<PAGE> 1
[THE GALAXY VIP FUND LOGO]
[FIGURE 1]
GALAXY VARIABLE ANNUITY REPORT
SEMI-ANNUAL
REPORT
FOR THE PERIOD ENDED
JUNE 30, 1995
<PAGE> 2
CHAIRMAN'S
MESSAGE FOR THE
GALAXY VIP FUND
TRUSTEES
AND OFFICERS
Dwight E. Vicks, Jr.
Chairman and Trustee
John T. O'Neill
President, Treasurer
and Trustee
Louis DeThomasis,
F.S.C., Ph.D.
Trustee
Donald B. Miller
Trustee
James M. Seed
Trustee
Bradford S. Wellman
Trustee
W. Bruce
McConnel, III, Esq.
Secretary
Neil Forrest
Vice President &
Assistant Treasurer
Louis J. Russo
Assistant Treasurer
INVESTMENT ADVISOR
Fleet Investment
Advisors Inc.
45 East Avenue
Rochester, New York
14604
DISTRIBUTOR
440 Financial
Distributors, Inc.
290 Donald Lynch Blvd.
Marlboro,
Massachusetts 01752
ADMINISTRATOR
440 Financial
290 Donald Lynch Blvd.
Marlboro,
Massachusetts 01752
Dear Galaxy Variable Annuity Policyowner:
Enclosed is your report on the performance of The Galaxy VIP Fund for the six
months ended June 30, 1995. Over the last six months, the prices of stocks and
bonds staged dramatic comebacks from losses they suffered last year. By the end
of the period, stock prices had reached new highs and bond prices were
significantly stronger than they were when the Federal Reserve Board ("the
Fed") began to raise interest rates.
Although the economy has weakened, the Fed seems to have met its goal
of slower, sustainable growth. This should mean additional declines in interest
rates and further gains in bond prices. As lower rates stimulate new growth at
year's end, stock prices should also move higher.
These exceptional changes in market direction offer important lessons
for shareholders in The Galaxy VIP Fund. By remaining invested during the
temporary market downturns, shareholders were in a position to earn attractive
returns once stocks and bonds began to rally. Over time, longer-term market
gains have generally offset short-term market fluctuations. Investors may make
the most of these gains, and improve the chance of reaching their financial
goals, by staying with a well-diversified investment strategy.
The Market Overview and Portfolio Reviews that follow explain what
happened to the financial markets in the first half of 1995 and show how Fleet
Investment Advisors Inc. ("Fleet") managed the portfolios of The Galaxy VIP Fund
to take advantage of this environment. You will also read how Fleet expects the
markets to perform in the next six months and how this may affect the management
of The Galaxy VIP Fund portfolios.
As always, we would be happy to discuss this report with you in
greater detail. You may contact our Galaxy Investment Specialists 24 hours a
day at 800-628-0414.
Sincerely,
/s/ DWIGHT E. VICKS, JR.
------------------------
Dwight E. Vicks, Jr.
<PAGE> 3
MARKET OVERVIEW
PERFORMANCE
AT-A-GLANCE
Average Annual Returns as
of June 30, 1995
Variable Account E
[FIGURE 2]
2.4%*
4.3%
8.1%
15.8%*
20.4%
23.5%
17.5%*
19.3%
19.8%
14.4%*
13.8%
12.0%
The performance data quoted represents past performance and the investment
return and principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost. The
Administrator and the Advisor are presently waiving fees. Without such waivers,
performance would be lower. An investment in the Money Market Fund is neither
insured nor guaranteed by the U.S. Government. There can be no assurance that
the Money Market Fund will be able to maintain a stable net asset value of $1.00
per share. The Variable Account E sub-accounts purchase shares of the Galaxy VIP
Funds. These results reflect the experience of the sub-accounts of Variable
Account E of American Skandia Life Assurance Corporation and include all
management fees and expenses and insurance costs and accordingly will be
different from the results of the Galaxy VIP Funds. The sub-accounts are GAL
Money Market, GAL Equity, GAL High Quality Bond, and GAL Asset Allocation.
* Total Return
MARKET OVERVIEW
BY FLEET INVESTMENT ADVISORS INC.
Stock prices rose to record highs in the first half of 1995, driven by
strong corporate earnings, moderate inflation and falling interest rates. As
rates fell, bond prices soared, retracing all and more of the ground lost last
year. By investing heavily in high-quality growth stocks, which led the stock
rally, and emphasizing longer-maturity bonds, we believe The Galaxy VIP Fund
delivered exceptional returns for the six months ended June 30, 1995.
After growing strongly for most of 1994, the economy weakened
substantially in the first half of 1995. Increasingly, investors became
convinced higher interest rates imposed by the Federal Reserve Board ("the Fed")
would control inflation and provide a soft landing for the economy. Once the Fed
raised short-term rates again in February, long-term bond prices skyrocketed and
long-term yields fell. By the end of June, the yield on 30-year Treasury bonds
had dropped from 7.95% to 6.65%. After rising in the first quarter, yields on
3-month Treasury bills also declined, reaching 5.44% by the end of June.
The lower yields on bonds improved corporate profits and made stocks
more appealing to investors. With companies reporting earnings that were much
stronger than analysts expected, stock prices started to rise surpassing
previous market highs by March. By the end of June, the Dow Jones Industrial
Average had reached 4556, for a six-month gain of 19%.
INVESTMENT STRATEGIES
Last fall, when it was clear higher interest rates would slow the
economy, Fleet Investment Advisors Inc. increased its commitment to
high-quality growth stocks. In a slowing economy, investors have historically
favored growth stocks, whose earnings depend less on economic improvement.
In selecting growth companies, we gave extra weight to technology
companies. As continued weakness in the dollar made U.S. technology firms more
competitive overseas, corporate restructuring increased the demand for personal
computers. These factors helped make technology stocks the undisputed leader of
the recent rally. During the first half of 1995, the prices of technology
stocks rose nearly 40% more than doubling returns for the stock market as a
whole.
Given the uncertainties of a slowing economy, investors also favored
the consumer staples sector, whose earnings move without regard to economic
growth. Having purchased consumer staples issues when they were undervalued in
1994, our equity portfolios enjoyed strong returns as these stocks rebounded in
the recent rally. Other top performers included airlines stocks, also
1
<PAGE> 4
MARKET OVERVIEW
PERFORMANCE
AT-A-GLANCE
Total Returns as
of June 30, 1995
Variable Account B-Class 3
[FIGURE 3]
0.7%
4.8%
6.3%
6.4%
The performance data quoted represents past performance and the investment
return and principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost. The
Administrator and the Adviser are presently waiving fees. Without such waivers,
performance would be lower. An investment in the Money Market Fund is neither
insured nor guaranteed by the U.S. Government. There can be no assurance that
the Money Market Fund will be able to maintain a stable net asset value of $1.00
per share. The Class 3 sub-accounts purchase shares of the Galaxy VIP Funds.
These results reflect the experience of the Class 3 sub-accounts of Variable
Account B of American Skandia Life Assurance Corporation and include all
management fees and expenses and insurance costs and accordingly, will be
different from the results of the Galaxy VIP Funds. The sub-accounts are GAL
Money Market 3, GAL Equity 3, GAL High Quality Bond 3, and GAL Asset Allocation
3.
bought at attractive prices, and the stocks of energy companies, which
benefited as oil prices improved.
Expecting a rebound in bond prices, we were heavily weighted in
longer-maturity issues as 1995 began. In addition to giving shareholders extra
income, these issues produced stronger gains as bond prices rose.
During the period we increased investments in U.S. government and
agency bonds. Strong corporate earnings, and a weak supply of new issues,
helped the prices for corporates rise more than the prices for government
bonds. This made corporate yields less attractive than those for government
securities, in light of the extra credit risk that corporates carry.
MARKET OUTLOOK
After improving at an annual rate of 5.1% in the fourth quarter of
1994, economic growth has now slowed to less than 1%. With inventories rising
and consumption weakening, we expect the economy to grow at this level for the
next few months.
While slower growth should restrain inflation, it will likely cause
disappointments in earnings. With the recent improvement in stock prices, the
market indices are now yielding an average 2.5%, the lowest level in 95 years.
This historically high valuation could lead to a temporary price correction of
10% or more.
To make the most of this environment, we've taken profits in some of
the top performing stocks in our equity portfolios and increased their cash
reserves. If there is a correction and stock prices become more attractive,
these reserves would provide the money for new investment opportunities. In
addition to certain technology issues, we'll watch for opportunities in the
retail, capital goods and financial services sectors. We believe these groups
have the potential for solid gains in a period of slow, sustainable economic
growth.
As the economy continues to weaken, interest rates may edge lower in
the next few months. Although it's unlikely rates will drop as much as they have
in recent quarters, we believe the yield for 30-year Treasuries could fall to
6.5%. This should provide additional gains in bond prices.
To protect shareholders against a bond price reversal, we've
significantly reduced investments in longer-maturity issues. When interest
rates fall, the prices of longer-term issues tend to suffer more than the prices
of shorter-maturity issues. In addition, we're watching the yields of government
and corporate issues. If the economy slows and earnings weaken, the prices on
corporate bonds may soften sooner than the prices of government issues. If that
happens, corporate yields could become more attractive and we may increase our
investments in that sector.
2
<PAGE> 5
PORTFOLIO REVIEWS
GALAXY VIP MONEY MARKET FUND
Investment Manager
Pat Galuska
[FIGURE 4]
By making the most of recent changes in short-term interest rates, the
Galaxy VIP Money Market Fund earned a competitive return for its shareholders
in the six months ended June 30, 1995. During that time, the Fund had a total
return of 2.66%. That compares with 2.80% for money market funds tracked by
Donoghue's Money Market Fund/All-Taxable Average.
GALAXY VIP MONEY
MARKET FUND
Portfolio Distribution
as of June 30, 1995
[FIGURE 5]
Commercial Paper 54%
U.S. Government and Agency Obligations 46%
KEEPING PACE WITH CHANGING YIELDS
As the Federal Reserve Board raised short-term rates in the first part
of 1995, we lengthened the average maturity of the Fund's investments from 25
days to 35 days. This allowed us to lock in the higher yields that became
available. Then, the economy weakened, investors began to expect the Federal
Reserve Board to begin cutting rates, and money market yields began to fall. As
that happened, the yields on money market instruments maturing in three months
to one year fell to levels that were nearly the same or slightly less than the
yields for shorter-maturity issues. Because there was little advantage to
investing in longer-term securities, we focused our investments on shorter-term
issues. By the end of the period, this gave the Fund an average maturity of 22
days.
In addition, we sought securities that matured a week later than the
dates when investors expected the Federal Reserve Board to move interest rates.
Because there was less demand for these securities, their prices and yields
were especially attractive. Throughout the period, we continued to stagger the
dates on which the Fund's investments matured and made substantial investments
in overnight repurchase agreements. These strategies gave us extra flexibility
in making the most of changes in yields.
During the period we raised the Fund's investments in Treasury bills
from 19.87% of the portfolio as of December 31, 1994 to 20.29% on June 30, 1995.
We placed less emphasis on commercial
GALAXY VIP MONEY MARKET FUND
7-Day Average Yields
[FIGURE 6]
- - Galaxy VIP Money Market Fund
- - Donoghue's Money Market Fund/
All-Taxable Average
* Donoghue's Money Market Fund/All-Taxable Average reflects the average
current investment rate paid by over 620 money market funds.
3
<PAGE> 6
PORTFOLIO REVIEWS
[FIGURE 7]
Harold A. Mackinney
paper and the obligations of U.S. government agencies because their yields were
less attractive compared to the yields for Treasury issues.
