changes in the value of the portfolio securities due to
anticipated changes in interest rates and market conditions and where the
transactions are economically appropriate to the reduction of risks inherent in
the management of the Fund. The Fund will not use futures contracts or options
transactions to leverage its assets.

Futures contracts and options pose some risks, primarily: (i) there may be
imperfect correlation between the change in market value of the securities held
by the Fund and the prices of the futures contracts and options; and (ii) the
possible lack of a liquid secondary market for a futures contract and the
resulting inability to close a futures contract prior to its maturity date. The
risk of imperfect correlation is minimized by investing only in those contracts
whose price fluctuations are expected to resemble those of the Fund's underlying
securities. The illiquidity risk will be minimized by entering into such
transactions on a national exchange with an active and liquid secondary market.

7
<PAGE>
INVESTMENT LIMITATIONS

The Fund has adopted certain limitations on its investment practices,
including the following:

(1) The Fund will normally not invest less than 80% of its net assets in
securities other than municipal securities; however, the Fund may invest up
to 20% of its net assets in certain short-term taxable securities and in
municipal bond index futures contracts, interest rate futures contracts and
options thereon;

(2) The Fund will not borrow money except for temporary or emergency purposes
and then not in excess of 33 1/3% of its total assets; the Fund will repay
all borrowings before making additional investments;

(3) With respect to 75% of its total assets, the Fund will not invest more than
5% of its assets in securities of one issuer (except the U.S. Government,
its agencies and instrumentalities); for purposes of this limitation, the
issuer will be identified based on a determination of the source of assets
and revenues committed to meeting interest and principal payments of each
security;

(4) The Fund will not purchase any securities which would cause more than 25% of
the value of the Fund's net assets at the time of such purchase to be
invested in the securities of one or more issuers conducting their principal
activities in the same state; and

(5) The Fund will not pledge, mortgage or hypothecate more than 33 1/3% of its
total assets.

These investment restrictions, and certain of those contained in the Fund's
Statement of Additional Information, can be changed only with the approval of
the holders of a majority of the outstanding shares of the Fund.

INVESTMENT RISKS

Interest rate risk is the potential for fluctuations in bond prices due to
changing interest rates. In general, bond prices rise when interest rates fall,
and bond prices fall when interest rates rise. Longer-term bonds are affected
more dramatically than shorter-term bonds. The following table illustrates the
changes caused by a 2% change in interest rates on the market prices of
non-callable bonds with various maturities:

<TABLE>
<CAPTION>
2% INCREASE IN 2% DECREASE IN
MATURITY INTEREST RATES INTEREST RATES
- ---------------------------------------------------------------------------------- ---------------- -----------------
<S> <C> <C>
1 year............................................................................ -2% +2%
5 years........................................................................... -8% +9%
10 years.......................................................................... -14% +17%
30 years.......................................................................... -25% +39%
</TABLE>

As the Fund expects to maintain an average dollar-weighted maturity of 7 to
12 years, it is subject to a moderate amount of interest rate risk.

Market risk is the possibility that market prices of bonds will decline
without regard to fluctuations in prevailing interest rates.

Credit risk is the possibility that a bond issuer will fail to make timely
payments of interest or principal to the Fund. The credit risk of the Fund
depends on the credit quality of its underlying securities. As the Fund expects
to maintain high credit quality (at least 65% of the Fund's municipal securities
will be rated A or higher by Moody's, S&P or another NRSRO), the Fund's credit
risk is expected to be low.

8
<PAGE>
Call risk is the possibility that, during periods of falling interest rates,
a municipal security with a high stated interest rate will be prepaid, or
"called," prior to its expected maturity date. As a result, the Fund will be
required to invest the unanticipated proceeds at lower interest rates, and the
Fund's income may decline. As the Fund may invest in some callable securities,
it may be exposed to call risk.

Manager risk is the possibility that Fleet will fail to execute the Fund's
investment strategy effectively. If this happens, the Fund may fail to meet its
stated objective.

WHO SHOULD INVEST

The Fund is intended for investors seeking income that is exempt from
regular federal income taxes. As a rule, tax-free income is attractive to
investors in high federal income tax brackets. Investors in lower federal income
tax brackets may find a taxable income investment more suitable to their needs
since the after-tax yield of the taxable investment may be greater than the
tax-exempt yield offered by an investment such as the Fund.

You can determine whether tax-exempt or taxable income is more attractive in
your particular case by calculating the "tax equivalent yield" of the Fund and
comparing it with the yield from a comparable taxable mutual fund investment.
See "Comparing Tax-Exempt and Taxable Yields" below.

Because the Fund invests in municipal bonds of all durations, the price per
share of the Fund will fluctuate, particularly due to interest rate risk. The
Fund is intended for investors willing to accept share price fluctuations in
return for potentially higher and more constant yields. These share price
fluctuations may cause the share price at the time of an investor's redemption
to be more or less than the purchase price, thus affecting the investor's total
return from an investment in the Fund.

The Fund intends to invest virtually all of its assets in debt obligations.
As such, capital growth is not an objective of the Fund, though some incidental
capital gains or losses may be realized in the course of the Fund's operations.
The Fund is intended for investors willing to forego capital growth in return
for potentially more constant yields. Of course, there may be other fixed income
investments, particularly longer-term investments, which offer a higher yield
than the Fund.

COMPARING TAX-EXEMPT AND TAXABLE YIELDS

Before choosing a tax-exempt investment such as the Fund, you should
determine if you would be better off with taxable or tax-exempt income in your
particular marginal tax bracket. To compare taxable and tax-exempt income, you
should calculate the "tax-equivalent yield" for the Fund and compare it with the
yield of a taxable investment with similar credit and maturity standards.

The tax-equivalent yield for the Fund is based upon the Fund's tax-exempt
yield and your marginal tax bracket. The formula is:

Fund's Tax-Exempt Yield
--------------------------------------- = Your Tax-Equivalent Yield

100% - Your Marginal Tax Bracket

9
<PAGE>
For example, if you are in the 28% tax bracket and can earn a tax-exempt
yield of 4.0%, the tax-equivalent yield would be 5.56%, as shown here:

In this example you would invest in the 4.0% tax-exempt investment if your
taxable alternative yielded less than 5.56%. You would invest in the taxable
investment if you expected its yield to be greater than 5.56% (assuming, of
course, similar credit and maturity standards).

The following table shows tax-equivalent yields for various tax brackets and
tax-exempt yields. There can be no guarantee that the Fund will achieve any
specific yield. Also, although the Fund's objective is to seek tax-exempt
income, it is possible from time to time for some small portion of the Fund's
income to be taxable. Also, a portion of the Fund's income may be subject to the
alternative minimum tax.

<TABLE>
<CAPTION>
TAX-EQUIVALENT RATES BASED ON TAX-EXEMPT YIELD OF:
FEDERAL MARGINAL ---------------------------------------------------------------------------
INCOME TAX BRACKET 2% 3% 4% 5% 6% 7% 8%
- ------------------ --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
15% 2.4% 3.5% 4.7% 5.9% 7.1% 8.2% 9.4%
28% 2.8% 4.2% 5.6% 6.9% 8.3% 9.7% 11.1%
31% 2.9% 4.3% 5.8% 7.2% 8.7% 10.1% 11.6%
36% 3.1% 4.7% 6.2% 7.8% 9.4% 10.9% 12.5%
39.6% 3.3% 5.0% 6.6% 8.3% 9.9% 11.6% 13.2%
</TABLE>

PRICING OF SHARES

On every day the New York Stock Exchange (the "NYSE") is open, First Data
Investor Services Group, Inc. ("Investor Services Group"), Galaxy II's
sub-administrator, calculates the net asset value per share of the Fund as of
the close of regular trading on the NYSE (currently, 4:00 p.m. Eastern Time). In
calculating net asset value, investments are valued based on their market
values, but when market quotations are not readily available, investments are
valued based on fair value as determined in good faith in accordance with
procedures established by Galaxy II's Board of Trustees. Bonds and other fixed
income securities may be valued on the basis of prices provided by a pricing
service when such prices are believed to reflect the market value of such
securities. The prices provided by a pricing service may be determined without
regard to bid or last sale prices of each security but take into account
institutional size transactions in similar groups of securities as well as any
developments relating to specific securities.

HOW TO PURCHASE AND REDEEM SHARES

First Data Distributors, Inc. ("FD Distributors"), Galaxy II's distributor,
has established several procedures to enable different types of investors to
purchase shares of the Fund. Shares may be purchased by individuals or
corporations who submit a purchase application to Galaxy II, purchasing directly
either for their own accounts or for the accounts of others ("Direct
Investors"). Shares may also be purchased by FIS Securities, Inc., Fleet
Brokerage Securities, Inc., Fleet Securities, Inc., Fleet Enterprises, Inc.,
Fleet Financial Group, Inc., its affiliates, their correspondent banks and other
qualified banks, savings and loan associations and broker/dealers
("Institutions") on behalf of their customers ("Customers"). Purchases by

10
<PAGE>
Direct Investors may take place only on days on which FD Distributors, Galaxy
II's custodian and Investor Services Group, Galaxy II's transfer agent, are open
for business ("Business Days"). If an Institution accepts a purchase order from
a Customer on a non-Business Day, the order will not be executed until it is
received and accepted by FD Distributors on a Business Day in accordance with FD
Distributors' procedures.

PURCHASE PROCEDURES--CUSTOMERS OF INSTITUTIONS

Purchase orders are placed by Customers of Institutions through their
Institution. The Institution is responsible for transmitting Customer purchase
orders to FD Distributors and for wiring required funds in payment to the Galaxy
II's custodian on a timely basis. FD Distributors is responsible for
transmitting such orders to Investor Services Group for execution. Shares
purchased by Institutions on behalf of their Customers will normally be held of
record by the Institution and beneficial ownership of the shares will be
recorded by the Institution and reflected in the account statements provided to
their Customers. Investor Services Group may establish an account of record for
each Customer of an Institution reflecting beneficial ownership of shares.
Depending on the terms of the arrangement between a particular Institution and
Investor Services Group, confirmations of share purchases and redemptions and
pertinent account statements will either be sent by Investor Services Group
directly to a Customer with a copy to the Institution, or will be furnished
directly to the Customer by the Institution. Other procedures for the purchase
of shares established by Institutions in connection with the requirements of
their Customer accounts may apply. Customers wishing to purchase shares through
their Institution should contact such entity directly for appropriate purchase
instructions.

PURCHASE PROCEDURES--DIRECT INVESTORS

PURCHASES BY MAIL. Shares may be purchased by completing a purchase
application and mailing it, together with a check payable to the Fund to:

Galaxy Fund II
4400 Computer Drive
P.O. Box 5108
Westboro, MA 01581

ALL PURCHASE ORDERS PLACED BY MAIL MUST BE ACCOMPANIED BY A PURCHASE
APPLICATION. APPLICATIONS MAY BE OBTAINED BY CALLING FD DISTRIBUTORS AT
1-800-628-0414.

Subsequent investments in an existing account in the Fund may be made at any
time by sending a check for a minimum of $100 payable to the Fund to Galaxy II
at the above address along with either (a) the detachable form that regularly
accompanies confirmation of a prior transaction, (b) a subsequent order form
that may be obtained from FD Distributors, or (c) a letter stating the amount of
the investment, the name of the Fund and the account number in which the
investment is to be made. If a Direct Investor's check does not clear, the
purchase will be cancelled.

OTHER PURCHASE INFORMATION

PURCHASES BY WIRE. Investors may also purchase shares by arranging to
transmit federal funds by wire to Fleet National Bank as agent for Investor
Services Group, Galaxy II's transfer agent. Prior to making any purchase by
wire, an investor must telephone FD Distributors at 1-800-628-0414 to place an
order and for instructions.

11
<PAGE>
Direct Investors making initial investments by wire must promptly complete a
purchase application and forward it to Galaxy Fund II, 4400 Computer Drive, P.O.
Box 5108, Westboro, Massachusetts 01581. Applications may be obtained by calling
FD Distributors at 1-800-628-0414.

Except as provided in "Investor Programs" below, the minimum initial
investment by a Direct Investor, or initial aggregate investment by an
Institution investing on behalf of its Customers, is $2,500. The minimum
investment for subsequent purchases is $100. There are no minimum investment
requirements for investors participating in the Automatic Investment Program
described below. Customers may agree with a particular Institution to change the
minimum initial and minimum subsequent purchase requirements with respect to
their accounts.

EFFECTIVE TIME OF PURCHASES. A purchase order for shares received and
accepted by FD Distributors from an Institution or a Direct Investor on a
Business Day prior to the close of regular trading hours on the NYSE (currently
4:00 p.m. Eastern Time) will be executed at the net asset value per share
determined on that date, provided that the Fund's custodian receives the
purchase price in federal funds or other immediately available funds prior to
4:00 p.m. on the fifth Business Day following the receipt of such order. Such
order will be executed on the day on which the purchase price is received in
proper form. If funds are not received by such date and time, the order will not
be accepted and notice thereof will be given promptly to the Institution or
Direct Investor submitting the order. Payment for orders which are not received
or accepted will be returned. If an Institution accepts a purchase order from a
Customer on a non-Business Day, the order will not be executed until it is
received and accepted by FD Distributors on a Business Day in accordance with
the above procedures. On a Business Day when the NYSE closes early due to a
partial holiday or otherwise, Galaxy II will advance the time at which purchase
orders must be received in order to be processed on that Business Day.

REDEMPTION PROCEDURES--CUSTOMERS OF INSTITUTIONS

Payments for redemption orders received by FD Distributors on a Business Day
will normally be wired on the third Business Day to the Institutions.

DIRECT INVESTORS MAY REDEEM ALL OR A PORTION OF THEIR SHARES IN ACCORDANCE
WITH ANY OF THE PROCEDURES DESCRIBED BELOW.

REDEMPTION PROCEDURES--DIRECT INVESTORS

REDEMPTION BY MAIL. Shares may be redeemed by a Direct Investor by
submitting a written request for redemption to:

Galaxy Fund II
4400 Computer Drive
P.O. Box 5108
Westboro, MA 01581

12
<PAGE>
A written redemption request must (i) state the name of the Fund and the
number of shares to be redeemed, (ii) identify the shareholder account number
and social security number or tax identification number, and (iii) be signed by
each registered owner exactly as the shares are registered. A redemption request
for an amount in excess of $50,000, or for any amount where (i) the proceeds are
to be sent elsewhere than the address of record, (ii) the proceeds are to be
sent to an address of record which has changed in the preceding 30 days, or
(iii) the check is to be made payable to someone other than the registered
owner(s), must be accompanied by signature guarantees. The guarantor of a
signature must be a bank that is a member of the Federal Deposit Insurance
Corporation, a trust company, a member firm of a national securities exchange or
any other eligible guarantor institution. FD Distributors will not accept
guarantees from notaries public. FD Distributors may require additional
supporting documents for redemptions made by corporations, executors,
administrators, trustees and guardians. A redemption request will not be deemed
to be properly received until FD Distributors receives all required documents in
proper form. The Fund ordinarily will make payment for shares redeemed by mail
within five Business Days after proper receipt by FD Distributors of the
redemption request. Questions with respect to the proper form for redemption
requests should be directed to FD Distributors at 1-800-628-0414.

13
<PAGE>
follow established procedures for the authentication of telephone instructions,
it may be liable for losses due to unauthorized or fraudulent telephone
transactions.

NO REDEMPTION BY A DIRECT INVESTOR IN THE FUND WILL BE PROCESSED UNTIL
GALAXY II HAS RECEIVED A COMPLETED APPLICATION WITH RESPECT TO THE DIRECT
INVESTOR'S ACCOUNT. IF ANY PORTION OF THE SHARES TO BE REDEEMED REPRESENTS AN
INVESTMENT MADE BY PERSONAL CHECK, GALAXY II RESERVES THE RIGHT TO DELAY PAYMENT
OF PROCEEDS UNTIL FD DISTRIBUTORS IS REASONABLY SATISFIED THAT THE CHECK HAS
BEEN COLLECTED, WHICH COULD TAKE UP TO 15 DAYS FROM THE PURCHASE DATE. A DIRECT
INVESTOR WHO ANTICIPATES THE NEED FOR MORE IMMEDIATE ACCESS TO HIS OR HER
INVESTMENT SHOULD PURCHASE SHARES BY FEDERAL FUNDS OR BANK WIRE OR BY CERTIFIED
OR CASHIER'S CHECK. BANKS NORMALLY IMPOSE A CHARGE IN CONNECTION WITH THE USE OF
BANK WIRES, AS WELL AS CERTIFIED CHECKS, CASHIER'S CHECKS AND FEDERAL FUNDS.

OTHER REDEMPTION INFORMATION

Galaxy II reserves the right to redeem accounts involuntarily, upon 60 days'
written notice, if the account's net asset value falls below $250 as a result of
redemptions. In addition, if an investor has agreed with a particular
Institution to maintain a minimum balance in his or her account at the
Institution with respect to Fund shares, and the balance in such account falls
below that minimum, the Customer may be obliged by the Institution to redeem all
of his or her shares.

Galaxy II may require any information reasonably necessary to ensure that a
redemption has been duly authorized.

Redemption orders are effected at the net asset value per share next
determined after receipt and acceptance of the order by FD Distributors. On a
Business Day when the NYSE closes early due to a partial holiday or otherwise,
Galaxy II will advance the time at which redemption orders must be received in
order to be processed on that Business Day. Galaxy II reserves the right to wire
redemption proceeds within seven days after receiving the redemption order if,
in its judgment, an earlier payment could adversely affect the Fund.

DIVIDENDS, DISTRIBUTIONS AND TAXES

Dividends consisting of virtually all ordinary income of the Fund will be
declared daily and will be payable to shareholders of record at the close of the
previous Business Day. Such dividends will be paid monthly. Capital gains
distributions, if any, will be made annually. Dividends and distributions may be
made on a more frequent basis to comply with the distribution requirements of
the Internal Revenue Code of 1986, as amended (the "Code").

You will receive all dividends and capital gains distributions as additional
shares of the Fund at their then current net asset value, unless you elect to
receive cash. You may elect to receive cash by so specifying on your account
application or by notifying Investor Services Group, Galaxy II's transfer agent,
in writing. Shareholders electing to reinvest dividends in the Fund will receive
confirmation of their dividends on regular, quarterly statements. As with all
purchases and redemptions, you pay no sales commissions or fees of any kind on
shares acquired through reinvestment of dividends and distributions.

The Fund intends to invest a sufficient portion of its assets in municipal
securities so that it will qualify to pay "exempt-interest dividends" to
shareholders. Such exempt-interest dividends distributed to shareholders
generally are excluded from a shareholder's gross income for federal income tax
purposes. A

14
<PAGE>
portion of the Fund's dividends, while exempt from regular federal income tax,
may be a tax preference item for purposes of the federal alternative minimum
tax.

