GALAXY VIP FUND, 497, 1996-05-07

GALAXY VIP FUND
497, 1996-05-07

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<PAGE> 1

THE GALAXY VIP FUND
4400 COMPUTER DRIVE
WESTBOROUGH, MASSACHUSETTS 01581
PROSPECTUS

APRIL 30, 1996

The Galaxy VIP Fund ("GALAXY VIP") is an open-end, diversified series
investment company established exclusively for the purpose of providing an
investment vehicle for variable annuity contracts and variable life insurance
policies offered by the separate accounts of various life insurance companies
("Participating Insurance Companies"). Shares of GALAXY VIP are not offered
to the general public but solely to such separate accounts ("Separate
Accounts"). Shares of GALAXY VIP may be sold to and held by Separate Accounts
funding variable annuity contracts and variable life insurance policies issued
by both affiliated and unaffiliated life insurance companies. As of the date
of this Prospectus, shares of GALAXY VIP are offered only to Separate Accounts
funding variable annuity contracts issued by American Skandia Life Assurance
Corporation and its affiliated life insurance companies.

GALAXY VIP currently offers four portfolios -- Money Market , Equity , Asset
Allocation and High Quality Bond Funds (collectively, the "Funds") with
investment objectives as follows. There is, of course, no assurance that a
Fund will achieve its stated objective.

The MONEY MARKET FUND'S investment objective is to seek as high a level of
current income as is consistent with liquidity and stability of principal. The
Fund invests in "money market" instruments with remaining maturities of
thirteen months or less, such as domestic and foreign bank certificates of
deposit, bankers' acceptances and commercial paper (including variable and
floating rate obligations) in addition to obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities, and repurchase
agreements relating to such obligations.

The EQUITY FUND'S investment objective is to seek long-term growth by
investing in companies that the Fund's investment adviser believes have
above-average earnings potential. Under normal market and economic conditions,
the Fund will invest at least 75% of its total assets in common stock,
preferred stock, common stock warrants and securities convertible into common
stock of such companies.

The ASSET ALLOCATION FUND'S investment objective is to seek a high total
return by providing both a current level of income that is greater than that
produced by the popular stock market averages as well as long-term growth in
the value of the Fund's assets. The Fund attempts to achieve this objective
and at the same time reduce volatility by allocating its assets in varying
amounts among short-term obligations, common stocks, preferred stocks and
bonds.

The HIGH QUALITY BOND FUND'S investment objective is to seek a high level of
current income consistent with prudent risk of capital. Under normal market
and economic conditions, the Fund will invest its assets in high quality debt
obligations that are rated at the time of purchase within the two highest
ratings of Standard & Poor's Ratings Group, Division of McGraw Hill, Inc.
("S&P") or Moody's Investors Service, Inc. ("Moody's") (or which, if unrated,
are of comparable quality) and in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and other "money market"
instruments.

<PAGE> 2

Each of the Funds is distributed by 440 Financial Distributors, Inc. and
advised by Fleet Investment Advisors Inc. SHARES OF THE FUNDS ARE NOT BANK
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, FLEET FINANCIAL GROUP
INC. OR ANY OF ITS AFFILIATES, FLEET INVESTMENT ADVISORS INC. OR ANY FLEET
BANK. SHARES OF THE FUNDS ARE NOT FEDERALLY INSURED BY, GUARANTEED BY,
OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENTAL AGENCY. INVESTMENT RETURN AND, WITH RESPECT TO THE EQUITY, HIGH
QUALITY BOND AND ASSET ALLOCATION FUNDS, PRINCIPAL VALUE WILL VARY AS A RESULT
OF MARKET CONDITIONS OR OTHER FACTORS SO THAT SHARES OF THE FUNDS, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. AN INVESTMENT IN
THE FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL
AMOUNT INVESTED. THE MONEY MARKET FUND SEEKS TO MAINTAIN ITS NET ASSET VALUE
PER SHARE AT $1.00 FOR PURPOSES OF PURCHASES AND REDEMPTIONS, ALTHOUGH THERE IS
NO ASSURANCE THAT IT WILL BE ABLE TO DO SO ON A CONTINUOUS BASIS. Shares of
the Funds may only be purchased by the Separate Accounts of Participating
Insurance Companies for the purpose of funding variable annuity contracts and
variable life insurance policies. A particular Fund may not be available under
the variable annuity contract or variable life insurance policy which you have
chosen. The prospectus of the specific insurance product you have chosen will
indicate which Funds are available and should be read in conjunction with this
Prospectus. Inclusion in this Prospectus of a Fund which is not available under
your contract or policy is not to be considered a solicitation.

