<PAGE> 1
[GALAXY VIP FUND LOGO]
[PHOTO]
GALAXY VARIABLE ANNUITY REPORT
ANNUAL
REPORT
FOR THE YEAR ENDED
DECEMBER 31, 1995
<PAGE> 2
CHAIRMAN'S
MESSAGE FOR THE
GALAXY VIP FUND
Dear Galaxy Variable Annuity Policyowner:
In the last year stock and bond prices rebounded strongly from the doldrums of
1994. This helped portfolios of The Galaxy VIP Fund deliver solid returns -- in
many cases outpacing funds with similar investment objectives.
Weaker economic growth and dramatic declines in interest rates
produced the third largest total return for bonds in 45 years. Stocks, as
measured by the Standard & Poor's 500 Composite Stock Price Index ("S&P"), had
a total return of 37.53%. This was the third largest return for stocks in five
decades. Even counting the flat stock performance of 1994, the average annual
return for the last two years was about 15% -- versus an average of 13.5% in
the last 50 years.
Although these returns were high by historical measures, they show how
important long-term investing can be. Shareholders who stayed put during the
temporary disappointments of 1994 could make the most of recent market rallies.
Investors who abandoned their holdings missed some or all of these gains and
may have suffered losses they will not recoup for some time.
Although investment returns may be less exceptional in the year ahead,
Fleet Investment Advisors Inc. believes there should be many new opportunities
for growth and income. Such opportunities make stocks and bonds important parts
of a well-diversified investment strategy.
The enclosed report covers performance of The Galaxy VIP Fund for the
12 months ended December 31, 1995. The Market Overview shows what helped stock
and bond prices to rise. Individual Portfolio Reviews explain how Fleet
Investment Advisors Inc. managed the Fund's holdings in this environment. The
report also looks at where stock and bond prices may head in coming months and
how this could mold future investment strategies.
If you have questions about this report, you can discuss them with an
Investment Specialist by calling 800-628-0414.
Sincerely,
/s/ DWIGHT E. VICKS, JR.
Dwight E. Vicks, Jr.
MUTUAL FUNDS:
- - ARE NOT BANK DEPOSITS
- - ARE NOT FDICINSURED
- - ARE NOT OBLIGATIONS OF FLEET BANK
- - ARE NOT GUARANTEED BY FLEET BANK
- - ARE SUBJECT TO INVESTMENT RISKS INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED
<PAGE> 3
MARKET OVERVIEW
PERFORMANCE
AT-A-GLANCE
Average Annual Returns
as of December 31, 1995
Variable Account E
<TABLE>
<CAPTION>
1 Year Life of Account
<S> <C> <C>
GALAXY VIP MONEY MARKET FUND
Inception Date 2/1/93 4.8% 3.7%
GALAXY VIP EQUITY FUND
Inception Date 1/11/93 26.1% 11.6%
GALAXY VIP ASSET ALLOCATION FUND
Inception Date 2/6/93 28.6% 10.8%
GALAXY VIP HIGH QUALITY BOND FUND
Inception Date 1/21/93 21.8% 6.9%
</TABLE>
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
performance of the corresponding Galaxy VIP Fund. The Variable Account E
sub-accounts purchase shares of The Galaxy VIP Fund. The sub-accounts are GAL
Money Market, GAL Equity, GAL High Quality Bond, and GAL Asset Allocation. 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.
MARKET OVERVIEW
BY FLEET INVESTMENT ADVISORS INC.
Weaker economic growth, a dramatic decline in interest rates and surprising
resiliency in corporate earnings drove stock and bond prices sharply higher in
the 12 months ended December 31, 1995. By emphasizing investments that
performed strongly in such an environment, the Galaxy VIP Fund earned solid
returns during this time.
Slower economic growth and moderate inflation helped prices rally for
most of the year. After rising at an annual rate of 5.1% in 1994's fourth
quarter, growth in the gross domestic product (GDP), a measure of U.S. goods and
services, slowed to an unexpectedly low 1.3% annual rate by the second quarter
of 1995. This convinced investors that inflation would remain in check and the
economy might enjoy a "soft landing." As investors realized the economy might
weaken enough for the Federal Reserve (the "Fed") to cut interest rates, rates
began to fall and bond prices rose.
When bond prices improved, their yields fell -- making stocks more
attractive to investors. By mid-year, the yield on 30-year Treasuries had
fallen from 7.95% to 6.65%. This, plus stronger-than-expected gains in
corporate earnings, set off a sizable rally in stock prices. Over the first
six months of 1995, the S&P 500 Index had a total return of 20.09%.
In July, the Fed reduced its short-term Fed Funds rate from 6% to
5.75%. This cut, the first in three years, fueled further gains in the prices
of stocks and bonds. Although mixed news on the economy revived concerns about
inflation -- causing prices to stall in the summer -- further weakening in the
economy, plus increased hope for a balanced federal budget and a cut in
short-term rates to 5.5%, pushed stock and bond prices higher for the rest of
the year. By the end of 1995, rising bond prices had reduced long-term
Treasury yields to 5.94% -- the lowest they'd been since 1993. Further gains
in stocks helped the S&P 500 Index earn a 12-month total return of 37.53%.
INVESTMENT STRATEGIES
Expecting a weaker economy and falling interest rates, Fleet Investment
Advisors Inc. had invested heavily in bonds with longer maturities and
attractive prices. Because such issues tend to outperform other bonds in a
rally, this strategy significantly enhanced gains for the Fund's bond
portfolios. The long-term bonds also improved portfolio income as interest
rates fell.
By mid-year, when bond prices sta-
1
<PAGE> 4
MARKET OVERVIEW
PERFORMANCE
AT-A-GLANCE
Average Annual Returns
as of December 31, 1995
Variable Account B Class 3
<TABLE>
<CAPTION>
Life of Account
<S> <C>
GALAXY VIP MONEY MARKET FUND
Inception Date 5/1/95 2.9%
GALAXY VIP EQUITY FUND
Inception Date 5/1/95 13.8%
GALAXY VIP ASSET ALLOCATION FUND
Inception Date 5/1/95 16.2%
GALAXY VIP HIGH QUALITY BOND FUND
Inception Date 5/1/95 13.2%
</TABLE>
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 corresponding Galaxy VIP Fund. The Class 3
sub-accounts purchase shares of The Galaxy VIPFund. The sub-accounts are GAL
Money Market 3, GAL Equity 3, GAL High Quality Bond 3, and GAL Asset Allocation
3. 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. Effective May 1, 1995, Variable Account E is
no longer available for new investors.
bilized, we reduced the portion of securities maturing in 10 years or more from
50% to 30% of the bond portfolios. This strategy was taken in order to buffer
the Fund against falling bond prices. Once it seemed interest rates were headed
lower, we increased the allocation of longer issues to 40% since longer
maturities help maintain solid yields as interest rates fall. During most of
the year, we gave the greatest weight to government bonds, feeling yields on
corporate securities did not fully compensate investors for the added price
risk that corporates carry.
The Fund's equity portfolios benefited from sizable investments in
high-quality growth stocks, whose potential for strong earnings attracted
investors as the economy slowed. Many of these were technology stocks, which
far outpaced the market for most of the rally. The Fund also benefited from
heavy investments in consumer staples stocks, whose earnings can generally keep
growing in a weaker economy, and from holdings in financial stocks, which
gained from lower interest rates and a proliferation of banking mergers.
MARKET OUTLOOK
Fleet Investment Advisors Inc. believes the GDP could grow by 2.5% in 1996 --
which would be slightly stronger than the growth rate for 1995. Since
commodity prices have been stable, this level of growth should keep inflation
near its current rate of 2.7%. If this is the case, progress on federal budget
reductions could give the Fed further room to cut interest rates.
Lower interest rates would produce additional gains in bond prices.
However, we expect any such gains to be modest. Therefore, to protect the
Fund's bond portfolios from a turnaround in prices, we've started to reduce the
weightings in longer-maturity issues to 30%. Because the spread between yields
of government and corporate bonds remains relatively narrow, we expect to
maintain heavy investments in government issues in the Asset Allocation and the
High Quality Bond portfolios.
Lower interest rates would have the potential to improve corporate
profits. However, if first quarter earnings are disappointing, stock prices
could drop. This has already happened, in fact, to technology stocks. We
expect, therefore, to keep the Asset Allocation and Equity portfolio cash
reserves higher than normal levels. If stock prices weaken, we could put this
money to work in stocks that offer continued potential for growth. These may
include additional investments in consumer staples stocks, as well as selected
issues in the technology and financial sectors.
2
<PAGE> 5
PORTFOLIO REVIEWS
GALAXY VIP MONEY MARKET FUND
Investment Manager
Pat Galuska
[PHOTO]
GALAXY VIP MONEY MARKET FUND
Distribution of Total Net Assets
as of December 31, 1995
Commercial Paper 53%
U.S. Government and Agency Obligations 47%
Other Net Assets & Liabilities = (0.07%)
In the past year we selected maturities for the Galaxy VIP Money Market Fund
that could benefit the most from changes in interest rates. This helped the
Fund earn a solid return that was competitive with other funds in its class.