Distributions paid by the Fund from long-term capital gains, whether
received in cash or reinvested in additional shares, are taxable, regardless of
the length of time you have owned shares in the Fund. Also, any short-term
capital gains or any taxable interest income will be distributed as a taxable
ordinary dividend distribution. The Fund expects distributions of capital gains,
whether long-term or short-term, and taxable interest income to be negligible in
comparison to exempt-interest dividends.

Although dividend income from the Fund is expected to be exempt from regular
federal income taxes, a sale or other disposition of the Fund's shares is a
taxable event, and may result in a capital gain or loss. This gain or loss may
be realized by any redemption of the Fund's shares, including an exchange of
shares between the Fund and another of the funds or portfolios offered by Galaxy
II or otherwise advised by Fleet or its affiliates. In addition, any capital
loss realized from municipal securities held for six months or less is
disallowed to the extent of tax-exempt income received. In other words, if you
held shares in the Fund for six months or less, and sold those shares (or a
portion of those shares) at a loss, the capital loss you report is reduced by
the tax-exempt dividends paid on those shares.

STATE AND LOCAL TAXES

Tax-exempt dividends and capital gains distributions from the Fund and any
capital gains or losses realized from the redemption of shares may be subject to
state and local taxes. However, some states allow shareholders to exclude from
state income tax that portion of the Fund's tax-exempt income that is
attributable to municipal securities issued within the shareholder's own state.
To assist shareholders of these states, the Fund will provide a breakdown of its
tax-exempt interest income on a state-by-state basis at year-end.

The tax discussion set forth above is included for general information
purposes only. Prospective investors should consult their own tax advisers
concerning the tax consequences of an investment in the Fund.

Statements as to the tax status of your dividends and distributions will be
mailed annually. Galaxy II will also send you, if applicable, various written
notices after the close of its tax year with respect to certain dividends and
distributions that were, or were deemed to be, received from the Fund during
that tax year.

MANAGEMENT OF THE FUND

The Board of Trustees sets strategic and policy directions for Galaxy II and
oversees management. The Board selects and supervises the Fund's investment
adviser and Galaxy II's officers who are responsible for the day-to-day
management of Galaxy II's affairs.

INVESTMENT ADVISER

Fleet Investment Advisors Inc. ("Fleet"), with principal offices at 75 State
Street, Boston, Massachusetts 02109, serves as investment adviser to the Fund.
Fleet also provides investment management and advisory services to individual
and institutional clients, and manages the other investment portfolios of Galaxy
II, the investment portfolios of The Galaxy Fund and certain of the investment
portfolios of The Galaxy VIP Fund. Fleet is an indirect, wholly-owned subsidiary
of Fleet Financial Group, Inc., a registered

15
<PAGE>
bank holding company with total assets as of June 30, 1998 of approximately
$100.7 billion. Fleet is also an indirect, wholly-owned subsidiary of Fleet
National Bank, the Fund's administrator. To fulfill its responsibilities, Fleet
employs the personnel, software and support systems needed to manage the Fund.

For its services as investment adviser, Fleet receives a fee from the Fund
at the annual rate of .25% of the average daily net assets of the Fund, which
was the rate of Fleet's compensation during the fiscal year ended March 31,
1998.

The organizational arrangements of Fleet require that all investment
decisions with respect to the Fund be made by Fleet's Tax-Exempt Investment
Policy Committee, and no one person is responsible for making recommendations to
that Committee.

Fleet is authorized to allocate purchase and sale orders for portfolio
securities to certain financial institutions, including, to the extent permitted
by law or order of the Securities and Exchange Commission ("SEC"), financial
institutions that are affiliated with Fleet or that have sold shares of the
Fund, if Fleet believes that the quality of the transaction and the commission
are comparable to what they would be with other qualified brokerage firms.

ADMINISTRATOR AND SUB-ADMINISTRATOR

Fleet National Bank ("FNB") provides Galaxy II with office facilities and
support personnel and generally assists in all aspects of administration and
operation of Galaxy II. FNB, with principal offices at 50 Kennedy Plaza,
Providence, Rhode Island 02903-2305, is a wholly-owned subsidiary of Fleet
Financial Group, Inc. FNB pays all of the expenses of the Fund, except the fees
and expenses of those Trustees who are not interested persons of Galaxy II,
brokerage fees and commissions, interest on borrowings, taxes and such
extraordinary, non-recurring expenses as may arise, including litigation to
which Galaxy II may be a party. For its services as administrator, FNB receives
a fee from the Fund at an annual rate of .35% of the average daily net assets of
the Fund, which was the rate of FNB's compensation during the fiscal year ended
March 31, 1998. From time to time, FNB may waive voluntarily all or a portion of
the administration fee payable to it by the Fund.

FNB has entered into a sub-administration agreement with First Data Investor
Services Group, Inc. ("Investor Services Group"), 4400 Computer Drive, P.O. Box
5108, Westboro, Massachusetts 01581, a wholly-owned subsidiary of First Data
Corporation, to provide administrative services to Galaxy II and to serve as
shareholder servicing agent. FNB bears the fees of Investor Services Group for
providing such services.

DISTRIBUTOR

First Data Distributors, Inc. ("FD Distributors"), a wholly-owned subsidiary
of Investor Services Group, is responsible for the marketing and distribution of
the shares of the Fund. FD Distributors is a registered broker-dealer with
principal offices located at 4400 Computer Drive, P.O. Box 5108, Westboro,
Massachusetts 01581. FD Distributors does not receive any compensation from
Galaxy II or the Fund for its services.

16
<PAGE>
CUSTODIAN AND TRANSFER AGENT

The Chase Manhattan Bank (the "Custodian"), located at 1 Chase Manhattan
Plaza, New York, New York 10081, a wholly-owned subsidiary of The Chase
Manhattan Corporation, serves as the custodian of the Fund's assets, and
Investor Services Group serves as the Fund's transfer and dividend disbursing
agent. Services performed by both entities for the Fund are described in the
Statement of Additional Information. Communications to Investor Services Group
should be directed to Investor Services Group at 4400 Computer Drive, P.O. Box
5108, Westboro, Massachusetts 01581.

DESCRIPTION OF SHARES

The Fund is a series of shares of Galaxy II. Galaxy II was organized on
February 22, 1990 under the laws of the Commonwealth of Massachusetts and is a
business entity commonly known as a "Massachusetts business trust." Galaxy II
offers shares of beneficial interest, par value $.001 per share. Currently, five
series of shares have been authorized for sale to the public, one of whose
shares constitute the interests of the Fund described in this Prospectus. When
matters are submitted for shareholder vote, shareholders of each Fund will have
one vote for each full share held and proportionate, fractional votes for
fractional shares held. Generally, shares of Galaxy II will vote in the
aggregate and not by series, except as otherwise expressly required by law or
when the Board of Trustees determines that the matter to be voted on affects
only the interests of shareholders of a particular series.

INVESTOR PROGRAMS

EXCHANGE PRIVILEGE

Direct Investors and Customers of Institutions may, after appropriate prior
authorization, exchange shares of the Fund having a value of at least $100 for
shares of any of the other funds or portfolios offered by Galaxy II or otherwise
advised by Fleet or its affiliates in which the Direct Investor or Customer
maintains an account, provided that such other shares may legally be sold in the
state of the investor's residence. The minimum initial investment to establish a
new account by exchange in another Fund offered by Galaxy II is $2,500, unless
at the time of the exchange the Direct Investor or Customer elects, with respect
to the fund or portfolio into which the exchange is being made, to participate
in the Automatic Investment Program described below, in which event there is no
minimum initial investment requirement, or in the College Investment Program
described below, in which event the minimum initial investment is generally
$100.

17
<PAGE>
by the Fleet or its affiliates. The redemption will be made at the per share net
asset value next determined after the exchange request is received. The shares
of the fund or portfolio to be acquired will be purchased at the per share net
asset value next determined after acceptance of the exchange request plus any
applicable sales charge.

Investors may find the exchange privilege useful if their investment
objectives or market outlook should change after they invest in the Fund. For
further information regarding Galaxy II's exchange privilege, Direct Investors
should call 1-800-628-0414. Customers of Institutions should call their
Institution for such information. Customers exercising the exchange privilege
with the Large Company Index Fund, Small Company Index Fund, U.S. Treasury Index
Fund or Utility Index Fund or another portfolio otherwise advised by Fleet or
its affiliates should request and review a prospectus for such Fund or portfolio
prior to making an exchange. Telephone 1-800-628-0414 to request a prospectus
and/or to make exchanges.

In order to prevent abuse of this privilege to the disadvantage of other
shareholders, Galaxy II reserves the right to terminate the exchange privilege
of any shareholder who requests more than three exchanges a year. Galaxy II will
determine whether to do so based on a consideration of both the number of
exchanges that any particular shareholder or group of shareholders has requested
and the time period over which their exchange requests have been made, together
with the level of expenses to Galaxy II which will result from effecting
additional exchange requests. The exchange privilege may be modified or
terminated at any time. At least 60 days' notice of any material modification or
termination will be given to shareholders except where notice is not required
under the regulations of the Securities and Exchange Commission.

AUTOMATIC INVESTMENT PROGRAM

The Automatic Investment Program permits a Direct Investor to purchase Fund
shares (minimum of $50 per transaction) each month or each quarter. Provided the
Direct Investor's financial institution allows automatic withdrawals, Fund
shares are purchased by transferring funds from a Direct Investor's checking,
bank money market or NOW account designated by the investor. The account
designated will be debited in the specified amount, and Fund shares will be
purchased on a monthly or quarterly basis on any Business Day designated by a
Direct Investor. If the designated day falls on a weekend or holiday, the
purchase will be made on the Business Day closest to the designated day. Only an
account maintained at a domestic financial institution which is an Automated
Clearing House member may be so designated.

SYSTEMATIC WITHDRAWAL PLAN

18
<PAGE>
has a starting value of at least $10,000. If the designated day falls on a
weekend or holiday, the redemption will be made on the Business Day closest to
the designated day. Proceeds of the redemption will be sent to the shareholder's
address of record or financial institution within three Business Days of the
redemption. If withdrawals exceed purchases and dividends, the number of shares
in the account will be reduced. Investors may terminate the Systematic
Withdrawal Plan at any time upon written notice to FD Distributors (but not less
than five days before a payment date). There is no charge for this service.

PAYROLL DEDUCTION PROGRAM

The Payroll Deduction Program provides Direct Investors with a convenient,
systematic way to purchase Fund shares by deducting a minimum amount of $25 per
pay period from their paycheck. To be eligible for the Program, the payroll
department of a Direct Investor's employer must have the capability to forward
transactions directly through the Automated Clearing House (ACH), or indirectly
through a third party payroll processing company that has access to the ACH. A
Direct Investor must complete and submit a Galaxy II Payroll Deduction
Application to his or her employer's payroll department, which will arrange for
the specified amount to be debited from the Direct Investor's paycheck each pay
period. Shares of the Fund will be purchased within three days after the debit
occurs. If the designated day falls on a weekend or non-Business Day, the
purchase will be made on the Business Day closest to the designated day. A
Direct Investor should allow between two to four weeks for the Payroll Deduction
Program to be established after submitting an application to the employer's
payroll department.

COLLEGE INVESTMENT PROGRAM

The College Investment Program (the "College Program") permits a Direct
Investor to open an account with Galaxy II and purchase Fund shares with a
minimum amount of $100 for initial or subsequent investments, except that if the
Direct Investor purchases shares through the Automatic Investment Program, the
minimum per transaction is $50. The College Program is designed to assist Direct
Investors who want to finance a college savings plan. See "Investor Programs--
Automatic Investment Program" for information on the Automatic Investment
Program. Galaxy II reserves the right to redeem accounts participating in the
College Program involuntarily, upon 60 days' written notice, if the account's
net asset value falls below the applicable minimum initial investment as a
result of redemptions. See "How to Purchase and Redeem Shares--Other Redemption
Information" above for further information.

DIRECT DEPOSIT PROGRAM

19
<PAGE>
INFORMATION SERVICES

GALAXY II INFORMATION CENTER--24 HOUR INFORMATION SERVICE

The Galaxy II Information Center provides Fund performance and investment
information 24 hours a day, seven days a week. To access the Galaxy II
Information Center, just call 1-800-628-0414.

VOICE RESPONSE SYSTEM

GALAXY II SHAREHOLDER SERVICES

Galaxy II also offers a TDD service for the hearing impaired. Just call
1-800-696-6515, 24 hours a day, seven days a week.

Direct Investors residing outside the United States can contact Galaxy II by
calling 1-508-855-5237.

PERFORMANCE REPORTING

From time to time, in advertisements or in reports to shareholders, the
performance of the Fund may be quoted and compared to that of other mutual funds
with similar investment objectives and to stock or other relevant bond indexes
or to rankings prepared by independent services or other financial or industry
publications that monitor the performance of mutual funds. For example, the
performance of the Fund may be compared to data prepared by LIPPER ANALYTICAL
SERVICES, INC., a widely recognized independent service which monitors the
performance of mutual funds.

Performance data as reported in national financial publications including,
but not limited to, MONEY MAGAZINE, FORBES, BARRON'S, THE WALL STREET JOURNAL,
and THE NEW YORK TIMES, or publications of a local or regional nature, may also
be used in comparing the performance of the Fund.

The standard yield is computed by dividing the Fund's average daily net
investment income per share during a 30-day (or one month) base period
identified in the advertisement by the net asset value per share on the last day
of the period, and annualizing the result on a semi-annual basis. The Fund may
also advertise its "effective yield" which is calculated similarly but, when
annualized, the income earned by an investment in the Fund is assumed to be
reinvested. The Fund may also quote its "tax-equivalent yield" which
demonstrates the level of taxable yield necessary to produce an after-tax
equivalent yield to the

20
<PAGE>
Fund's tax-free yield. It is calculated by increasing the Fund's yield
(calculated as above) by the amount necessary to reflect the payment of income
taxes at stated tax rates. The tax-equivalent yield will always be higher than
the Fund's yield.

The Fund may also advertise its performance using "average annual total
return" figures over various periods of time. Such total return figures reflect
the average percentage change in the value of an investment in the Fund from the
beginning date of the measuring period to the end of the measuring period.
Average total return figures will be given for the most recent one-, five- and
ten-year periods (if applicable), and may be given for other periods as well,
such as from the commencement of the Fund's operations, or on a year-by-year
basis. The Fund may also use "aggregate total return" figures for various
periods, representing the cumulative change in the value of an investment in the
Fund for the specified period. Both methods of calculating total return assume
that dividend and capital gain distributions made by the Fund during the period
are reinvested in Fund shares.

The performance of the Fund will fluctuate and any quotation of performance
should not be considered as representative of future performance. Since yields
fluctuate, yield data cannot necessarily be used to compare an investment in the
Fund's shares with bank deposits, savings accounts and similar investment
alternatives which often provide an agreed or guaranteed fixed yield for a
stated period of time. Shareholders should remember that performance data are
generally functions of the kind and quality of the instruments held in a
portfolio, portfolio maturity, operating expenses, and market conditions.

Any additional fees charged by institutions with respect to accounts of
Customers that have invested in shares of the Fund will not be included in
performance calculations.

MISCELLANEOUS

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

Inquiries regarding the Fund may be directed to Galaxy II at 1-800-628-0414.

21
<PAGE>
GALAXY

FUNDS

Logo

Municipal Bond Fund

FN-313 (7/98) July 29, 1998
<PAGE>

GALAXY FUND II
THE INDEXED FUNDS
FORM N-1A
CROSS REFERENCE SHEET

PURSUANT TO RULE 495(a)

Part B Heading in Statement of
Item No. Additional Information
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Cover Page Cover Page

Table of Contents Table of Contents

General Information and Not Applicable
History

Investment Objectives and Investment Objectives; Investment
Policies Policies and Risk Considerations;
Investment Limitations

Management of the Fund Trustees and Officers

Control Persons and Principal See Prospectus--"Management of the
Holders of Securities Funds"

Investment Advisory and Advisory, Administration, Sub-
Other Services Administration, Custody and Transfer
Agency Agreements; Independent
Accountants; Counsel

Brokerage Allocation and Other Portfolio Transactions
Securities

Capital Stock and Other See Prospectus--"Description of
Securities Shares"

Purchases and Redemptions Additional Purchase and Redemption
Information

Tax Status Additional Information Concerning
Taxes

Underwriters Portfolio Transactions

Calculation of Performance Performance and Yield Information
Data

Financial Statements Financial Statements
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GALAXY FUND II - THE INDEXED FUNDS

STATEMENT OF ADDITIONAL INFORMATION

THE LARGE COMPANY INDEX FUND
THE SMALL COMPANY INDEX FUND
THE UTILITY INDEX FUND
THE U.S. TREASURY INDEX FUND

JULY 29, 1998

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This Statement of Additional Information is meant to be read in
conjunction with the Prospectus of Galaxy Fund II ("Galaxy II") dated July 29,
1998 relating to the Large Company Index, Small Company Index, Utility Index
and U.S. Treasury Index Funds (the "Funds") and is incorporated by reference in
its entirety into that Prospectus (the "Prospectus"). Because this Statement
of Additional Information is not itself a prospectus, no investment in shares of
the Funds should be made solely upon the information contained herein. Copies
of the Prospectus relating to the Funds may be obtained by calling First Data
Distributors, Inc., Galaxy II's distributor, at 1-800-628-0414. Information
regarding the status of shareholder accounts may be obtained by calling First
Data Investor Services Group, Inc., Galaxy II's transfer agent, at
1-800-628-0414.

SHARES OF THE FUNDS ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, FLEET FINANCIAL GROUP, INC. OR ANY OF ITS AFFILIATES,
FLEET INVESTMENT ADVISORS INC., OR ANY FLEET BANK. SHARES OF THE FUNDS ARE NOT
FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL VARY AS A RESULT OF MARKET CONDITIONS OR OTHER FACTORS SO THAT SHARES
OF THE FUNDS, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
AN INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL AMOUNT INVESTED.