This Prospectus sets forth concisely the information about GALAXY VIP that a
prospective investor ought to know before investing and should be retained for
future reference. Certain additional information about GALAXY VIP is contained
in a Statement of Additional Information dated the same date as this Prospectus
which has been filed with the Securities and Exchange Commission and is
incorporated herein by reference. The Statement of Additional Information as
it may be amended from time to time is available upon request and without
charge by writing to GALAXY VIP or calling the Participating Insurance Company
sponsoring the variable annuity contract or variable life insurance policy.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

2
<PAGE> 3

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FINANCIAL HIGHLIGHTS . . . . . . . . . . . 4
INVESTMENT OBJECTIVES AND POLICIES . . . . 8
TYPES OF OBLIGATIONS AND OTHER
INVESTMENT INFORMATION . . . . . . . . . 11
INVESTMENT LIMITATIONS . . . . . . . . . . 19
PRICING OF SHARES . . . . . . . . . . . . . 21
PURCHASE AND REDEMPTION OF SHARES . . . . . 22
DIVIDENDS AND DISTRIBUTIONS . . . . . . . . 23
TAXES . . . . . . . . . . . . . . . . . . . 23
MANAGEMENT OF GALAXY VIP . . . . . . . . . 24
DESCRIPTION OF GALAXY VIP
AND ITS SHARES . . . . . . . . . . . . . 26
CUSTODIAN . . . . . . . . . . . . . . . . . 27
EXPENSES . . . . . . . . . . . . . . . . . 27
PERFORMANCE AND YIELD INFORMATION . . . . . 27
MISCELLANEOUS . . . . . . . . . . . . . . . 28
</TABLE>

3
<PAGE> 4

FINANCIAL HIGHLIGHTS

The financial highlights presented below have been audited by Coopers &
Lybrand L.L.P., GALAXY VIP's independent accountants, whose report is
contained in GALAXY VIP's Annual Report to Shareholders dated December 31,
1995. Such financial highlights should be read in conjunction with the Funds'
financial statements incorporated in the Statement of Additional Information.
More information about the performance of the Funds is also contained in the
Annual Report to Shareholders, which may be obtained without charge.

MONEY MARKET FUND

(Selected per share data for a Fund share outstanding through the
period indicated)

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994 DECEMBER 31, 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(2)........................ 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%(3)
Ratios/Supplemental Data:
Net Assets, End of Period (000's).................. $17,925 $13,276 $10,864
Ratios to average net assets:
Net investment income........................... 5.25% 3.85% 3.00%(4)
Operating expenses(2)........................... 0.63% 0.42% 0.13%(4)
</TABLE>

(1) The Fund commenced operations on February 2, 1993.

(2) 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 years ended December 31, 1995
and December 31, 1994 and for the period ended December 31, 1993 were
$0.05 and 1.11%, $0.03 and 1.21%, and $0.01 and 2.00%, respectively.

(3) Not Annualized.

(4) Annualized.

<PAGE> 5

EQUITY FUND
(Selected per share data for a Fund share outstanding through the period
indicated)

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994 DECEMBER 31, 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(2)........................... 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%(3)
Ratios/Supplemental Data:
Net Assets, End of Period (000's).................... $30,826 $19,391 $12,909
Ratios to average net assets:
Net investment income.............................. 1.55% 2.06% 2.23%(4)
Operating expenses(2).............................. 1.21% 0.71% 0.20%(4)
Portfolio Turnover Rate.............................. 3% 2% 5%(3)
</TABLE>

(1) The Fund commenced operations on January 11, 1993.

(2) Net investment income (loss) per share and annualized operating expense
ratios before waiver and reimbursement of fees by the investment adviser
and administrator for the fiscal years ended December 31, 1995 and
December 31, 1994 and for the period ended December 31, 1993 were $0.18
and 1.24%, $0.13 and 1.42%, and ($0.02) and 2.60%, respectively.

(3) Not Annualized.

(4) Annualized.