GOING FORWARD
We believe the economy will continue to weaken in coming months,
prompting the Federal Reserve Board to stimulate growth by lowering short-term
interest rates. Because longer-maturity issues still offer little yield
advantage, we expect to keep the Fund's average maturity relatively short for
now. The yields on longer-term issues may become more attractive as rates fall.
If that happens, we would probably lengthen the average maturity of the Fund's
investments to maximize income for shareholders.
GALAXY VIP EQUITY FUND
Portfolio Distribution
as of June 30, 1995
[FIGURE 8]
Consumer Staples 23%
Consumer Cyclical 12%
Tech. 11%
U.S. Treasury Bills 10%
Cash & Equiv. & Other Assets & Liabilities 9%
Basic Materials 7%
Capital Goods 7%
Financial 7%
Energy 6%
Trans. 4%
Other Common Stocks 2%
Utilities 2%
Pat Galuska assumed management for the Galaxy VIP Money Market Fund in
September 1994. She also has managed the Galaxy Tax-Exempt Money Market Fund
since 1988.
GALAXY VIP EQUITY FUND
Investment Manager
Harold A. Mackinney
The Galaxy VIP Equity Fund seeks long-term growth by investing in
stocks of companies that Fleet Investment Advisors Inc. believes have the
potential for above-average earnings. Typically, this means emphasizing stocks
whose prices are attractive compared to their prospective earnings and to
prices for stocks as a whole.
This strategy worked especially well in recent months, as stock prices
established new highs. By concentrating on attractive valuations, the Fund
enjoyed exceptional gains from many holdings and produced strong returns for
shareholders. For the six months ended June 30, 1995, the Fund had a total
return of 16.15%. During the same period, the Standard & Poor's 500 Index ("S&P
500 Index") had a total return of 20.09%.
FOCUS ON MARKET LEADERS
By focusing on stocks with outstanding potential, we invested heavily
in sectors that led the market during the recent rally. During the period we
more than doubled the Fund's investments in the high-flying technology sector,
increasing many existing positions and adding new holdings such as Motorola.
In addition, we raised the Fund's commitment to consumer staples and
consumer cyclical stocks increasing shares of Gillette, Ford, Pepsico, and Home
Depot, among others. Our search for value also boosted the Fund's holdings in
transportation and airlines stocks. During the period we increased the holding
in Boeing and added AMR Corporation, the parent company of American Airlines, to
the portfolio.
Believing that the market as a whole is now overpriced and vulnerable
to a temporary correction, we now have about 20% of the Fund's portfolio in
cash.
4
<PAGE> 7
PORTFOLIO REVIEWS
LOOKING AHEAD
We expect that the chances for a correction will increase in coming
months. The prices of most stocks do not yet reflect the disappointments in
corporate earnings that are likely to occur with further weakening in the
economy. If earnings results are disappointing, stock prices could drop by 10%
or more.
We believe such a correction could be temporary and would provide us
with the chance to put the Fund's cash reserves back to work. Because we like
the Fund's current diversification, we would probably use this cash to increase
existing positions. We would also be looking for new investment opportunities
that a correction might bring.
GALAXY VIP EQUITY FUND
Growth of $10,000 investment*
[FIGURE 9]
$13,321
$12,517
- - S&P 500 Index
- - Galaxy VIP Equity Fund
* Since inception on 1/11/93. The S&P 500 Index is an unmanaged index of 500
leading stocks. Results for the S&P 500 Index do not reflect the expenses
and investment management fees incurred by the Fund.
We expect that stock prices will recover by year's end. The Federal
Reserve Board may force interest rates lower to stimulate growth, which should
benefit the Fund's investments in consumer cyclical, basic materials and capital
goods stocks. A pickup in growth should also help the Fund's retail stocks,
which have lagged the market in recent months.
Harold A. Mackinney has managed the Galaxy VIP Equity Fund since its inception.
He has been Chairman of the Fleet Investment Advisors Investment Policy
Committee since 1973.
GALAXY VIP ASSET ALLOCATION FUND
Investment Manager
Don Jones
The Galaxy VIP Asset Allocation Fund seeks a high total return by
providing both current income that is greater than that for popular stock
market averages and long-term growth in the value of its assets. The Fund
invests in a diversified portfolio of equity, bond and money market
investments.
During the first half of 1995, the Fund made the most of twin rallies
in stocks and bonds by investing heavily in top-performing sectors. Large
investments in technology and consumer staples stocks, as well as bonds with
longer maturities, helped the Fund earn a total return of 17.79% for the six
months ended June 30, 1995. That compares to 14.2% for the average balanced
fund tracked by Lipper Analytical Services and 20.1% for the Standard & Poor's
500 Index.
MARKET WINNERS
As technology stocks produced returns that doubled the market average,
the Fund benefited from a 98.4% gain in Intel, its largest equity holding. The
Fund also earned strong gains from American Power Conversion, up 43% during the
period. In the consumer staples sector, which rebounded as investors went
shopping for value, the Fund had strong returns from Johnson & Johnson, Merck,
Bristol Myers, McDonalds and PepsiCo. Other strong performers included the
Fund's financial stocks, as well as individual issues like Ford, Dow Chemical
and Thermo Electron.
5
<PAGE> 8
PORTFOLIO REVIEWS
[FIGURE 10]
Don Jones
In the second quarter, we took profits in some of these stocks. We
also sold shares of Telephones de Mexico, Fruit of the Loom and Conseco
Insurance, which had not met our expectations. Although we added a position in
Boeing, we reduced stocks from 63% of Fund assets to 59% and raised cash to
about 11%. This gave the Fund protection against a correction in stock prices
and the flexibility to use new opportunities a correction could bring.
We kept bonds at 30% of assets, but adjusted their average maturity
several times. As 1995 began, the Fund's bonds had an average maturity of about
14 years, and roughly 60% of the Fund's bonds matured in 10 or more years. As
interest rates fell, the prices of these issues improved substantially more
than the prices of shorter-term issues.
GALAXY VIP ASSET
ALLOCATION FUND
Growth of $10,000 investment*
[FIGURE 11]
$13,260
$12,141
- - S&P 500 Index
- - Galaxy VIP Asset Allocation Fund
* Since inception on 2/6/93. The S&P 500 Index is an unmanaged index of 500
stocks. Results for the S&P 500 Index do not reflect the expenses and
investment management fees incurred by the Fund.
As it looked like rates might be bottoming, we reduced the Fund's
investments in longer-term bonds. In doing so, we maximized income for
shareholders by selling bonds with lower yields. By the end of June,
longer-term issues represented about 40% of the bond portfolio, the Fund had an
average maturity of 11 years, and the Fund's SEC 30-day yield was 6.99%.
NEW OPPORTUNITIES
If earnings disappointments cause a temporary correction in stock
prices, as we expect, there should be many attractive sectors where we can
reinvest the Fund's cash. In addition to technology, which still has strong
growth potential, we'll look for new opportunities in the capital goods group
which should benefit as lower interest rates stimulate the economy at year's
end. Lower rates should also benefit financial stocks.
As interest rates get closer to bottoming, we'll continue to cut the
Fund's longer-term bonds, which would suffer most as interest rates and bond
prices change course. We expect to keep three quarters of the Fund's
investments in government bonds, until the yields on corporates become
attractive enough to outweigh the extra price risk the bonds carry.
Don Jones has managed the Galaxy VIP Asset Allocation Fund since its inception.
He has managed investment portfolios for Fleet Investment Advisors Inc., and
its predecessors, since 1988.
GALAXY VIP ASSET
ALLOCATION FUND
Portfolio Distribution
as of June 30, 1995
[FIGURE 12]
Common Stocks 59%
U.S. Government and Agency Obligations 22%
Cash Equivalents & Net Other Assets & Liabilities 12%
Corporate Bonds 7%
6
<PAGE> 9
PORTFOLIO REVIEWS
GALAXY VIP HIGH QUALITY BOND FUND
Investment Manager
Mary McGoldrick
[FIGURE 13]
The Galaxy VIP High Quality Bond Fund seeks a high level of current
income consistent with the prudent risk of capital. The Fund invests primarily
in government securities and high-quality corporate issues rated in the two
highest rating categories by Moody's or Standard & Poor's.
As interest rates fell and bond prices rose in the first half of 1995,
the prices of longer-term bonds improved more than the prices for shorter-term
issues, and the prices of corporate bonds gained more than the prices of
government bonds. With an above average weighting in long-term corporate
issues, the Fund produced a total return of 14.67% for the six months ended
June 30, 1995. That compares to 11.80% for the Lehman Brothers
Government/Corporate Bond Index.
INVESTMENT STRATEGY
Late in 1994, when it looked like interest rates might be peaking, we
purchased a significant number of longer-term corporate bonds for the
portfolio. In addition to giving the Fund strong price gains as rates fell in
the first quarter of 1995, these bonds had high coupon rates that boosted the
Fund's yield. The bonds were also "noncallable" securities, which meant their
issuers couldn't redeem them when interest rates fell. This feature added to
the price gains the bonds enjoyed.
As the period started, about 50% of the Fund was invested in bonds
maturing in 10 years or more. After interest rates had dropped sharply, we
reduced
GALAXY VIP HIGH QUALITY BOND FUND
Growth of $10,000 investment*
[FIGURE 14]
$11,796
$11,449
- - Lehman Brothers Government/
Corporate Bond Index
- - Galaxy VIP High
Quality Bond Fund
* Since inception on 1/21/93. The Lehman Brothers Government/Corporate Bond
Index is an unmanaged index of U.S. Treasury obligations and the debt of
U.S. Government agencies as well as all publicly issued, fixed rate,
non-convertible investment grade, dollar-denominated, SEC-registered
corporate debt. Results for the Lehman Brothers Government/Corporate Bond
Index do not reflect the expenses and investment management fees incurred
by the Fund.
7
<PAGE> 10
PORTFOLIO REVIEWS
GALAXY VIP HIGH
QUALITY BOND FUND
Portfolio Distribution
as of June 30, 1995
[FIGURE 15]
U.S. Government and Agency Obligations 61%
Corporate Bonds 26%
Cash Equivalents & Net Other Assets & Liabilities 13%
the Fund's commitment to longer-term issues to protect the Fund from a reversal
in rates and bond prices. By the end of June, about 40% of the Fund was
invested in longer-term issues. As a result, the average maturity of the Fund's
investments fell from 14 years to about 12 years. This was still longer,
however, than the 9.5-year average maturity for the Lehman Brothers
Government/Corporate Bond Index.
Many of the bonds we sold were corporate issues. This was because the
strong price gains for corporates had made their yields less attractive
compared to those for U.S. government securities. By selling issues with lower
coupons, we were able to maximize the Fund's yield. At the end of June the Fund
had an SEC 30-day yield of 5.86%.
ANTICIPATING HIGHER RATES
Although we expect the Federal Reserve Board to protect the economy by
bringing interest rates lower in coming months, we don't expect rates to drop
much below current levels. With inflation likely to remain around 3%, there's
only so much room for interest rates to fall. The low interest rates of the
third quarter should renew economic growth by the fourth quarter. As that
happens, interest rates should start to rise.
To further protect the Fund from falling bond prices, we will probably
cut its long-term holdings even more. For now, we're directing most new
investments in the funds to bonds with maturities of 5 to 7 years.
Mary McGoldrick has managed the Galaxy VIP High Quality Bond Fund since its
inception. She has managed investment portfolios at Fleet Investment Advisors
Inc., and its predecessors and other investment management companies for eight
years.
8
<PAGE> 11
VIP MONEY MARKET FUND
THE GALAXY PORTFOLIO OF INVESTMENTS
VIP FUND JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
------------ -------------
<S> <C>
COMMERCIAL PAPER (A) - 54.42%
CONSUMER STAPLES - 16.19%
$ 650,000 Anheuser-Busch Cos., Inc.