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TABLE OF CONTENTS
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INVESTMENT OBJECTIVES . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

INVESTMENT POLICIES AND RISK CONSIDERATIONS . . . . . . . . . . . . . . . . 1

The Indexing Approach . . . . . . . . . . . . . . . . . . . . . . . . 1
U.S. Government Securities . . . . . . . . . . . . . . . . . . . . . . 2
Bank Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Futures Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Lending of Portfolio Securities. . . . . . . . . . . . . . . . . . . . 4
Repurchase Agreements. . . . . . . . . . . . . . . . . . . . . . . . . 4
Investing in Utilities . . . . . . . . . . . . . . . . . . . . . . . . 5
Valuation of Portfolio Securities. . . . . . . . . . . . . . . . . . . 5

INVESTMENT LIMITATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . 8

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION. . . . . . . . . . . . . . .10

ADDITIONAL INFORMATION CONCERNING TAXES . . . . . . . . . . . . . . . . . .10

TRUSTEES AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . .11

ADVISORY, ADMINISTRATION, SUB-ADMINISTRATION,
CUSTODY AND TRANSFER AGENCY AGREEMENTS. . . . . . . . . . . . . . . . . . .15
Investment Adviser and Administrator . . . . . . . . . . . . . . . . .15
Authority to Act as Investment Adviser . . . . . . . . . . . . . . . .17
Custodian and Transfer Agent . . . . . . . . . . . . . . . . . . . . .17

PERFORMANCE AND YIELD INFORMATION . . . . . . . . . . . . . . . . . . . . .18

COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20

INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . .20

GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . .20

FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . .21
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INVESTMENT OBJECTIVES

Galaxy II, which is a no-load, open-end, management investment
company, offers five investment options, four of which, the Large Company Index
Fund (the "Large Company Fund"), the Small Company Index Fund (the "Small
Company Fund"), the Utility Index Fund (the "Utility Fund"), and the U.S.
Treasury Index Fund (the "U.S. Treasury Fund," and together with the Large
Company Fund, the Small Company Fund and the Utility Fund, the "Funds"), are
described in this Statement of Additional Information. The investment objective
of the Large Company Fund is to provide investment results that, before
deduction of operating expenses, match the price and yield performance of U.S.
publicly traded common stocks with large stock market capitalizations, as
represented by the Standard & Poor's 500 Composite Stock Price Index (the "S&P
500"). The investment objective of the Small Company Fund is to provide
investment results that, before deduction of operating expenses, match the price
and yield performance of U.S. publicly traded common stocks with smaller stock
market capitalizations, as represented by the Standard & Poor's SmallCap 600
Stock Price Index (the "S&P SmallCap 600 Index"). The investment objective of
the Utility Fund is to provide investment results that, before the deduction of
operating expenses, match the price and yield performance of U.S. publicly
traded common stocks of companies in the utility industry, as represented by the
Standard & Poor's Utilities Composite Stock Price Index (the "S&P Utilities
Index"). The investment objective of the U.S. Treasury Fund is to provide
investment results that, before deduction of operating expenses, match the price
and yield performance of U.S. Treasury notes and bonds, as represented by the
U.S. Treasury component (the "U.S. Treasury Index") of the Salomon Brothers
Broad Investment-Grade Bond Index.

A Prospectus and Statement of Additional Information describing the
fifth investment option available through Galaxy II, the Municipal Bond Fund,
can be obtained by calling Galaxy II at 1-800-628-0414.

INVESTMENT POLICIES AND RISK CONSIDERATIONS

The following policies supplement the descriptions of the Funds'
investment objectives and policies in the Prospectus.

THE INDEXING APPROACH

In using sophisticated computer models to select securities, a Fund
will only purchase a security that is included in its respective index at the
time of such purchase. A Fund may, however, temporarily continue to hold a
security that has been deleted from its respective index pending the rebalancing
of the Fund's portfolio. A list of securities included, as of the date of this
Statement of Additional Information, in each of the S&P 500, the S&P SmallCap
600 Index, the S&P Utilities Index, and the U.S. Treasury Index is available
free of charge by calling Galaxy II at 1-800-628-0414, or by writing to Galaxy
II, c/o First Data Investor Services Group, Inc., 4400 Computer Drive, P.O. Box
5108, Westboro, Massachusetts 01581.

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As noted in the Prospectus, the U.S. Treasury Fund will not and the
Small Company Index Fund may not, from time to time, hold all of the issues
in its index because of the costs involved and the illiquidity of many of the
securities. The U.S. Treasury Fund will hold a limited number of the notes
and bonds represented in the U.S. Treasury Index.

U.S. GOVERNMENT SECURITIES

As noted in the Prospectus, a Fund may invest in short-term debt
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities ("U.S. Government Securities"). U.S. Government Securities in
which a Fund may invest include direct obligations of the U.S. Treasury and
obligations issued by U.S. Government agencies and instrumentalities. Included
among direct obligations of the United States are Treasury Bills, Treasury Notes
and Treasury Bonds, which differ principally in terms of their maturities.
Included among the securities issued by U.S. Government agencies and
instrumentalities are: securities that are supported by the full faith and
credit of the United States (such as Government National Mortgage Association
certificates); securities that are supported by the right of the issuer to
borrow from the U.S. Treasury (such as securities of Federal Home Loan Banks);
and securities that are supported by the credit of the instrumentality (such as
Federal National Mortgage Association and Federal Home Loan Mortgage Corporation
bonds).

BANK OBLIGATIONS

Certificates of deposit and time deposits in which the Funds may
invest are generally limited to those instruments issued by U.S. and foreign
banks, savings and loan associations and other banking institutions having total
assets in excess of $1 billion. Certificates of deposit ("CDs") are short-term
negotiable obligations of commercial banks. Time deposits ("TDs") are
non-negotiable deposits maintained in banking institutions for specified periods
of time at stated interest rates. The Funds may invest in U.S.
dollar-denominated CDs and TDs, including instruments issued or supported by the
credit of U.S. or foreign banks or savings institutions having total assets at
the time of purchase in excess of $1 billion. A Fund will invest in an
obligation of a foreign bank or a foreign branch of a U.S. bank only if Fleet
Investment Advisors Inc. ("Fleet"), the Funds' adviser, deems the obligation to
present minimal credit risks. Nevertheless, this kind of obligation entails
risks that are different from those of investments in domestic obligations of
U.S. banks due to differences in political, regulatory and economic systems and
conditions. The Funds will treat TDs maturing in more than seven calendar days
as illiquid securities.

FUTURES CONTRACTS

The Large Company Fund, the Small Company Fund and the Utility Fund
(the "Stock Funds") may enter into stock index futures contracts that are traded
on a national exchange. A Stock Fund will enter into stock index futures
contracts only for bona fide hedging purposes, or as otherwise permitted by
Commodity Futures Trading Commission ("CFTC") regulations. If permitted, a
Stock Fund may use stock index futures to maintain cash reserves while remaining
fully invested, to facilitate trading, to reduce transaction costs or to

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seek higher investment returns when a stock index futures contract is priced
more attractively than the underlying index.

A stock index futures contract is an agreement between a seller and a
buyer to deliver and take delivery of, respectively, a commodity which is
represented by a multiple of a stock price index at a future specified date.
The delivery is a cash settlement of the difference between the original
transaction price and the final price of the index times the multiple at the
termination of the contract. No physical delivery of the underlying stocks in
the index is made. By entering into a stock index futures contract, a Stock
Fund is able to seek to protect its assets from fluctuations in value without
necessarily buying or selling the assets.

A Fund may not engage in futures activities for other than bona fide
hedging purposes if the aggregate initial margin deposits on its non-hedging
futures contracts and premiums paid on its related options exceed 5% of the fair
market value of the Fund's total assets, after taking into account unrealized
profits and unrealized losses on futures contracts it has entered into.

No consideration is paid or received by a Fund upon the purchase or
sale of a futures contract. Upon entering into a futures contract, a Fund will
be required to deposit in a segregated account with its custodian an amount of
cash or liquid securities equal to approximately 1% to 10% of the contract
amount (this amount is subject to change by the exchange on which the contract
is traded and brokers may require a higher amount). This amount is known as
"initial margin" and is in the nature of a performance bond or good faith
deposit on the contract, which is returned to the Fund involved upon termination
of the futures contract, assuming all contractual obligations have been
satisfied. The broker will have access to amounts in the margin account if a
Fund fails to meet its contractual obligations. Subsequent payments, known as
"variation margin," to and from the broker, will be made daily as the price of
the index or securities underlying the futures contract fluctuates, making the
long and short positions in the futures contract more or less valuable, a
process known as "marking-to-market." At any time prior to the expiration of a
futures contract, the Fund may elect to close the position by taking an opposite
position, which will operate to terminate the Fund's existing position in the
contract.

Galaxy II will set aside with its custodian, or with a designated
subcustodian, cash or liquid securities at least equal to the underlying
commodity value of each long position the Fund assumes in commodity futures
contracts or will take other actions consistent with regulatory requirements to
avoid leverage.

There are several risks in connection with investing in futures
contracts. For example, although the Funds intend to enter into futures
contracts only if there is an active market for such contracts, there is no
assurance that a liquid market will exist for the contracts at any particular
time. Most futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. Once the daily limit has
been reached in a particular contract, no trades may be made that day at a price
beyond that limit. It is possible that futures contract prices could move to
the daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting a Fund
to

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substantial losses. In such event, and in the event of adverse price movements,
a Fund would continue to be required to make daily cash payments of variation
margin. In addition, there can be no assurance that there will be a perfect
correlation between movements in the price of stocks underlying a stock index
futures contract and movements in the price of stocks underlying a Fund's TARGET
index. There is some risk, therefore, that the use of stock index futures
contracts may reduce the correlation between the performance of a Stock Fund and
its index.

Losses incurred in futures transactions and the costs of these
transactions will affect a Fund's performance. In addition, a Fund might have
to sell securities to meet daily variation margin requirements at a time when it
would be disadvantageous to do so. These sales of securities may, but will not
necessarily, be at increased prices.

LENDING OF PORTFOLIO SECURITIES

Each Fund may lend portfolio securities to brokers, dealers and other
financial organizations that meet capital and other credit requirements or other
criteria established by Galaxy II's Board of Trustees. These loans, if and when
made, may not exceed 33 1/3% of the Fund's total assets taken at value. Loans
of portfolio securities will be collateralized by cash, letters of credit or
U.S. Government Securities, which are maintained at all times in an amount at
least equal to the current market value of the loaned securities plus any
dividends and interest accrued thereon. From time to time, a Fund may return a
part of the interest earned from the investment of collateral received for
securities loaned to the borrower and/or a third party that is unaffiliated with
the Fund and that is acting as a "placing agent," provided that the Board of
Trustees (1) determines that any amount paid to a placing agent is reasonable
and based solely upon services rendered and (2) considers the propriety of any
amount paid to a borrower.

A Fund will adhere to the following conditions whenever its portfolio
securities are loaned: (a) the Fund must receive cash or equivalent securities
from the borrower as collateral at least equal to 100% of the current market
value of the loaned securities plus any interest and dividends accrued thereon;
(b) the borrower must increase such collateral whenever the market value of the
securities plus any accrued interest or dividends rises above the level of such
collateral; (c) the Fund must be able to terminate the loan at any time; (d) the
Fund must receive reasonable interest on the loan, as well as any dividends,
interest or other distributions on the loaned securities, and any increase in
market value; (e) the Fund may pay only reasonable custodian fees in connection
with the loan; and (f) voting rights on the loaned securities may pass to the
borrower, provided, however, that if a material event adversely affecting the
investment occurs, the Board of Trustees must terminate the loan and regain the
right to vote the securities.

REPURCHASE AGREEMENTS

Each Fund may invest in repurchase agreement transactions with respect
to U.S. Government Securities. A Fund will enter into repurchase agreements
only with(a) banks that are the issuers of instruments acceptable for purchase
by the Fund or that are on the "approved list" maintained by Fleet or (b)
primary non-bank dealers that are listed on the Federal Reserve Bank of New
York's list of reporting dealers and that meet certain other criteria.
Repurchase agreements are contracts under which the buyer of a security

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simultaneously commits to resell the security to the seller at an agreed-upon
price and date. Under the terms of a typical repurchase agreement, a Fund would
acquire a U.S. Government Security for a relatively short period(not more than
seven days) subject to an obligation of the seller to repurchase, and the Fund
to resell, the U.S. Government Security at an agreed-upon price and time,
thereby determining the yield during the Fund's holding period. This
arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. Under each repurchase agreement,
the selling institution will be required to maintain the value of the securities
subject to the repurchase agreement at not less than 101% of the repurchase
price (including accrued interest).

Repurchase agreements involve certain risks in the event of default or
insolvency of the other party, including possible delays or restrictions upon
the subject Fund's ability to dispose of the underlying securities. In
evaluating these potential risks, Fleet, acting under the supervision of the
Board of Trustees, and on an ongoing basis, monitors (a) the value of the
collateral underlying each repurchase agreement of the Funds to determine
whether the value is at least equal to the total amount of the repurchase
obligation, including interest, and (b) the creditworthiness of the banks and
dealers with which the Funds enter into repurchase agreements. A Fund will not
enter into repurchase agreements that would cause more than 5% of its net assets
to be invested in illiquid securities.

A joint trading account may be used by the Funds to enter into
repurchase agreements. Each Fund's decision to invest in the joint account will
be solely at its option; a Fund will not be required either to invest a minimum
amount or to maintain a minimum balance. The Board of Trustees will evaluate
annually the joint account arrangement and will continue participation only if
it determines that there is a reasonable likelihood that each participating Fund
and its shareholders would benefit from continued participation and that no
participant will be treated on a less advantageous basis than another
participant.

INVESTING IN UTILITIES

The Utility Fund will concentrate its investments in the utility
industry. As a result, the Fund's investments may be subject to greater risk
and market fluctuation than a fund that had securities representing a broader
range of investment alternatives. The Fund's concentration policy means that it
will invest in excess of 25% of its total assets in utility companies, which
policy is a fundamental policy of the Fund and cannot be changed without
approval of a majority of the Fund's outstanding voting securities. The Fund
expects, however, to invest at least 80% of its total assets in utility
companies.

VALUATION OF PORTFOLIO SECURITIES

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amortization to maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument) unless Galaxy
II's Board of Trustees has determined that amortized cost does not approximate
market value. Other securities for which market quotations are readily
available are valued as nearly as possible in the manner described above.
Securities may be valued by a pricing service when such prices are believed to
reflect the fair market value of such securities. Other assets and securities
for which market quotations are not readily available are valued based on fair
value as determined in good faith in accordance with procedures established by
Galaxy II's Board of Trustees.

INVESTMENT LIMITATIONS

The investment limitations set forth below as they affect a particular
Fund may not be changed without the approval by a vote of a majority of the
outstanding shares of that Fund. A majority vote by shareholders, with respect
to the approval of an investment advisory agreement or a change in a fundamental
investment objective or policy, is defined as the lesser of (a) 67% or more of
the shares present at the meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy, or (b) more
than 50% of the outstanding shares of the Fund.

A Fund may not:

1. Purchase the securities of any issuer if as a result more than 5%
of the value of the Fund's total assets would be invested in the securities of
such issuer, except that (a) this 5% limitation does not apply to U.S.
Government Securities and (b) up to 25% of the value of the Fund's total assets
may be invested without regard to this 5% limitation.

2. Borrow money or issue senior securities except that the Fund may
borrow from banks for temporary or emergency purposes, and not for leveraging,
and then in amounts not in excess of 33 1/3% of the value of the Fund's total
assets at the time of such borrowing; or mortgage, pledge or hypothecate any
assets except in connection with any bank borrowing and in amounts not in excess
of the lesser of the dollar amounts borrowed or 33 1/3% of the value of the
Fund's total assets at the time of such borrowing. Whenever borrowings are
outstanding, a Fund will not make any additional investments (including
roll-overs). For purposes of this restriction, collateral arrangements with
respect to (a) the purchase and sale of options on stock indexes and (b) initial
and variation margin for futures contracts will not be deemed to be issuances of
senior securities or to be pledges of a Fund's assets.

3. Purchase any securities that would cause 25% or more of the value
of the Fund's total assets at the time of purchase to be invested in the
securities of issuers conducting their principal business activities in the same
industry, except that the Utility Fund will invest in excess of 25% of its
assets in the securities of companies within the utility industry, and provided
that there shall be no limit on the purchase of U.S. Government Securities.

4. Make loans, except that the Fund may purchase or hold debt
obligations, lend portfolio securities and enter into repurchase agreements, as
described herein and in the Prospectus.

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5. Underwrite any issue of securities except to the extent that the
sale of portfolio securities in accordance with the Fund's investment objective,
policies and limitations may be deemed to be underwriting.

6. Purchase or sell real estate or real estate limited partnership
interests, or invest in oil, gas or mineral leases, or mineral exploration or
development programs, except that the Fund may invest in securities secured by
real estate, mortgages or interests therein and may purchase securities issued
by companies that invest or deal in any of the above.

7. Make short sales of securities or maintain a short position.

8. Purchase securities of other investment companies except as they
may be acquired in connection with a merger, consolidation, acquisition,
reorganization or offer of exchange and except as permitted under the Investment
Company Act of 1940, as amended (the "1940 Act"). Purchases made in connection
with this restriction may subject shareholders to duplicate fees and expenses.

9. Purchase more than 10% of the voting securities of any one
issuer, more than 10% of the securities of any class of any one issuer or more
than 10% of the outstanding debt securities of any one issuer; provided that
this limitation shall not apply to investments in U.S. Government Securities.

10. Purchase securities on margin, except that a Fund may obtain any
short-term credits necessary for the clearance of purchases and sales of
securities. For purposes of this restriction, the deposit or payment of initial
or variation margin in connection with futures contracts or related options will
not be deemed to be a purchase of securities on margin by the Fund.

11. Invest in commodities, except that the Stock Funds may invest in
stock index futures as described in this Statement of Additional Information and
in the Prospectus.

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

13. Invest more than 5% of the value of the Fund's net assets in
securities which may be illiquid because of legal or contractual restrictions
on resale or securities for which there are no readily available market
quotations. For purposes of this limitation, repurchase agreements with
maturities greater than seven days shall be considered illiquid securities.

If a percentage restriction (other than that contained in
investment limitation number 2) is adhered to at the time of an investment, a
later increase or decrease in the percentage of assets resulting from a
change in the values of portfolio securities or in the amount of the relevant
Fund's assets will not constitute a violation of such restriction.

PORTFOLIO TURNOVER

Galaxy II cannot accurately predict the Funds' respective portfolio
turnover rates. Portfolio turnover rate is calculated by dividing the lesser
of a Fund's annual sales or purchases of portfolio securities by the monthly
average value of securities in the Fund during the year,

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excluding any portfolio security, the maturity of which at the time of
acquisition was one year or less. Higher portfolio turnover rates can result in
corresponding increases in brokerage commissions. A Fund will not consider its
turnover rate a limiting factor in making investment decisions consistent with
its investment objective and policies.

The Funds follow an index strategy and, therefore, any variation in
a Fund's portfolio turnover rate generally would be related to an increase or
decrease in the assets of the Fund resulting in the necessity of the Fund
buying or selling securities. For the fiscal years ended March 31, 1997 and
1998, respectively, the portfolio turnover rates were as follows: the Large
Company Index Fund, 11% and 3%; the Small Company Index Fund, 8% and 99%; the
Utility Index Fund, 170% and 72%; and the U.S. Treasury Index Fund, 39% and
79%.

At a special meeting of shareholders of Galaxy II's Small Company Fund
and Utility Fund held on May 9, 1997, shareholders of each Fund approved a
change in each Fund's benchmark index. Specifically, shareholders of the Small
Company Fund approved a change from the Russell Special Small Company Index to
the S&P SmallCap 600 Index and shareholders of the Utility Fund approved a
change from the Russell 1000 Utility Index to the S&P Utilities Index. As a
result, there was a significant variation in the Small Company Fund's portfolio
turnover rate for the fiscal year ended March 31, 1998 from that reported during
the fiscal year ended March 31, 1997 because of the rebalancing of the Fund's
portfolio in accordance with the new benchmark index.