For the 12 months ended December 31, 1995, the Fund had a total return of
5.38%.
MAXIMIZING YIELD
Early in the year, as the Fed was still raising interest rates, we increased
the average maturity of the Fund's investments to lock in higher yields. As
economic growth weakened in the second quarter, and it looked like the Fed
might cut interest rates, yields on money market securities started to drop.
Because the yields for longer-term money market securities fell near or below
yields for shorter-term instruments, we began investing in shorter-term
securities.
In particular, we increased our holdings in short-term repurchase
agreements, which gave us the flexibility to make the most of near-term changes
in yields. Where possible, we purchased securities that matured a week after
investors expected the Fed to change interest rates next. Since there was less
demand for these issues, their prices weakened and their yields became
especially desirable.
We continued to maintain a relatively short average maturity for the
Fund's investments during the third quarter of 1995, as ongoing expectations
for lower rates kept the spreads between short- and longer-term yields fairly
narrow. To enhance the Fund's return, we added investments in commercial paper
- -- which offered yields that were relatively strong compared to yields for
government securities.
GALAXY VIP MONEY MARKET FUND
7-Day Average Yields
[GRAPH]
- - Galaxy VIP Money Market Fund
- - Donoghue's Money Market Fund/
JANUARY 1, 1995 DECEMBER 31, 1995
* 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
[PHOTO]
Harold A. Mackinney
GALAXY VIP EQUITY FUND
Distribution of Total Net Assets
as of December 31, 1995
Consumer Staples 23%
Cash Equivalents & Net
Other Assets & Liabilities 17%
Technology 16%
Consumer Cyclical 12%
Financial 9%
Capital Goods 8%
Energy 7%
Basic Materials 5%
Transportation 3%
As yield spreads for short- and longer-term issues improved, we traded
some short-term repurchase agreements for longer-term issues to earn additional
yield. We continued to invest in commercial paper and gave extra attention to
high-coupon securities issued by U.S. Government agencies. In order to balance
the premium prices of the high-coupon issues, we bought other agency securities
selling at a discount.
LOOKING AHEAD
If slower economic growth and moderate inflation help interest rates fall
further, as we expect, we will probably maintain our recent efforts to maximize
yield. Since yields on shorter-maturity instruments will likely slide more than
yields on longer-term securities, we may even increase the Fund's commitment to
longer maturities.
Pat Galuska has managed the Galaxy VIP Money Market Fund since September 1994.
She 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
in general.
Using this strategy, we made sizable investments in many sectors that led
the recent rally in stock prices. For the 12 months ended December 31, 1995,
the Fund had a total return of 26.76%. Because stock prices were quite high by
historical measures for most of the year, we maintained a strong cash reserve
in case of a correction. This caused the Fund to lag the S&P 500 Index, which
had a total return of 37.53% for the year ended December 31, 1995.
FOCUS ON TECHNOLOGY,
CONSUMER STAPLES
Throughout the year the Fund benefited from its focus on large-company stocks
whose earnings might be more predictable in an uncertain economy. The Fund also
enjoyed strong returns from individual industries -- such as technology, drugs
and consumer staples. These more than offset disappointing returns from retail
and capital goods stocks, where the Fund had less sizable investments.
4
<PAGE> 7
PORTFOLIO REVIEWS
GALAXY VIP
EQUITY FUND
Growth of $10,000 investment*
[GRAPH]
- - 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.
In the first half of the year we more than doubled the dollar value of the
Fund's holdings in technology stocks, consumer staples, consumer cyclicals,
transportation and airline companies; although their percentages within the
portfolio remained approximately the same.
In the third quarter, we raised the Fund's weighting in bank stocks, which
benefited from lower interest rates and ongoing consolidation in the industry.
Once prices for technology stocks became more attractive in July and August, we
took several new positions in selected issues.
As investors became more defensive in the fourth quarter, we continued to
emphasize consumer staples, drug and financial stocks. Looking forward to a
stronger economy, we also increased positions in selected cyclical issues with
strong potential for long-term growth in a growing economy.
A MORE MODERATE YEAR
We feel that gradual improvement in the economy should raise stock prices
further in the year ahead, though gains should be more moderate than in 1995.
As long as economic growth is weak, stocks remain vulnerable to temporary price
declines. While there may be further drops in interest rates, the lower rates
may be overshadowed by new disappointments in earnings.
To make the most of any investment opportunities that a correction might
bring, we expect to keep the Fund's cash reserves near 15% for now. If higher
stock prices make a correction more likely, we might raise the reserves even
more. If prices edge lower, we expect to put some of the cash to work --
possibly in additional shares of cyclical issues.
Harold A. Mackinney has managed the Galaxy VIP Equity Fund since its inception.
He is also Chairman of the Fleet Investment Advisors.
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 securities.
In the last year, we emphasized investing in sectors that outpaced the
market as a whole. We also maximized gains in bond prices by investing heavily
in longer-term issues. With these strategies, the Fund earned a total return of
29.42% for the 12 months ended December 31, 1995. Over the same time, the
average balanced fund tracked by Lipper Analytical Services had a return of
30.47% and the S&P 500 Index had a return of 37.53%.
5
<PAGE> 8
PORTFOLIO REVIEWS
[PHOTO]
Don Jones
GALAXY VIP ASSET ALLOCATION FUND
Growth of $10,000 investment*
[GRAPH]
- - 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.
WINNING SECTORS
When the period began, 63% of the Fund was invested in stocks. Technology
stocks represented about 13% of equities, and consumer staples stocks
represented about 26%. Both groups performed well in the first half of the
year, with technology stocks doubling returns for stocks as a whole. The Fund
also enjoyed healthy returns from its financial stocks, which represented about
9% of equities.
In the second quarter, after stocks had rallied strongly, we took profits
in these sectors, reduced stocks to 59% of assets, and raised cash reserves to
about 11%. We took additional profits in technology stocks in the third
quarter, while boosting investments in energy, financial and bank stocks --
which benefited from slower economic growth and lower interest rates. As
technology stocks became more attractive in the fourth quarter, we added shares
of selected issues. We also increased shares of telecommunications and consumer
staples firms that showed solid potential for growth.
For most of the year, we kept the bond portfolio near 30% of assets. When
the year started, about 60% of the bond portfolio was invested in issues
maturing in 10 years or more. Since longer-term issues generally respond better
to falling interest rates than shorter-term issues do, this greatly enhanced
Fund returns.
As interest rates fell, we reduced the portion of longer-term issues --
reaching 40% of the bond portfolio by mid-year. Although this decreased the
Fund's yields somewhat, it helped protect the value of Fund shares from a
turnaround in interest rates and bond prices. After further rate declines in
the fourth quarter, we cut the portion of longer-term issues to about 35% of
the bond portfolio.
Throughout the year we emphasized bonds issued by the U.S. Government and
its agencies. This was because strong supplies of government securities and a
large demand for corporates had made corporate yields relatively less
attractive.
FUTURE STRATEGIES
Although interest rates may edge lower in coming months, we believe that most
of the bond rally is probably behind us. Eventually, investors should
anticipate an improving economy, and interest rates should start to bottom. To
further protect the value of Fund shares from
GALAXY VIP ASSET ALLOCATION FUND
Distribution of Total Net Assets
as of December 31, 1995
Common Stocks 62%
U.S. Government and Agency Obligations 23%
Cash Equivalents and Net Other Assets &Liabilities 11%
Corporate Bonds 4%
6
<PAGE> 9
PORTFOLIO REVIEWS
rising interest rates, we expect to reduce longer-term issues to about 30% of
the bond portfolio.
Before the economy begins improving, however, there may be disappointments
in corporate earnings that could temporarily drag stock prices lower. For this
reason, we expect to maintain sizable cash reserves that we could use to make
new investments if prices grow more attractive. We may also increase holdings
in consumer staples stocks, whose earnings growth is usually more reliable in a
slow-growing economy.
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 HIGH QUALITY BOND FUND
Investment Manager
Mary McGoldrick
[PHOTO]
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.
When bond prices rise, the gains are often greatest for corporate bonds
and bonds with longer maturities. With sizable investments in these issues, as
well as issues with attractive yields, the Fund delivered a total return of
22.55% for the 12 months ended December 31, 1995. That compares with a return
of 15.33% for the Lehman Brothers Government/Corporate Bond Index.
MAXIMIZING PRICE GAINS AND YIELD
As the year began, about 50% of the Fund was invested in bonds maturing in 10
years or more. Many of these issues were corporate securities that we'd
purchased in 1994, when prices were relatively cheap. Also, most were also
"non-callable" bonds, which cannot be redeemed by their issuers when interest
rates fall. In addition to providing strong appreciation for Fund shares, the
noncallable securities also offered relatively strong yields.
GALAXY VIPHIGH QUALITY BOND FUND
Growth of $10,000 investment*
[GRAPH]
- - 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
Distribution of Total Net Assets
as of December 31, 1995
U.S. Government and Agency Obligations 56%
Corporate Notes & Bonds 27%
Cash Equivalents and Net Other Assets & Liabilities 17%
In the second and third quarters of 1995, after interest rates had dropped
substantially, we decreased the portion of longer-term securities to 35%. This
helped us protect the Fund against a reversal in interest rates and bond
prices, since longer-term issues generally suffer more when rates rise than
shorter-term issues do. Many of the bonds we sold were corporate securities.