4.57%, 07/14/95 . . . . . . . . $ 648,373
450,000 Kellogg, Inc.
5.02%, 07/06/95 . . . . . . . . 449,629
600,000 PepsiCo, Inc.
5.98%, 07/03/95 (B) . . . . . . 599,803
600,000 Pfizer, Inc.
5.76%, 07/26/95 . . . . . . . . 597,538
----------
2,295,343
----------
FINANCIAL SERVICES - 12.66%
600,000 MetLife Funding, Inc.
5.80%, 07/28/95 . . . . . . . . 597,332
600,000 State Street Bank & Trust Co.
5.41%, 07/10/95 . . . . . . . . 599,111
600,000 USAA Capital Corp.
5.75%, 07/24/95 . . . . . . . . 597,731
----------
1,794,174
----------
UTILITIES AND TELECOMMUNICATIONS - 8.45%
600,000 Bell Atlantic Corp.
5.16%, 07/07/95 . . . . . . . . 599,406
600,000 GTE California, Inc.
5.73%, 07/19/95 . . . . . . . . 598,209
----------
1,197,615
----------
TECHNOLOGY - 5.87%
600,000 AT&T Capital Corp.
5.71%, 07/20/95 . . . . . . . . 598,122
235,000 Xerox Credit Corp.
5.08%, 07/07/95 . . . . . . . . 234,771
----------
832,893
----------
BASIC MATERIALS - 4.22%
600,000 Weyerhaeuser Mortgage Co.
5.49%, 07/13/95 . . . . . . . . 598,826
----------
CAPITAL GOODS - 4.22%
600,000 Raytheon Corp.
5.75%, 07/24/95 . . . . . . . . 597,731
----------
MISCELLANEOUS - 2.81%
400,000 Knight-Ridder
5.68%, 07/18/95 . . . . . . . . 398,880
----------
TOTAL COMMERCIAL PAPER . . . . . 7,715,462
(Cost $7,715,462)
U.S. GOVERNMENT AND
AGENCY OBLIGATIONS (A) - 46.29%
U.S. TREASURY BILLS - 20.29%
492,000 4.75%, 07/06/95 . . . . . . . . 491,616
478,000 5.54%, 08/03/95 . . . . . . . . 475,534
596,000 5.51%, 08/17/95 . . . . . . . . 591,680
649,000 5.55%, 08/31/95 . . . . . . . . 642,883
682,000 5.65%, 09/07/95 . . . . . . . . 674,722
----------
2,876,435
----------
FEDERAL HOME LOAN BANK - 15.27%
370,000 6.15%, 07/03/95 (B) . . . . . . 369,875
600,000 5.11%, 07/07/95 . . . . . . . . 599,412
600,000 5.61%, 07/18/95 . . . . . . . . 598,340
600,000 5.51%, 08/02/95 . . . . . . . . 597,013
----------
2,164,640
----------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION - 6.51%
555,000 5.52%, 07/14/95 . . . . . . . . 553,824
370,000 5.62%, 07/18/95 . . . . . . . . 368,974
----------
922,798
----------
FEDERAL FARM CREDIT BANK - 4.22%
600,000 5.46%, 07/12/95 . . . . . . . . 598,922
----------
TOTAL U.S. GOVERNMENT AND
AGENCY OBLIGATIONS . . . . . . 6,562,795
(Cost $6,562,795) ----------
TOTAL INVESTMENTS - 100.71% . . . . . . . . . . . . 14,278,257
(Cost $14,278,257)**
NET OTHER ASSETS AND LIABILITIES - (0.71)% . . . . (100,855)
----------
NET ASSETS - 100.00% . . . . . . . . . . . . . . . $14,177,402
===========
</TABLE>
- ---------------------------------------------
** Aggregate cost for Federal tax purposes.
(A) Annualized yields to maturity.
(B) Annualized yields at time of purchase.
See Notes to Financial Statements.
9
<PAGE> 12
VIP EQUITY FUND
THE GALAXY PORTFOLIO OF INVESTMENTS
VIP FUND JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------------ -------------
<S> <C>
COMMON STOCKS - 81.08%
CONSUMER STAPLES - 23.15%
6,000 Anheuser-Busch Cos., Inc. . . . . . . $ 341,250
6,000 Bristol Myers Squibb Co. . . . . . . . 408,750
6,000 General Mills, Inc. . . . . . . . . . 308,250
14,000 Gillette Co. . . . . . . . . . . . . . 624,750
8,000 Johnson & Johnson . . . . . . . . . . 541,000
14,000 Mcdonald's Corp. . . . . . . . . . . . 547,750
10,000 Merck & Co., Inc. . . . . . . . . . . 490,000
11,000 PepsiCo, Inc. . . . . . . . . . . . . 501,875
10,000 Pfizer, Inc. . . . . . . . . . . . . . 461,875
6,000 Procter & Gamble Co. . . . . . . . . . 431,250
14,000 Rubbermaid, Inc. . . . . . . . . . . . 388,500
15,000 Sara Lee Corp. . . . . . . . . . . . . 427,500
14,000 Sysco Corp. . . . . . . . . . . . . . 413,000
----------
5,885,750
----------
CONSUMER CYCLICAL - 12.34%
9,000 Armstrong World Industries, Inc. . . . 451,125
7,000 Dayton Hudson Corp. . . . . . . . . . 502,250
9,000 Disney (Walt) Co. . . . . . . . . . . 500,625
14,000 Ford Motor Co. . . . . . . . . . . . . 416,500
11,000 Home Depot, Inc. . . . . . . . . . . . 446,875
11,000 Sherwin-Williams Co. . . . . . . . . . 391,875
16,000 Wal-Mart Stores, Inc. . . . . . . . . 428,000
----------
3,137,250
----------
TECHNOLOGY - 11.30%
12,000 AMP, Inc. . . . . . . . . . . . . . . 507,000
8,000 Automatic Data Processing, Inc. . . . . 503,000
12,000 Intel Corp. . . . . . . . . . . . . . 759,750
7,000 Microsoft Corp.* . . . . . . . . . . . 632,625
7,000 Motorola, Inc. . . . . . . . . . . . . 469,875
----------
2,872,250
----------
CAPITAL GOODS - 7.45%
8,000 Boeing Co. . . . . . . . . . . . . . . 501,000
8,000 Caterpillar, Inc. . . . . . . . . . . 514,000
5,000 Deere & Co. . . . . . . . . . . . . . 428,125
8,000 General Electric Co. . . . . . . . . . 451,000
----------
1,894,125
----------
BASIC MATERIALS - 6.97%
8,000 Air Products & Chemicals, Inc. . . . . 446,000
8,000 Consolidated Papers, Inc. . . . . . . 461,000
6,000 Dow Chemical Co. . . . . . . . . . . . 431,250
5,000 Georgia-Pacific Corp. . . . . . . . . 433,750
----------
1,772,000
----------
FINANCIAL SERVICES - 6.94%
4,000 American International Group, Inc.. . . 456,000
5,000 Federal National
Mortgage Association . . . . . . . 471,875
9,000 H & R Block, Inc. . . . . . . . . . . 370,125
8,000 Suntrust Banks, Inc. . . . . . . . . . 466,000
----------
1,764,000
----------
ENERGY - 5.60%
3,000 Atlantic Richfield Co. . . . . . . . . 329,250
5,000 Exxon Corp. . . . . . . . . . . . . . 353,125
10,000 Halliburton Co. . . . . . . . . . . . 357,500
4,000 Mobil Corp. . . . . . . . . . . . . . 384,000
----------
1,423,875
----------
TRANSPORTATION AND SERVICES - 3.50%
6,000 AMR Corp.* . . . . . . . . . . . . . . 447,750
8,000 Union Pacific Corp. . . . . . . . . . 443,000
----------
890,750
----------
UTILITIES AND TELECOMMUNICATIONS - 2.28%
7,000 American Telephone &
Telegraph Co. . . . . . . . . . . . 371,875
7,000 Telefonos De Mexico, Series L, ADR 207,375
----------
579,250
----------
CONGLOMERATES - 1.55%
12,000 Corning, Inc. . . . . . . . . . . . . 393,000
----------
TOTAL COMMON STOCKS . . . . . . . . . 20,612,250
(Cost $16,772,654) ----------
</TABLE>
See Notes to Financial Statements
10
<PAGE> 13
VIP EQUITY FUND
THE GALAXY PORTFOLIO OF INVESTMENTS (CONTINUED)
VIP FUND JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
------------ -------------
<S> <C>
U.S. TREASURY BILLS - 9.58%
$ 500,000 6.22%, 9/21/95 (A) . . . . . . . $ 492,923
1,000,000 5.76%, 11/16/95 (B) . . . . . . 968,885
1,000,000 5.41%, 12/21/95 (A) . . . . . . . 974,208
-----------
TOTAL U.S. TREASURY BILLS . . . 2,436,016
(Cost $2,436,016) -----------
REPURCHASE AGREEMENTS - 13.67%
3,476,465 Chase Securities, Inc.
6.05%, due 7/03/95, dated 6/30/95,
Repurchase Price $3,478,218
(Collateralized by U.S. Treasury Note
7.50%, due 1996;Total Par $3,475,000;
Market Value $3,548,844) . . . . 3,476,465
-----------
TOTAL REPURCHASE AGREEMENTS . . 3,476,465
(Cost $3,476,465) -----------
TOTAL INVESTMENTS - 104.33% . . . . . . . . . . . 26,524,731
(Cost $22,685,135)** -----------
NET OTHER ASSETS AND LIABILITIES - (4.33)% . . . . (1,101,733)
-----------
NET ASSETS - 100.00% . . . . . . . . . . . . . . . $25,422,998
===========
</TABLE>
- ------------------------------------------
* Non income producing security.
** Aggregate cost for Federal tax purposes.
(A) Annualized yield to maturity.
(B) Annualized yield at time of purchase.
ADR American Depository Receipts.