There was a significant variation in the portfolio turnover rate
for the Utility Fund for the fiscal year ended March 31, 1998 as compared to
the fiscal year ended March 31, 1997 because during the fiscal year ended
March 31, 1997 Fleet, in the mistaken belief that the Board approval had been
obtained and that shareholder approval was not required before changing the
Fund's benchmark index to the S&P Utilities Index, proceeded to rebalance the
Fund's portfolio pursuant to this desired change in the index. Once Fleet
became aware that the Board approval had not been obtained and that
shareholder approval was required, Fleet reversed these steps and rebalanced
the Fund's portfolio to bring it in line with the Russell 1000 Utility Index.
Fleet reimbursed the Utility Fund and adjusted its shareholder accounts as
necessary to eliminate any material negative impact to the Fund or its
shareholders resulting from this error. The Utility Fund's portfolio
turnover rate for the fiscal year ended March 31, 1998 reflects the
rebalancing of the Fund's portfolio in accordance with the new benchmark
index approved by shareholders on May 9, 1997.

PORTFOLIO TRANSACTIONS

Fleet will select specific portfolio investments and effect
transactions for the Funds. Fleet seeks to obtain the best net price and the
most favorable execution of orders. Fleet may, in its discretion, effect
transactions in portfolio securities with dealers who provide research advice
or other services to the Funds or Fleet. Fleet is authorized to pay a broker
or dealer who provides such brokerage and research services a commission for
executing a portfolio transaction for any Fund which is in excess of the
amount of commission another broker or dealer would have charged for
effecting that transaction if Fleet determines in good faith that such
commission

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was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or Fleet's overall responsibilities to the particular
Fund and to Galaxy II. Such brokerage and research services might consist of
reports and statistics relating to specific companies or industries, general
summaries of groups of stocks or bonds and their comparative earnings and
yields, or broad overviews of the stock, bond and government securities
markets and the economy. The fees under the investment advisory agreement
between Galaxy II and Fleet are not reduced by reason of receiving such
brokerage and research services. The Board of Trustees will periodically
review the commissions paid by the Funds to determine if the commissions paid
over representative periods of time were reasonable in relation to the
benefits insuring to the Funds. During the fiscal year ended March 31, 1998,
the total amount of soft dollar commissions paid by the Large Company Index
Fund, Small Company Index Fund and Utility Index Fund were $53,737, $381,899
and $9,649, respectively.

Transactions on U.S. stock exchanges involve the payment of
negotiated brokerage commissions. On exchanges on which commissions are
negotiated, the cost of transactions may vary among different brokers. There
is generally no stated commission in the case of securities traded in U.S.
over-the-counter markets, but the prices of those securities include
undisclosed commissions or mark-ups. The cost of securities purchased from
underwriters includes an underwriting commission or concession, and the
prices at which securities are purchased from and sold to dealers include a
dealer's mark-up or mark-down. U.S. Government Securities are generally
purchased from underwriters or dealers, although certain newly issued U.S.
Government Securities may be purchased directly from the U.S. Treasury or
from the issuing agency or instrumentality. No brokerage commissions are
typically paid on purchases and sales of U.S. Government Securities.

During the fiscal years ended March 31, 1996, March 31, 1997 and
March 31, 1998, the Funds paid the following commissions to broker-dealers
for execution of portfolio transactions: Large Company Fund - $22,538,
$118,621 and $84,998, respectively; Small Company Fund - $95,120, $105,820 and
$652,975, respectively; Utility Fund - $16,044, $296,342 and $106,486,
respectively; and U.S. Treasury Fund - $0, $0 and $0, respectively.

Galaxy II is required to identify any securities of its regular
brokers or dealers or their parents that Galaxy II has acquired during its
most recent fiscal year. At March 31, 1998, the Large Company Fund held
common stock of(a) Chase Manhattan Corp. in the amount of $4,069,710; (b)
Lehman Brothers Holdings, Inc. in the amount of $539,100; and (c) Morgan
Stanley, Dean Witter, Discover & Co. in the amount of $3,101,269.

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<PAGE>

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Shares of the Funds are sold on a continuous basis by Galaxy II's
distributor, First Data Distributors, Inc. ("FD Distributors"), and FD
Distributors has agreed to use appropriate efforts to solicit all purchase
orders. As described in the Prospectus, shares of the Funds are sold to
customers ("Customers") of FIS Securities, Inc., Fleet Brokerage Securities
Inc., Fleet Securities, Inc., Fleet Enterprises, Inc., Fleet Financial Group,
Inc., its affiliates, their correspondent banks, and other qualified banks,
savings and loan associations and broker/dealers ("Institutions"). As
described in the Prospectus, shares may also be sold to individuals or
corporations who submit a purchase application to Galaxy II, purchasing
either for their own accounts or for the accounts of others ("Direct
Investors").

Galaxy II may suspend the right of redemption or postpone the date
of payment for shares for more than seven days during any period when (a)
trading in the markets the Funds normally utilize is restricted, or an
emergency, as defined by the rules and regulations of the Securities and
Exchange Commission (the "SEC"), exists making disposal of the Funds'
investments or determination of their net asset values not reasonably
practicable; (b) the New York Stock Exchange is closed (other than customary
weekend and holiday closings); or (c) the SEC has by order permitted such
suspension.

ADDITIONAL INFORMATION CONCERNING TAXES

Each Fund has qualified each year in the past and each Fund intends
to qualify each year in the future as a "regulated investment company" under
the Internal Revenue Code of 1986, as amended (the "Code"). Provided that a
Fund (a) qualifies as a regulated investment company and (b) distributes to
its shareholders at least 90% of its "investment company taxable income"
(that is, its income minus its "net capital gains" and after taking into
account certain required adjustments), the Fund generally will not be subject
to federal income tax to the extent its net investment income (that is, its
income other than its net realized capital gains) and its net realized
long-term and short-term capital gains are distributed to its shareholders in
accordance with the Code. Because of the Code's requirements for
qualification as a regulated investment company, each Fund may be restricted
in the utilization of certain of the investment techniques described above
and in the Prospectus. Failure to meet these requirements would cause the
Fund to be subject to corporate income tax on its net income and gains,
without any deduction for dividends paid to shareholders.

Each Fund expects to pay dividends and to make distributions as
necessary to avoid the application of the 4% non-deductible excise tax
measured with respect to certain undistributed amounts of ordinary income and
capital gain. A Fund may also, in order to avoid the 4% excise tax, declare
one or more dividends in October, November or December of any calendar year,
payable to shareholders of record on a specified date in such a month. If a
Fund declares such dividends, then each such shareholder will be treated as
receiving such dividends and the Fund will be treated as having paid the
dividends on December 31 of that year provided that the Fund pays such
dividends to such shareholders during January of the following calendar year.
As a general rule, dividends paid by a Fund will qualify for the
dividends-received

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<PAGE>

deduction for corporate shareholders if such dividends are attributable to
dividends received by the Fund from U.S. corporations and certain holding period
requirements are met.

Investors considering buying shares of a Fund on or just prior to
the record date for a taxable dividend or capital gain distribution should be
aware that the amount of the forthcoming dividend or distribution payment,
although, in effect, a return of capital will be a taxable dividend or
distribution payment.

If a shareholder fails to furnish a correct taxpayer identification
number, fails to report fully dividend or interest income, or fails to
certify that he or she has provided a correct taxpayer identification number
and that he or she is not subject to backup withholding, then the shareholder
may be subject to a 31% "backup withholding tax" with respect to (a)
dividends and distributions and (b) the proceeds of any sales or redemptions
of a Fund's shares. An individual's taxpayer identification number is his or
her social security number. Corporate shareholders and certain other
shareholders specified in the Code generally are exempt from backup
withholding. The 31% "backup withholding tax" is not an additional tax and
may be credited against a taxpayer's regular federal income tax liability.
Dividends and distributions also may be subject to state and local taxes
depending on each shareholder's particular situation.

The foregoing is only a summary of certain tax considerations
generally affecting the Funds and their shareholders, and is not intended as
a substitute for careful tax planning. Shareholders are urged to consult
their tax advisers with respect to the particular tax consequences to them of
an investment in a Fund.

TRUSTEES AND OFFICERS

The trustees and executive officers of Galaxy II, their addresses,
their principal occupations during the past five years, ages and other
affiliations are set forth below. Each trustee who is an "interested person"
of Galaxy II, as defined in the 1940 Act, is indicated by an asterisk.

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<PAGE>

Positions Held with Galaxy II and
Principal Occupation(s) During
Name and Address Past 5 Years
- ---------------- ---------------------------------

Dwight E. Vicks, Jr. Trustee and Chairman of the Board
Vicks Lithograph & President & Director, Vicks
Printing Corporation Lithograph & Printing Corporation
Commercial Drive (book manufacturing and commercial
P.O. Box 270 printing); Director, Utica First Insurance
Yorkville, NY 13495 Company; Trustee, Savings Bank of Utica;
Age 65 Director, Monitor Life Insurance Company;
Director, Commercial Travelers Mutual
Insurance Company; Chairman of the Board, The
Galaxy Fund and The Galaxy VIP Fund.

John T. O'Neill* Trustee, President and Treasurer
Hasbro, Inc. Executive Vice President and Chief
1027 Newport Avenue Financial Officer, Hasbro, Inc. (toy and
Pawtucket, RI 02862 game manufacturer); Trustee, President and
Age 53 Treasurer, The Galaxy Fund and The Galaxy VIP
Fund.

Louis DeThomasis Trustee
Saint Mary's College President, Saint Mary's College of
of Minnesota Minnesota; Director, Bright Day
Winona, MN 55987 Travel, Inc.; Trustee, Religious Communities
Age 57 Trust; Trustee, The Galaxy Fund and The
Galaxy VIP Fund.

Donald B. Miller Trustee
10725 Quail Covey Road Chairman, Horizon Media, Inc.
Boynton Beach, FL 33436 (broadcast services) Director/Trustee,
Age 72 Lexington Funds; Director, Maguire Group of
Connecticut, Inc. (consulting engineers);
Trustee, Keuka College; Trustee, The Galaxy
Fund and The Galaxy VIP Fund.

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<PAGE>

Positions Held with Galaxy II and
Principal Occupation(s) During
Name and Address Past 5 Years
- ---------------- ---------------------------------

James M. Seed Trustee
The Astra Ventures, Inc. Chairman and President, The Astra Projects,
One Citizens Plaza Incorporated (land development); President,
Providence, RI 02903 The Astra Ventures, Incorporated
Age 57 (manufacturer of cardboard boxes);
Commissioner, Rhode Island Investment
Commission; Trustee, The Galaxy Fund and
The Galaxy VIP Fund.

Bradford S. Wellman* Trustee
2468 Ohio Street Private Investor; Director, Essex
Bangor, ME 04401 County Gas Company, until January 1994;
Age 67 Director, Maine Mutual Fire Insurance Co.;
Member, Maine Finance Authority; Trustee, The
Galaxy Fund and The Galaxy VIP Fund.

Jylanne Dunne Vice President and Assistant
First Data Investor Treasurer
Services Group, Inc. Employee of First Data
4400 Computer Drive Investor Services Group, Inc.
P.O. Box 5108
Westboro, MA 01581
Age 39

W. Bruce McConnel, III Secretary
Drinker Biddle & Reath LLP Partner of the law firm of Drinker
1345 Chestnut St. Biddle & Reath LLP, Philadelphia,
Philadelphia, PA 19107 Pennsylvania.
Age 55

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<PAGE>

incurred in attending meetings. Each trustee also receives $750 for each
telephone Board meeting in which the trustee participates, $1,000 for each
in-person Board committee meeting attended and $500 for each telephone Board
committee meeting in which the trustee participates. The Chairman of the
Boards of Galaxy II, Galaxy and Galaxy VIP is entitled to an additional
annual aggregate fee in the amount of $4,000 and the President and Treasurer
of Galaxy II, Galaxy and Galaxy VIP is entitled to an additional annual
aggregate fee of $2,500, for their services in these respective capacities.
The foregoing trustees' and officers' fees are allocated among the portfolios
of Galaxy II, Galaxy and Galaxy VIP based on their relative net assets.

Prior to March 5, 1998, each trustee was authorized to receive an
annual aggregate fee of $29,000 for his services as a trustee of Galaxy II,
Galaxy and Galaxy VIP, plus an additional $2,250 for each in-person Galaxy
Board meeting attended, $1,500 for each in-person Galaxy VIP or Galaxy II
Board meeting attended not held concurrently with an in-person Galaxy Board
meeting, and $500 for each telephone Board meeting in which the trustee
participated and was reimbursed for expenses incurred in attending all
meetings. Annual fees to the Chairman of the Boards and the President and
Treasurer of Galaxy II, Galaxy and Galaxy VIP were the same as the current
fees, as were the fees for Board committee meetings.

Beginning March 1, 1996, each trustee became entitled to
participate in The Galaxy Fund, The Galaxy VIP Fund and Galaxy Fund II
Deferred Compensation Plans (the "Original Plans"). Effective January 1,
1997, the Original Plans were merged into The Galaxy Fund/The Galaxy VIP
Fund/Galaxy Fund II Deferred Compensation Plan (together with the Original
Plans, the "Plan"). Under the Plan, a trustee may elect to have his deferred
fees treated as if they had been invested by Galaxy II, Galaxy and Galaxy VIP
in the shares of one or more portfolios in Galaxy II or Galaxy, or other
types of investment options, and the amount paid to the trustees under the
Plan will be determined based upon the performance of such investments.
Deferral of trustees' fees will have no effect on a portfolio's assets,
liabilities, and net income per share, and will not obligate Galaxy II,
Galaxy and Galaxy VIP to retain the services of any trustee or obligate a
portfolio to any level of compensation to the trustee. Galaxy II, Galaxy and
Galaxy VIP may invest in underlying securities without shareholder approval.

No employee of Investor Services Group receives any compensation
from Galaxy II for acting as an officer. No person who is an officer,
director or employee of Fleet, or any of its affiliates, serves as a trustee,
officer or employee of Galaxy II.

As of the date of this Statement of Additional Information, the
trustees and officers of Galaxy II owned less than 1% of its outstanding
shares.

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<PAGE>

The following chart provides certain information about the trustee
fees for the year ended March 31, 1998:

<TABLE>
<CAPTION>
TOTAL
PENSION OR COMPENSA-
RETIREMENT TION FROM
BENEFITS FUND
AGGREGATE ACCRUED COMPLEX*
NAME OF COMPENSATION AS PART OF PAID TO
PERSON FROM GALAXY II GALAXY II EXPENSES TRUSTEES
- ------ -------------- ------------------ --------
<S> <C> <C> <C>
Bradford S. Wellman $3,599 None $38,500

Dwight E. Vicks, Jr. $4,021 None $43,000

Donald B. Miller** $3,665 None $39,000

Louis DeThomasis $3,647 None $39,000

John T. O'Neill $3,880 None $41,500

James M. Seed** $3,665 None $39,000
</TABLE>

* The "Fund Complex" consists of Galaxy II, The Galaxy Fund and The Galaxy
VIP Fund. Each trustee of Galaxy II also serves as a trustee of The Galaxy Fund
and The Galaxy VIP Fund.

** Deferred compensation in the amounts of $ 3,919 and $ 4,004 accrued during
Galaxy II's fiscal year ended March 31, 1998 for Messrs. Miller and Seed,
respectively.

ADVISORY, ADMINISTRATION, SUB-ADMINISTRATION,
CUSTODY AND TRANSFER AGENCY AGREEMENTS

INVESTMENT ADVISER AND ADMINISTRATOR

Fleet, an indirect subsidiary of Fleet Financial Group, Inc., serves
as the investment adviser to the Funds. Fleet's principal offices are located
at 75 State Street, Boston, Massachusetts 02109.

Pursuant to the Advisory Agreement with Galaxy II, Fleet, subject to
the general supervision of Galaxy II's Board of Trustees and in accordance with
each Fund's investment policies, manages each Fund, makes decisions with respect
to and places orders for all purchases and sales of its portfolio securities and
maintains related records. The fees paid to Fleet under the Advisory Agreement
are described in the Prospectus. Fleet bears all expenses in connection with
its duties under the Advisory Agreement.

For the fiscal years ended March 31, 1996, March 31, 1997 and March
31, 1998, Fleet earned advisory fees of $194,615, $324,858 and $523,353,
respectively, with respect to the Large Company Fund, $264,753, $311,685 and
$365,498, respectively, with

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<PAGE>

respect to the Small Company Fund, $55,279, $51,447 and $48,970,
respectively, with respect to the Utility Fund, and $117,603, $116,944 and
$113,719, respectively, with respect to the U.S. Treasury Fund.

Pursuant to its administration agreement with Galaxy II (the
"Administration Agreement"), Fleet National Bank ("FNB") generally assists in
certain aspects of the administration and operation of the Funds. FNB has
agreed to maintain office facilities for Galaxy II, furnish Galaxy II with
statistical and research data, clerical, accounting, and bookkeeping
services, certain other services such as internal auditing services required
by Galaxy II, and compute the net asset value and net income of the Funds.
In addition, FNB prepares the Funds' annual and semi-annual reports to the
SEC, federal and state tax returns, and filings with state securities
commissions, arranges for and bears the cost of processing share purchase and
redemption orders, maintains the Funds' financial accounts and records, and
generally assists in all aspects of Galaxy II's operations. Pursuant to the
Administration Agreement, FNB may delegate to another organization the
performance of some or all of these services, in which case FNB will be
responsible for all compensation payable to such organization and will remain
liable for losses or failures resulting from the actions or omissions of such
agent. FNB has entered into a Sub-Administration Agreement with First Data
Investor Services Group, Inc. ("Investor Services Group"), pursuant to which
Investor Services Group has agreed to provide Galaxy II with the services
which Galaxy II is entitled to receive under the Administration Agreement
with FNB.

For the fiscal years ended March 31, 1996, March 31, 1997 and March
31, 1998, FNB earned administration fees of $581,697, $974,572 and
$1,570,060, respectively, with respect to the Large Company Fund, $787,499,
$935,055 and $1,096,493, respectively, with respect to the Small Company
Fund, $164,968, $154,341 and $146,908, respectively, with respect to the
Utility Fund, and $352,810, $350,831 and $341,158, respectively, with respect
to the U.S. Treasury Fund.

FNB bears all expenses in connection with its duties under the
Administration Agreement and bears all of Galaxy II's expenses with the
following exceptions: brokerage fees and commissions; fees and expenses of
trustees who are not officers, directors or employees of Fleet, FNB, FD
Distributors or any of their affiliates; taxes; interest; sub-account fees
payable with respect to shares of the Funds held by defined contribution
plans; and any extraordinary non-recurring expenses, including litigation to
which Galaxy II may be a party. The fees paid to FNB under the
Administration Agreement are described in the Prospectus.