5
<PAGE> 6

ASSET ALLOCATION FUND
(Selected per share data for a Fund share outstanding through the period
indicated)

Income from Investment Operations:
Net investment income(2).............................. 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%(3)
----- ==== ====
Ratios/Supplemental Data:
Net Assets, End of Period (000's)..................... $17,246 $10,572 $11,800
Ratios to average net assets:
Net investment income............................... 2.54% 3.02% 3.01%(4)
Operating expenses(2)............................... 1.37% 0.78% 0.26%(4)
Portfolio Turnover Rate............................. 46% 28% 10%(3)
</TABLE>

(1) The Fund commenced operations on February 6, 1993.

(2) Net investment income (loss) per share and annualized operating expense
ratios before waiver and reimbursement of fees by the investment adviser
and administrator for the fiscal years ended December 31, 1995 and
December 31, 1994 and for the period ended December 31, 1993 were $0.26
and 1.54%, $0.22 and 1.68%, and $0.01 and 3.11%, respectively.

(3) Not Annualized.

(4) Annualized.

6
<PAGE> 7

HIGH QUALITY BOND FUND
(Selected per share data for a Fund share outstanding through the period
indicated)

Income from Investment Operations:
Net investment income(2)......................... 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%(3)
-----
Ratios/Supplemental Data:
Net Assets, End of Period (000's)................ $11,067 $8,012 $9,802
Ratios to average net assets:
Net investment income.......................... 5.86% 5.90% 5.30%(4)
Operating expenses(2).......................... 0.80% 0.57% 0.22%(4)
Portfolio Turnover Rate............................ 21% 32% 7%(3)
</TABLE>

(1) The Fund commenced operations on January 21, 1993.

(2) Net investment income (loss) per share and annualized operating expense
ratios before waiver and reimbursement of fees by the investment adviser
and administrator for the fiscal years ended December 31, 1995 and
December 31, 1994 and for the period ended December 31, 1993 were $0.50
and 1.57%, $0.46 and 1.63% and $0.23 and 2.92%, respectively.

(3) Not annualized.

(4) Annualized.

7
<PAGE> 8

INVESTMENT OBJECTIVES AND POLICIES

IN GENERAL

The Funds' investment adviser will use its best efforts to achieve the
investment objectives of the Funds, although such achievement cannot be
assured. The investment objective of a Fund may not be changed without the
approval of the holders of a majority of its outstanding shares (as defined
under "Miscellaneous"). Except as noted below under "Investment Limitations,"
a Fund's investment policies may be changed without shareholder approval.

INVESTMENT OBJECTIVE AND POLICIES OF THE MONEY MARKET FUND

The Money Market Fund's investment objective is to seek as high a level of
current income as is consistent with liquidity and stability of principal. The
Fund seeks to achieve its objective by investing in "money market" instruments
that are determined by the investment adviser to present minimal credit risk
and meet certain rating criteria. Instruments that may be purchased by the
Money Market Fund include obligations of domestic and foreign banks (including
negotiable certificates of deposit, non-negotiable time deposits, savings
deposits, and bankers' acceptances); commercial paper (including variable and
floating rate notes); obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities; and repurchase agreements issued by
financial institutions such as banks and broker/dealers. These instruments
have remaining maturities of thirteen months or less (except for certain
variable and floating rate notes and securities underlying certain repurchase
agreements). See "Types of Obligations and Other Investment Information" below
for information regarding additional investment policies of the Money Market
Fund.

In accordance with a rule promulgated by the Securities and Exchange
Commission (the "SEC"), the Money Market Fund will purchase only those
instruments which meet the applicable quality requirements described below.
The Money Market Fund will not purchase a security (other than a U.S.
Government security) unless the security or the issuer with respect to
comparable securities (i) is rated by at least two nationally recognized
statistical rating organizations ("Rating Organizations") (such as S&P or
Moody's) in the highest category for short-term debt securities, (ii) is rated
by the only Rating Organization that has issued a rating in such Rating
Organization's highest category for short-term debt, or (iii) if not rated, the
security is determined to be of comparable quality. Determinations of
comparable quality shall be made in accordance with procedures established by
the Board of Trustees. See Appendix A to the Statement of Additional
Information for a description of the rating categories of S&P, Moody's and
certain other Rating Organizations.