See Notes to Financial Statements
11
<PAGE> 14
VIP ASSET ALLOCATION
THE GALAXY PORTFOLIO OF INVESTMENTS
VIP FUND JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------------ -------------
<S> <C>
COMMON STOCKS - 58.65%
CONSUMER STAPLES - 14.87%
3,000 Bristol Myers Squibb Co. . . . . $ 204,375
2,000 Coca-Cola Co. . . . . . . . . . 127,498
2,000 General Mills, Inc. . . . . . . 102,750
6,000 Gillette Co. . . . . . . . . . . 267,750
4,000 Johnson & Johnson . . . . . . . 270,500
4,000 Mcdonald's Corp. . . . . . . . . 156,500
5,000 Merck & Co., Inc. . . . . . . . 245,000
5,000 Pepsico, Inc. . . . . . . . . . 228,125
5,000 Sara Lee Corp. . . . . . . . . . 142,500
4,000 Sysco Corp. . . . . . . . . . . 118,000
----------
1,862,998
----------
CONSUMER CYCLICALS - 9.76%
5,000 Armstrong World Industries, Inc 250,625
2,500 Dillard Department Stores, Inc.,
Class A . . . . . . . . . . . 73,438
5,000 Disney (Walt) Co. . . . . . . . 278,125
10,000 Ford Motor Co. . . . . . . . . . 297,500
4,000 Home Depot, Inc. . . . . . . . . 162,500
6,000 Wal-Mart Stores, Inc. . . . . . 160,500
----------
1,222,688
----------
TECHNOLOGY - 7.56%
6,000 American Power Conversion Corp.* 137,250
3,000 Automatic Data Processing, Inc. 188,625
4,000 General Motors Corp., Class E . 174,000
6,000 Intel Corp . . . . . . . . . . . 379,875
1,000 Motorola, Inc. . . . . . . . . . 67,125
----------
946,875
----------
CAPITAL GOODS - 7.52%
3,000 Boeing Co. . . . . . . . . . . . 187,875
2,000 Deere & Co. . . . . . . . . . . 171,250
5,000 General Electric Co. . . . . . . 281,875
7,500 Thermo Electron Corp.* . . . . . 301,875
----------
942,875
----------
FINANCIAL SERVICES - 6.12%
2,000 American International Group, Inc. 228,000
4,000 Banc One Corp. . . . . . . . . . 129,000
3,000 Citicorp . . . . . . . . . . . . 173,625
2,500 Federal National
Mortgage Association . . . . 235,938
----------
766,563
----------
BASIC MATERIALS - 4.78%
3,000 Air Products & Chemicals, Inc. . 167,250
5,000 Consolidated Papers, Inc. . . . 288,125
2,000 Dow Chemical Co. . . . . . . . . 143,750
----------
599,125
----------
ENERGY - 4.49%
1,000 Amoco Corp. . . . . . . . . . . 66,625
1,700 Atlantic Richfield Co. . . . . . 186,575
1,500 Exxon Corp. . . . . . . . . . . 105,938
3,000 Halliburton Co. . . . . . . . . 107,250
1,000 Mobil Corp. . . . . . . . . . . 96,000
----------
562,388
----------
<CAPTION>
UTILITIES AND TELECOMMUNICATIONS - 1.44%
<S> <C>
2,000 American Telephone &
Telegraph Co. . . . . . . . . 106,250
2,500 Telefonos De Mexico, Series L, ADR 74,063
----------
180,313
----------
TRANSPORTATION - 1.33%
3,000 Union Pacific Corp. . . . . . . 166,125
----------
CONGLOMERATES - 0.78%
3,000 Corning, Inc. . . . . . . . . . 98,250
----------
TOTAL COMMON STOCKS . . . . . . 7,348,200
(Cost $6,098,374) ----------
</TABLE>
See Notes to Financial Statements.
12
<PAGE> 15
VIP ASSET ALLOCATION
THE GALAXY PORTFOLIO OF INVESTMENTS (CONTINUED)
VIP FUND JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
------------ -------------
<S> <C>
U.S. GOVERNMENT AND
AGENCY OBLIGATIONS - 22.18%
U.S. TREASURY NOTES - 5.03%
$ 250,000 6.25%, 05/31/00 . . . . . . . . . . . . $ 252,608
350,000 7.50%, 05/15/02 . . . . . . . . . . . . 377,321
----------
629,929
----------
FEDERAL HOME LOAN BANK - 4.78%
200,000 8.22%, 12/22/97 . . . . . . . . . . . . 201,468
100,000 8.05%, 04/26/00 . . . . . . . . . . . . 100,142
200,000 7.00%, 06/12/00 . . . . . . . . . . . . 200,482
100,000 6.41%, 12/29/03 . . . . . . . . . . . . 96,641
----------
598,733
----------
U.S. TREASURY BONDS - 4.43%
250,000 7.63%, 02/15/07 . . . . . . . . . . . . 266,697
250,000 8.00%, 11/15/21 . . . . . . . . . . . . 288,907
----------
555,604
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 4.40%
100,000 6.40%, 03/25/03 . . . . . . . . . . . . 97,788
150,000 6.31%, 08/25/03 . . . . . . . . . . . . 145,171
200,000 7.55%, 06/10/04 . . . . . . . . . . . . 203,618
100,000 8.18%, 04/15/24 . . . . . . . . . . . . 103,960
----------
550,537
----------
STUDENT LOAN MARKETING ASSOCIATION - 2.72%
350,000 5.08%, 03/02/99+ . . . . . . . . . . . . 340,714
----------
FEDERAL HOME LOAN MORTGAGE CORP. - 0.82%
100,000 7.88%, 04/28/04 . . . . . . . . . . . . 102,662
----------
TOTAL U.S. GOVERNMENT AND
AGENCY OBLIGATIONS . . . . . . . . . . . 2,778,179
(Cost $2,718,934) ----------
CORPORATE NOTES AND BONDS - 7.46%
200,000 Citicorp
8.63%, 11/01/04 . . . . . . . . . . . . 213,000
150,000 Dow Chemical Co.
6.85%, 08/15/13 . . . . . . . . . . . . 140,625
200,000 Duke Power Co.
8.75%, 03/01/21 . . . . . . . . . . . . 220,000
250,000 Ford Motor Credit Corp.
6.38%, 12/15/05 . . . . . . . . . . . . 240,000
125,000 NBD Bank N.A.
6.25%, 08/15/03 . . . . . . . . . . . . 121,406
----------
TOTAL CORPORATE NOTES AND BONDS . . . . . 935,031
(Cost $925,508) ----------
REPURCHASE AGREEMENTS - 11.16%
1,398,561 Chase Securities, Inc.
6.05%, due 7/03/95, dated 6/30/95,
Repurchase Price $1,399,267
(Collateralized by U.S. Treasury Note
7.50% due 1996; Total Par $1,400,000;
Market Value $1,429,750) . . . . . . . . 1,398,561
-----------
TOTAL REPURCHASE AGREEMENTS . . . . . . 1,398,561
(Cost $1,398,561) -----------
TOTAL INVESTMENTS - 99.45% . . . . . . . . . . . . . . . . 12,459,971
(Cost $11,141,377)** -----------
NET OTHER ASSETS AND LIABILITIES - 0.55% . . . . . . . . . 68,880
-----------
NET ASSETS - 100.00% . . . . . . . . . . . . . . . . . . . $ 12,528,851
===========
</TABLE>
- -------------------------------------------
* Non income producing security.
** Aggregate cost for Federal tax purposes.
+ Interest rate steps up periodically.
The interest rate shown reflects the rate
at period end.
ADR American Depository Receipts.
See Notes to Financial Statements.
13
<PAGE> 16
VIP HIGH QUALITY BOND FUND
THE GALAXY PORTFOLIO OF INVESTMENTS
VIP FUND JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
------------ -------------
<S> <C>
U.S. GOVERNMENT AND
AGENCY OBLIGATIONS - 61.05%
U.S. TREASURY BONDS - 22.49%
$ 100,000 7.63%, 02/15/07 . . . . . . . . . . . . $ 106,679
500,000 7.25%, 05/15/16 . . . . . . . . . . . . 531,190
850,000 7.50%, 11/15/16 . . . . . . . . . . . . 926,559
500,000 7.25%, 08/15/22 . . . . . . . . . . . . 533,459
----------
2,097,887
----------
U.S. TREASURY NOTES - 15.49%
250,000 4.75%, 10/31/98 . . . . . . . . . . . . 241,115
300,000 6.00%, 10/15/99 . . . . . . . . . . . . 300,303
100,000 6.38%, 01/15/00 . . . . . . . . . . . . 101,426
100,000 5.50%, 04/15/00 . . . . . . . . . . . . 98,059
200,000 6.38%, 08/15/02 . . . . . . . . . . . . 202,544
500,000 6.25%, 02/15/03 . . . . . . . . . . . . 501,755
----------
1,445,202
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 10.66%
500,000 6.38%, 07/08/03 . . . . . . . . . . . . 485,980
500,000 7.55%, 06/10/04 . . . . . . . . . . . . 509,044
----------
995,024
----------
FEDERAL HOME LOAN MORTGAGE CORP. - 7.09%
200,000 6.80%, 09/18/02 . . . . . . . . . . . . 198,404
500,000 6.20%, 09/08/08 . . . . . . . . . . . . 462,629
----------
661,033
----------
U.S. GOVERNMENT BACKED BONDS - 5.32%
300,000 Tennessee Valley Authority, Series C
6.13%, 07/15/03 . . . . . . . . . . . . 292,125
200,000 Tennessee Valley Authority, Series F
6.88%, 08/01/02 . . . . . . . . . . . . 204,000
----------
496,125
----------
TOTAL U.S. GOVERNMENT AND
AGENCY OBLIGATIONS . . . . . . . . . . . 5,695,271
(Cost $5,736,041) ----------
CORPORATE NOTES AND BONDS - 26.13%
300,000 Aetna Life & Casualty Co.
6.75%, 09/15/13 . . . . . . . . . . . . . 266,625
300,000 Associates Corp. of North America
5.25%, 03/30/00 . . . . . . . . . . . . . 285,375
100,000 Associates Corp. of North America
6.88%, 02/01/03 . . . . . . . . . . . . . 102,750
300,000 Coca-Cola Enterprises
8.50%, 02/01/22 . . . . . . . . . . . . . 341,625
50,000 Duke Power Co.
7.00%, 09/01/05 . . . . . . . . . . . . . 50,813
250,000 Duke Power Co.
8.75%, 03/01/21 . . . . . . . . . . . . . 275,000
300,000 General Electric Capital Corp.
5.50%, 11/01/01 . . . . . . . . . . . . . 283,500
250,000 International Business Machines Corp.
7.50%, 06/15/13 . . . . . . . . . . . . . 255,000
50,000 Mcdonald's Corp.
6.75%, 02/15/03 . . . . . . . . . . . . . 50,187
100,000 Norwest Financial, Inc.
7.00%, 01/15/03 . . . . . . . . . . . . . 101,875
50,000 Pacific Bell
6.25%, 03/01/05 . . . . . . . . . . . . . 47,813
300,000 Southwestern Bell Telephone Co.
5.75%, 09/01/04 . . . . . . . . . . . . . 277,125
100,000 Wal-Mart Stores, Inc.
6.50%, 06/01/03 . . . . . . . . . . . . . 99,375
----------
TOTAL CORPORATE NOTES AND BONDS 2,437,063
(Cost $2,455,275) ----------
REPURCHASE AGREEMENTS - 11.05%
1,031,237 Chase Securities
6.05%, due 7/03/95, dated 6/30/95,
Repurchase Price $1,031,756
(Collateralized by U.S. Treasury Note
7.50%, due 1996; Total Par $1,030,000;
Market Value $1,051,888) . . . . . . . . 1,031,237
----------
TOTAL REPURCHASE AGREEMENTS . . . . . . 1,031,237
(Cost $1,031,237) ----------
TOTAL INVESTMENTS - 98.23% . . . . . . . . . . . . . . . . 9,163,571
(Cost $9,222,553)** ----------
NET OTHER ASSETS AND LIABILITIES - 1.77% . . . . . . . . . 164,823
----------
NET ASSETS - 100.00% . . . . . . . . . . . . . . . . . . . $ 9,328,394
==========
</TABLE>
- -------------------------------------------
** Aggregate cost for Federal tax purposes.
See Notes to Financial Statements.