This was because the strong gains corporates had earned made their yields less
attractive compared to yields for government bonds. Later in the third quarter,
as it became clear that interest rates were headed lower, we increased the
portion of longer-term issues to 40%. We also continued to emphasize
noncallable securities and bonds issued by the U.S. Government and its
agencies.
INCREASED FOCUS ON YIELD
As 1995 drew to an end, we again cut the weighting in longer-maturity issues.
Although moderate inflation and slower economic growth may push interest rates
lower in coming months, we believe the price gains for longer-term issues are
largely complete.
Since most of the returns from bonds will now come primarily from their
yields, we expect to take further steps to enhance the Fund's yield where we
can. If the difference between the yields for government and corporate bonds
remains relatively narrow, we may increase the Fund's commitment to government
securities since their price risk is less than that of corporate securities.
With inflation at today's low levels, we feel the yields on government bonds
remain quite attractive.
Mary McGoldrick has managed the Galaxy VIP High Quality Bond Fund since its
inception. She has managed investment portfolios at Fleet Investment Advisors
Inc., its predecessors and other investment management companies for eight
years.
8
<PAGE> 11
VIP MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
THE GALAXY
VIP FUND
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
- ----------- ---------
<S> <C> <C>
COMMERCIAL PAPER - 53.27%
FINANCIAL - 20.89%
$ 900,000 MetLife Funding, Inc.
5.42%, 01/22/96 (A) . . . . . . . . . . . . . . . . $ 897,060
604,000 Pitney Bowes Credit Corp.
5.55%, 01/25/96 (A) . . . . . . . . . . . . . . . . 601,705
800,000 State Street Bank and Trust Co.
5.87%, 01/25/96 . . . . . . . . . . . . . . . . . . 800,000
750,000 USAA Capital Corp.
5.53%, 01/26/96 (A) . . . . . . . . . . . . . . . . 747,047
700,000 Wachovia Bank
5.75%, 01/22/96 . . . . . . . . . . . . . . . . . . 700,000
------------
3,745,812
------------
CONSUMER STAPLES (A) - 16.82%
740,000 Campbell Soup Co.
5.47%, 01/16/96 . . . . . . . . . . . . . . . . . . 738,227
735,000 Heinz, (H. J.), Co.
5.52%, 02/05/96 . . . . . . . . . . . . . . . . . . 730,998
750,000 Pfizer, Inc.
5.30%, 01/12/96 . . . . . . . . . . . . . . . . . . 748,694
800,000 Proctor & Gamble Co.
5.50%, 01/22/96 . . . . . . . . . . . . . . . . . . 797,349
------------
3,015,268
------------
UTILITIES (A) - 7.79%
800,000 GTE North, Inc.
5.67%, 01/31/96 . . . . . . . . . . . . . . . . . . 796,147
600,000 Southwestern Bell Capital Corp.
3.81%, 01/03/96 . . . . . . . . . . . . . . . . . . 599,811
------------
1,395,958
------------
CONSUMER PRODUCTS (A) - 4.15%
748,000 Kimberly Clark Corp.
5.49%, 01/30/96 . . . . . . . . . . . . . . . . . . 744,626
------------
BASIC MATERIALS (A) - 3.62%
650,000 Air Products & Chemicals, Inc.
5.40%, 01/16/96 . . . . . . . . . . . . . . . . . . 648,462
------------
TOTAL COMMERCIAL PAPER . . . . . . . . . . . . . . . 9,550,126
(Cost $9,550,126) ------------
U.S. GOVERNMENT AND
AGENCY OBLIGATIONS - 46.80%
FEDERAL HOME LOAN BANK - 20.59%
850,000 4.29%, 01/04/96 (A) . . . . . . . . . . . . . . . . 849,600
800,000 5.01%, 01/08/96 (A) . . . . . . . . . . . . . . . . 799,121
750,000 5.35%, 01/17/96 (A) . . . . . . . . . . . . . . . . 748,130
800,000 5.40%, 01/22/96 (A) . . . . . . . . . . . . . . . . 797,396
495,000 6.85%, 02/28/96 . . . . . . . . . . . . . . . . . . 495,809
------------
3,690,056
------------
FEDERAL HOME LOAN MORTGAGE CORP. - 8.64%
800,000 5.35%, 01/16/96 (A) . . . . . . . . . . . . . . . . 798,123
750,000 7.24%, 02/05/96 . . . . . . . . . . . . . . . . . . 751,025
------------
1,549,148
------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (A) - 7.52%
500,000 4.31%, 01/04/96 . . . . . . . . . . . . . . . . . . 499,764
850,000 5.39%, 01/16/96 . . . . . . . . . . . . . . . . . . 847,992
------------
1,347,756
------------
FEDERAL FARM CREDIT BANK - 6.70%
500,000 7.11%, 02/01/96 . . . . . . . . . . . . . . . . . . 500,535
700,000 6.76%, 02/28/96 . . . . . . . . . . . . . . . . . . 701,049
------------
1,201,584
------------
U.S. TREASURY BILL (A) - 3.35%
600,000 5.34%, 01/04/96 . . . . . . . . . . . . . . . . . . 599,736
------------
TOTAL U.S. GOVERNMENT AND
AGENCY OBLIGATIONS . . . . . . . . . . . . . . . . . 8,388,280
(Cost $8,388,280) ------------
TOTAL INVESTMENTS - 100.07% . . . . . . . . . . . . . . . . . . . . . . 17,938,406
------------
(Cost $17,938,406)
NET OTHER ASSETS AND LIABILITIES - (0.07%) . . . . . . . . . . . . . . (13,127)
------------
NET ASSETS - 100.00% . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,925,279
============
</TABLE>
- ---------------------------------------------
(A) Annualized yield to maturity.
See Notes to Financial Statements.
9
<PAGE> 12
VIP EQUITY FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
THE GALAXY
VIP FUND
<TABLE>
<CAPTION>
VALUE
SHARE (NOTE 2)
- ------ ---------
<S> <C>
COMMON STOCKS - 83.05%
CONSUMER STAPLES - 23.35%
6,000 Anheuser-Busch Cos., Inc. . . . . . . . . . . . . . $ 401,250
6,000 Bristol-Myers Squibb Co. . . . . . . . . . . . . . 515,250
6,000 General Mills, Inc. . . . . . . . . . . . . . . . . 346,500
14,000 Gillette Co. . . . . . . . . . . . . . . . . . . . . 729,750
8,000 Johnson & Johnson . . . . . . . . . . . . . . . . . 685,000
16,000 McDonald's Corp. . . . . . . . . . . . . . . . . . 722,000
10,000 Merck & Co., Inc. . . . . . . . . . . . . . . . . . 657,500
11,000 PepsiCo, Inc. . . . . . . . . . . . . . . . . . . . 614,625
10,000 Pfizer, Inc. . . . . . . . . . . . . . . . . . . . 630,000
7,000 Procter & Gamble Co. . . . . . . . . . . . . . . . . 581,000
15,000 Rubbermaid, Inc. . . . . . . . . . . . . . . . . . 382,500
15,000 Sara Lee Corp. . . . . . . . . . . . . . . . . . . . 478,125
14,000 Sysco Corp. . . . . . . . . . . . . . . . . . . . . 455,000
------------
7,198,500
------------
TECHNOLOGY - 15.83%
8,000 American Telephone & Telegraph Corp. . . . . . . . . 518,000
12,000 AMP, Inc. . . . . . . . . . . . . . . . . . . . . . 460,500
5,000 Applied Materials, Inc.* . . . . . . . . . . . . . . 196,875
9,000 Automatic Data Processing, Inc. . . . . . . . . . . 668,250
16,000 Corning, Inc. . . . . . . . . . . . . . . . . . . . 512,000
7,000 Dow Chemical Co. . . . . . . . . . . . . . . . . . . 492,625
12,000 Intel Corp. . . . . . . . . . . . . . . . . . . . . 681,000
7,000 Microsoft Corp.* . . . . . . . . . . . . . . . . . . 614,250
9,000 Motorola, Inc. . . . . . . . . . . . . . . . . . . 513,000
7,000 Telefonos De Mexico, Class L, ADR . . . . . . . . . 223,125
------------
4,879,625
------------
CONSUMER CYCLICALS - 12.14%
10,000 Armstrong World Industries, Inc. . . . . . . . . . 620,000
7,000 Dayton-Hudson Corp. . . . . . . . . . . . . . . . . 525,000
9,000 Disney (Walt) Co. . . . . . . . . . . . . . . . . . 531,000
14,000 Ford Motor Co. . . . . . . . . . . . . . . . . . . . 406,000
12,000 Home Depot, Inc. . . . . . . . . . . . . . . . . . . 574,500
14,000 Sherwin-Williams Co. . . . . . . . . . . . . . . . . 570,500
23,000 Wal-Mart Stores, Inc. . . . . . . . . . . . . . . . 514,625
------------
3,741,625
------------
FINANCIAL - 9.45%
7,000 American International Group, Inc. . . . . . . . . . 647,500
9,000 Barnett Banks, Inc. . . . . . . . . . . . . . . . . 531,000
5,000 Crestar Financial Corp. . . . . . . . . . . . . . . 295,625
5,000 Federal National Mortgage Association.. . . . . . . 620,625
25,000 Hibernia Corp., Class A . . . . . . . . . . . . . . 268,750
8,000 SunTrust Banks, Inc. . . . . . . . . . . . . . . . . 548,000
------------
2,911,500
------------
CAPITAL GOODS - 7.86%
8,000 Boeing Co. . . . . . . . . . . . . . . . . . . . . . 627,000
10,000 Caterpillar, Inc. . . . . . . . . . . . . . . . . . 587,500
18,000 Deere & Co. . . . . . . . . . . . . . . . . . . . . 634,500
8,000 General Electric Co. . . . . . . . . . . . . . . . . 576,000
------------
2,425,000
------------
ENERGY - 6.71%
4,000 Atlantic Richfield Co. . . . . . . . . . . . . . . 443,000
7,000 Exxon Corp. . . . . . . . . . . . . . . . . . . . . 560,875
10,000 Halliburton Co. . . . . . . . . . . . . . . . . . . 506,250
5,000 Mobil Corp. . . . . . . . . . . . . . . . . . . . . 560,000
------------
2,070,125
------------
BASIC MATERIALS - 4.55%
9,000 Air Products & Chemicals, Inc. . . . . . . . . . . . 474,750
8,000 Consolidated Papers, Inc. . . . . . . . . . . . . . 449,000
7,000 Georgia-Pacific Corp. . . . . . . . . . . . . . . . 480,375
------------
1,404,125
------------
TRANSPORTATION - 3.16%
6,000 AMR Corp.* . . . . . . . . . . . . . . . . . . . . . 445,500
8,000 Union Pacific Corp. . . . . . . . . . . . . . . . . 528,000
------------
973,500
------------
TOTAL COMMON STOCKS . . . . . . . . . . . . . . . . 25,604,000
(Cost $19,527,574) ------------
</TABLE>
See Notes to Financial Statements.