The Advisory and Administration Agreements provide that, absent
willful misfeasance, bad faith, gross negligence or reckless disregard of
duty (or, in the case of Fleet, a breach of fiduciary duty with respect to
the receipt of compensation for services), neither Fleet nor FNB, as the case
may be, shall be liable to Galaxy II for any error of judgment or mistake of
law or for any loss sustained by Galaxy II. The Advisory and Administration
Agreements are terminable without penalty by Galaxy II on sixty days' written
notice when authorized by vote of a majority of its Board of Trustees, or by
Fleet or FNB, as the case may be, on sixty days' written notice. In addition,
the Advisory Agreement is terminable without penalty by Galaxy II on sixty

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<PAGE>

days' written notice when authorized by a majority vote of
its outstanding voting shares and will automatically terminate in the event
of its "assignment" as defined in the 1940 Act.

Each of the Advisory and Administration Agreements provides that
the agreement remains in effect until June 30 of each year, unless earlier
terminated, as long as such continuance is annually approved by a vote of
trustees who are not parties to the contract or "interested persons," as
defined by the 1940 Act, of any such party cast in person at a meeting
specially called for the purpose of voting on the continuance of the
agreement.

Fleet Bank and Columbia Trust Company, affiliates of Fleet, are
paid fees for sub-account and administrative services performed with respect
to shares of the Funds held by defined contribution plans. Pursuant to
agreements with Galaxy II and Investor Services Group, Fleet Bank and
Columbia Trust Company will be paid $21.00 per year for each defined
contribution plan participant sub-account. As of June 30, 1998, there were
approximately 24,228 defined contribution plan participant sub-accounts
invested in shares of the Funds; thus it is expected that Fleet Bank will
receive annually approximately $508,788 for sub-account services. Investor
Services Group bears this expense directly, and shareholders of the Funds
bear this expense indirectly through fees paid to Investor Services Group for
transfer agency services.

AUTHORITY TO ACT AS INVESTMENT ADVISER

Banking laws and regulations currently prohibit a bank holding
company registered under the Bank Holding Company Act of 1956, as amended, or
any bank or non-bank affiliate thereof from sponsoring, organizing,
controlling or distributing the shares of a registered, open-end investment
company continuously engaged in the issuance of its shares, and prohibit
banks generally from issuing, underwriting, selling or distributing
securities such as shares of the Funds, but do not prohibit such a bank
holding company or its affiliates or banks generally from acting as
investment adviser, administrator, transfer agent or custodian to such an
investment company or from purchasing shares of such a company as agent for
and upon the order of customers. Fleet, FNB, the Funds' custodian and
certain financial institutions which have agreed to provide shareholder
support services that are banks or bank affiliates are subject to such
banking laws and regulations. Should legislative, judicial or administrative
action prohibit or restrict the activities of such companies in connection
with their services to the Funds, Galaxy II might be required to alter
materially or discontinue its arrangements with such companies and change its
method of operation. It is anticipated, however, that any resulting change
in the Funds' method of operation would not affect their net asset value per
share or result in financial losses to any shareholder.

CUSTODIAN AND TRANSFER AGENT

The Chase Manhattan Bank (the "Custodian") serves as custodian to
the Funds pursuant to a Mutual Fund Custody Agreement (the "Custody
Agreement"). Under the Custody Agreement, the Custodian has agreed to: (i)
maintain a separate account or accounts in the name of each Fund; (ii) hold
and disburse portfolio securities on account of each Fund; (iii) collect and

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<PAGE>

make disbursements of money on behalf of each Fund; (iv) collect and receive all
income and other payments and distributions on account of each Fund's portfolio
securities; and (v) respond to correspondence from security brokers and others
relating to its duties.

First Data Investor Services Group, Inc.("Investor Services Group")
serves as Galaxy II's transfer agent and dividend disbursing agent pursuant
to a Transfer Agency and Services Agreement ("Transfer Agency Agreement").
Under the Transfer Agency Agreement, Investor Services Group has agreed to:
(i) issue and redeem shares of each Fund; (ii) transmit all communications by
each Fund to its shareholders of record, including reports to shareholders,
dividend and distribution notices and proxy materials for meetings of
shareholders; (iii) respond to correspondence by security brokers and others
relating to its duties; and (iv) maintain shareholder accounts.

PERFORMANCE AND YIELD INFORMATION

From time to time, a Fund may quote its performance, as based upon its
total return, or its tax-equivalent yield in the case of the U.S. Treasury Fund,
in advertisements or in reports and other communications to shareholders. The
average annual total returns for the one-year and five-year periods ended March
31, 1998 were 47.29% and 21.91%, respectively, with respect to the Large Company
Fund, and 41.22% and 17.70%, respectively, with respect to the Small Company
Fund. The average annual total returns for the Large Company Fund and the Small
Company Fund for the period beginning October 1, 1990 (commencement of
operations) through March 31, 1998 were 21.03% and 20.80%, respectively. For
the U.S. Treasury Fund, the average annual total returns for the one-year and
five-year periods ended March 31, 1998 were 11.72% and 6.32%, respectively. The
average annual total return for the U.S. Treasury Fund for the period beginning
June 4, 1991 (commencement of operations) through March 31, 1998 was 7.93%. For
the Utility Fund, the total return for the one-year and five-year periods ended
March 31, 1998 were 39.07% and 12.65%, respectively. The average annual total
return for the Utility Fund for the period beginning January 5, 1993
(commencement of operations) through March 31, 1998 was 14.09%. Aggregate total
return may be shown by means of schedules, charts or graphs, and may indicate
subtotals of the various components of total return (that is, change in value of
initial investment, income dividends and capital gains distributions). A Fund's
"average annual total return" figures described in the Prospectus are computed
according to a formula prescribed by the SEC. The formula can be expressed as
follows:

n
P(1+T) =ERV

Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
N = number of years.
ERV = Ending Redeemable Value of a hypothetical $1,000
investment made at the beginning of a period, at the
end of a 1-, 5- or 10-year period (or

-18-
<PAGE>

fractional portion thereof), assuming reinvestment of
all dividends and distributions.

Yield is calculated by annualizing the net investment income
generated by the U.S. Treasury Fund over a specified thirty-day period
according to the following formula:

6
YIELD = 2[(a-b+1) -1]
---
cd

For purposes of this formula: "a" is dividends and interest earned during the
period; "b" is expenses accrued for the period (net of reimbursements); "c" is
the average daily number of shares outstanding during the period that were
entitled to receive dividends; and "d" is the maximum offering price per share
on the last day of the period.

The yield of the U.S. Treasury Fund for the 30-day period ended March
31, 1998 was 5.19%.

Tax-equivalent yield is calculated over a specified thirty-day period
by dividing that portion of the Fund's yield which is tax-exempt by one minus a
stated income tax rate and adding the product to that portion, if any, of the
yield of the Fund that is not tax-exempt.

A Fund's performance will vary from time to time depending upon market
conditions, the composition of its portfolio and its operating expenses.
Consequently, any given performance quotation should not be considered
representative of a Fund's performance for any specified period in the future.
In addition, because the performance will fluctuate, it may not provide a basis
for comparing an investment in a Fund with certain bank deposits or other
investments that pay a fixed yield for a stated period of time. Investors
comparing a Fund's performance with that of other mutual funds should give
consideration to the quality and maturity of the respective investment
companies' portfolio securities.

Comparative performance information may be used from time to time in
advertising the shares of a Fund, including data from Lipper Analytical
Services, Inc., Ibbotson Associates, Morningstar, Inc., the Dow Jones Industrial
Average, the BIG Index, the S&P 500, the S&P SmallCap 600 Index, the S&P
Utilities Index, the U.S. Treasury Index, and other industry publications.

Galaxy II may compare the performance of the Large Company Fund and
the Small Company Fund to certain U.S. diversified equity mutual funds, as
calculated by Morningstar, Inc. or another industry service and with that of the
S&P 500 and the S&P SmallCap 600 Index, respectively. The performance of the
Utility Fund may be compared to certain utility funds, as calculated by
Morningstar, Inc. or another industry service and with that of the S&P Utilities
Index. In addition, Galaxy II may compare the performance of the U.S.

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<PAGE>

Treasury Fund to certain U.S. fixed income mutual funds, as calculated by
Morningstar, Inc. or another industry service and with that of the U.S. Treasury
Index.

COUNSEL

Drinker Biddle & Reath LLP (of which Mr. McConnel, Secretary of Galaxy
II, is a partner), 1345 Chestnut Street, Philadelphia, Pennsylvania 19107, is
counsel to Galaxy II and will pass upon certain legal matters on its behalf.

INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers LLP, independent accountants, with offices
at One Post Office Square, Boston, Massachusetts 02109, currently serve as
auditors to Galaxy II. PricewaterhouseCoopers LLP performs an annual audit
of Galaxy II's financial statements and provides other services related to
filings with respect to securities regulations. Reports of its activities are
provided to the Board of Trustees.

GENERAL INFORMATION

Galaxy II is organized as an unincorporated business trust under the
laws of the Commonwealth of Massachusetts pursuant to a Declaration of Trust
dated February 22, 1990 (the "Trust Agreement"). Under the Trust Agreement, the
Board of Trustees has authority to create an unlimited number of shares of
beneficial interest with a par value of $.001 per share.

In the interest of economy and convenience, certificates representing
shares in Galaxy II are not physically issued. Investor Services Group
maintains a record of each shareholder's ownership of Galaxy II shares. Shares
do not have cumulative voting rights, which means that holders of more than 50%
of the shares voting for the election of trustees can elect all trustees.
Shares are transferable, but have no preemptive, conversion or subscription
rights. Shareholders generally vote by Fund, except with respect to the
election of trustees and the selection of independent accountants. At a
shareholders meeting held on June 15, 1994, trustees were elected and the
Advisory Agreement was approved with respect to each of the Funds. There will
normally be no meetings of shareholders for the purpose of electing trustees
unless and until such time as less than a majority of trustees holding office
have been elected by shareholders, at which time trustees then in office will
call a shareholders' meeting for the election of trustees. Under the 1940 Act,
shareholders of record of no less than two-thirds of the outstanding shares of
Galaxy II may remove a trustee through a declaration in writing or by vote cast
in person or by proxy at a meeting called for that purpose. Under the Trust
Agreement, trustees are required to call a meeting of shareholders for the
purpose of voting upon the question of removal of any such trustee when
requested in writing to do so by the shareholders of record of not less than 10%
of Galaxy II's outstanding shares.

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<PAGE>

Massachusetts law provides that shareholders could, under certain
circumstances, be held personally liable for the obligations of Galaxy II. The
Trust Agreement disclaims shareholder liability for acts or obligations of
Galaxy II, however, and requires that notice of the disclaimer be given in each
agreement, obligation or instrument entered into or executed by Galaxy II or a
trustee. The Trust Agreement provides for indemnification from Galaxy II's
property for all losses and expenses of any shareholder held personally liable
for the obligations of Galaxy II. Thus, the risk of a shareholder's incurring
financial loss on account of shareholder liability is limited to circumstances
in which Galaxy II would be unable to meet its obligations, a possibility that
Galaxy II's management believes is remote. Upon payment of any liability
incurred by Galaxy II, the shareholder paying the liability will be entitled to
reimbursement from the general assets of Galaxy II. Trustees intend to conduct
the operations of Galaxy II in such a way so as to avoid, as far as possible,
ultimate liability of the shareholders for liabilities of Galaxy II.

As of July 10, 1998, the name, address and percentage ownership of the
persons that owned of record 5% or more of the outstanding shares of any
portfolio of Galaxy II were as follows: Large Company Index Fund - - Gales &
Co., Fleet Investment Services, Mutual Funds Unit-NY/RO/T04A, 159 East Main
Street, Rochester, NY 14638, (33.58%); Fleet Savings Plus, c/o Norstar Trust
Company, Gales & Co., 150 East Main Street, Rochester, NY 14638 (15.54%); U.S.
Treasury Index Fund - - Gales & Co., Fleet Investment Services, Mutual Funds
Unit-NY/RO/T04A, 159 East Main Street, Rochester, NY 14638, (12.34%); Priests
Retirement Plan, Diocese of Albany, c/o Norstar Trust Company, Gales & Co., 150
East Main Street, Rochester, NY 14638, (5.89%). No person owned of record 5% or
more of the outstanding shares of the Small Company Index Fund, the Utility
Index Fund or the Municipal Bond Fund.

FINANCIAL STATEMENTS

Galaxy II's audited financial statements and notes thereto in
Galaxy II's Annual Report to Shareholders for the fiscal year ended March 31,
1998 (the "Annual Report") are incorporated into this Statement of Additional
Information by reference. No other parts of the Annual Report are
incorporated by reference herein. The financial statements included in the
Annual Report have been audited by PricewaterhouseCoopers LLP, whose report
thereon is incorporated herein by reference. Such financial statements have
been incorporated herein in reliance upon such report given upon the
authority of PricewaterhouseCoopers LLP as experts in accounting and
auditing. Additional copies of the Annual Report may be obtained at no
charge by telephoning Galaxy II at 1-800-628-0414.

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<PAGE>

GALAXY FUND II
MUNICIPAL BOND FUND
FORM N-1A
CROSS REFERENCE SHEET

PURSUANT TO RULE 495(a)

Part B Heading in Statement of
Item No. Additional Information
- -------- ----------------------

Cover Page Cover Page

Table of Contents Table of Contents

General Information and Not Applicable
History

Investment Objectives and Investment Objective; Investment
Policies Policies and Risk Considerations;
Investment Limitations

Management of the Fund Trustees and Officers

Control Persons and Principal See Prospectus--"Management of the
Holders of Securities Fund"

Investment Advisory and Advisory, Administration, Sub-
Other Services Administration, Custody and Transfer
Agency Agreements; Independent
Accountants; Counsel

Brokerage Allocation and Other Portfolio Transactions
Securities

Capital Stock and Other See Prospectus--"Description of
Securities Shares"

Purchases and Redemptions Additional Purchase and Redemption
Information

Tax Status Additional Information Concerning
Taxes

Underwriters Portfolio Transactions

Calculation of Performance Performance and Yield Information
Data

Financial Statements Financial Statements

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GALAXY FUND II

STATEMENT OF ADDITIONAL INFORMATION

MUNICIPAL BOND FUND

JULY 29, 1998

<PAGE>

TABLE OF CONTENTS

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INVESTMENT OBJECTIVE . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

INVESTMENT POLICIES AND RISK CONSIDERATIONS. . . . . . . . . . . . . . . . 2
U.S. Government Securities. . . . . . . . . . . . . . . . . . . . . . 2
Bank Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Securities of Other Investment Companies. . . . . . . . . . . . . . . 3
Futures Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Options on Futures Contracts. . . . . . . . . . . . . . . . . . . . . 5
Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . 5
Municipal Securities. . . . . . . . . . . . . . . . . . . . . . . . . 6
When-Issued and Delayed-Delivery Securities . . . . . . . . . . . . . 8
Valuation of Portfolio Securities . . . . . . . . . . . . . . . . . . 8
Ratings as Investment Criteria. . . . . . . . . . . . . . . . . . . . 9

INVESTMENT LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 9

PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 12

ADDITIONAL INFORMATION CONCERNING TAXES. . . . . . . . . . . . . . . . . . 13

TRUSTEES AND OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 15

ADVISORY, ADMINISTRATION, SUB-ADMINISTRATION,
CUSTODY AND TRANSFER AGENCY AGREEMENTS. . . . . . . . . . . . . . . . . 19
Investment Adviser, Administrator and Sub-Administrator . . . . . . . 19
Authority to Act as Investment Adviser. . . . . . . . . . . . . . . . 20
Custodian and Transfer Agent. . . . . . . . . . . . . . . . . . . . . 21

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION . . . . . . . . . . . . . . 21

PERFORMANCE AND YIELD INFORMATION. . . . . . . . . . . . . . . . . . . . . 22

COUNSEL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

INDEPENDENT ACCOUNTANTS. . . . . . . . . . . . . . . . . . . . . . . . . . 23

GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

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FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 24

APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1

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This Statement of Additional Information is meant to be read in
conjunction with the Prospectus of Galaxy Fund II ("Galaxy II") dated July 29,
1998, relating to the Municipal Bond Fund (the "Fund"), and is incorporated by
reference in its entirety into that Prospectus (the "Prospectus"). Because this
Statement of Additional Information is not itself a prospectus, no investment in
shares of the Fund should be made solely upon the information contained herein.
Copies of the Prospectus relating to the Fund may be obtained by calling First
Data Distributors, Inc., Galaxy II's distributor, at 1-800-628-0414.
Information regarding the status of shareholder accounts may be obtained by
calling First Data Investor Services Group, Inc., Galaxy II's transfer agent, at
1-800-628-0414.

SHARES OF THE FUND ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, FLEET FINANCIAL GROUP, INC. OR ANY OF ITS AFFILIATES, FLEET
INVESTMENT ADVISORS INC., OR ANY FLEET BANK. SHARES OF THE FUND ARE NOT
FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL VARY AS A RESULT OF MARKET CONDITIONS OR OTHER FACTORS SO THAT SHARES
OF THE FUND, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
AN INVESTMENT IN THE FUND INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS
OF PRINCIPAL AMOUNT INVESTED.

<PAGE>

INVESTMENT OBJECTIVE

The Fund seeks to provide investors the highest level of income exempt
from regular federal income tax as is consistent with prudent investment
management and preservation of capital. Under normal market conditions, the
Fund will invest substantially all of its total assets in a diversified
portfolio of municipal securities. Under normal market conditions, at least 65%
of the Fund's municipal securities will be rated at least A or the equivalent by
major rating agencies. The Fund is a series of shares of Galaxy II, a no-load,
open-end investment company. Currently, there are four other series of shares
offered to the public by Galaxy II.

A Prospectus and Statement of Additional Information describing the
four other investment options currently available to the public through Galaxy
II, i.e. the Large Company Index Fund, the Small Company Index Fund, the U.S.
Treasury Index Fund and the Utility Index Fund (collectively with the Fund, the
"Funds"), can be obtained by calling Galaxy II at 1-800-628-0414.

INVESTMENT POLICIES AND RISK CONSIDERATIONS

The following policies supplement the descriptions of the Fund's
investment objective and policies in the Prospectus.

U.S. GOVERNMENT SECURITIES

As noted in the Prospectus, the Fund may invest in short-term debt
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities ("U.S. Government Securities"). U.S. Government Securities in
which the Fund may invest include direct obligations of the U.S. Treasury and
obligations issued by U.S. Government agencies and instrumentalities. Included
among direct obligations of the United States are Treasury Bills, Treasury Notes
and Treasury Bonds, which differ principally in terms of their maturities.
Included among the securities issued by U.S. Government agencies and
instrumentalities are: securities that are supported by the full faith and
credit of the United States (such as Government National Mortgage Association
certificates); securities that are supported by the right of the issuer to
borrow from the U.S. Treasury (such as securities of Federal Home Loan Banks);
and securities that are supported by the credit of the instrumentality (such as
Federal National Mortgage Association and Federal Home Loan Mortgage Corporation
bonds).