14
<PAGE> 17
THE GALAXY STATEMENTS OF ASSETS AND LIABILITIES
VIP FUND JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
MONEY MARKET EQUITY ASSET ALLOCATION HIGH QUALITY
FUND FUND FUND BOND FUND
------------- -------------- ----------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments (Note 2):
Investments at cost . . . . . . . . . . . . . $ 14,278,257 $ 19,208,670 $ 9,742,816 $ 8,191,316
Repurchase agreements . . . . . . . . . . . . -- 3,476,465 1,398,561 1,031,237
Net unrealized appreciation (depreciation) . . -- 3,839,596 1,318,594 (58,982)
------------- ------------- ------------- -------------
Total investments at value . . . . . . . . 14,278,257 26,524,731 12,459,971 9,163,571
Cash . . . . . . . . . . . . . . . . . . . . . 2,753 -- -- 12
Receivable for investments sold . . . . . . . . . -- 54,648 -- --
Receivable for shares sold . . . . . . . . . . . -- 42,061 29,807 32,182
Interest and dividend receivables . . . . . . . . -- 29,432 59,570 148,176
Receivable from investment adviser (Note 4) . . . -- -- 5,152 --
Deferred organizational expense (Note 2) . . . . 8,448 8,288 8,484 8,341
------------- ------------- ------------- -------------
Total Assets . . . . . . . . . . . . . . . 14,289,458 26,659,160 12,562,984 9,352,282
------------- ------------- ------------- -------------
LIABILITIES:
Payable for investments purchased . . . . . . . . -- 1,182,613 -- --
Payable for shares repurchased . . . . . . . . . 83,567 -- 112 --
Advisory fee payable (Note 3 & 4) . . . . . . . . 1,468 15,317 -- 150
Payable to TSSG (Note 3 & 4) . . . . . . . . . . 4,413 12,865 13,825 5,856
Trustees' fees and expenses payable (Note 3) . . 831 831 831 831
Accrued expenses and other payables . . . . . . . 21,777 24,536 19,365 17,051
------------- ------------- ------------- -------------
Total Liabilities . . . . . . . . . . . . . 112,056 1,236,162 34,133 23,888
------------- ------------- ------------- -------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . $ 14,177,402 $ 25,422,998 $ 12,528,851 $ 9,328,394
============= ============= ============= =============
NET ASSETS CONSIST OF:
Par value (Note 5) . . . . . . . . . . . . . . . $ 14,177 $ 2,119 $ 1,098 $ 935
Paid-in capital in excess of par value . . . . . 14,163,121 21,778,456 11,386,227 9,589,713
Undistributed net investment income . . . . . . . 284 10,288 14,247 --
Accumulated net realized gain (loss) on
investments sold . . . . . . . . . . . . . . . (180) (207,461) (191,315) (203,272)
Net unrealized appreciation (depreciation) . . .
of investments . . . . . . . . . . . . . . . . -- 3,839,596 1,318,594 (58,982)
------------- ------------- ------------- -------------
TOTAL NET ASSETS . . . . . . . . . . . . . . . . . . $ 14,177,402 $ 25,422,998 $ 12,528,851 $ 9,328,394
============= ============= ============= =============
SHARES OF BENEFICIAL INTEREST OUTSTANDING . . . . . . 14,177,298 2,119,276 1,098,246 935,113
NET ASSET VALUE,
offering and redemption price per share
(Net Assets / Shares Outstanding) . . . . . . . . $ 1.00 $ 12.00 $ 11.41 $ 9.98
============= ============= ============= =============
</TABLE>
See Notes to Financial Statements.
15
<PAGE> 18
STATEMENTS OF OPERATIONS
THE GALAXY FOR THE SIX MONTHS ENDED JUNE 30, 1995
VIP FUND (UNAUDITED)
<TABLE>
<CAPTION>
MONEY MARKET EQUITY ASSET ALLOCATION HIGH QUALITY
FUND FUND FUND BOND FUND
------------- -------------- ----------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest (Note 2) . . . . . . . . . . . . . . . . $ 390,354 $ 195,589 $ 143,536 $ 294,055
Dividends (Note 2) . . . . . . . . . . . . . . . -- 104,597 74,740 35
----------- ----------- ----------- -----------
Total investment income . . . . . . . . . . . 390,354 300,186 218,276 294,090
----------- ----------- ----------- -----------
EXPENSES:
Investment advisory fee (Note 3) . . . . . . . . 26,045 81,898 40,821 23,235
Administration fee (Note 3) . . . . . . . . . . . 12,397 12,397 12,397 12,397
Custody fee . . . . . . . . . . . . . . . . . . . 6,494 4,637 5,082 3,740
Fund accounting fee (Note 3) . . . . . . . . . . 12,851 14,028 14,898 15,195
Legal fee (Note 3) . . . . . . . . . . . . . . . 9,186 13,039 6,510 5,934
Audit fee . . . . . . . . . . . . . . . . . . . . 5,148 5,148 5,148 5,148
Trustees' fees and expenses (Note 3) . . . . . . 1,837 1,837 1,837 1,837
Amortization of organization costs (Note 2) . . . 1,614 1,614 1,614 1,614
Reports to shareholders . . . . . . . . . . . . . 2,782 6,996 2,454 2,074
Registration fees . . . . . . . . . . . . . . . . 253 2,225 201 72
Insurance . . . . . . . . . . . . . . . . . . . . 592 535 437 394
Miscellaneous . . . . . . . . . . . . . . . . . . 176 176 176 176
----------- ----------- ----------- -----------
Total Expenses before
reimbursement/waiver . . . . . . . . . . . 79,375 144,530 91,575 71,816
Less: Reimbursement/waiver
(Notes 3 & 4) . . . . . . . . . . . . . . . (34,785) ( 6,749) (18,837) (37,271)
----------- ----------- ----------- -----------
Total Expenses net of reimbursement/
waiver . . . . . . . . . . . . . . . . . . 44,590 137,781 72,738 34,545
----------- ----------- ----------- -----------
NET INVESTMENT INCOME . . . . . . . . . . . . . . . . 345,764 162,405 145,538 259,545
----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (NOTE 2):
Net realized gain (loss) on investments sold . . (26) ( 18,061) 2,180 (26,647)
Net change in unrealized appreciation
(depreciation) of investments . . . . . . . . -- 3,121,407 1,645,729 930,512
----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS . . . . . . . . . . . . . . . . (26) 3,103,346 1,647,909 903,865
----------- ----------- ----------- -----------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS . . . . . . . . . . . . . . . . . . . $ 345,738 $ 3,265,751 $ 1,793,447 $ 1,163,410
==========- =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
16
<PAGE> 19
THE GALAXY
VIP FUND STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MONEY MARKET FUND EQUITY FUND
----------------------------------- -----------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31, JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994 (UNAUDITED) 1994
---------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD:. . . . . . . . . . $ 13,276,092 $ 10,863,791 $ 19,391,332 $ 12,908,871
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS:
Net investment income . . . . . . . . . . . . . . 345,764 480,223 162,405 346,429
Net realized gain (loss) on investments sold . . (26) (47) (18,061) (124,453)
Net change in unrealized appreciation
(depreciation) of investments . . . . . . . . -- -- 3,121,407 356,961
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from operations . . . . . . . . . . . . . . 345,738 480,176 3,265,751 578,937
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income . . . . . . . . . . . . . . (345,764) (479,939) (152,111) (346,423)
In excess of net investment income . . . . . . . -- -- -- (6)
Net realized gain on investments . . . . . . . . -- (284) -- --
Return of capital . . . . . . . . . . . . . . . . -- -- -- (267)
------------- ------------- ------------- -------------
Total Distributions . . . . . . . . . . . . . (345,764) (480,223) (152,111) (346,696)
------------- ------------- ------------- -------------
SHARE TRANSACTIONS:
Net proceeds from sales of shares . . . . . . . . 4,779,822 11,407,186 3,276,689 8,162,524
Issued to shareholders in reinvestment
of dividends . . . . . . . . . . . . . . . . . 345,764 480,223 152,111 346,696
Costs of shares repurchased . . . . . . . . . . . (4,224,250) (9,475,061) (510,774) (2,259,000)
------------- ------------- ------------- -------------
Net increase (decrease) from share
transactions. . . . . . . . . . . . . . . . 901,336 2,412,348 2,918,026 6,250,220
------------- ------------- ------------- -------------
Net increase (decrease) in net assets . . . . 901,310 2,412,301 6,031,666 6,482,461
------------- ------------- ------------- -------------
NET ASSETS AT END OF PERIOD: . . . . . . . . . . . . $ 14,177,402 $ 13,276,092 $ 25,422,998 $ 19,391,332
============= ============= ============= =============
Accumulated undistributed net
investment income . . . . . . . . . . . . . . . . $ 284 $ 284 $ 10,288 $ (6)
============= ============= ============= =============
OTHER INFORMATION:
SHARE TRANSACTIONS:
Sold . . . . . . . . . . . . . . . . . . . . . 4,779,822 11,407,186 287,723 791,455
Issued to shareholders in reinvestment
of dividends. . . . . . . . . . . . . . . . . 345,764 480,223 13,198 33,267
Repurchased. . . . . . . . . . . . . . . . . . . (4,224,250) (9,475,061) (45,659) (220,435)
------------- ------------- ------------- -------------
Net increase (decrease) in shares outstanding 901,336 2,412,348 255,262 604,287
============= ============= ============= =============
</TABLE>
See Notes to Financial Statements.
17
<PAGE> 20
THE GALAXY STATEMENTS OF CHANGES IN NET ASSETS
VIP FUND (CONTINUED)
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND HIGH QUALITY BOND FUND
----------------------------------- -----------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31, JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994 (UNAUDITED) 1994
---------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD:. . . . . . . . . . $ 10,571,573 $ 11,800,291 $ 8,011,781 $ 9,801,629
-------------- ------------- -------------- --------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS:
Net investment income . . . . . . . . . . . . . . 145,538 363,472 259,545 546,555
Net realized gain (loss) on investments sold . . 2,180 (193,495) (26,647) (176,625)
Net change in unrealized appreciation . . . . . .
(depreciation) of investments . . . . . . . . 1,645,729 (431,751) 930,512 (975,502)
-------------- ------------- -------------- --------------
Net increase (decrease) in net assets resulting
from operations . . . . . . . . . . . . . . 1,793,447 (261,774) 1,163,410 (605,572)
-------------- ------------- -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income . . . . . . . . . . . . . . (131,291) (363,472) (259,545) (546,555)
Net realized gain on investments . . . . . . . . -- -- -- --
Return of capital . . . . . . . . . . . . . . . . -- (638) -- --
-------------- ------------- -------------- --------------
Total Distributions . . . . . . . . . . . . . (131,291) (364,110) (259,545) (546,555)
-------------- ------------- -------------- --------------
SHARE TRANSACTIONS:
Net proceeds from sales of shares . . . . . . . . 1,755,962 3,054,961 987,411 2,118,130
Issued to shareholders in reinvestment
of dividends . . . . . . . . . . . . . . . . . 131,291 364,110 259,545 546,555
Costs of shares repurchased . . . . . . . . . . . (1,592,131) (4,021,905) (834,208) (3,302,406)
-------------- ------------- -------------- --------------
Net increase (decrease) from share
transactions. . . . . . . . . . . . . . . . 295,122 (602,834) 412,748 (637,721)
-------------- ------------- -------------- --------------
Net increase (decrease) in net assets . . . . 1,957,278 (1,228,718) 1,316,613 (1,789,848)
-------------- ------------- -------------- --------------
NET ASSETS AT END OF PERIOD: . . . . . . . . . . . . $ 12,528,851 $ 10,571,573 $ 9,328,394 $ 8,011,781
============== ============= ============== ==============
Accumulated undistributed net
investment income . . . . . . . . . . . . . . . . $ 14,247 $ -- $ -- $ --
============== ============= ============== ==============
OTHER INFORMATION:
SHARE TRANSACTIONS:
Sold . . . . . . . . . . . . . . . . . . . . . 159,993 301,150 102,761 221,295
Issued to shareholders in reinvestment
of dividends. . . . . . . . . . . . . . . . . 12,011 36,287 27,240 58,399
Repurchased. . . . . . . . . . . . . . . . . . . (152,717) (400,957) (88,138) (356,260)
-------------- ------------- -------------- --------------
Net increase (decrease) in shares outstanding 19,287 (63,520) 41,863 (76,566)
============== ============= ============== ==============
</TABLE>
See Notes to Financial Statements.