10
<PAGE> 13
VIP EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995
THE GALAXY
VIP FUND
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
- ----------- ---------
<S> <C>
U.S. TREASURY BILL (A) - 3.24%
$ 1,000,000 5.42%, 01/11/96 . . . . . . . . . . . . . . . . . . $ 998,616
------------
TOTAL U.S. TREASURY BILL . . . . . . . . . . . . . . 998,616
(Cost $998,616) ------------
REPURCHASE AGREEMENT - 13.68%
4,215,676 Chase Securities, Inc.
5.30%, 01/02/96, Dated 12/29/95,
Repurchase Price $4,218,158
(Collaterized by U.S. Treasury Note
8.00%, Due 10/15/96, Par Value $4,155,000,
Market Value $4,300,425) . . . . . . . . . . . . . . 4,215,676
------------
TOTAL REPURCHASE AGREEMENT . . . . . . . . . . . . . 4,215,676
(Cost $4,215,676) ------------
TOTAL INVESTMENTS - 99.97% . . . . . . . . . . . . . . . . . . . . . . 30,818,292
(Cost $24,741,866) ------------
NET OTHER ASSETS AND LIABILITIES - 0.03% . . . . . . . . . . . . . . . 7,957
------------
NET ASSETS - 100.00% . . . . . . . . . . . . . . . . . . . . . . . . . $30,826,249
============
</TABLE>
- --------------------------------------------
* Non income producing security.
(A) Annualized yield to maturity.
ADR American Depository Receipts
See Notes to Financial Statements.
11
<PAGE> 14
VIP ASSET ALLOCATION
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
THE GALAXY
VIP FUND
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ------ ---------
<S> <C>
COMMON STOCKS - 62.28%
CONSUMER STAPLES - 16.47%
3,000 Bristol-Myers Squibb Co. . . . . . . . . . . . . . . $ 257,625
3,000 Coca-Cola Co. . . . . . . . . . . . . . . . . . . . 222,750
3,000 CPC International, Inc. . . . . . . . . . . . . . . 205,875
8,000 Gillette Co. . . . . . . . . . . . . . . . . . . . 417,000
5,000 Johnson & Johnson . . . . . . . . . . . . . . . . . 428,125
4,000 McDonald's Corp. . . . . . . . . . . . . . . . . . 180,500
6,000 Merck & Co., Inc. . . . . . . . . . . . . . . . . . 394,500
5,000 PepsiCo, Inc. . . . . . . . . . . . . . . . . . . . 279,375
2,000 Procter & Gamble Co. . . . . . . . . . . . . . . . . 166,000
5,000 Sara Lee Corp. . . . . . . . . . . . . . . . . . . 159,375
4,000 Sysco Corp. . . . . . . . . . . . . . . . . . . . . 130,000
-----------
2,841,125
-----------
TECHNOLOGY - 10.90%
5,000 American Telephone & Telegraph Corp. . . . . . . . . 323,750
4,000 Automatic Data Processing, Inc. . . . . . . . . . . 297,000
3,000 Dow Chemical Co. . . . . . . . . . . . . . . . . . . 211,125
8,000 Intel Corp. . . . . . . . . . . . . . . . . . . . . 454,000
3,000 Motorola, Inc. . . . . . . . . . . . . . . . . . . 171,000
2,500 Telefonos De Mexico, Class L, ADR . . . . . . . . . 79,686
2,500 Xerox Corp. . . . . . . . . . . . . . . . . . . . . 342,500
-----------
1,879,061
-----------
CONSUMER CYCLICALS - 9.72%
5,000 Armstrong World Industries, Inc. . . . . . . . . . 310,000
6,000 Disney (Walt) Co. . . . . . . . . . . . . . . . . . 354,000
10,000 Ford Motor Co. . . . . . . . . . . . . . . . . . . . 290,000
4,000 General Motors Corp., Class E . . . . . . . . . . . 208,000
7,000 Home Depot, Inc. . . . . . . . . . . . . . . . . . . 335,125
8,000 Wal-Mart Stores, Inc. . . . . . . . . . . . . . . . 179,000
-----------
1,676,125
-----------
CAPITAL GOODS - 7.87%
4,000 Boeing Co. . . . . . . . . . . . . . . . . . . . . . 313,500
12,000 Deere & Co. . . . . . . . . . . . . . . . . . . . . 423,000
5,000 General Electric Co. . . . . . . . . . . . . . . . . 360,000
5,000 Thermo Electron Corp.* . . . . . . . . . . . . . . . 260,000
-----------
1,356,500
-----------
FINANCIAL - 7.81%
3,000 American International Group, Inc. . . . . . . . . . 277,500
2,000 Banc One Corp. . . . . . . . . . . . . . . . . . . 75,500
2,000 Barnett Banks, Inc. . . . . . . . . . . . . . . . . 118,000
2,000 Citicorp . . . . . . . . . . . . . . . . . . . . . . 134,500
2,000 Crestar Financial Corp. . . . . . . . . . . . . . . 118,250
2,500 Federal National Mortgage Association . . . . . . . 310,313
10,000 Hibernia Corp., Class A . . . . . . . . . . . . . . 107,500
2,500 Old Kent Financial Corp. . . . . . . . . . . . . . . 102,812
1,500 SunTrust Banks, Inc. . . . . . . . . . . . . . . . . 102,750
-----------
1,347,125
-----------
ENERGY - 5.87%
2,000 Amoco Corp. . . . . . . . . . . . . . . . . . . . . 143,750
2,000 Atlantic Richfield Co. . . . . . . . . . . . . . . 221,500
1,500 Exxon Corp. . . . . . . . . . . . . . . . . . . . . 120,188
6,000 Halliburton Co. . . . . . . . . . . . . . . . . . . 303,750
2,000 Mobil Corp. . . . . . . . . . . . . . . . . . . . . 224,000
-----------
1,013,188
-----------
TRANSPORTATION - 1.53%
4,000 Union Pacific Corp. . . . . . . . . . . . . . . . . 264,000
-----------
BASIC MATERIALS - 2.11%
3,000 Air Products & Chemicals, Inc. . . . . . . . . . . 158,250
3,000 Georgia-Pacific Corp. . . . . . . . . . . . . . . . 205,875
-----------
364,125
-----------
TOTAL COMMON STOCKS . . . . . . . . . . . . . . . . 10,741,249
(Cost $8,511,403) -----------
</TABLE>
<TABLE>
<CAPTION>
PAR VALUE
- --------
<S> <C>
U.S. GOVERNMENT AND
AGENCY OBLIGATIONS - 23.13%
U.S. TREASURY NOTES - 9.73%
$ 250,000 5.50%, 11/15/98 . . . . . . . . . . . . . . . . . . 251,825
500,000 6.25%, 05/31/00 . . . . . . . . . . . . . . . . . . 517,254
250,000 5.75%, 10/31/00 . . . . . . . . . . . . . . . . . . 253,868
350,000 7.50%, 05/15/02 . . . . . . . . . . . . . . . . . . 388,342
250,000 6.50%, 08/15/05 . . . . . . . . . . . . . . . . . . 266,537
-----------
1,677,826
-----------
</TABLE>
See Notes to Financial Statements.