INVESTMENT OBJECTIVE AND POLICIES OF THE EQUITY FUND

The Equity Fund's investment objective is to seek long-term growth by
investing in companies that the Fund's investment adviser believes have
above-average earnings potential. The Fund seeks to achieve its investment
objective by investing, under normal market and economic conditions, at least
75% of its total assets in a broadly diversified portfolio of equity securities
such as common stock, preferred stock, common stock warrants and securities
convertible into common stock of companies that the investment adviser believes
will increase future earnings to a level above the average earnings of similar
issuers. Such companies often retain their earnings to finance current and
future growth and, for this reason, generally pay little or no dividends.
Equity securities in which the Fund invests are selected based on analyses of
trends in industries and companies, earning power, growth features, quality and
depth of management, marketing and manufacturing skills, financial conditions
and other investment criteria. By investing in convertible securities, the
Fund will seek the opportunity, through

8
<PAGE> 9

the conversion feature, to participate in the capital appreciation of the
common stock into which the securities are convertible.

All debt obligations, including convertible bonds, purchased by the Fund
will be rated at the time of purchase in one of the four highest rating
categories by S&P (AAA, AA, A and BBB) or Moody's (Aaa, Aa, A and Baa) or, if
not rated, will be determined to be of an equivalent quality by the investment
adviser. Debt securities rated BBB by S&P or Baa by Moody's are generally
considered to be investment grade securities although they may have speculative
characteristics and changes in economic conditions or circumstances are more
likely to lead to a weakened capacity to make principal and interest payments
than is the case for higher grade debt obligations. See Appendix A to the
Statement of Additional Information for a description of S&P's and Moody's
rating categories.

The Equity Fund may invest indirectly in foreign securities through the
purchase of American Depository Receipts ("ADRs") and European Depository
Receipts ("EDRs") as described under "Types of Obligations and Other Investment
Information." In addition, the Fund may invest in securities issued by foreign
branches of U.S. banks and foreign banks, Canadian commercial paper and
Canadian securities listed on a national securities exchange, and Europaper
(U.S. dollar-denominated commercial paper of foreign issuers). The Fund may
also write covered call options. See "Types of Obligations and Other
Investment Information."

As a temporary defensive measure, the Fund may invest without limitation in
cash, "money market" instruments (such as those listed under "Types of
Obligations and Other Investment Information") and obligations issued or
guaranteed by the U.S. Government, its agencies and instrumentalities at such
times and in such proportions as, in the opinion of the investment adviser,
prevailing market or economic conditions warrant. See "Types of Obligations
and Other Investment Information" below for information regarding additional
investment policies of the Equity Fund.

INVESTMENT OBJECTIVE AND POLICIES OF THE ASSET ALLOCATION FUND

The investment objective of the Asset Allocation Fund is to seek a high
total return by providing both a current level of income that is greater than
that provided by the popular stock market averages as well as long-term growth
in the value of the Fund's assets. The Fund seeks to achieve its investment
objective and at the same time reduce volatility by allocating its assets among
short-term obligations, common stock, preferred stock and bonds. The
proportion of the Fund's assets invested in each type of security will vary
from time to time as a result of the investment adviser's interpretation of
economic and market conditions. However, at least 25% of the Fund's total
assets will at all times be invested in fixed-income senior securities,
including debt securities and preferred stocks. Debt securities purchased by
the Fund will be rated at the time of purchase in one of the four highest
rating categories by S&P (AAA, AA, A and BBB) or Moody's (Aaa, Aa, A and Baa)
(or which, if unrated, are determined by the investment adviser to be of
comparable quality). Debt securities rated BBB by S&P or Baa by Moody's are
generally considered to be investment grade securities although they may have
speculative characteristics and changes in economic conditions or circumstances
are more likely to lead to a weakened capacity to make principal and interest
payments than is the case for higher grade debt obligations. See Appendix A to
the Statement of Additional Information for a description of S&P's and Moody's
ratings. In selecting common stock for purchase by the Fund, the investment
adviser will analyze trends in industries and companies, earning power, growth
features, quality and depth of management, marketing and manufacturing skills,
financial conditions and other investment criteria.

The Asset Allocation Fund may also invest up to 20% of its total assets in
foreign securities, either directly or indirectly through ADRs and EDRs. See
"Special Risk Considerations -- Asset Allocation Fund" and "Types

<PAGE> 10

of Obligations and Other Investment Information." The Fund may write covered
call options, purchase asset-backed securities and mortgage-backed securities
and enter into foreign currency exchange transactions. See "Types of
Obligations and Other Investment Information."