BANK OBLIGATIONS

Certificates of deposit in which the Fund may invest are generally
limited to those instruments issued by U.S. and foreign banks, savings and loan
associations and other banking institutions having total assets in excess of $1
billion. Certificates of deposit ("CDs") are short-term negotiable obligations
of commercial banks. The Fund may invest in U.S. dollar-denominated CDs,
including instruments issued or supported by the credit of U.S. or foreign banks
or savings institutions having total assets at the time of purchase in excess of
$1 billion.

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The Fund will invest in an obligation of a foreign bank or a foreign branch of a
U.S. bank only if Fleet Investment Advisors Inc. ("Fleet"), the Fund's adviser,
deems the obligation to present minimal credit risks. Nevertheless, this kind
of obligation entails risks that are different from those of investments in
domestic obligations of U.S. banks due to differences in political, regulatory
and economic systems and conditions.

SECURITIES OF OTHER INVESTMENT COMPANIES

The Fund may invest in securities of other investment companies to the
extent permitted under the Investment Company Act of 1940, as amended (the "1940
Act"). Presently, under the 1940 Act, the Fund may hold securities of another
investment company in amounts which (a) do not exceed 3% of the total
outstanding voting stock of such company, (b) do not exceed 5% of the value of
the Fund's total assets and (c) when added to all other investment company
securities held by the Fund, do not exceed 10% of the value of the Fund's total
assets. Purchases of securities of other investment companies may subject
shareholders to duplicate fees and expenses.

FUTURES CONTRACTS

The Fund may enter into interest rate futures contracts and municipal
bond index futures contracts. The Fund will enter into such futures contracts
only for "bona fide hedging" purposes, or as otherwise permitted by Commodity
Futures Trading Commission ("CFTC") regulations. The Fund may not engage in
futures activities if the aggregate initial margin deposits on its existing
futures contracts and the premiums paid for unexpired options required to
establish positions other than those considered to be "bona fide hedging" by the
CFTC would exceed 5% of the Fund's net asset value, after taking into account
unrealized profits and unrealized losses on futures contracts it has entered
into.

An interest rate futures contract is a standardized contract for the
future delivery of a specified security (such as a U.S. Treasury bond or U.S.
Treasury note) or its equivalent at a future date at a price set at the time of
the contract. A municipal bond index futures contract is an agreement pursuant
to which two parties agree to take or make delivery of an amount of cash equal
to the difference between the value of the index at the close of the last
trading day of the contract and the price at which the index contract was
originally written. No physical delivery of the underlying securities is made.
By entering into an interest rate or municipal bond index futures contract, the
Fund is able to seek to protect its assets from fluctuations in interest rates
on tax-exempt securities without actually buying or selling the long-term
municipal securities.

No consideration is paid or received by the Fund upon the purchase or
sale of a futures contract. Upon entering into a futures contract, the Fund
will be required to deposit in a segregated account with its custodian an amount
of cash or liquid securities equal to approximately 1% to 10% of the contract
amount (this amount is subject to change by the exchange on which the contract
is traded and brokers may require a higher amount). This amount is known as
"initial margin" and is in the nature of a performance bond or good faith
deposit on the contract, which is returned to the Fund upon termination of the
futures contract,

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<PAGE>

assuming all contractual obligations have been satisfied. The broker will have
access to amounts in the margin account if the Fund fails to meet its
contractual obligations. Subsequent payments, known as "variation margin," to
and from the broker, will be made daily as the price of the index or securities
underlying the futures contract fluctuates, making the long and short positions
in the futures contract more or less valuable, a process known as
"marking-to-market." At any time prior to the expiration of a futures contract,
the Fund may elect to close the position by taking an opposite position, which
will operate to terminate the Fund's existing position in the contract.

Galaxy II will set aside with its custodian, or with a designated
sub-custodian, cash or liquid securities at least equal to the underlying
commodity value of each long position the Fund assumes in commodity futures
contracts or will take other actions consistent with regulatory requirements to
avoid leverage.

There are several risks in connection with investing in futures
contracts. Successful use of such futures contracts by the Fund is subject to
the ability of Fleet to predict correctly movements in the direction of interest
rates. Such predictions involve skills and techniques which may be different
from those involved in the management of a municipal bond portfolio. In
addition, although the Fund intends to enter into futures contracts only if
there is an active market for such contracts, there is no assurance that a
liquid market will exist for the contracts at any particular time. Most futures
exchanges limit the amount of fluctuation permitted in futures contract prices
during a single trading day. Once the daily limit has been reached in a
particular contract, no trades may be made that day at a price beyond that
limit. It is possible that futures contract prices could move to the daily
limit for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and subjecting the Fund to
substantial losses. In such event, and in the event of adverse price movements,
the Fund would continue to be required to make daily cash payments of variation
margin. Further, there can be no assurance that there will be a perfect
correlation between movements in the price of the security or index underlying
the futures contract and movements in the price of the municipal securities
which are the subject of the hedge. The degree of imperfection of correlation
depends upon various circumstances, such as variations in speculative market
demand for futures contracts and municipal securities and technical influences
in futures trading, and differences between the municipal securities being
hedged and the municipal securities underlying the futures contracts, in such
respects as interest rate levels, maturities and creditworthiness of issuers. A
decision of whether, when and how to hedge involves the exercise of skill and
judgment and even a well-conceived hedge may be unsuccessful to some degree
because of market behavior or unexpected trends in interest rates.

Losses incurred in futures transactions and the costs of these
transactions will affect the Fund's performance. In addition, the Fund might
have to sell securities to meet daily variation margin requirements at a time
when it would be disadvantageous to do so. These sales of securities may, but
will not necessarily, be at increased prices.

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<PAGE>

OPTIONS ON FUTURES CONTRACTS

The Fund may purchase put and call options on interest rate and
municipal bond index futures contracts which are traded on a United States
exchange as a hedge against changes in interest rates, and may enter into
closing transactions with respect to such options to terminate existing
positions. The Fund would sell put and call options on futures contracts only
as part of closing sale transactions to terminate its options positions. There
is no guarantee that such closing transactions can be effected.

Options on futures contracts, as contrasted with the direct investment
in such contracts, gives the purchaser the right, in return for the premium
paid, to assume a position in futures contracts at a specified exercise price at
any time prior to the expiration date of the options. Upon exercise of an
option, the delivery of the futures position by the writer of the option to the
holder of the option will be accompanied by delivery of the accumulated balance
in the writer's futures margin account, which represents the amount by which the
market price of the futures contract exceeds, in the case of a call, or is less
than, in the case of a put, the exercise price of the option on the futures
contract. The potential loss related to the purchase of an option on a futures
contract is limited to the premium paid for the option (plus transaction costs).
Because the value of the option is fixed at the point of sale, there are no
daily cash payments to reflect changes in the value of the underlying contract;
however, the value of the option does change daily and that change would be
reflected in the net asset value of the Fund.

Galaxy II will set aside with its custodian, or with a designated
sub-custodian, cash or liquid securities at least equal to the underlying
commodity value of each long position the Fund assumes in options on futures
contracts or will take other actions consistent with regulatory requirements to
avoid leverage.

There are several risks relating to options on futures contracts. The
ability to establish and close out positions on such options will be subject to
the existence of a liquid market. In addition, the Fund's purchase of put or
call options will be based upon predictions as to anticipated interest rate
trends by Fleet, which could prove to be inaccurate. Even if these expectations
are correct there may be an imperfect correlation between the change in the
value of the options and of the Fund's portfolio securities.

REPURCHASE AGREEMENTS

The Fund may invest in repurchase agreement transactions pending
investment of proceeds or for other temporary purposes. The Fund will enter
into repurchase agreements only with (a) banks that are the issuers of
instruments acceptable for purchase by the Fund or that are on the "approved
list" maintained by Fleet or (b) primary non-bank dealers of U.S. Government
Securities that are listed on the Federal Reserve Bank of New York's list of
reporting dealers and that meet certain other criteria. Repurchase agreements
are contracts

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<PAGE>

under which the buyer of a security simultaneously commits to resell the
security to the seller at an agreed-upon price and date. Under the terms of a
typical repurchase agreement, the Fund would acquire a U.S. Government Security
for a relatively short period (not more than seven days) subject to an
obligation of the seller to repurchase, and the Fund to resell, the U.S.
Government Security at an agreed-upon price and time, thereby determining the
yield during the Fund's holding period. This arrangement results in a fixed
rate of return that is not subject to market fluctuations during the Fund's
holding period. Under each repurchase agreement, the selling institution will
be required to maintain the value of the securities subject to the repurchase
agreement at not less than 101% of the repurchase price (including accrued
interest).

Repurchase agreements involve certain risks in the event of default or
insolvency of the other party, including possible delays or restrictions upon
the Fund's ability to dispose of the underlying securities. In evaluating these
potential risks, Fleet, acting under the supervision of the Board of Trustees,
and on an ongoing basis, monitors (a) the value of the collateral underlying
each repurchase agreement of the Fund to determine whether the value is at least
equal to the total amount of the repurchase obligation, including interest, and
(b) the creditworthiness of the banks and dealers with which the Fund enters
into repurchase agreements. The Fund will not enter into repurchase agreements
that would cause more than 15% of its net assets to be invested in illiquid
securities.

A joint trading account may be used by the Fund to enter into
repurchase agreements. The Fund's decision to invest in the joint account will
be solely at its option; the Fund will not be required either to invest a
minimum amount or to maintain a minimum balance. The Board of Trustees will
evaluate annually the joint account arrangement and will continue participation
only if it determines that there is a reasonable likelihood that the Fund and
its shareholders would benefit from continued participation and that no
participant will be treated on a less advantageous basis than another
participant.

MUNICIPAL SECURITIES

The term "municipal securities" as used in the Prospectus and this
Statement of Additional Information means debt obligations issued by, or on
behalf of, states, territories and possessions of the United States and the
District of Columbia and their political subdivisions, agencies and
instrumentalities or multi-state agencies or authorities, the interest from
which debt obligations is, in the opinion of bond counsel to the issuer,
excluded from gross income for regular federal income tax purposes. Municipal
securities generally are understood to include debt obligations issued to obtain
funds for various public purposes, including the construction of a wide range of
public facilities, refunding of outstanding obligations, payment of general
operating expenses and extensions of loans to public institutions and
facilities. Private activity bonds that are issued by or on behalf of public
authorities to finance privately operated facilities are considered to be
municipal securities if the interest paid on them qualifies as excluded from
gross income (but not necessarily from alternative minimum taxable income) for
federal income tax purposes in the opinion of bond counsel to the issuer ("AMT
bonds"). The Fund may invest up to 20% of its assets in AMT bonds.

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<PAGE>

Municipal securities may be issued to finance lifecare facilities,
which are an alternative form of long-term housing for the elderly that offer
residents the independence of a condominium life-style and, if needed, the
comprehensive care of nursing home services. Bonds to finance these facilities
have been issued by various state industrial development authorities. Because
the bonds are secured only by the revenues of each facility and not by state or
local government tax payments, they are subject to a wide variety of risks,
including a drop in occupancy levels, the difficulty of maintaining adequate
financial reserves to secure estimated actuarial liabilities, the possibility of
regulatory cost restrictions applied to healthcare delivery and competition
from alternative healthcare or conventional housing facilities.

Municipal leases are municipal securities that may take the form of a
lease or an installment purchase contract issued by state and local governmental
authorities to obtain funds to acquire a wide variety of equipment and
facilities such as fire and sanitation vehicles, computer equipment and other
capital assets. These obligations have evolved to make it possible for state
and local government authorities to acquire property and equipment without
meeting constitutional and statutory requirements for the issuance of debt.
Thus, municipal leases have special risks not normally associated with municipal
securities. These obligations frequently contain "non-appropriation" clauses
that provide that the governmental issuer of the obligation has no obligation to
make future payments under the lease or contract unless money is appropriated
for those purposes by the legislative body on a yearly or other periodic basis.
In addition to the non-appropriation risk, municipal leases represent a type of
financing that has not yet developed the depth of marketability associated with
other municipal securities. Moreover, although municipal leases will be secured
by the leased equipment, the disposition of the equipment in the event of
foreclosure might prove to be difficult. The Fund does not intend to invest
more than 5% of its net assets in municipal leases.

The yields on municipal securities are dependent on a variety of
factors, including general economic and monetary conditions, money market
factors, conditions of the municipal securities market, the size of a particular
offering, maturity of the obligation, and rating of the issue.

Municipal securities may also be subject to the provisions of
bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors, such as the Federal Bankruptcy Code, and laws, if any, which may be
enacted by Congress or state legislatures extending the time for payment of
principal or interest, or both, or imposing other constraints upon enforcement
of such obligations or upon the ability of municipalities to levy taxes. There
is also the possibility that as a result of litigation or other conditions the
power or ability of any one or more issuers to pay, when due, the principal of
and interest on its or their municipal securities may be materially affected.

The Fund will not invest more than 25% of its total assets in
municipal securities whose issuers conduct their principal activities in the
same state. The Fund may invest without limitation in municipal securities that
are repayable out of revenue streams generated from economically related
projects or facilities. Investments in these obligations could involve an
increased risk to the Fund should any of the related projects or facilities
experience financial

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<PAGE>

difficulties. In addition, there could be economic, business or political
developments or changes which might affect all municipal securities of a similar
type. However, the Fund believes that the most important consideration
affecting risk is the quality of particular issues of municipal securities
rather than factors affecting all, or broad classes of, municipal securities.

Tax legislation in recent years has included several provisions that
may affect the supply of, and the demand for, municipal securities, as well as
the tax-exempt nature of interest paid on those obligations. Neither Galaxy II
nor Fleet can predict with certainty the effect of recent tax law changes upon
the municipal securities market, including the availability of instruments for
investment by the Fund. In addition, neither Galaxy II nor Fleet can predict
whether additional legislation adversely affecting the municipal securities
market will be enacted in the future. Galaxy II will monitor legislative
developments and consider whether changes in the investment objective or
policies of the Fund need to be made in response to those developments.

WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES

Municipal securities are subject to changes in value based upon the
public's perception of the creditworthiness of the issuers and changes, real or
anticipated, in the level of interest rates. In general, municipal securities
tend to appreciate when interest rates decline and depreciate when interest
rates rise. Purchasing municipal securities on a when-issued or
delayed-delivery basis, therefore, can involve the risk that the yields
available in the market when the delivery takes place actually may be higher
than those obtained in the transaction itself. To account for this risk, a
separate account of the Fund consisting of cash or liquid securities equal to
the amount of the when-issued or delayed-delivery commitments will be
established at the Fund's custodian bank. For the purpose of determining the
adequacy of the securities in the account, the deposited securities will be
valued at market or fair value. If the market or fair value of such securities
declines, additional cash or securities will be placed in the account on a daily
basis so that the value of the account will equal the amount of such commitments
by the Fund. Upon the settlement date of the when-issued or delayed-delivery
securities, the Fund will meet its obligations from the then available cash
flow, sale of securities held in the separate account, sale of other securities
or, although it would not normally expect to do so, from the sale of the
securities themselves (which may have a greater or lesser value than the Fund's
payment obligations). Sales of securities to meet such obligations may involve
the realization of capital gains, which are not exempt from federal income
taxes.

VALUATION OF PORTFOLIO SECURITIES

Debt securities of U.S. issuers (other than U.S. Government Securities
and short-term investments), including municipal securities, are valued by First
Data Investor Services Group, Inc. ("Investor Services Group"), the Fund's
sub-administrator, after consultation with a pricing service. When, in the
judgment of the pricing service, quoted bid prices for investments of the Fund
are readily available and are representative of the bid side of the market,
these investments are valued at the mean between the quoted bid prices and asked
prices. Investments of the Fund that are not regularly quoted are carried at
fair value as determined by

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<PAGE>

the Board of Trustees, which may rely on the assistance of the pricing service.
The procedures of the pricing service are reviewed periodically by Fleet under
the general supervision and responsibility of Galaxy II's Board of Trustees.

Portfolio securities which are listed on the New York Stock Exchange
or the American Stock Exchange are valued at the last quoted sales price, or if
no sales occurred, the closing bid price. Investments in U.S. Government
Securities (other than short-term investments) are valued at the average of the
quoted bid and asked prices in the over-the-counter market. Short-term
investments that mature in 60 days or less are valued on the basis of amortized
cost (which involves valuing an investment instrument at its cost and,
thereafter, assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument) unless Galaxy II's Board of Trustees has determined
that amortized cost does not approximate market value. Other securities for
which market quotations are readily available are valued as nearly as possible
in the manner described above. Securities may be valued by a pricing service
when such prices are believed to reflect the fair market value of such
securities. Other assets and securities for which market quotations are not
readily available are valued based on fair value as determined in good faith in
accordance with procedures established by the Board of Trustees.

RATINGS AS INVESTMENT CRITERIA

The ratings of nationally recognized statistical rating organizations
("NRSROs") such as Standard & Poor's Ratings Group ("S&P") or Moody's Investors
Service, Inc. ("Moody's") represent the opinions of those organizations as to
the quality of securities that they rate. Although these ratings, which are
relative and subjective and are not absolute standards of
quality, will be used by Fleet as initial criteria for the selection of
portfolio securities on behalf of the Fund, Fleet will also rely upon its own
analysis to evaluate potential investments.

Subsequent to its purchase by the Fund, an issue of securities may
cease to be rated or its rating may be reduced below the minimum required for
purchase by the Fund. Although a change in rating may not necessarily require
the sale of the securities by the Fund, Fleet will consider the event in its
determination of whether the Fund should continue to hold the securities. In
the event of a default by the issuer of the security, the Fund will dispose of
the security as soon as practicable, unless Galaxy II's Board of Trustees
determines that disposal of the security would not be in the best interests of
the Fund. To the extent that a NRSRO's ratings change as a result of a change
in the NRSRO or its rating system, the Fund will attempt to use comparable
ratings as standards for its investments in accordance with its investment
objective and policies.

INVESTMENT LIMITATIONS

The investment limitations set forth below may not be changed without
the approval by a vote of a majority of the outstanding shares of the Fund. A
majority vote by

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shareholders is defined, with respect to the approval of an investment advisory
agreement or a change in a fundamental investment objective or policy as the
lesser of (a) 67% or more of the shares present at the meeting, if the holders
of more than 50% of the outstanding shares of the Fund are present or
represented by proxy, or (b) more than 50% of the outstanding shares of the
Fund.