12
<PAGE> 15
VIP ASSET ALLOCATION
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995
THE GALAXY
VIP FUND
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
----------- ----------
<S> <C>
FEDERAL HOME LOAN BANK - 4.66%
$ 250,000 6.00%, 10/30/97 . . . . . . . . . . . . . . . . . . $ 251,950
200,000 7.00%, 06/12/00 . . . . . . . . . . . . . . . . . . 200,984
100,000 6.41%, 12/29/03 . . . . . . . . . . . . . . . . . . 100,168
250,000 7.00%, 11/21/05 . . . . . . . . . . . . . . . . . . 250,322
-----------
803,424
-----------
U.S. TREASURY BONDS - 3.41%
250,000 7.63%, 02/15/07 . . . . . . . . . . . . . . . . . . 275,222
250,000 8.00%, 11/15/21 . . . . . . . . . . . . . . . . . . 312,920
-----------
588,142
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 3.29%
100,000 6.40%, 03/25/03 . . . . . . . . . . . . . . . . . . 101,081
150,000 6.31%, 08/25/03, MTN . . . . . . . . . . . . . . . . 150,201
200,000 7.55%, 06/10/04 . . . . . . . . . . . . . . . . . . 209,176
100,000 8.18%, 04/15/24, MTN . . . . . . . . . . . . . . . . 105,881
-----------
566,339
-----------
FEDERAL FARM CREDIT BANK - 1.45%
250,000 6.40%, 12/11/00, MTN . . . . . . . . . . . . . . . . 250,395
-----------
FEDERAL HOME LOAN MORTGAGE CORP. - 0.59%
100,000 7.88%, 04/28/04 . . . . . . . . . . . . . . . . . . 102,611
-----------
TOTAL U.S. GOVERNMENT AND
AGENCY OBLIGATIONS . . . . . . . . . . . . . . . . . 3,988,737
(Cost $3,840,013) -----------
CORPORATE NOTES AND BONDS - 3.93%
200,000 Citicorp, MTN
8.63%, 11/01/04 . . . . . . . . . . . . . . . . . . 216,250
200,000 Duke Power Co.
8.75%, 03/01/21 . . . . . . . . . . . . . . . . . . 208,780
250,000 Ford Motor Credit Co.
6.38%, 12/15/05 . . . . . . . . . . . . . . . . . . 252,188
-----------
TOTAL CORPORATE NOTES AND BONDS . . . . . . . . . . 677,218
(Cost $651,763) -----------
REPURCHASE AGREEMENT - 10.50%
1,811,173 Chase Securities, Inc.
5.30%, 01/02/96, Dated 12/29/95,
Repurchase Price $1,812,239
(Collaterized by U.S. Treasury Note
8.00%, Due 10/15/96, Par Value $1,785,000,
Market Value $1,847,478) . . . . . . . . . . . . . . 1,811,173
-----------
TOTAL REPURCHASE AGREEMENT . . . . . . . . . . . . . 1,811,173
(Cost $1,811,173) -----------
TOTAL INVESTMENTS - 99.84% . . . . . . . . . . . . . . . . . . . . . . . . 17,218,377
-----------
(Cost $14,814,352)
NET OTHER ASSETS AND LIABILITIES - 0.16% . . . . . . . . . . . . . . . . . 27,141
-----------
NET ASSETS - 100.00% . . . . . . . . . . . . . . . . . . . . . . . . . . . $17,245,518
===========
</TABLE>
- ---------------------------------
* Non income producing security.
ADR American Depository Receipts
MTN Medium Term Note
See Notes to Financial Statements.
13
<PAGE> 16
VIP HIGH QUALITY BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
THE GALAXY
VIP FUND
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
- ----------- --------
<S> <C>
U.S. GOVERNMENT AND
AGENCY OBLIGATIONS - 56.35%
U.S. TREASURY BONDS - 18.30%
$ 500,000 7.25%, 05/15/16 . . . . . . . . . . . . . . . . . . $ 570,945
500,000 7.50%, 11/15/16 . . . . . . . . . . . . . . . . . . 586,548
750,000 7.25%, 08/15/22 . . . . . . . . . . . . . . . . . . 867,142
------------
2,024,635
------------
U.S. TREASURY NOTES - 13.47%
250,000 4.75%, 10/31/98 . . . . . . . . . . . . . . . . . . 246,863
300,000 6.00%, 10/15/99 . . . . . . . . . . . . . . . . . . 307,296
100,000 6.38%, 01/15/00 . . . . . . . . . . . . . . . . . . 103,747
100,000 5.50%, 04/15/00 . . . . . . . . . . . . . . . . . . 100,863
200,000 6.38%, 08/15/02 . . . . . . . . . . . . . . . . . . 210,036
500,000 6.25%, 02/15/03 . . . . . . . . . . . . . . . . . . 522,105
------------
1,490,910
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 9.22%
500,000 6.38%, 07/08/03, MTN . . . . . . . . . . . . . . . . 497,500
500,000 7.55%, 06/10/04 . . . . . . . . . . . . . . . . . . 522,940
------------
1,020,440
------------
FEDERAL HOME LOAN MORTGAGE CORP. - 8.48%
250,000 6.29%, 09/18/98 . . . . . . . . . . . . . . . . . . 250,883
200,000 6.80%, 09/18/02 . . . . . . . . . . . . . . . . . . 200,272
500,000 6.20%, 09/08/08 . . . . . . . . . . . . . . . . . . 487,115
------------
938,270
------------
U.S. GOVERNMENT BACKED BONDS - 4.62%
200,000 Tennessee Valley Authority, Series F
6.88%, 08/01/02 . . . . . . . . . . . . . . . . . . 208,000
300,000 Tennessee Valley Authority, Series C
6.13%, 07/15/03 . . . . . . . . . . . . . . . . . . 303,375
------------
511,375
------------
FEDERAL HOME LOAN BANK - 2.26%
250,000 7.00%, 11/21/05 . . . . . . . . . . . . . . . . . . 250,323
------------
TOTAL U.S. GOVERNMENT AND
AGENCY OBLIGATIONS . . . . . . . . . . . . . . . . . 6,235,953
(Cost $6,037,167) ------------
CORPORATE NOTES AND BONDS - 26.47%
FINANCIAL - 11.92%
300,000 Associates Corp. of North America
5.25%, 03/30/00 . . . . . . . . . . . . . . . . . . 292,500
100,000 Associates Corp. of North America
6.88%, 02/01/03 . . . . . . . . . . . . . . . . . . 104,375
300,000 General Electric Credit Corp.
5.50%, 11/01/01 . . . . . . . . . . . . . . . . . . 294,000
100,000 Norwest Financial, Inc.
7.00%, 01/15/03 . . . . . . . . . . . . . . . . . . 105,375
500,000 Swiss Bank Corp.
6.75%, 07/15/05 . . . . . . . . . . . . . . . . . . 523,125
------------
1,319,375
------------
UTILITIES - 5.94%
50,000 Duke Power Co.
7.00%, 09/01/05 . . . . . . . . . . . . . . . . . . 52,563
250,000 Duke Power Co.
8.75%, 03/01/21 . . . . . . . . . . . . . . . . . . 260,975
50,000 Pacific Bell
6.25%, 03/01/05 . . . . . . . . . . . . . . . . . . 50,688
300,000 Southwestern Bell Telephone Co.
5.75%, 09/01/04 . . . . . . . . . . . . . . . . . . 293,625
------------
657,851
------------
CONSUMER STAPLES - 3.80%
300,000 Coca-Cola Enterprises
8.50%, 02/01/22 . . . . . . . . . . . . . . . . . . 368,250
50,000 McDonald's Corp.
6.75%, 02/15/03 . . . . . . . . . . . . . . . . . . 52,063
------------
420,313
------------
TECHNOLOGY - 2.48%
250,000 International Business Machines Corp.
7.50%, 06/15/13 . . . . . . . . . . . . . . . . . . 274,063
------------
CONSUMER CYCLICAL - 2.33%
250,000 Wal-Mart Stores
6.50%, 06/01/03 . . . . . . . . . . . . . . . . . . 257,813
------------
TOTAL CORPORATE NOTES AND BONDS . . . . . . . . . . 2,929,415
(Cost $2,804,002) ------------
</TABLE>
See notes to Financial Statements.
14
<PAGE> 17
VIP HIGH QUALITY BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995
THE GALAXY
VIP FUND
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
- ---------- --------
<S> <C>
REPURCHASE AGREEMENT - 15.71%
$ 1,738,936 Chase Securities, Inc.