As a temporary defensive measure, the Fund may invest without limitation in
cash, "money market" instruments, such as those listed under "Types of
Obligations and Other Investment Information" and obligations issued or
guaranteed by the U.S. Government, its agencies and instrumentalities at such
times and in such proportions as, in the opinion of the investment adviser,
prevailing market and economic conditions warrant. See "Types of Obligations
and Other Investment Information" below for information regarding additional
investment policies of the Asset Allocation Fund.

INVESTMENT OBJECTIVE AND POLICIES OF THE HIGH QUALITY BOND FUND

The High Quality Bond Fund's investment objective is to seek a high level of
current income consistent with prudent risk of capital. The Fund invests its
assets in corporate debt obligations such as bonds, debentures, obligations
convertible into common stock, "money market" instruments such as bank
obligations and commercial paper, in obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, and in debt obligations of
supranational entities. Supranational entities include international
organizations designated or supported by governmental entities to promote
economic reconstruction or development and international banking institutions
and related government agencies. Examples of these include The International
Bank for Reconstruction and Development ("World Bank"), The Asian Development
Bank and The InterAmerican Development Bank. Obligations of supranational
entities may be supported by appropriated but unpaid commitments of their
member countries, and there is no assurance that these commitments will be
undertaken or met in the future. The failure by a member country to honor such
commitments could adversely affect the payment of principal and interest on
these obligations.

The Fund may also invest, from time to time, in obligations issued by state
and local governmental issuers ("Municipal Securities"). The purchase of
Municipal Securities may be advantageous when, as a result of prevailing
economic, regulatory or other circumstances, the performance of such
securities, on a pretax basis, is comparable to that of corporate or U.S. debt
obligations. The High Quality Bond Fund may enter into interest rate futures
contracts to hedge against changes in market values of fixed-income instruments
that the Fund holds or intends to purchase. See "Types of Obligations and
Other Investment Information." At least 65% of the Fund's total assets will be
invested in non-convertible bonds. Any common stock received through the
conversion of convertible debt obligations will be sold in an orderly manner as
soon as possible.

Under normal market and economic conditions, the Fund will invest at least
80% of its assets in high quality debt obligations that are rated, at the time
of purchase, within the two highest ratings of S&P (AAA and AA) or Moody's (Aaa
and Aa) (or which, if unrated, are determined by the investment adviser to be
of comparable quality) and in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and other "money market"
instruments such as those listed below under "Types of Obligations and Other
Investment Information." Unrated securities will be determined to be of
comparable quality to high quality debt obligations if, among other things,
other outstanding obligations of the issuers of such securities are rated AA or
A-2/P-2 or better. When, in the opinion of the investment adviser, a defensive
investment posture is warranted, the Fund may invest temporarily and without
limitation in high quality, short-term "money market" instruments. See
Appendix A to the Statement of Additional Information for a description of
S&P's and Moody's rating categories.

The Fund may also invest up to 5% of its total assets in dollar-denominated
high quality debt obligations of U.S. companies issued outside the United
States. In addition, the Fund may acquire high quality obligations

10
<PAGE> 11

issued by Canadian Provincial Governments which are similar to U.S. Municipal
Securities except that the income derived therefrom is fully subject to U.S.
Federal taxation. These instruments are denominated in either Canadian or U.S.
dollars and have an established over-the-counter market in the United States.

The Fund seeks to provide a current yield greater than that generally
available from a portfolio of high quality short-term obligations. The High
Quality Bond Fund's average weighted maturity will vary from time to time
depending on, among other things, current market and economic conditions and
the comparative yields on instruments with different maturities. The Fund
adjusts its average weighted maturity and its holdings of corporate and U.S.
Government debt securities in a manner consistent with the investment adviser's
assessment of prospective changes in interest rates. The success of this
strategy depends upon the investment adviser's ability to predict changes in
interest rates.

The value of the Fund's portfolio securities will generally vary inversely
with changes in prevailing interest rates. The high quality credit criteria
applied to the selection of portfolio securities are intended to reduce adverse
price changes due to credit considerations. See "Types of Obligations and
Other Investment Information" below for information regarding additional
investment policies of the High Quality Bond Fund.