The Fund may not:

1. Under normal market conditions invest less than 80% of its net
assets in municipal securities.

2. With respect to 75% of its total assets, purchase the securities
of any issuer if as a result more than 5% of the value of the Fund's total
assets would be invested in the securities of such issuer, except that this 5%
limitation does not apply to U.S. Government Securities. For purposes of this
limitation, the issuer will be identified based on a determination of the source
of assets and revenues committed to meeting interest and principal payments of
each security. The Fund will regard each state and each of its political
subdivisions, agencies and instrumentalities and each multi-state agency, as
separate issuers for purposes of this restriction. If private companies are
responsible for payment of principal and interest, the Fund will regard each
such company as a separate issuer for purposes of this restriction. All
securities of a foreign government and its agencies will be treated as a single
issuer for purposes of this restriction.

3. Borrow money or issue senior securities except that the Fund may
borrow from banks for temporary or emergency purposes, and not for leveraging,
and then in amounts not in excess of 33 1/3% of the value of the Fund's total
assets at the time of such borrowing; or mortgage, pledge or hypothecate any
assets except in connection with any bank borrowing and in amounts not in excess
of the lesser of the dollar amounts borrowed or 33 1/3% of the value of the
Fund's total assets at the time of such borrowing. The Fund will repay all
borrowings before making additional investments. For purposes of this
restriction, collateral arrangements with respect to (a) the purchase and sale
of options on futures contracts and (b) initial and variation margin for futures
contracts, will not be deemed to be issuances of senior securities or to be
pledges of the Fund's assets.

4. Purchase any securities that would cause 25% or more of the value
of the Fund's net assets at the time of purchase to be invested in the
securities of issuers conducting their principal business activities in the same
state.

5. Make loans, except that the Fund may purchase or hold debt
obligations and enter into repurchase agreements, as described herein and in the
Prospectus.

6. Underwrite any issue of securities except to the extent that the
sale of portfolio securities in accordance with the Fund's investment objective,
policies and limitations may be deemed to be underwriting.

-10-
<PAGE>

7. Purchase or sell real estate or real estate limited partnership
interests, or invest in oil, gas or mineral leases, or mineral exploration or
development programs, except that the Fund may invest in securities secured by
real estate mortgages or interests therein and may purchase securities issued by
companies that invest or deal in any of the above.

8. Make short sales of securities or maintain a short position.

9. Purchase securities of other investment companies except as they
may be acquired in connection with a merger, consolidation, acquisition,
reorganization or offer of exchange and except as permitted under the 1940 Act.

10. With respect to 75% of its total assets, purchase more than 10%
of the voting securities of any one issuer, more than 10% of the securities of
any class of any one issuer or more than 10% of the outstanding debt securities
of any one issuer; provided that this limitation shall not apply to investments
in U.S. Government Securities. The Fund will regard each state and each of its
political subdivisions, agencies and instrumentalities and each multi-state
agency, as separate issuers for purposes of this restriction. If private
companies are responsible for payment of principal and interest, the Fund will
regard each such company as a separate issuer for purposes of this restriction.
All securities of a foreign government and its agencies will be treated as a
single issuer for purposes of this restriction.

11. Purchase securities on margin, except that the Fund may obtain
any short-term credits necessary for the clearance of purchases and sales of
securities. For purposes of this restriction, the deposit or payment of initial
or variation margin in connection with futures contracts or related options will
not be deemed to be a purchase of securities on margin by the Fund.

12. Invest in commodities, except that the Fund may invest in futures
contracts and options thereon as described herein and in the Prospectus.

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

14. Invest more than 15% of the value of the Fund's net assets in
securities which may be illiquid because of legal or contractual restrictions on
resale or securities for which there are no readily available market quotations.

15. Invest more than 25% of its assets in the securities of issuers
in any single industry; provided that there shall be no limitation on the
purchase of municipal securities and U.S. Government Securities. For the
purposes of this restriction, private activity bonds, where the payment of
principal and interest is the ultimate responsibility of companies within the
same industry, are grouped together as an "industry."

If a percentage restriction (other than that contained in investment
limitation number 3) is adhered to at the time of an investment, a later
increase or decrease in the percentage of assets resulting from a change in the
values of portfolio securities or in the amount of the Fund's assets will not
constitute a violation of such restriction.

-11-
<PAGE>

PORTFOLIO TURNOVER

Galaxy II cannot accurately predict the Fund's portfolio turnover
rate. However, the annual turnover rate of the Fund generally is expected to be
less than 100%. For the fiscal years ended March 31, 1997 and March 31, 1998,
the Fund's portfolio turnover rates were 7% and 28%, respectively. Portfolio
turnover rate is calculated by dividing the lesser of the Fund's annual sales or
purchases of portfolio securities by the monthly average value of securities in
the Fund during the year, excluding any portfolio security, the maturity of
which at the time of acquisition was one year or less. Higher portfolio
turnover rates can result in corresponding increases in brokerage commissions.
The Fund will not consider its turnover rate a limiting factor in making
investment decisions consistent with its investment objective and policies.

PORTFOLIO TRANSACTIONS

Fleet will select specific portfolio investments and effect
transactions for the Fund. Fleet seeks to obtain the best net price and the
most favorable execution of orders. Fleet may, in its discretion, effect
transactions in portfolio securities with dealers who provide research advice or
other services to the Fund or Fleet. Fleet is authorized to pay a broker or
dealer who provides such brokerage and research services a commission for
executing a portfolio transaction for the Fund which is in excess of the amount
of commission another broker or dealer would have charged for effecting that
transaction if Fleet determines in good faith that such commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either that particular
transaction or Fleet's overall responsibilities to the Fund and to Galaxy II.
Such brokerage and research services might consist of reports and statistics
relating to specific companies or industries, general summaries of groups of
stocks or bonds and their comparative earnings and yields, or broad overviews of
the stock, bond and government securities markets and the economy. The fees
under the investment advisory agreement between Galaxy II and Fleet are not
reduced by reason of receiving such brokerage and research services. The Board
of Trustees will periodically review the commissions paid by the Fund to
determine if the commissions paid over representative periods of time were
reasonable in relation to the benefits inuring to the Fund.

Municipal securities and U.S. Government Securities are generally
purchased from underwriters or dealers, although certain newly issued municipal
securities and U.S. Government Securities may be purchased directly from the
issuing agency or instrumentality. No brokerage commissions are typically paid
on purchases and sales of municipal securities or U.S. Government Securities.

Transactions on U.S. stock exchanges involve the payment of negotiated
brokerage commissions. There is generally no stated commission in the case of
securities traded in U.S. over-the-counter markets, but the prices of those
securities include undisclosed commissions or mark-ups. The cost of securities
purchased from underwriters includes an

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<PAGE>

underwriting commission or concession, and the prices at which securities are
purchased from and sold to dealers include a dealer's mark-up or mark-down.

Galaxy II is required to identify any securities of its regular
brokers or dealers or their parents that Galaxy II has acquired during its most
recent fiscal year. At March 31, 1998, the Large Company Index Fund held
common stock of (a) Chase Manhattan Corp. in the amount of $4,069,718; (b)
Lehman Brothers Holdings, Inc. in the amount of $539,100; and (c) Morgan
Stanley, Dean Witter, Discover & Co. in the amount of $3,101,269.

ADDITIONAL INFORMATION CONCERNING TAXES

As described above and in the Prospectus, the Fund is designed to
provide shareholders with current income which is excluded from gross income for
regular federal income tax purposes. The Fund is not intended to constitute a
balanced investment program and is not designed for investors seeking capital
gains or maximum tax-exempt income irrespective of fluctuations in principal.
Investment in the Fund would not be suitable for tax-exempt institutions,
qualified retirement plans (including those that cover self-employed
individuals) and individual retirement accounts since such investors would not
gain any additional tax benefit from the receipt of tax-exempt income.

The Fund has qualified each year in the past and intends to qualify
each year in the future as a "regulated investment company" under the Code.
Provided that the Fund (a) is a regulated investment company and (b) distributes
to its shareholders (i) at least 90% of its "investment company taxable income"
(that is, its income minus its "net capital gains" and after taking into account
certain required adjustments) and (ii) at least 90% of its tax-exempt interest
income (reduced by certain expenses), the Fund generally will not be subject to
federal income tax to the extent its net investment income (that is, its income
other than its net realized capital gains) and its net realized long-term and
short-term capital gains are distributed to its shareholders in accordance with
the Code. If the Fund were to fail to meet these tests, the Fund would be
taxed on its taxable income at regular corporate rates without any deduction for
dividends to shareholders, and shareholders would be taxable on Fund dividends,
including dividends derived from tax-exempt interest.

Although the Fund expects to be relieved of all or substantially all
federal, state and local income and franchise taxes, portions of the Fund's
income may be subject to state or local tax in some jurisdictions. Any such
taxes paid by the Fund would reduce the amount of income and gains available for
distribution to shareholders.

The Fund expects to pay dividends and to make distributions as
necessary to avoid the application of the 4% non-deductible excise tax measured
with respect to certain undistributed amounts of taxable ordinary income and
capital gain. The Fund may also, in order to avoid the 4% excise tax, declare
one or more dividends in October, November or December of

-13-
<PAGE>

any calendar year, payable to shareholders of record on a specified date in such
a month. If the Fund declares such dividends, then each such shareholder will
be treated as receiving such dividends and the Fund will be treated as having
paid such dividends on December 31 of that year provided that the Fund pays such
dividends to such shareholders during January of the following calendar year.
As a general rule, dividends paid by the Fund will qualify for the
dividends-received deduction for corporate shareholders only to the extent the
Fund's dividends are attributable to dividends received by the Fund from U.S.
corporations.

In order for the Fund to pay exempt-interest dividends for any taxable
year, at the close of each taxable quarter, at least 50% of the aggregate value
of the Fund's portfolio must consist of exempt-interest obligations. Within 60
days after the close of the taxable year of the Fund, Galaxy II will notify the
Fund's shareholders of the portion of the dividends paid that constitutes an
exempt-interest dividend with respect to that taxable year. The percentage of
total dividends paid by the Fund with respect to any taxable year that qualifies
as federal exempt-interest dividends will be the same for all shareholders
receiving dividends from the Fund for that year.

A portion of the interest on indebtedness incurred by a shareholder to
purchase or carry shares of the Fund, equal to the percentage of the total
non-capital gain dividends distributed during the shareholder's taxable year
that are exempt-interest dividends, is not deductible for federal income tax
purposes. In addition, the Code may require a shareholder, if he or she
receives exempt-interest dividends, to treat as federal taxable income a portion
of certain otherwise non-taxable social security and railroad retirement benefit
payments. Furthermore, that portion of any exempt-interest dividend paid by the
Fund which represents income derived from "private activity bonds" held by the
Fund may not retain its tax-exempt status in the hands of a shareholder who is a
"substantial user" of a facility financed by such bonds, or a "related person"
thereof.

While exempt-interest dividends are exempt from regular federal income
tax, they may be subject to alternative minimum tax (currently imposed at the
rate of 26%-28% on non-corporate taxpayers and at the rate of 20% in the case of
corporate taxpayers), in two circumstances. First, exempt-interest dividends
derived from private activity bonds issued after August 7, 1986 generally will
constitute an item of tax preference for both corporate and non-corporate
taxpayers. Second, exempt-interest dividends derived from all bonds, regardless
of the date of issue, must be taken into account by corporate taxpayers in
determining certain adjustments for alternative minimum tax purposes. Receipt
of exempt-interest dividends may result in collateral federal income tax
consequences to certain other taxpayers, including subchapter S corporate
shareholders, financial institutions, property and casualty insurance companies,
and foreign corporations engaged in trade or business in the United States.
Prospective investors should consult their own tax advisers as to such
consequences.

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<PAGE>

Investors considering buying shares of the Fund on or just prior to
the record date for a taxable dividend or capital gain distribution should be
aware that the amount of the forthcoming dividend or distribution payment,
although in effect a return of capital, will be a taxable dividend or
distribution payment.

If a shareholder fails to furnish a correct taxpayer identification
number, fails to report fully dividend or interest income, or fails to certify
that he or she has provided a correct taxpayer identification number and that he
or she is not subject to backup withholding, then the shareholder may be subject
to a 31% "backup withholding tax" with respect to (a) dividends and
distributions and (b) the proceeds of any sales or redemptions of the Fund's
shares. An individual's taxpayer identification number is his or her social
security number. The 31% "backup withholding tax" is not an additional tax and
may be credited against a taxpayer's regular federal income tax liability.

The foregoing is only a summary of certain tax considerations
generally affecting the Fund and its shareholders, and is not intended as a
substitute for careful tax planning. Shareholders are urged to consult their
tax advisers with specific reference to their own tax situations, including
their state and local tax liabilities.

TRUSTEES AND OFFICERS

The trustees and executive officers of Galaxy II, their addresses,
ages and their principal occupations during the past five years and other
affiliations are set forth below. Each trustee who is an "interested person" of
Galaxy II, as defined in the 1940 Act, is indicated by an asterisk.

Positions Held with Galaxy II and Principal
Name, Address and Age Occupation(s) During Past 5 Years
--------------------- -------------------------------------------

Dwight E. Vicks, Jr. Trustee and Chairman of the Board
Vicks Lithograph &
Printing Corporation President & Director, Vicks Lithograph &
Commercial Drive Printing Corporation (book manufacturing
P.O. Box 270 and commercial printing); Director, Utica
Yorkville, NY 13495 First Insurance Company; Trustee, Savings
Age 65 Bank of Utica; Director, Monitor Life
Insurance Company; Director, Commercial
Travelers Mutual Insurance Company;
Chairman of the Board, The Galaxy Fund and
The Galaxy VIP Fund.

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<PAGE>

Positions Held with Galaxy II and Principal
Name, Address and Age Occupation(s) During Past 5 Years
--------------------- -------------------------------------------

John T. O'Neill* Trustee, President and Treasurer
Hasbro, Inc.
1027 Newport Avenue Executive Vice President and Chief
Pawtucket, RI 02862 Financial Officer, Hasbro, Inc. (toy and
Age 53 game manufacturer); Trustee, President
and Treasurer, The Galaxy Fund and The
Galaxy VIP Fund.

Louis DeThomasis Trustee
Saint Mary's College
of Minnesota President, Saint Mary's College of
Winona, MN 55987 Minnesota; Director, Bright Day
Age 57 Travel, Inc.; Trustee, Religious
Communities Trust; Trustee, The Galaxy
Fund and The Galaxy VIP Fund.

Donald B. Miller Trustee
10725 Quail Covey Road
Boynton Beach, FL 33436 Chairman, Horizon Media, Inc.
Age 72 (broadcast services); Director/Trustee,
Lexington Funds; Director, Maguire Group
of Connecticut, Inc. (consulting
engineers); Trustee, Keuka College;
Trustee, The Galaxy Fund and The Galaxy
VIP Fund.

James M. Seed Trustee
The Astra Ventures, Inc.
One Citizens Plaza Chairman and President, The Astra
Providence, RI 02903 Projects, Incorporated (land
Age 57 development); President, The Astra
Ventures, Incorporated (manufacturer of
cardboard boxes); Commissioner, Rhode
Island Investment Commission; Trustee, The
Galaxy Fund and The Galaxy VIP Fund.

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<PAGE>

Positions Held with Galaxy II and Principal
Name, Address and Age Occupation(s) During Past 5 Years
--------------------- -------------------------------------------

Bradford S. Wellman* Trustee
2468 Ohio Street
Bangor, ME 04401 Private Investor; Director, Essex County
Age 67 Gas Company, until January 1994; Director,
Maine Mutual Fire Insurance Co.; Member,
Maine Finance Authority; Trustee, The
Galaxy Fund and The Galaxy VIP Fund.

Jylanne Dunne Vice President and Assistant
First Data Investor Treasurer
Services Group, Inc.
4400 Computer Drive Employee of First Data Investor Services
P.O. Box 5108 Group, Inc.
Westboro, MA 01581
Age 39

W. Bruce McConnel, III Secretary
Drinker Biddle & Reath LLP
1345 Chestnut St. Partner of the law firm of Drinker
Philadelphia, PA 19107 Biddle & Reath LLP, Philadelphia,
Age 55 Pennsylvania.

Effective March 5, 1998, each trustee receives an annual aggregate
fee of $40,000 for his services as a trustee of Galaxy II, The Galaxy Fund
("Galaxy") and The Galaxy VIP Fund ("Galaxy VIP"), plus an additional $2,500
for each in-person Galaxy Board meeting attended and $1,500 for each in-person
Galaxy VIP or Galaxy II Board meeting attended not held concurrently with an
in-person Galaxy Board meeting, and is reimbursed for expenses incurred in
attending meetings. Each trustee also receives $750 for each telephone Board
meeting in which the trustee participates, $1,000 for each in-person Board
committee meeting attended and $500 for each telephone Board committee meeting
in which the trustee participates. The Chairman of the Boards of Galaxy II,
Galaxy and Galaxy VIP is entitled to an additional annual aggregate fee in the
amount of $4,000 and the President and Treasurer of Galaxy II, Galaxy and Galaxy
VIP is entitled to an additional annual aggregate fee of $2,500, for their
services in these respective capacities. The foregoing trustees' and officers'
fees are allocated among the portfolios of Galaxy II, Galaxy and Galaxy VIP
based on their relative net assets.

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<PAGE>

in-person Galaxy Board meeting, and $500 for each telephone Board meeting in
which the trustee participated and was reimbursed for expenses incurred in
attending all meetings. Annual fees to the Chairman of the Boards and the
President and Treasurer of Galaxy II, Galaxy and Galaxy VIP were the same as
the current fees, as were the fees for Board committee meetings.

Beginning March 1, 1996, each trustee became entitled to participate
in The Galaxy Fund, The Galaxy VIP Fund and Galaxy Fund II Deferred Compensation
Plans (the "Original Plans"). Effective January 1, 1997, the Original Plans
were merged into The Galaxy Fund/The Galaxy VIP Fund/Galaxy Fund II Deferred
Compensation Plan (together with the Original Plans, the "Plan"). Under the
Plan, a trustee may elect to have his deferred fees treated as if they had been
invested by Galaxy II, Galaxy and Galaxy VIP in the shares of one or more
portfolios in Galaxy II or Galaxy, or other types of investment options, and the
amount paid to the trustees under the Plan will be determined based upon the
performance of such investments. Deferral of trustees' fees will have no effect
on a portfolio's assets, liabilities, and net income per share, and will not
obligate Galaxy II, Galaxy and Galaxy VIP to retain the services of any trustee
or obligate a portfolio to any level of compensation to the trustee. Galaxy II,
Galaxy and Galaxy VIP may invest in underlying securities without shareholder
approval.

No employee of Investor Services Group receives any compensation from
Galaxy II for acting as an officer. No person who is an officer, director or
employee of Fleet, or any of its affiliates, serves as a trustee, officer or
employee of Galaxy II.

As of the date of this Statement of Additional Information, the
trustees and officers of Galaxy II owned less than 1% of its outstanding shares.