5.30%, 01/02/96, Dated 12/29/95,
Repurchase Price $1,739,960
(Collaterized by U.S. Treasury Note
8.00%, Due 10/15/96, Par Value $1,715,000
Market Value $1,775,025) . . . . . . . . . . . . . . $ 1,738,936
------------
TOTAL REPURCHASE AGREEMENT . . . . . . . . . . . . . 1,738,936
(Cost $1,738,936) ------------
TOTAL INVESTMENTS - 98.53% . . . . . . . . . . . . . . . . . . . . . . 10,904,304
(Cost $10,580,105) ------------
NET OTHER ASSETS AND LIABILITIES - 1.47% . . . . . . . . . . . . . . . 162,672
------------
NET ASSETS - 100.00% . . . . . . . . . . . . . . . . . . . . . . . . . $11,066,976
============
</TABLE>
- --------------------------------------------
MTN Medium Term Note
See Notes to Financial Statements.
15
<PAGE> 18
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
THE GALAXY
VIP FUND
<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 . . . . . . . . . . . . $ 17,938,406 $ 20,526,190 $ 13,003,179 $ 8,841,169
Repurchase agreements . . . . . . . . . . . -- 4,215,676 1,811,173 1,738,936
Net unrealized appreciation (depreciation) . -- 6,076,426 2,404,025 324,199
------------- ------------- ------------- ------------
Total investments at value . . . . . . 17,938,406 30,818,292 17,218,377 10,904,304
Receivable for shares sold . . . . . . . . . . . -- 23,744 6,586 15,801
Interest and dividend receivables . . . . . . . 79,474 39,212 73,063 166,828
Receivable from investment advisor (Note 3 & 4) 292 -- 16,428 1,160
Deferred organizational expense ( Note 2) . . . 6,806 6,646 6,842 6,699
------------- ------------- ------------- ------------
Total Assets . . . . . . . . . . . . . 18,024,978 30,887,894 17,321,296 11,094,792
------------- ------------- ------------- ------------
LIABILITIES:
Payable for investments purchased . . . . . . . -- -- 29,813 --
Payable for shares repurchased . . . . . . . . . 67,888 -- -- 2,540
Advisory fee payable (Note 3 & 4) . . . . . . . 2,299 19,459 4,556 1,376
Payable to FDISG (Note 3 & 4) . . . . . . . . . 2,263 9,509 11,214 2,601
Payable to custodian . . . . . . . . . . . . . . 2,161 -- -- --
Trustees' fees and expenses payable (Note 3) . . 1,851 1,851 1,851 1,851
Accrued expenses and other payables . . . . . . 23,237 30,826 28,344 19,448
------------- ------------- ------------- ------------
Total Liabilities . . . . . . . . . . . . . 99,699 61,645 75,778 27,816
------------- ------------- ------------- ------------
NET ASSETS . . . . . . . . . . . . . . . . . . . $ 17,925,279 $ 30,826,249 $ 17,245,518 $ 11,066,976
============= ============= ============= ============
NET ASSETS CONSIST OF:
Par value (Note 5) . . . . . . . . . . . . . . . $ 17,925 $ 2,373 $ 1,393 $ 1,067
Paid-in capital in excess of par value . . . . . 17,907,270 24,954,319 14,866,923 10,924,465
Undistributed (overdistributed)
net investment income. . . . . . . . . . . . . 284 -- 379 --
Accumulated net realized gain (loss)
on investments sold . . . . . . . . . . . . . (200) (206,869) (27,202) (182,755)
Net unrealized appreciation (depreciation)
of investments . . . . . . . . . . . . . . . . -- 6,076,426 2,404,025 324,199
------------- ------------- ------------- ------------
TOTAL NET ASSETS . . . . . . . . . . . . . . . . . $ 17,925,279 $ 30,826,249 $ 17,245,518 $ 11,066,976
============= ============= ============= ============
SHARES OF BENEFICIAL INTEREST OUTSTANDING . . . . . 17,925,195 2,372,831 1,392,562 1,067,460
NET ASSET VALUE:
offering and redemption price per share
(Net Assets / Shares Outstanding) . . . . . . . $ 1.00 $ 12.99 $ 12.38 $ 10.37
============= ============= ============= ============
</TABLE>
See Notes to Financial Statements.
16
<PAGE> 19
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
THE GALAXY
VIP FUND
<TABLE>
<CAPTION>
MONEY MARKET EQUITY ASSET ALLOCATION HIGH QUALITY
FUND FUND FUND BOND FUND
------------ ---------- ---------------- ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest (Note 2) . . . . . . . . . . . . . . . $ 860,776 $ 261,469 $ 332,402 $ 619,457
Dividends (Note 2) . . . . . . . . . . . . . . . -- 432,617 175,444 35
----------- ---------- ---------- ----------
Total investment income . . . . . . . . . . 860,776 694,086 507,846 619,492
----------- ---------- ---------- ----------
EXPENSES:
Investment advisory fee (Note 3) . . . . . . . . 58,540 188,501 97,541 51,220
Administration fee (Note 3) . . . . . . . . . . 25,000 25,000 25,000 25,000
Custody fees . . . . . . . . . . . . . . . . . 12,382 11,378 8,085 7,788
Fund accounting fee (Note 3) . . . . . . . . . . 25,915 28,288 31,299 30,642
Legal fees . . . . . . . . . . . . . . . . . . . 16,178 23,895 13,501 10,166
Audit fees . . . . . . . . . . . . . . . . . . . 10,380 10,381 10,381 10,380
Trustees fees (Note 3) . . . . . . . . . . . . . 3,538 3,538 3,538 3,538
Amortization of organization costs (Note 2) . . 3,256 3,256 3,256 3,256
Reports to shareholders . . . . . . . . . . . . 5,910 11,781 6,216 3,546
Registration fees . . . . . . . . . . . . . . . 252 3,329 201 72
Insurance fees . . . . . . . . . . . . . . . . 960 903 805 670
Miscellaneous . . . . . . . . . . . . . . . . . 357 357 357 357
----------- ---------- ---------- ----------
Total Expenses before reimbursement/waiver . 162,668 310,607 200,180 146,635
Less: Reimbursement/waiver (Note 4) . . . . (69,980) (6,749) (22,475) (72,510)
----------- ---------- ---------- ----------
Total Expenses net of reimbursement/waiver . 92,688 303,858 177,705 74,125
----------- ---------- ---------- ----------
NET INVESTMENT INCOME . . . . . . . . . . . . . . . 768,088 390,228 330,141 545,367
----------- ---------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 2):
Net realized gain (loss) on investments sold . . (46) (17,469) 167,752 (6,130)
Net change in unrealized appreciation (depreciation)
of investments . . . . . . . . . . . . . . . -- 5,358,237 2,731,160 1,313,693
----------- ---------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS . . . . . . . . . . . . . . . . . . (46) 5,340,768 2,898,912 1,307,563
----------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS . . . . . . . . . . . . . $ 768,042 $5,730,996 $3,229,053 $1,852,930
=========== ========== ========== ==========
</TABLE>
See Notes to Financial Statements.
17
<PAGE> 20
STATEMENTS OF CHANGES IN NET ASSETS
THE GALAXY
VIP FUND
<TABLE>
<CAPTION>
MONEY MARKET FUND EQUITY FUND
-------------------------------- ---------------------------------
YEARS ENDED DECEMBER 31, YEARS ENDED DECEMBER 31,
-------------------------------- ---------------------------------
1995 1994 1995 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 . . . . . . . . . . . . . 768,088 480,223 390,228 346,429
Net realized gain (loss) on investments sold . . (46) (47) (17,469) (124,453)
Net change in unrealized appreciation
(depreciation) of investments . . . . . . . . -- -- 5,358,237 356,961
-------------- -------------- -------------- -------------
Net increase (decrease) in net assets
resulting from operations. . . . . . . . . . . 768,042 480,176 5,730,996 578,937
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income . . . . . . . . . . . . . (768,088) (479,939) (390,222) (346,423)
In excess of net investment income . . . . . . . -- -- (6) (6)
Net realized gain on investments . . . . . . . . -- (284) -- --
Return of capital . . . . . . . . . . . . . . . -- -- (245) (267)
-------------- -------------- -------------- -------------
Total Distributions . . . . . . . . . . . . (768,088) (480,223) (390,473) (346,696)
-------------- -------------- -------------- -------------
SHARE TRANSACTIONS:
Net proceeds from sale of shares . . . . . . . . 11,069,167 11,407,186 7,425,431 8,162,524
Issued to shareholders in reinvestment
of dividends . . . . . . . . . . . . . . . . . 768,088 480,223 390,473 346,696
Costs of shares repurchased . . . . . . . . . . (7,188,022) (9,475,061) (1,721,510) (2,259,000)
-------------- -------------- -------------- -------------
Net increase (decrease) from share transactions 4,649,233 2,412,348 6,094,394 6,250,220
-------------- -------------- -------------- -------------
Net increase (decrease) in net assets. . . . . 4,649,187 2,412,301 11,434,917 6,482,461
-------------- -------------- -------------- -------------
NET ASSETS AT END OF PERIOD . . . . . . . . . . . . $ 17,925,279 $ 13,276,092 $ 30,826,249 $ 19,391,332
============== ============== ============== =============
Accumulated undistributed (overdistributed)
net investment income . . . . . . . . . . . . . $ 284 $ 284 $ -- $ (6)
============== ============== ============== =============
OTHER INFORMATION:
SHARE TRANSACTIONS:
Sold . . . . . . . . . . . . . . . . . . . 11,069,167 11,407,186 620,539 791,455
Issued to shareholders in reinvestment
of dividends . . . . . . . . . . . . . . . . . 768,088 480,223 31,898 33,267
Repurchased . . . . . . . . . . . . . . . . . . (7,188,022) (9,475,061) (143,620) (220,435)
-------------- -------------- -------------- -------------
Net increase (decrease) in shares outstanding. 4,649,233 2,412,348 508,817 604,287
============== ============== ============== =============
</TABLE>
See Notes to Financial Statements.