18
<PAGE> 21
VIP MONEY MARKET FUND
THE GALAXY FINANCIAL HIGHLIGHTS
VIP FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED PERIOD ENDED
JUNE 30, 1995 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1994 1993(A)
-------------- --------------- --------------
<S> <C> <C> <C>
Net Asset Value, Beginning of period . . . . . . . . $ 1.00 $ 1.00 $ 1.00
------------ ------------ ------------
Income from Investment Operations: . . . . . . . . .
Net investment income (B) . . . . . . . . . . . . 0.03 0.04 0.03
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . . . -- -- --
------------ ------------ ------------
Total from Investment Operations: . . . . . . 0.03 0.04 0.03
------------ ------------ ------------
Less Distributions:
Dividends from net investment income . . . . . . (0.03) (0.04) (0.03)
Distributions from net realized capital gains . . -- -- --
------------ ------------ ------------
Total Distributions: . . . . . . . . . . . . . (0.03) (0.04) (0.03)
------------ ------------ ------------
Net increase (decrease) in net asset value . . . . . -- -- --
------------ ------------ ------------
Net Asset Value, End of period . . . . . . . . . . . $ 1.00 $ 1.00 $ 1.00
============ ============ ============
Total Return . . . . . . . . . . . . . . . . . . . . 2.66%+ 3.89% 2.74%+
Ratios/Supplemental Data:
Net Assets, End of Period (000's) . . . . . . . . . . $ 14,177 $ 13,276 $ 10,864
Ratios to average net assets:
Net investment income . . . . . . . . . . . . . . 5.31%* 3.85% 3.00%*
Operating expenses (B) . . . . . . . . . . . . . 0.68%* 0.42% 0.13%*
</TABLE>
- ---------------------------------
* Annualized
+ Not annualized
(A) The Fund commenced operations on February 2, 1993.
(B) Net investment income (loss) per share and the annualized operating
expense ratios before waiver and reimbursement of fees by
the investment adviser and administrator for the six months ended
June 30, 1995, for the year ended December 31, 1994 and for the period
ended December 31, 1993 were $0.02 and 1.22%, $0.03 and 1.21%, and $0.01
and 2.00%, respectively.
See Notes to Financial Statements.
19
<PAGE> 22
VIP EQUITY FUND
THE GALAXY FINANCIAL HIGHLIGHTS
VIP FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED PERIOD ENDED
JUNE 30, 1995 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1994 1993(A)
-------------- --------------- --------------
<S> <C> <C> <C>
Net Asset Value, Beginning of period . . . . . . . . $ 10.40 $ 10.25 $ 10.00
------------ ------------ ------------
Income from Investment Operations: . . . . . . . . .
Net investment income (B) . . . . . . . . . . . . 0.08 0.20 0.16
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . . . 1.60 0.15 0.25
------------ ------------ ------------
Total from Investment Operations: . . . . . . 1.68 0.35 0.41
------------ ------------ ------------
Less Distributions:
Dividends from net investment income . . . . . . (0.08) (0.20) (0.16)
Distributions from net realized capital gains . . -- -- --
------------ ------------ ------------
Total Distributions: . . . . . . . . . . . . . (0.08) (0.20) (0.16)
------------ ------------ ------------
Net increase (decrease) in net asset value . . . . . 1.60 0.15 0.25
------------ ------------ ------------
Net Asset Value, End of period . . . . . . . . . . . $ 12.00 $ 10.40 $ 10.25
============ ============ ============
Total Return . . . . . . . . . . . . . . . . . . . . 16.15%+ 3.47% 4.15%+
Ratios/Supplemental Data:
Net Assets, End of Period (000's) . . . . . . . . . . $ 25,423 $ 19,391 $ 12,909
Ratios to average net assets:
Net investment income . . . . . . . . . . . . . . 1.49%* 2.06% 2.23%*
Operating expenses (B) . . . . . . . . . . . . . 1.26%* 0.71% 0.20%*
Portfolio Turnover Rate . . . . . . . . . . . . . . . 2% 2% 5%
</TABLE>
- ---------------------------------
* Annualized
+ Not annualized
(A) The Fund commenced operations on January 11, 1993.
(B) Net investment income (loss) per share and the annualized operating
expense ratios before waiver and reimbursement of fees by the investment
adviser and administrator for the six months ended June 30, 1995, for the
year ended December 31, 1994 and for the period ended December 31, 1993
were $0.08 and 1.32%, $0.13 and 1.42%, and $(0.02) and 2.60%, respectively.
See Notes to Financial Statements.
20
<PAGE> 23
VIP ASSET ALLOCATION FUND
THE GALAXY FINANCIAL HIGHLIGHTS
VIP FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED PERIOD ENDED
JUNE 30, 1995 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1994 1993(A)
-------------- --------------- --------------
<S> <C> <C> <C>
Net Asset Value, Beginning of period . . . . . . . . $ 9.80 $ 10.33 $ 10.00
------------ ------------ ------------
Income from Investment Operations:
Net investment income (B) . . . . . . . . . . . 0.14 0.31 0.18
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . . . 1.60 (0.53) 0.35
------------ ------------ ------------
Total from Investment Operations: . . . . . . 1.74 (0.22) 0.53
------------ ------------ ------------
Less Distributions:
Dividends from net investment income . . . . . . (0.13) (0.31) (0.18)
Distributions from net realized capital gains . . -- -- (0.02)
------------ ------------ ------------
Total Distributions: . . . . . . . . . . . . . (0.13) (0.31) (0.20)
------------ ------------ ------------
Net increase (decrease) in net asset value . . . . . 1.61 (0.53) 0.33
------------ ------------ ------------
Net Asset Value, End of period . . . . . . . . . . . $ 11.41 $ 9.80 $ 10.33
============ ============ ============
Total Return . . . . . . . . . . . . . . . . . . . . 17.79%+ (2.15)% 5.33%+
Ratios/Supplemental Data:
Net Assets, End of Period (000's) . . . . . . . . . . $ 12,529 $ 10,572 $ 11,800
Ratios to average net assets:
Net investment income . . . . . . . . . . . . . . 2.67%* 3.02% 3.01%*
Operating expenses (B) . . . . . . . . . . . . . 1.34%* 0.78% 0.26%*
Portfolio Turnover Rate . . . . . . . . . . . . . . . 18% 28% 10%
</TABLE>
- ----------------------------------------------------
* Annualized
+ Not annualized
(A) The Fund commenced operations on February 6, 1993.
(B) Net investment income (loss) per share and the annualized operating
expense ratios before waiver and reimbursement of fees by the investment
adviser and administrator for the six months ended June 30, 1995, for the
year ended December 31, 1994 and for the period ended December 31, 1993
were $0.12 and 1.68%, $0.22 and 1.68%, and $0.01 and 3.11%, respectively.
See Notes to Financial Statements.
21
<PAGE> 24
VIP HIGH QUALITY BOND FUND
THE GALAXY FINANCIAL HIGHLIGHTS
VIP FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED PERIOD ENDED
JUNE 30, 1995 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1994 1993(A)
-------------- --------------- --------------
<S> <C> <C> <C>
Net Asset Value, Beginning of period . . . . . . . . $ 8.97 $ 10.11 $ 10.00
------------ ------------ ------------
Income from Investment Operations:
Net investment income (B) . . . . . . . . . . . . 0.29 0.56 0.47
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . . . 1.01 (1.14) 0.12
------------ ------------ ------------
Total from Investment Operations: . . . . . . 1.30 (0.58) 0.59
------------ ------------ ------------
Less Distributions:
Dividends from net investment income . . . . . . (0.29) (0.56) (0.47)
Distributions from net realized capital gains . . -- -- (0.01)
------------ ------------ ------------
Total Distributions: . . . . . . . . . . . . . (0.29) (0.56) (0.48)
------------ ------------ ------------
Net increase (decrease) in net asset value . . . . . 1.01 (1.14) 0.11
------------ ------------ ------------
Net Asset Value, End of period . . . . . . . . . . . $ 9.98 $ 8.97 $ 10.11
============ ============ ============
Total Return . . . . . . . . . . . . . . . . . . . . 14.67%+ (5.85)% 6.04%+
Ratios/Supplemental Data:
Net Assets, End of Period (000's) . . . . . . . . . . $ 9,328 $ 8,012 $ 9,802
Ratios to average net assets:
Net investment income . . . . . . . . . . . . . . 6.14%* 5.90% 5.30%*
Operating expenses (B) . . . . . . . . . . . . . 0.82%* 0.57% 0.22%*
Portfolio Turnover Rate . . . . . . . . . . . . . 0% 32% 7%
</TABLE>
- ---------------------------------------------------
* Annualized
+ Not annualized
(A) The Fund commenced operations on January 21, 1993.
(B) Net investment income (loss) per share and the annualized operating expense
ratios before waiver and reimbursement of fees by the investment adviser
and administrator for the fiscal six months ended June 30, 1995, for the
year ended December 31, 1994, and for the period ended December 31, 1993
were $0.25 and 1.70%, and $0.46 and 1.63%,, and $0.23 and 2.92%,
respectively.
See Notes to Financial Statements.
22
<PAGE> 25
THE GALAXY
VIP FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION
The Galaxy VIP Fund, a Massachusetts business trust, (the "Trust"), is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end, diversified, management investment company for the
purpose of providing a vehicle for the investment of assets of various separate
accounts established exclusively for the purpose of providing an investment
vehicle for variable annuity contracts and variable life insurance policies.
Currently, shares of the Trust are offered only to separate accounts funding
variable annuity contracts issued by American Skandia Life Assurance
Corporation and its affiliated life assurance companies. The accompanying
financial statements and financial highlights are those of the Money Market,
Equity, Asset Allocation and High Quality Bond Funds (individually a "Fund,"
collectively, the "Funds"), the four managed investment portfolios offered by
the Trust as of the date of this report.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies in
conformity with generally accepted accounting principles consistently followed
by the Trust in the preparation of its financial statements.
PORTFOLIO VALUATION: Investments in securities which are traded on a
recognized stock exchange are valued at the last sale price on the securities
exchange on which such securities are primarily traded, or at the last sale
price on the national securities market. Also, securities traded on
over-the-counter markets are valued at the last bid price. Short-term
obligations that mature in 60 days or less are valued at amortized cost.
Corporate debt securities and debt securities of U.S. issuers (other than
short-term investments), including municipal securities, are valued by an
independent pricing service approved by the Board of Trustees. When, in the
judgement of the service, quoted bid prices for securities are readily
available and are representative of the bid side of the market, these
investments are valued at the mean between quoted bid prices and asked prices.
Investments with prices that cannot be readily obtained, if any, are carried at
fair value as determined by the service based on methods which include
consideration of yields or prices of bonds of comparable quality, coupon
maturity and type, indications as to values from dealers, and general market
conditions. The investments of the Money Market Fund are valued utilizing the
amortized cost valuation method permitted in accordance with Rule 2a-7 under
the 1940 Act. This method involves valuing a portfolio security initially at
its cost and thereafter assuming a constant amortization to maturity of any
discount or premium. All other securities and assets are appraised at their
fair value as determined in good faith under consistently applied procedures
established by and under the general supervision of the Board of Trustees.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on a trade date basis. Net realized gains and losses on sales of
securities are determined by the identified cost method. Interest income is
recorded on the accrual basis. Dividend income is recorded on the ex-dividend
date.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Dividends from net
investment income are declared daily and paid monthly with respect to the Money
Market and High Quality Bond Funds, and declared and paid quarterly with
respect to the Equity and Asset Allocation Funds. Net realized capital gains,
if any, are distributed at least annually.
23
<PAGE> 26
THE GALAXY NOTES TO FINANCIAL STATEMENTS (CONTINUED)
VIP FUND (UNAUDITED)
Income distributions and capital gains distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles.