SPECIAL RISK CONSIDERATIONS -- ASSET ALLOCATION FUND

Investments in foreign securities involve higher costs for the Fund than
investments in U.S. securities, including higher transaction costs as well as
the imposition in some cases of additional taxes by foreign governments. For
example, fixed commissions on foreign stock exchanges are generally higher than
the negotiated commissions on U.S. exchanges and the Fund may be subject in
some cases to withholding and/or transfer taxes. In addition, foreign
investments may include additional risks associated with currency exchange
rates, less complete financial information about the issuers, less market
liquidity, and political instability. Future political and economic
developments, the possible seizure or nationalization of foreign holdings, the
possible establishment of exchange controls, or the adoption of other
governmental restrictions, might adversely affect the payment of principal and
interest on foreign obligations.

Although the Asset Allocation Fund may invest in securities
denominated in foreign currencies, the Fund values its securities and other
assets in U.S. dollars. As a result, the net asset value of the Fund's shares
may fluctuate with U.S. dollar exchange rates as well as with price changes of
the Fund's securities in the various local markets and currencies. Thus, an
increase in the value of the U.S. dollar compared to the currencies in which
the Fund makes its investments could reduce the effect of increases and magnify
the effect of decreases in the price of the Fund's securities in their local
markets. Conversely, a decrease in the value of the U.S. dollar will have the
opposite effect of magnifying the effect of increases and reducing the effect
of decreases in the prices of the Fund's securities in their local markets. In
addition to favorable and unfavorable currency exchange-rate developments, the
Fund is subject to the possible imposition of exchange control regulations or
freezes on convertibility of currency.

TYPES OF OBLIGATIONS AND OTHER INVESTMENT INFORMATION

GOVERNMENT OBLIGATIONS

Each Fund may invest in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities to the extent described above
under "Investment Objectives and Policies." Obligations of certain agencies
and instrumentalities of the U.S. Government, such as the Government National
Mortgage Association, are supported by the full faith and credit of the U.S.
Treasury; others, such as those of Federal Home Loan Banks,

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are supported by the right of the issuer to borrow from the Treasury; others,
such as those of the Federal National Mortgage Association, are supported by
the discretionary authority of the U.S. Government to purchase the agency's
obligations; still others, such as those of the Student Loan Marketing
Association, are supported only by the credit of the instrumentality. No
assurance can be given that the U.S. Government would provide financial support
to U.S. Government-sponsored instrumentalities if it is not obligated to do so
by law. Some government obligations may be issued as variable or floating rate
instruments.

Securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities have historically involved little risk of loss of principal.
However, due to fluctuations in interest rates, the market value of such
securities may vary during the period a shareholder owns shares of the Funds.

MONEY MARKET INSTRUMENTS

"Money Market" instruments include bank obligations and commercial paper.

Bank obligations include bankers' acceptances, negotiable certificates of
deposit, and non-negotiable time deposits issued for a definite period of time
and earning a specified return by a U.S. bank that is a member of the Federal
Reserve System or is insured by the Federal Deposit Insurance Corporation, or
by a savings and loan association or savings bank that is insured by the
Federal Deposit Insurance Corporation. Bank obligations also include U.S.
dollar-denominated obligations of foreign branches of U.S. banks or of U.S.
branches of foreign banks, all of the same type as domestic bank obligations.
Investments in bank obligations are limited to the obligations of financial
institutions having more than $1 billion in total assets at the time of
purchase. Investments in non-negotiable time deposits are limited to no more
than 5% of the Money Market Fund's total assets at the time of purchase.

Domestic and foreign banks are subject to extensive but different
government regulations which may limit the amount and types of their loans and
the interest rates that may be charged. In addition, the profitability of the
banking industry is largely dependent upon the availability and cost of funds
to finance lending operations and the quality of underlying bank assets.

Investments in obligations of foreign branches of U.S. banks and of U.S.
branches of foreign banks may subject a Fund to additional investment risks,
including future political and economic developments, possible seizure or
nationalization of foreign deposits, the possible establishment of exchange
controls, or the adoption of other foreign governmental restrictions which
might adversely affect the payment of principal and interest on such
obligations. In addition, foreign branches of U.S. banks and U.S. branches of
foreign banks may be subject to less stringent reserve requirements and to
different accounting, auditing, reporting, and recordkeeping standards than
those applicable to domestic branches of U.S. banks. Investments in the
obligations of U.S. branches of foreign banks or foreign branches of U.S.
banks will be made only when the investment adviser believes that the credit
risk with respect to the instrument is minimal.