18
<PAGE> 21
STATEMENTS OF CHANGES IN NET ASSETS
(CONTINUED)
THE GALAXY
VIP FUND
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND HIGH QUALITY BOND FUND
------------------------------- ----------------------------
YEARS ENDED DECEMBER 31, YEARS ENDED DECEMBER 31,
------------------------------- ----------------------------
1995 1994 1995 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 . . . . . . . . . . . . . 330,141 363,472 545,367 546,555
Net realized gain (loss) on investments sold . . 167,752 (193,495) (6,130) (176,625)
Net change in unrealized appreciation
(depreciation) of investments. . . . . . . . . 2,731,160 (431,751) 1,313,693 (975,502)
------------- ------------- ------------ ------------
Net increase (decrease) in net assets
resulting from operations. . . . . . . . . . . 3,229,053 (261,774) 1,852,930 (605,572)
------------- ------------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income . . . . . . . . . . . . . (330,141) (363,472) (545,367) (546,555)
In excess of net investment income . . . . . . . (1,080) -- -- --
Net realized gain on investments . . . . . . . . -- -- -- --
Return of capital . . . . . . . . . . . . . . . -- (638) -- --
------------- ------------- ------------ ------------
Total Distributions . . . . . . . . . . (331,221) (364,110) (545,367) (546,555)
------------- ------------- ------------ ------------
SHARE TRANSACTIONS:
Net proceeds from sale of shares . . . . . . . . 5,412,403 3,054,961 2,630,095 2,118,130
Issued to shareholders in reinvestment
of dividends . . . . . . . . . . . . . . . . 331,221 364,110 545,367 546,555
Costs of shares repurchased . . . . . . . . . . (1,967,511) (4,021,905) (1,427,830) (3,302,406)
------------- ------------- ------------ ------------
Net increase (decrease) from share
transactions . . . . . . . . . . . . . . . 3,776,113 (602,834) 1,747,632 (637,721)
------------- ------------- ------------ ------------
Net increase (decrease) in net assets . . . 6,673,945 (1,228,718) 3,055,195 (1,789,848)
------------- ------------- ------------ ------------
NET ASSETS AT END OF PERIOD . . . . . . . . . . . . $ 17,245,518 $ 10,571,573 $ 11,066,976 $ 8,011,781
============= ============= ============ ============
Accumulated undistributed (overdistributed)
net investment income . . . . . . . . . . . . . $ 379 $ -- $ -- $ --
============= ============= ============ ============
OTHER INFORMATION:
SHARE TRANSACTIONS:
Sold . . . . . . . . . . . . . . . . . . . 469,406 301,150 265,770 221,295
Issued to shareholders in reinvestment
of dividends . . . . . . . . . . . . . . . . 28,486 36,287 55,441 58,399
Repurchased . . . . . . . . . . . . . . . . . . (184,289) (400,957) (147,001) (356,260)
------------- ------------- ------------ ------------
Net increase (decrease) in shares outstanding 313,603 (63,520) 174,210 (76,566)
============= ============= ============ ============
</TABLE>
See Notes to Financial Statements.
19
<PAGE> 22
VIP MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
THE GALAXY
VIP FUND
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------
1995 1994 1993(1)
----------- ----------- ------------
<S> <C> <C> <C>
Net Asset Value, Beginning of period . . . . . . . . $ 1.00 $ 1.00 $ 1.00
----------- ----------- ------------
Income from Investment Operations:
Net investment income (A) . . . . . . . . . . . . 0.05 0.04 0.03
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . . -- -- --
----------- ----------- ------------
Total from Investment Operations . . . . . . 0.05 0.04 0.03
----------- ----------- ------------
Less Distributions:
Dividends from net investment income . . . . . . (0.05) (0.04) (0.03)
Distributions from net realized capital gains . -- -- --
----------- ----------- ------------
Total Distributions . . . . . . . . . . . . . (0.05) (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 . . . . . . . . . . . . . . . . . . . . 5.38% 3.89% 2.74%**
Ratios/Supplemental Data:
Net Assets, End of period (000's) . . . . . . . . . $ 17,925 $ 13,276 $ 10,864
Ratios to average net assets:
Net investment income including reimbursement/waiver 5.25% 3.85% 3.00%*
Operating expenses including reimbursement/waiver 0.63% 0.42% 0.13%*
Operating expenses excluding reimbursement/waiver 1.11% 1.21% 2.00%*
Portfolio Turnover Rate . . . . . . . . . . . . . . . N/A N/A N/A
</TABLE>
- ---------------------------------
* Annualized
** Not Annualized
(1) The Fund commenced operations on February 2, 1993.
(A) Net investment income per share before reimbursement/waiver of fees
by the Investment Advisor and/or Administrator were as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1995 1994 1993(1)
-------- -------- --------
<S> <C> <C>
$ 0.05 $ 0.03 $ 0.01
</TABLE>
See Notes to Financial Statements.
20
<PAGE> 23
VIP EQUITY FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
THE GALAXY
VIP FUND
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------
1995 1994 1993(1)
---------- ----------- ----------
<S> <C> <C> <C>
Net Asset Value, Beginning of period . . . . . . . $ 10.40 $ 10.25 $ 10.00
---------- ----------- ----------
Income from Investment Operations:
Net investment income (A) . . . . . . . . . . . . 0.18 0.20 0.16
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . . . 2.59 0.15 0.25
---------- ----------- ----------
Total from Investment Operations . . . . . . . . 2.77 0.35 0.41
---------- ----------- ----------
Less Distributions:
Dividends from net investment income . . . . . . (0.18) (0.20) (0.16)
Distributions from net realized capital gains . -- -- --
---------- ----------- ----------
Total Distributions . . . . . . . . . . . . . . . (0.18) (0.20) (0.16)
---------- ----------- ----------
Net increase (decrease) in net asset value . . . . 2.59 0.15 0.25
---------- ----------- ----------
Net Asset Value, End of period . . . . . . . . . . $ 12.99 $ 10.40 $ 10.25
========== =========== ==========
Total Return . . . . . . . . . . . . . . . . . . . 26.76% 3.47% 4.15%**
Ratios/Supplemental Data:
Net Assets, End of period (000's) . . . . . . . . . $ 30,826 $ 19,391 $ 12,909
Ratios to average net assets:
Net investment income including
reimbursement/waiver . . . . . . . . . . . . . 1.55% 2.06% 2.23%*
Operating expenses including reimbursement/waiver 1.21% 0.71% 0.20%*
Operating expenses excluding reimbursement/waiver 1.24% 1.42% 2.60%*
Portfolio Turnover Rate . . . . . . . . . . . . . . 3% 2% 5%**
</TABLE>
- ----------------------------------
* Annualized
** Not Annualized
(1) The Fund commenced operations on January 11, 1993.
(A) Net investment income per share before reimbursement/waiver of fees
by the Investment Advisor and/or Administrator were as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------
1995 1994 1993(1)
-------- -------- ----------
<S> <C> <C>
$ 0.18 $ 0.13 $ (0.02)
</TABLE>
See Notes to Financial Statements.
21
<PAGE> 24
VIP ASSET ALLOCATION FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
THE GALAXY
VIP FUND
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------
1995 1994 1993(1)
---------- ---------- ----------
<S> <C> <C> <C>
Net Asset Value, Beginning of period . . . . . . . $ 9.80 $ 10.33 $ 10.00
---------- ---------- ----------
Income from Investment Operations:
Net investment income (A) . . . . . . . . . . . 0.28 0.31 0.18
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . . . 2.58 (0.53) 0.35
---------- ---------- ----------
Total from Investment Operations . . . . . . 2.86 (0.22) 0.53
---------- ---------- ----------
Less Distributions:
Dividends from net investment income . . . . . . (0.28) (0.31) (0.18)
Distributions from net realized capital gains . -- -- (0.02)
---------- ---------- ----------
Total Distributions . . . . . . . . . . . . (0.28) (0.31) (0.20)
---------- ---------- ----------
Net increase (decrease) in net asset value . . . . 2.58 (0.53) 0.33
---------- ---------- ----------
Net Asset Value, End of period . . . . . . . . . . $ 12.38 $ 9.80 $ 10.33
========== ========== ==========
Total Return . . . . . . . . . . . . . . . . . . . 29.42% (2.15)% 5.33%**
Ratios/Supplemental Data:
Net Assets, End of period (000's) . . . . . . . . . $ 17,246 $ 10,572 $ 11,800
Ratios to average net assets:
Net investment income including
reinbursement/waiver . . . . . . . . . . . . . 2.54% 3.02% 3.01%*
Operating expenses including reimbursement/waiver 1.37% 0.78% 0.26%*
Operating expenses excluding reimbursement/waiver 1.54% 1.68% 3.11%*
Portfolio Turnover Rate . . . . . . . . . . . . . . 46% 28% 10%**
</TABLE>
- --------------------------------
* Annualized
** Not Annualized
(1) The Fund commenced operations on February 6, 1993.