FEDERAL INCOME TAXES: The Trust treats each Fund as a separate entity
for Federal income tax purposes. Each Fund intends to qualify each year as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended. By so qualifying, each Fund will not be subject to Federal
income taxes to the extent it distributes substantially all of its taxable or
tax-exempt income, if any, for the tax year ending December 31. In addition,
by distributing during each calendar year substantially all of its net
investment income, capital gains and certain other amounts, if any, each Fund
will not be subject to a Federal excise tax. Therefore, no Federal income tax
provision is required.
EXPENSES: The Trust accounts separately for the assets, liabilities
and operations of each Fund. Expenses directly attributable to a Fund are
charged to the Fund, while expenses which are attributable to more than one
Fund of the Trust are allocated among the respective Funds.
ORGANIZATION COSTS: Each Fund bears all costs in connection with its
organization, including the fees and expenses of registering and qualifying its
shares for distribution under Federal and state securities laws. All such costs
are being amortized using the straight-line method over a period of five years
beginning with the commencement of each Fund's operation.
3. INVESTMENT ADVISORY, ADMINISTRATION AND
OTHER RELATED PARTY TRANSACTIONS
The Trust and Fleet Investment Advisors Inc. (the "Investment
Adviser"), an indirect subsidiary of Fleet Financial Group, Inc., are parties
to an investment advisory agreement under which the Investment Adviser provides
services for a fee, computed daily and paid monthly, at an annual rate based
upon the following percentages of average daily net asset value: 0.40% for the
Money Market Fund, 0.75% for the Equity and Asset Allocation Funds and 0.55%
for the High Quality Bond Fund.
Effective March 31, 1995, the Trust and The Shareholder Services
Group, Inc., doing business as 440 Financial ("TSSG"), a wholly-owned
subsidiary of First Data Corporation ("First Data"), are parties to an
administration agreement under which TSSG (the "Administrator") provides
services for a fee, computed daily and paid monthly, at the annual rate of
0.085% of the first $1 billion of the combined average daily net assets of the
Funds, plus 0.078% of the next $1.5 billion of the combined average daily net
assets of the Funds, plus 0.073% of the combined average daily net assets of
the Funds in excess of $2.5 billion. The minimum aggregate annual fee payable
for administration of the Funds is $100,000. In addition, TSSG receives a
separate annual fee from each Fund for certain fund accounting services. Prior
to March 31, 1995, the administration and fund accounting services described
above were provided by 440 Financial Group of Worcester, Inc., a wholly-owned
subsidiary of State Mutual Life Assurance of America ("State Mutual"), for the
same annual fees. On that date, TSSG acquired substantially all the assets of
440 Financial Group of Worcester, Inc.
Effective March 31, 1995, 440 Financial Distributors, Inc. ("the Distributor"),
a wholly-owned subsidiary of TSSG and an indirect wholly-owned subsidiary of
First Data, acts as the exclusive distributor of the Trust's shares. Prior to
March 31, 1995, the Distributor was a wholly-owned subsidiary of 440 Financial
Group of Worcester, Inc. and an indirect
24
<PAGE> 27
THE GALAXY NOTES TO FINANCIAL STATEMENTS (CONTINUED)
VIP FUND (UNAUDITED)
wholly-owned subsidiary of State Mutual. Prior to March 1, 1994, Allmerica
Investments, Inc., a wholly-owned subsidiary of State Mutual, served as the
Trust's distributor.
Certain officers of the Trust are also officers of the Administrator
and/or Distributor. Such officers receive no compensation from the Trust for
serving in their respective roles. No officer, director or employee of the
Investment Adviser serves as an officer, Trustee or employee of the Trust.
Prior to June 1, 1995, each Trustee was entitled to receive $2,000 per annum
plus certain other fees for attending or participating in meetings as well as
reimbursement for expenses incurred in attending meetings. The Chairman of the
Board of Trustees is entitled to an additional annual fee of $1,000 and the
Trust's President and Treasurer each receive an additional annual fee of $500
for their services in these capacities. Effective June 1, 1995, each Trustee
is entitled to receive $3,000 per annum plus certain other fees for attending
or participating in meetings as well as reimbursement for expenses incurred in
attending meetings.
Expenses for the six months ended June 30, 1995 include legal fees
paid to Drinker Biddle & Reath. A partner of that firm is Secretary to the
Trust.
At June 30, 1995 with the exception of the initial shares, the
separate accounts owned all of the outstanding shares of the four Funds as
investment accounts for the life assurance policies offered by American Skandia
Life Assurance Corporation.
4. WAIVER OF FEES AND REIMBURSEMENT OF
EXPENSES
The Investment Adviser and Administrator may waive all or a portion of
the fees payable to them by the Funds, either voluntarily or pursuant to
applicable statutory expense limitations. The Investment Adviser and
Administrator may, at their discretion, revise or discontinue the voluntary
limitations.
For the six months ended June 30, 1995, the Investment Adviser and
Administrator voluntarily waived advisory, administration, fund accounting and
custody fees as follows:
<TABLE>
<CAPTION>
FEES WAIVED BY FEES WAIVED BY
FUND INVESTMENT ADVISER ADMINISTRATOR
- ----------------------------------------------------------------------
<S> <C> <C>
Money Market $ 16,278 $ 16,709
Equity -- 806
Asset Allocation 365 2,349
High Quality Bond 16,856 17,494
</TABLE>
The Investment Adviser may, from time to time, agree to reimburse a
Fund for expenses above a specified percentage of average net assets. For the
six months ended June 30, 1995, the Investment Adviser voluntarily agreed to
reimburse the Money Market, Equity, Asset Allocation, and High Quality Bond
Funds in the amount of $1,798, $5,943, $16,123 and $2,921, respectively.
5. SHARES OF BENEFICIAL INTEREST
The Trust's Declaration of Trust authorizes the Trustees to issue an
unlimited number of shares of beneficial interest, each with a par value of
$0.001. Shares of the Trust are currently classified into four classes of
shares including: Class A - Money Market Fund; Class B - Equity Fund; Class C -
Asset Allocation Fund; and Class D - High Quality Bond Fund. Each share
represents an equal proportionate interest in the respective Fund, bears the
same fees and expenses and is entitled to such dividends and distributions of
income earned as are declared at the discretion of the Trust's Board of
Trustees. Shareholders are entitled to one vote for each full share held and
will vote in the aggregate and not by class, except as otherwise expressly
required by law or when the Board of Trustees determines that the matter to be
voted on affects only the interests of shareholders of a particular class.
25
<PAGE> 28
THE GALAXY NOTES TO FINANCIAL STATEMENTS (CONTINUED)
VIP FUND (UNAUDITED)
6. PURCHASES AND SALES OF SECURITIES
The cost of purchases and proceeds from sales of securities, excluding
short-term investments, for the six months ended June 30, 1995, were as
follows:
<TABLE>
<CAPTION>
PURCHASES SALES
--------------------------------------------------------------------------
FUND OTHER GOVERNMENT OTHER GOVERNMENT
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equity $ 2,188,550 $ -- $ 275,333 $ --
Asset Allocation 840,678 1,022,918 1,869,866 1,095,258
High Quality Bond -- -- 556,231 --
</TABLE>
The aggregate gross unrealized appreciation and depreciation, net
unrealized appreciation (depreciation) and cost for all securities, as computed
on a Federal income tax basis, at June 30, 1995 for each Fund is as follows:
<TABLE>
<CAPTION>
FUND APPRECIATION (DEPRECIATION ) NET COST
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equity $ 4,157,633 $ (318,037) $ 3,839,596 $ 22,685,135
Asset Allocation 1,502,861 (184,267) 1,318,594 11,141,377
High Quality Bond 164,610 (223,592) (58,982) 9,222,553
</TABLE>
7. CAPITAL LOSS CARRYFORWARD
At December 31, 1994, the following funds had capital loss
carryforwards:
<TABLE>
<CAPTION>
Fund Amount Expiration
- ---- ------ ----------
<S> <C> <C>
Money Market $ 154 2002
Equity 64,947 2001
124,453 2002
Asset Allocation 142,569 2002
High Quality Bond 155,797 2002
</TABLE>
26
<PAGE> 29
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT E
FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 1995
(UNAUDITED)
27
<PAGE> 30
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT E
STATEMENT OF ASSETS AND LIABILITIES
AS OF JUNE 30, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in mutual funds at market value (Note 2):
Galaxy VIP Funds (GAL):
Money Market - shares 13,481,336 (cost $13,481,336)............... $13,481,336
Equity - shares 2,080,070 (cost $21,401,341)...................... 24,960,843
High Quality Bond - shares 924,480 (cost $9,171,457).............. 9,226,315
Asset Allocation - shares 1,079,292 (cost $11,184,585)............ 12,314,716
-----------
Total Invested Assets.................................. 59,983,210
-----------
Receivable from American Skandia Life.................................................. 8,266
-----------
Total Assets........................................... $59,991,476
-----------
LIABILITIES:
Payable to Galaxy VIP Funds............................................................ $ 9,501
-----------
Total Liabilities...................................... $ 9,501
-----------
</TABLE>
NET ASSETS:
<TABLE>
<CAPTION>
Galaxy Contractowners' Equity Units Unit Value
----------------------------- ---------- ----------
<S> <C> <C> <C>
GAL - Money Market.............................. 1,247,289 $10.81 $13,481,363
GAL - Equity.................................... 2,021,528 12.35 24,960,843
GAL - High Quality Bond......................... 816,781 11.29 9,225,052
GAL - Asset Allocation.......................... 1,028,314 11.98 12,314,717
-----------
Total Net Assets........... $59,981,975
===========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
28
<PAGE> 31
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT E
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SUB-ACCOUNTS INVESTING IN:
--------------------------------------------------------------------------
GAL - MONEY GAL GAL - HIGH GAL - ASSET
TOTAL MARKET EQUITY QUALITY BOND ALLOCATION
---------- ----------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Income
Dividends................................... $ 884,859 $ 343,670 $ 151,307 $ 259,255 $ 130,627
Expenses
Mortality and Expense Risks Charges and
Administrative Fees (Note 4).............. (157,963) (38,279) (62,788) (24,092) (32,804)
--------- --------- --------- --------- ---------
NET INVESTMENT INCOME............................... 726,896 305,391 88,519 235,163 97,823
--------- --------- --------- --------- ---------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales............................. 7,053,004 4,124,563 510,524 834,198 1,583,719
Cost of Securities Sold......................... 7,011,532 4,124,563 458,202 890,390 1,538,377
--------- --------- --------- --------- ---------
NET REALIZED GAIN (LOSS)............................ 41,472 0 52,322 (56,192) 45,342
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Year............................... (902,660) 0 490,672 (908,576) (484,756)
End of Period................................... 4,744,491 0 3,559,502 54,858 1,130,131
--------- --------- --------- --------- ---------
NET UNREALIZED GAIN................................. 5,647,151 0 3,068,830 963,434 1,614,887
--------- --------- --------- --------- ---------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS......................... $6,415,519 $ 305,391 $3,209,671 $1,142,405 $1,758,052
========= ========= ========= ========= =========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
29
<PAGE> 32
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT E
STATEMENTS OF CHANGES IN NET ASSETS
UNAUDITED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SUB-ACCOUNTS INVESTING IN:
-----------------------------------------------------------------------
TOTAL GAL-MONEY MARKET
-------------------------------- --------------------------------
PERIOD ENDED PERIOD ENDED
JUN. 30, YEAR ENDED JUN. 30, YEAR ENDED
1995 DEC. 31, 1994 1995 DEC. 31, 1994
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net Investment Income............................... $ 726,896 $ 1,447,657 $ 305,391 $ 410,100
Net Realized Gain (Loss)............................ 41,472 (261,712) 0 0
Net Unrealized Gain (Loss) on Investments........... 5,647,151 (1,294,897) 0 0
---------- ---------- ---------- ----------
Net Increase (Decrease) in Net Assets
Resulting from Operations......................... 6,415,519 (108,952) 305,391 410,100
---------- ---------- ---------- ----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits.................. 9,090,680 18,419,920 5,223,537 13,131,303
Net Transfers between Sub-accounts.................. 0 0 (1,333,163) (6,751,680)
Surrenders.......................................... (6,772,153) (12,445,462) (3,990,354) (4,377,375)
---------- ---------- ---------- ----------
Net Increase (Decrease) in Net Assets
Resulting from Capital Share Transactions......... 2,318,527 5,974,458 (99,980) 2,002,248
---------- ---------- ---------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS................. 8,734,046 5,865,506 205,411 2,412,348
NET ASSETS:
Beginning of Year................................... 51,247,929 45,382,423 13,275,952 10,863,604
---------- ---------- ---------- ----------
End of Period....................................... $59,981,975 $ 51,247,929 $13,481,363 $13,275,952
========== ========== ========== ==========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced
30
<PAGE> 33
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SUB-ACCOUNTS INVESTING IN:
-----------------------------------------------------------------------------------------------------------------------------
GAL - EQUITY GAL - HIGH QUALITY BOND GAL - ASSET ALLOCATION
----------------------------------- ----------------------------------- -----------------------------------
PERIOD ENDED PERIOD ENDED PERIOD ENDED
JUN. 30, YEAR ENDED JUN. 30, YEAR ENDED JUN. 30, YEAR ENDED
1995 DEC. 31, 1994 1995 DEC. 31, 1994 1995 DEC. 31, 1994
------------ ------------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
$ 88,519 $ 252,033 $ 235,163 $ 493,689 $ 97,823 $ 291,835
52,322 32,461 (56,192) (259,421) 45,342 (34,752)
3,068,830 190,762 963,434 (895,240) 1,614,887 (590,419)
---------- ---------- --------- ---------- ---------- ----------
3,209,671 475,256 1,142,405 (660,972) 1,758,052 (333,336)
---------- ---------- --------- ---------- ---------- ----------
2,343,826 2,849,176 641,057 757,438 882,260 1,682,003
675,396 4,648,563 244,955 596,054 412,812 1,507,063
(653,788) (1,499,452) (815,811) (2,484,901) (1,312,200) (4,083,734)
---------- ---------- --------- ---------- ---------- ----------
2,365,434 5,998,287 70,201 (1,131,409) (17,128) (894,668)
---------- ---------- --------- ---------- ---------- ----------
5,575,105 6,473,543 1,212,606 (1,792,381) 1,740,924 (1,228,004)
19,385,738 12,912,195 8,012,446 9,804,827 10,573,793 11,801,797
---------- ---------- --------- ---------- ---------- ----------
$24,960,843 $19,385,738 $9,225,052 $ 8,012,446 $12,314,717 $10,573,793
========== ========== ========= ========== ========== ==========
</TABLE>
- --------------------------------------------------------------------------------
31
<PAGE> 34
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT E
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION
American Skandia Life Assurance Corporation Variable Account E (the "Account")
is a separate investment account of American Skandia Life Assurance Corporation
("American Skandia"). The Account is registered with the SEC under the
Investment Company Act of 1940 as a unit investment trust. The account commenced
operations January 8, 1993.