The following chart provides certain information about the trustee
fees for the year ended March 31, 1998:

TOTAL
PENSION OR COMPENSA-
RETIREMENT TION FROM
BENEFITS FUND
AGGREGATE ACCRUED COMPLEX*
NAME OF COMPENSATION AS PART OF PAID TO
PERSON FROM GALAXY II GALAXY II EXPENSES TRUSTEES
- ------ -------------- ------------------ --------
<S> <C> <C> <C>
Bradford S. Wellman $3,599 None $38,500

Dwight E. Vicks, Jr. $4,021 None $43,000

Donald B. Miller** $3,665 None $39,000

Louis DeThomasis $3,647 None $39,000

John T. O'Neill $3,880 None $41,500

James M. Seed** $3,665 None $39,000
</TABLE>

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<PAGE>

* The "Fund Complex" consists of Galaxy II, The Galaxy Fund and The Galaxy
VIP Fund. Each trustee of Galaxy II also serves as a trustee of The Galaxy
Fund and The Galaxy VIP Fund.

** Deferred compensation in the amounts of $ 3,919 and $ 4,004 accrued
during Galaxy II's fiscal year ended March 31, 1998 for Messrs. Miller and
Seed, respectively.

ADVISORY, ADMINISTRATION, SUB-ADMINISTRATION,
CUSTODY AND TRANSFER AGENCY AGREEMENTS

Investment Adviser, Administrator and Sub-Administrator

Fleet, an indirect subsidiary of Fleet Financial Group, Inc., serves
as the investment adviser to the Fund. Fleet's principal offices are located at
75 State Street, Boston, Massachusetts 02109.

Pursuant to the Advisory Agreement with Galaxy II, Fleet, subject to
the general supervision of Galaxy II's Board of Trustees and in accordance with
the Fund's investment policies, manages the Fund, makes decisions with respect
to and places orders for all purchases and sales of its portfolio securities and
maintains related records. The fees paid to Fleet under the Advisory Agreement
are described in the Prospectus. Fleet bears all expenses in connection with
its duties under the Advisory Agreement.

For the fiscal years ended March 31, 1996 , March 31, 1997 and March
31, 1998, Fleet earned advisory fees of $59,097 , $51,631 and $48,421,
respectively, with respect to the Fund.

Pursuant to an administration agreement with the Trust (the
"Administration Agreement"), Fleet National Bank ("FNB"), subject to the
supervision of the Board of Trustees, generally assists in certain aspects of
the administration and operation of the Fund. Under the Administration
Agreement, FNB has agreed to maintain office facilities for Galaxy II, furnish
Galaxy II with statistical and research data, clerical, accounting, and
bookkeeping services, certain other services such as internal auditing services
required by Galaxy II, and compute the net asset value and net income of the
Fund. In addition, FNB prepares the Fund's annual and semi-annual reports to
the Securities and Exchange Commission ("SEC"), federal and state tax returns,
and filings with state securities commissions, arranges for and bears the cost
of processing share purchase and redemption orders, maintains the Fund's
financial accounts and records, and generally assists in all aspects of Galaxy
II's operations. Pursuant to the Administration Agreement, FNB may delegate to
another organization the performance of some or all of these services, in which
case FNB will be responsible for all compensation payable to such organization
and will remain liable for losses or failures resulting from the actions or
omissions of such agent. FNB has entered into a Sub-Administration Agreement
with First Data Investor Services Group, Inc. ("Investor Services Group"),
pursuant to which Investor Services Group has agreed to provide Galaxy II with
the services which Galaxy II is entitled to receive under the Administration
Agreement with FNB.

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<PAGE>

For the fiscal years ended March 31, 1996 , March 31, 1997 and March
31, 1998, FNB earned administration fees of $82,017 , $72,282 and $67,789,
respectively, with respect to the Fund.

FNB bears all expenses in connection with its duties under the
Administration Agreement and bears all of Galaxy II's expenses with the
following exceptions: brokerage fees and commissions; fees and expenses of
trustees who are not officers, directors or employees of Fleet, FNB, FD
Distributors or any of their affiliates; taxes; interest; annual sub-account
fees payable with respect to shares of Galaxy II's Large Company Index, Small
Company Index, Utility Index and U.S. Treasury Index Funds held by defined
contribution plans; and any extraordinary non-recurring expenses, including
litigation to which Galaxy II may be a party. The fees paid to FNB under the
Administration Agreement are described in the Prospectus.

The Advisory and Administration Agreements provide that, absent
willful misfeasance, bad faith, gross negligence or reckless disregard of
duty (or, in the case of Fleet, a breach of fiduciary duty with respect to
the receipt of compensation for services), neither Fleet nor FNB shall be
liable to Galaxy II for any error of judgment or mistake of law or for any
loss sustained by Galaxy II. The Advisory and Administration Agreements are
terminable without penalty by Galaxy II on sixty days' written notice when
authorized by vote of a majority of its Board of Trustees or by Fleet or FNB,
as the case may be, on sixty days' written notice. In addition, the Advisory
Agreement is terminable without penalty by Galaxy II on sixty days' written
notice when authorized by a majority vote of its outstanding voting shares
and will automatically terminate in the event of its "assignment" as defined
in the 1940 Act.

Each of the Advisory and Administration Agreements provide that the
agreement remains in effect until June 30 of each year, unless earlier
terminated, as long as such continuance is annually approved by a vote of
trustees who are not parties to the contract or "interested persons," as defined
by the 1940 Act, of any such party cast in person at a meeting specially called
for the purpose of voting on the continuance of the agreement.

AUTHORITY TO ACT AS INVESTMENT ADVISER

Banking laws and regulations currently prohibit a bank holding company
registered under the Bank Holding Company Act of 1956, as amended, or any bank
or non-bank affiliate thereof from sponsoring, organizing, controlling or
distributing the shares of a registered, open-end investment company
continuously engaged in the issuance of its shares, and prohibit banks generally
from issuing, underwriting, selling or distributing securities such as shares of
the Fund, but do not prohibit such a bank holding company or its affiliates or
banks generally from acting as investment adviser, administrator, transfer agent
or custodian to such an investment company or from purchasing shares of such a
company as agent for and upon the order of customers. Fleet, FNB, the Fund's
custodian and certain financial institutions which have agreed to provide
shareholder support services that are banks or bank affiliates are subject to
such banking laws and regulations. Should legislative, judicial or
administrative action prohibit or restrict the activities of such companies in
connection with their services to the Fund, Galaxy II might be required to alter
materially or discontinue its arrangements with such companies and change its

-20-
<PAGE>

method of operation. It is anticipated, however, that any resulting change in
the Fund's method of operation would not affect its net asset value per share or
result in financial losses to any shareholder.

CUSTODIAN AND TRANSFER AGENT

The Chase Manhattan Bank (the "Custodian") serves as custodian to the
Fund pursuant to a Mutual Fund Custody Agreement (the "Custody Agreement").
Under the Custody Agreement, the Custodian has agreed to: (i) maintain a
separate account or accounts in the name of the Fund; (ii) hold and disburse
portfolio securities on account of the Fund; (iii) collect and make
disbursements of money on behalf of the Fund; (iv) collect and receive all
income and other payments and distributions on account of the Fund's portfolio
securities; and (v) respond to correspondence from security brokers and others
relating to its duties.

Investor Services Group serves as the Trust's transfer agent and
dividend disbursing agent pursuant to a Transfer Agency and Services Agreement
("Transfer Agency Agreement"). Under the Transfer Agency Agreement, Investor
Services Group has agreed to: (i) issue and redeem shares of each Fund; (ii)
transmit all communications by each Fund to its shareholders of record,
including reports to shareholders, dividend and distribution notices and
proxy materials for meetings of shareholders; (iii) respond to correspondence by
security brokers and others relating to its duties; and (iv) maintain
shareholder accounts.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Shares of the Fund are sold on a continuous basis by Galaxy II's
distributor, First Data Distributors, Inc. ("FD Distributors"), and FD
Distributors has agreed to use appropriate efforts to solicit all purchase
orders. As described in the Prospectus, shares of the Fund are sold to
customers ("Customers") of FIS Securities, Inc., Fleet Brokerage Securities
Inc., Fleet Securities, Inc., Fleet Enterprises, Inc., Fleet Financial Group,
Inc., its affiliates, their correspondent banks, and other qualified banks,
savings and loan associations and broker/dealers ("Institutions"). As described
in the Prospectus, Shares may also be sold to individuals or corporations who
submit a purchase application to Galaxy II, purchasing either for their own
accounts or for the accounts of others ("Direct Investors").

Galaxy II may suspend the right of redemption or postpone the date of
payment for shares for more than seven days during any period when (a) trading
in the markets the Fund normally utilizes is restricted, or an emergency, as
defined by the rules and regulations of the Securities and Exchange Commission
("SEC"), exists making disposal of a Fund's investments or determination of its
net asset value not reasonably practicable; (b) the New York Stock Exchange is
closed (other than customary weekend and holiday closings); or (c) the SEC has
by order permitted such suspension.

-21-
<PAGE>

PERFORMANCE AND YIELD INFORMATION

From time to time, the Fund may quote its performance, as based upon
its total return, its yield or its tax-equivalent yield, in advertisements or in
reports and other communications to shareholders. Aggregate total return may be
shown by means of schedules, charts or graphs, and may indicate subtotals of the
various components of the total return (that is, change in value of the initial
investment, income dividends and capital gains distributions). The Fund's
"average annual total return" figures described in the Prospectus are computed
according to a formula prescribed by the SEC. The formula can be expressed as
follows:

n
P(1+T) =ERV

Where: P = a hypothetical initial payment of $1,000.

T = average annual total return.
n = number of years.
ERV = Ending Redeemable Value of a hypothetical $1,000 investment
made at the beginning of a period, at the end of a 1-, 5- or
10-year period (or fractional portion thereof), assuming
reinvestment of all dividends and distributions.

The Fund's average annual total return for the one-year period ended
March 31, 1998 was 8.29%. The Fund's average annual total return for the
period beginning April 15, 1993 (commencement of operations) through March 31,
1998 was 5.67%.

Yield is calculated by annualizing the net investment income generated
by the Fund over a specified thirty-day period according to the following
formula:

6
YIELD = 2[( a-b +1) ]
--------
cd

The Fund's yield for the 30-day period ended March 31, 1998 was
3.73%.

The Fund's tax-equivalent yield for the 30-day period ended March 31,
1998

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<PAGE>

was 5.18% for a federal marginal income tax ("FMIT") bracket of 28%, 5.41%
for a FMIT bracket of 31%, 5.83% for a FMIT bracket of 36% and 6.18% for a
FMIT bracket of 39.6%.

The Fund's performance will vary from time to time depending upon
market conditions, the composition of its portfolio and its operating expenses.
Consequently, any given performance quotation should not be considered
representative of the Fund's performance for any specified period in the future.
In addition, because the performance will fluctuate, it may not provide a basis
for comparing an investment in the Fund with certain bank deposits or other
investments that pay a fixed yield for a stated period of time. Investors
comparing the Fund's performance with that of other mutual funds should give
consideration to the quality and maturity of the respective investment
companies' portfolio securities.

Comparative performance information may be used from time to time in
advertising the shares of the Fund, including data from Lipper Analytical
Services, Inc., Morningstar, Inc., or similar independent services that monitor
the performance of mutual funds, or other industry publications.

COUNSEL

Drinker Biddle & Reath LLP (of which Mr. McConnel, Secretary of
Galaxy II, is a partner), 1345 Chestnut Street, Philadelphia, Pennsylvania
19107, are counsel to Galaxy II and will pass upon certain legal matters on its
behalf.

INDEPENDENT ACCOUNTANTS

GENERAL INFORMATION

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means that holders of more than 50% of the shares voting for the election of
trustees can elect all trustees. Shares are transferable, but have no
preemptive, conversion or subscription rights. Shareholders generally vote by
series of Galaxy II, except with respect to the election of trustees and the
selection of independent accountants. Trustees were elected and the Fund's
investment advisory agreement was approved by shareholders at a meeting of
shareholders on June 15, 1994. There will normally be no meetings of
shareholders for the purpose of electing trustees unless and until such time as
less than a majority of the trustees holding office have been elected by
shareholders, at which time the trustees then in office will call a
shareholders' meeting for the election of trustees. Under the 1940 Act,
shareholders of record of no less than two-thirds of the outstanding shares of
Galaxy II may remove a trustee through a declaration in writing or by vote cast
in person or by proxy at a meeting called for that purpose. Under the Trust
Agreement, the trustees are required to call a meeting of shareholders for the
purpose of voting upon the question of removal of any such trustee when
requested in writing to do so by the shareholders of record of not less than 10%
of Galaxy II's outstanding shares.

Massachusetts law provides that shareholders could, under certain
circumstances, be held personally liable for the obligations of Galaxy II. The
Trust Agreement disclaims shareholder liability for acts or obligations of
Galaxy II, however, and requires that notice of the disclaimer be given in each
agreement, obligation or instrument entered into or executed by Galaxy II or a
trustee. The Trust Agreement provides for indemnification from Galaxy II's
property for all losses and expenses of any shareholder held personally liable
for the obligations of Galaxy II. Thus, the risk of a shareholder's incurring
financial loss on account of shareholder liability is limited to circumstances
in which Galaxy II would be unable to meet its obligations, a possibility that
Galaxy II's management believes is remote. Upon payment of any liability
incurred by Galaxy II, the shareholder paying the liability will be entitled to
reimbursement from the general assets of Galaxy II. The trustees intend to
conduct the operations of Galaxy II in such a way so as to avoid, as far
as possible, ultimate liability of the shareholders for liabilities of Galaxy
II.

As of July 10, 1998, the name, address and percentage ownership of
the persons who owned of record 5% or more of the outstanding shares of any
portfolio of Galaxy II were as follows: Large Company Index Fund - - Gales &
Co., Fleet Investment Services, Mutual Funds Unit-NY/RO/T04A, 159 East Main
Street, Rochester, NY 14638, (33.58%); Fleet Savings Plus, c/o Norstar Trust
Company, Gales & Co., 150 East Main Street, Rochester, NY 14638 (15.54%); U.S.
Treasury Index Fund - - Gales & Co., Fleet Investment Services, Mutual Funds
Unit-NY/RO/T04A, 159 East Main Street, Rochester, NY 14638, (12.34%); Priests
Retirement Plan, Diocese of Albany, c/o Norstar Trust Company, Gales & Co., 150
East Main Street, Rochester, NY 14638, (5.89%). No person owned of record 5% or
more of the outstanding shares of the Small Company Index Fund , the Utility
Index Fund or the Municipal Bond Fund.

FINANCIAL STATEMENTS

Galaxy II's audited financial statements and notes thereto in Galaxy
II's Annual

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Report to Shareholders for the fiscal year ended March 31, 1998 (the "Annual
Report") are incorporated into this Statement of Additional Information by
reference. No other parts of the Annual Report are incorporated by reference
herein. The financial statements included in the Annual Report have been
audited by PricewaterhouseCoopers LLP, whose report thereon is incorporated
herein by reference. Such financial statements have been incorporated herein
in reliance upon such report given upon the authority of
PricewaterhouseCoopers LLP as experts in accounting and auditing. Additional
copies of the Annual Report may be obtained at no charge by telephoning
Galaxy II at 1-800-628-0414.

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APPENDIX

DESCRIPTION OF MUNICIPAL SECURITIES RATINGS

DESCRIPTION OF S&P MUNICIPAL LONG-TERM DEBT RATINGS

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

"AAA" - This designation represents the highest rating assigned by
Standard & Poor's to a debt obligation and indicates an extremely strong
capacity to pay interest and repay principal.

"AA" - Debt is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in small degree.

"A" - Debt is considered to have a strong capacity to pay interest and
repay principal although such issues are somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than debt in
higher-rated categories.

"BBB" - Debt is regarded as having an adequate capacity to pay
interest and repay principal. Whereas such issues normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than in higher-rated categories.

"BB," "B," "CCC," "CC," and "C" - Debt is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "C" the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.

"BB" - Debt has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.

"B" - Debt has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "BB" or "BB-" rating.

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"CCC" - Debt has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"B" or "B-" rating.

"CC" - This rating is typically applied to debt subordinated to senior
debt that is assigned an actual or implied "CCC" rating.

"C" - This rating is typically applied to debt subordinated to senior
debt which is assigned an actual or implied "CCC-" debt rating. The "C" rating
may be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.

"CI" - This rating is reserved for income bonds on which no interest
is being paid.

"D" - Debt is in payment default. This rating is used when interest
payments or principal payments are not made on the date due, even if the
applicable grace period has not expired, unless S & P believes that such
payments will be made during such grace period. "D" rating is also used upon
the filing of a bankruptcy petition if debt service payments are jeopardized.

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

"r" - This rating is attached to highlight derivative, hybrid, and
certain other obligations that S&P believes may experience high volatility or
high variability in expected returns due to non-credit risks. Examples of such
obligations are: securities whose principal or interest return is indexed to
equities, commodities, or currencies; certain swaps and options; and interest
only and principal only mortgage securities. The absence of an "r" symbol
should not be taken as an indication that an obligation will exhibit no
volatility or variability in total return.

DESCRIPTION OF S&P MUNICIPAL NOTE RATINGS

Municipal notes with maturities of three years or less are usually given
note ratings (designated "SP-1," "SP-2" or "SP-3") to distinguish more clearly
the credit quality of notes as compared to bonds. Notes rated SP-1 have a very
strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics are given the
designation of "SP-1+." Notes rated SP-2 have satisfactory capacity to pay
principal and interest. Notes rated SP-3 exhibit speculative capacity to pay
principal and interest.

DESCRIPTION OF MOODY'S MUNICIPAL LONG-TERM DEBT RATINGS

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

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

"Aa" - Bonds are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in "Aaa"
securities.

"A" - Bonds possess many favorable investment attributes and are to be
considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

"Baa" - Bonds considered medium-grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.

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

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

(P)... - When applied to forward delivery bonds, indicates that the
rating is provisional pending delivery of the bonds. The rating may be revised
prior to delivery if changes occur in the legal documents or the underlying
credit quality of the bonds.

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DESCRIPTION OF MOODY'S MUNICIPAL NOTE RATINGS

Moody's ratings for state and municipal notes and other short-term loans
are designated Moody's Investment Grade ("MIG") and for variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG"). This
distinction recognizes the differences between short-term credit risk and
long-term risk. Loans bearing the designation "MIG-1"/"VMIG-1" are the best
quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated and broad-based access to the market for
refinancing. Loans bearing the designation "MIG-2"/"VMIG-2" are of high
quality, with margins of protection ample although not as large as in the
preceding group. Loans bearing the designation "MIG-3"/"VMIG-3" are of
favorable quality, with all security elements accounted for but lacking the
undeniable strength of the higher grades. Liquidity and cash flow protection
may be narrow and market access for refinancing, in particular, is likely to be
less well established. Loans bearing the designation "MIG-4"/"VMIG-4" are of
adequate quality, carrying specific risk but having protection commonly regarded
as required of an investment security and not distinctly or predominantly
speculative. "SG" denotes speculative quality and lack of margins of
protection.

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