(A) Net investment income per share before reimbursement/waiver of fees
by the Investment Advisor and/or Administrator were as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1995 1994 1993(1)
------- ------- -------
<S> <C> <C>
$ 0.26 $ 0.22 $ 0.01
</TABLE>
See Notes to Financial Statements.
22
<PAGE> 25
VIP HIGH QUALITY BOND FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
THE GALAXY
VIP FUND
<TABLE>
Years Ended December 31,
---------------------------------------
1995 1994 1993(1)
---------- ----------- ----------
<S> <C> <C> <C>
Net Asset Value, Beginning of period . . . . . . . . $ 8.97 $ 10.11 $ 10.00
---------- ----------- ----------
Income from Investment Operations:
Net investment income (A) . . . . . . . . . . . . 0.57 0.56 0.47
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . . . 1.40 (1.14) 0.12
---------- ----------- ----------
Total from Investment Operations . . . . . . 1.97 (0.58) 0.59
---------- ----------- ----------
Less Distributions:
Dividends from net investment income . . . . . . (0.57) (0.56) (0.47)
Distributions from net realized capital gains . -- -- (0.01)
---------- ----------- ----------
Total Distributions . . . . . . . . . . . . . (0.57) (0.56) (0.48)
---------- ----------- ----------
Net increase (decrease) in net asset value . . . . 1.40 (1.14) 0.11
---------- ----------- ----------
Net Asset Value, End of period . . . . . . . . . . . $ 10.37 $ 8.97 $ 10.11
========== =========== ==========
Total Return . . . . . . . . . . . . . . . . . . . . 22.55% (5.85)% 6.04%**
Ratios/Supplemental Data:
Net Assets, End of period (000's) . . . . . . . . . . $ 11,067 $ 8,012 $ 9,802
Ratios to average net assets:
Net investment income including
reimbursement/waiver . . . . . . . . . . . . . 5.86% 5.90% 5.30%*
Operating expenses including reimbursement/waiver 0.80% 0.57% 0.22%*
Operating expenses excluding reimbursement/waiver 1.57% 1.63% 2.92%*
Portfolio Turnover Rate . . . . . . . . . . . . . . . 21% 32% 7%**
</TABLE>
- --------------------------------------
* Annualized
** Not Annualized
(1) The Fund commenced operations on January 21, 1993.
(A) Net investment income per share before reimbursement/waiver of fees
by the Investment Advisor and/or Administrator were as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1995 1994 1993(1)
-------- -------- --------
<S> <C> <C>
$ 0.50 $ 0.46 $ 0.23
</TABLE>
See Notes to Financial Statements.
23
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS
THE GALAXY
VIP FUND
1. ORGANIZATION
The Galaxy VIP Fund, a Massachusetts business trust, (the "Trust"), is
registered under the Invest-ment 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, which
constitutes fair value. 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 exdividend
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.
24
<PAGE> 27
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
THE GALAXY
VIP FUND
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.
REPURCHASE AGREEMENTS: Each Fund may engage in repurchase agreement
transactions with institutions that the Trust's investment adviser has
determined are creditworthy pursuant to guidelines established by the Trust's
Board of Trustees. Each repurchase agreement transaction is recorded at cost.
Each Fund requires that the securities purchased in a repurchase agreement
transaction be transferred to the Trust's Custodian (or sub-custodian) in a
manner that is intended to enable the Fund to obtain those securities in the
event of a counterparty default. The investment adviser monitors the value of
the securities, including accrued interest, daily to ensure that the value of
the collateral equals or exceeds 101% of amounts due under the repurchase
agreement. Repurchase agreement transactions involve certain risks in the event
of default or insolvency of the counterparty, including possible delays or
restrictions upon a Fund's ability to dispose of the underlying securities and
a possible decline in the value of the underlying securities during the period
while the Fund seeks to assert its rights.
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 First Data Investor Services
Group, Inc.("FDISG"),(formerly known as The Shareholder Services Group, Inc.,
doing business as 440 Financial), a wholly-owned subsidiary of First Data
Corporation, are parties to an administration agreement under which FDISG (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%
25
<PAGE> 28
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
THE GALAXY
VIP FUND
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, FDISG also provides certain fund
accounting and custody administration services pursuant to certain fee
arrangements. Pursuant to these fee arrangements, FDISGcompensates the Trust's
custodian bank for its 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,
FDISG 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 FDISG and an indirect wholly-owned subsidiary of
First Data Corporation, acts as the exclusive distributor of the Trust's
shares. Prior to March 31, 1995, the Distributor was a wholly-owned subsidiary
of 440 FinancialGroup of Worcester, Inc. and an indirect 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.
Effective May 26, 1995, each Trustee is entitled to receive for services as a
Trustee of both the Trust and The Galaxy Fund , an affiliated registered
investment company, an aggregate fee of $18,000 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 Boards of Trustees
of the Trust and The Galaxy Fund is entitled to an additional annual fee of
$4,000, and the President and Treasurer of the Trust and The Galaxy Fund is
entitled to an additional annual fee of $2,500 for their services in these
capacities. These fees are allocated among the Funds of the Trust and The
Galaxy Fund based on their relative net assets.
Expenses for the year ended December 31, 1995 include legal fees paid to
Drinker Biddle & Reath. A partner of that firm is Secretary to the Trust.
At December 31, 1995 with the exception of the initial shares, the
separate accounts owned all of the outstanding shares of the Funds as investment
accounts for the variable annuity contracts and variable life insurance
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 year ended December 31, 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 $ 36,587 $ 31,595
Equity -- 806
Asset Allocation 365 2,349
High Quality Bond 37,251 32,338
</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
year ended December 31, 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, $19,761 and $2,921, respectively.
26
<PAGE> 29
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
THE GALAXY
VIP FUND
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.
6. PURCHASES AND SALES OF SECURITIES
The cost of purchases and proceeds from sales of securities, excluding
short-term investments, for the year ended December 31, 1995, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
-------------------------------------------------------------
FUND OTHER GOVERNMENT OTHER GOVERNMENT
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equity $ 5,283,463 $ -- $ 615,630 $ --
Asset Allocation 4,177,124 3,286,728 3,200,260 2,270,328
High Quality Bond 648,429 1,259,205 823,216 1,011,313
</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 December 31, 1995 for each Fund is
as follows:
<TABLE>
<CAPTION>
FUND APPRECIATION (DEPRECIATION) NET COST
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market $ -- $ -- $ -- $ 17,938,406
Equity 6,466,800 (390,374) 6,076,426 24,741,866
Asset Allocation 2,609,704 (205,679) 2,404,025 14,814,352
High Quality Bond 372,982 (48,783) 324,199 10,580,105
</TABLE>
27
<PAGE> 30
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
THE GALAXY
VIP FUND
7. CAPITAL LOSS CARRYFORWARD
At December 31, 1995, the Funds had capital loss carryforwards:
<TABLE>
<CAPTION>
Fund Amount Expiration
- ---- ------ ----------
<S> <C> <C>
Money Market $ 154 2002
29 2003
Equity 64,947 2001
124,453 2002
17,469 2003
Asset Allocation 27,202 2002
High Quality Bond 155,797 2002
26,958 2003
</TABLE>
28
<PAGE> 31
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
THE GALAXY VIP FUND:
We have audited the accompanying statements of assets and liabilities of the
Money Market Fund, Equity Fund, Asset Allocation Fund and High Quality Bond
Fund (four series of The Galaxy VIP Fund), including the portfolios of
investments, as of December 31, 1995, and the related statements of operations,
the statements of changes in net assets, and the financial highlights for each
of the periods indicated therein. These financial statements and financial
highlights are the responsibility of The Galaxy VIPFund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1995 by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
the aforementioned series of The Galaxy VIP Fund as of December 31, 1995, the
results of their operations, the changes in their net assets, and their
financial highlights for each of the periods indicated therein, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 5, 1996
<PAGE> 32
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
First Data Investor
Services Group, Inc.
(formerly The
Shareholder
Services Group, Inc.
d/b/a 440
Financial) 4400 Computer
Drive
Westboro,
Massachusetts 01581-5108
This report is submitted for the general information of shareholders of
The Galaxy VIP Fund. It is not authorized for distribution toprospective
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.
[RECYCLED LOGO]
This report was printed on recycled paper.
<PAGE> 33
[GALAXY VIP FUND LOGO]
4400 Computer Drive
Box 5108
Westboro, MA 01581-5108
First Class Mail
U.S. Postage
PAID
New York, NY
Permit No. 8048