As of June 30, 1995 the Account consisted of four sub-accounts, each of which
invests only in a single corresponding portfolio of The Galaxy VIP Fund (the
"Fund"). The investment advisor is paid a fee by the above mentioned Fund.
2. VALUATION OF INVESTMENTS
The market value of the investments in the sub-accounts is based on the net
asset values of the Fund Shares held at the end of the current period.
Transactions are accounted for on the trade date and dividend income is
recognized on an accrual basis. Realized gains and losses on sales of
investments are determined on a first-in first-out basis.
3. INCOME TAXES
American Skandia does not expect to incur any Federal income tax liability on
earnings, or realized capital gains attributable to the Account, therefore, no
charges for Federal income taxes are currently deducted from the Account. If
American Skandia incurs income taxes attributable to the Account, or determines
that such taxes will be incurred, it may make a charge for such taxes against
the Account.
Under current laws, American Skandia may incur state and local income taxes (in
addition to premium tax) in several states. The Company does not anticipate that
these will be significant. However, American Skandia may make charges to the
Account in the event that the amount of these taxes change.
4. CONTRACT CHARGES
The following contract charges are paid to American Skandia:
Mortality and Expense Risk Charges -- Charged daily against the Account at
an annual rate of .40% of the net assets.
Administration Fee -- Charged daily against the Account at an annual rate
of .15% of the net assets. A Maintenance fee equaling the smaller of $30
or 2% of contract value is deducted at the end of each contract year and
upon surrender if contract value at the valuation period such fee is
payable is less than $50,000.
32
<PAGE> 35
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT E
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CON'T)
- --------------------------------------------------------------------------------
5. CHANGES IN THE UNITS OUTSTANDING
<TABLE>
<CAPTION>
-----------------------------------------------------------
SUB-ACCOUNTS INVESTING IN:
-----------------------------------------------------------
GAL - MONEY MARKET GAL - EQUITY
------------------------------- -------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUN. 30, 1995 DEC. 31, 1994 JUN. 30, 1995 DEC. 31, 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of the Year................... 1,257,546 1,063,152 1,818,564 1,246,452
Units Purchased........................................... 439,075 1,273,081 194,102 273,424
Units Transferred Between Sub-accounts.................... (124,636) (654,346) 57,222 443,530
Units Surrendered......................................... (324,696) (424,341) (48,360) (144,842)
-------- -------- -------- --------
Units Outstanding End of the Period....................... 1,247,289 1,257,546 2,021,528 1,818,564
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
GAL - HIGH QUALITY BOND GAL - ASSET ALLOCATION
------------------------------- -------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUN. 30, 1995 DEC. 31, 1994 JUN. 30, 1995 DEC. 31, 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of the Year................... 811,254 929,546 1,037,131 1,126,518
Units Purchased........................................... 54,963 74,133 79,028 162,294
Units Transferred Between Sub-accounts.................... 27,535 55,715 37,043 145,989
Units Surrendered......................................... (76,971) (248,139) (124,888) (397,670)
-------- -------- -------- --------
Units Outstanding End of the Period....................... 816,781 811,254 1,028,314 1,037,131
======== ======== ======== ========
</TABLE>
- --------------------------------------------------------------------------------
* Date Operations Commenced
33
<PAGE> 36
This report is submitted for the general information of shareholders of the
Galaxy VIP Fund. It is not not authorized for distribution to prospective
investors
unless accompanied or preceded by an effective prospectus for the Fund and
for the Galaxy Variable Annuity, which contain more information concerning the
Fund's investment policies, as well as fees and expenses and other pertinent
information. Read the prospectus carefully before you invest.
[RECYCLE LOGO]
This report was printed on recycled paper.
<PAGE> 37
[THE GALAXY VIP FUND LOGO]
440 Lincoln Street
Box 7
Worcester, MA 01653-0007
BULK RATE
U. S. POSTAGE PAID
PERMIT NO. 552
HACKENSACK, NJ
FN-210 8/95
<PAGE> 38
EDGAR APPENDIX
This appendix describes the components of the printed version of this report
that do not translate into a format acceptable to the EDGAR system.
The front cover of the printed version of this report includes a photograph two
men positioned near pillars speaking to one another.
Page 1 includes a chart showing the performance of the Variable Account E
sub-accounts for the annuity for six months, one year and since inception:
<TABLE>
<S> <C>
Galaxy VIP Money Market Fund
six months 2.4%
one year 4.3%
since inception 8.1%
Galaxy VIP Equity Fund
six months 15.8%
one year 20.4%
since inception 23.5%
Galaxy VIP Asset Allocation Fund
six months 17.5%
one year 19.3%
since inception 19.8%
Galaxy VIP High Quality Bond Fund
six months 14.4%
one year 13.8%
since inception 12.0%
</TABLE>
Page 2 includes a chart showing the performance of the Variable
Account B-Class 3 sub-accounts for the annuity since inception:
<TABLE>
<S> <C>
Galaxy VIP Money Market Fund
since inception 0.7%
Galaxy VIP Equity Fund
since inception 4.8%
Galaxy VIP Asset Allocation Fund
since inception 6.3%
Galaxy VIP High Quality Bond Fund
since inception 6.4%
</TABLE>
Page 3 includes a picture of Money Market Fund Manager Pat Galuska, a pie chart
of the fund's holdings (Commercial Paper 54% and US Government & Agency
Obligations 46%), and a line chart showing 7-Day Average Yields of the Fund and
the Donaghue's All Taxable Money Market Fund Average:
<PAGE> 39
<TABLE>
<CAPTION>
Donaghue's Money Market Fund
<S> <C> <C>
1/2/95 5.12% 5.12
2/1/95 5.23 5.14
3/1/95 5.49 5.55
4/1/95 5.53 5.38
5/1/95 5.51 5.36
6/1/95 5.51 5.35
7/1/95 5.46 5.26
</TABLE>
Page 4 includes a picture of Equity Fund Manager Harold MacKinney, and a pie
chart of the fund's holdings (Consumer Staples 23%, Consumer Cyclicals 12%,
Technology 11%, US Treasury Bills 10%, Cash & Cash Equivalents 9%, Basic
Materials 7%, Capital Goods 7%, Financial 7%, Energy 6%, Transportation 4%,
Utilities 2%, Other Common Stocks 2%).
Page 5 includes a mountain chart showing the growth of a $10,000 investment in
the Equity Fund compared to the Standard & Poor's 500 Index:
<TABLE>
<CAPTION>
S&P 500 Equity Fund
<S> <C> <C>
1/15/93 $10,000 $10,000
6/30/93 10,263 9,957
12/31/93 10,951 10,415
6/30/94 10,571 10,345
12/31/94 11,092 10,777
6/30/95 13,321 12,517
</TABLE>
Page 6 includes a picture of Asset Allocation Fund Manager Don Jones, and a
pie chart of the fund's holdings (Common Stocks 59%, Corporate Bonds 7%,
US Government and Agency Obligations 22%, Cash & Cash Equivalents 12%) and a
mountain chart showing the growth of a $10,000 investment in the Asset
Allocation Fund compared to the Standard & Poor's 500 Index:
<TABLE>
<CAPTION>
S&P 500 Asset Allocation Fund
<S> <C> <C>
1/15/93 $10,000 $10,000
6/30/93 10,670 10,152
12/31/93 10,679 10,553
6/30/94 10,314 10,125
12/31/94 10,817 10,307
6/30/95 13,260 12,141
</TABLE>
Page 7 includes a picture of High Quality Bond Fund Manager Mary McGoldrick and
a mountain chart showing the growth of a $10,000 investment in the High
Quality Bond Fund compared to the Lehman Brothers Government/Corporate Bond
Index:
<PAGE> 40
<TABLE>
<CAPTION>
Lehman Brothers
Government/Corporate Bond Index High Quality Bond Fund
------------------------------- ----------------------
<S> <C> <C>
1/15/93 $10,000 $10,000
6/30/93 10,489 10,306
12/31/93 11,549 10,604
6/30/94 10,460 9,996
12/31/94 10,551 9,984
6/30/95 11,796 11,449
</TABLE>
Page 8 includes a pie chart of the High Quality Bond Fund's holdings (Corporate
Bonds 26%, US Government and Agency Obligations 61%, Cash & Cash Equivalents
13%)