Commercial paper may include variable and floating rate instruments, which
are unsecured instruments that permit the indebtedness thereunder to vary.
Variable rate instruments provide for periodic adjustments in the interest
rate. Floating rate instruments provide for automatic adjustment of the
interest rate whenever some other specified interest rate changes. Some
variable and floating rate obligations are direct lending arrangements between
the purchaser and the issuer and there may be no active secondary market.
However, in the case of variable and floating rate obligations with a demand
feature, a Fund may demand payment of principal and accrued interest at a time
specified in the instrument or may resell the instrument to a third party. In
the event an issuer of a variable or floating rate obligation defaulted on its
payment obligation, a Fund might be unable to dispose of the note

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because of the absence of a secondary market and could, for this or other
reasons, suffer a loss to the extent of the default. Substantial holdings of
variable and floating rate instruments could reduce portfolio liquidity. The
Funds may also purchase Rule 144A securities. See "Investment Limitations"
below for a discussion of possible consequences to the Funds as a result of
investing in Rule 144A securities.

TYPES OF MUNICIPAL SECURITIES

The two principal classifications of Municipal Securities which may be held
by the High Quality Bond Fund are "general obligation" securities and "revenue"
securities. General obligation securities are secured by the issuer's pledge
of its full faith, credit and taxing power for the payment of principal and
interest. Revenue securities are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or other specific revenue source such as the user of
the facility being financed. Private activity bonds held by the Fund are in
most cases revenue securities and are not payable from the unrestricted
revenues of the issuer. Consequently, the credit quality of such private
activity bonds is usually directly related to the credit standing of the
corporate user of the facility involved.

The High Quality Fund's portfolio may also include "moral obligation"
securities, which are normally issued by special purpose public authorities.
If the issuer of moral obligation securities is unable to meet its debt service
obligations from current revenues, it may draw on a reserve fund, the
restoration of which is a moral commitment but not a legal obligation of the
state or municipality which created the issuer. The failure by a state or
municipality to restore such a reserve fund could adversely affect the ability
of an issuer of moral obligation securities to meet its payment obligations.

REPURCHASE AND REVERSE REPURCHASE AGREEMENTS

Each Fund may purchase portfolio securities subject to the seller's
agreement to repurchase them at a mutually specified date and price
("repurchase agreements"). Repurchase agreements will be entered into only
with financial institutions such as banks and broker/dealers which are deemed
to be creditworthy by the investment adviser under guidelines approved by
GALAXY VIP's Board of Trustees. No Fund will enter into repurchase agreements
with the investment adviser or any of its affiliates. Securities subject to
repurchase agreements may bear maturities exceeding thirteen months. Unless a
repurchase agreement has a remaining maturity of seven days or less or may be
terminated on demand by notice of seven days or less, the repurchase agreement
will be considered an illiquid security and will be subject to the 10% limit
described in Investment Limitation No. 3 under "Investment Limitations" in this
Prospectus.

The seller under a repurchase agreement will be required to maintain the
value of the securities which are subject to the agreement and held by a Fund
at not less than the agreed upon repurchase price. If the seller defaulted on
its repurchase obligation the Fund holding such obligation would suffer a loss
to the extent that the proceeds from a sale of the underlying securities
(including accrued interest) were less than the repurchase price (including
accrued interest) under the agreement. In the event that such a defaulting
seller filed for bankruptcy or became insolvent, disposition of such securities
by the Fund might be delayed pending court action.

Each Fund may also borrow funds for temporary purposes by selling portfolio
securities to financial institutions such as banks and broker/dealers and
agreeing to repurchase them at a mutually specified date and price ("reverse
repurchase agreements"). Reverse repurchase agreements involve the risk that
the market value of the securities sold by a Fund may decline below the
repurchase price. The Funds would pay interest on amounts obtained pursuant to
a reverse repurchase agreement.

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SECURITIES LENDING

Each Fund may lend its portfolio securities to financial institutions such
as banks and broker/dealers in accordance with the investment limitations
described below. Such loans would involve risks of delay in receiving
additional collateral or in recovering the securities loaned or even loss of
rights in the collateral, should the borrower of the securities fail
financially. Any portfolio securities purchased with cash collateral would
also be subject to possible depreciation. Loans will generally be short-term,
will be made only to borrowers deemed by the investment adviser to be of good
standing and only when, in the investment adviser's judgment, the income to be
earned from the loan justifies the attendant risks. The Funds currently intend
to limit the lending of their portfolio securities so that, at any given time,
securities loaned by a Fund represent not more than one-third of the value of
its total assets.

INVESTMENT COMPANY SECURITIES

Each Fund except the Money Market Fund may invest in securities issued by
other investment companies which invest in high quality, short-term debt
securities and which determine their net asset value per share based on the
amortized cost or penny-rounding method. Investments in other investment
companies will cause a Fund (and, indirectly, the Fund's shareholders) to bear
proportionately the costs incurred in connection with the investment companies'
operations. Securities of other investment companies will be acquired by a
Fund within the limits prescribed by the Investment Company Act of 1940, as
amended (the "1940 Act"). Each Fund currently intends to limit its investments
so that, as determined immediately after a securities purchase is made: (a) not
more than 5% of the value of its total assets will be invested in the
securities of any one investment company; (b) not more than 10% of the value of
its total assets will be invested in the aggregate in securities of other
investment companies as a group; (c) not more than 3% of the outstanding voting
stock of any one investment company will be owned by the Fund; and (d) not more
than 10% of the outstanding voting stock of any one closed-end investment
company will be owned in the aggregate by the Funds or any other investment
companies advised by the investment adviser. Any change by the Funds in the
future with respect to their policies concerning investments in securities
issued by other investment companies will be made only in accordance with the
requirements of the 1940 Act.

GUARANTEED INVESTMENT CONTRACTS

The Money Market and High Quality Bond Funds may invest in guaranteed
investment contracts ("GICs") issued or guaranteed by United States insurance
companies. The High Quality Bond Fund may also enter into GICs issued or
guaranteed by Canadian insurance companies. Pursuant to such contracts, the
Fund makes cash contributions to a deposit fund of the insurance company's
general account. The insurance company then credits to the Fund payments at
negotiated, floating or fixed interest rates. A GIC is a general obligation of
the issuing insurance company and not a separate account. The purchase price
paid for a GIC becomes part of the general assets of the insurance company, and
the contract is paid from the company's general assets. The Money Market Fund
will only purchase GICs that are issued or guaranteed by insurance companies
that at the time of purchase are rated in accordance with the Fund's quality
requirements as described above under "Investment Objectives and Policies --
Investment Objective and Policies of the Money Market Fund." The High Quality
Bond Fund will only purchase GICs that are issued or guaranteed by insurance
companies that at the time of purchase are rated at least AA by S&P or receive
a similar high rating from a nationally recognized service which provides
ratings of insurance companies. The Funds will not purchase GICs from
Participating Insurance Companies or their affiliated life insurance companies.
GICs are considered illiquid securities and will be subject to the Funds' 10%

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limitation on illiquid investments, unless there is an active and substantial
secondary market for the particular instrument and market quotations are
readily available.

BANK INVESTMENT CONTRACTS

The High Quality Bond Fund may invest in bank investment contracts ("BICs")
issued by banks that meet the quality and asset size requirements for banks
described above under "Money Market Instruments." Pursuant to BICs, cash
contributions are made to a deposit account at the bank in exchange for
payments at negotiated, floating or fixed interest rates. A BIC is a general
obligation of the issuing bank. BICs are considered illiquid securities and
will be subject to the Fund's 10% limitation on such investments, unless there
is an active and substantial secondary market for the particular instrument and
market quotations are readily available.

ASSET-BACKED SECURITIES

Each Fund except the Equity Fund may purchase asset-backed securities, which
represent a participation in, or are secured by and payable from, a stream of
payments generated by particular assets, most often a pool of assets similar to
one another. Assets generating such payments will consist of such instruments
as motor vehicle installment purchase obligations, credit card receivables and
home equity loans. Payment of principal and interest may be guaranteed up to
certain amounts and for a certain time period by a letter of credit issued by a
financial institution unaffiliated with entities issuing the securities. The
estimated life of an asset-backed security varies with the prepayment experience
with respect to the underlying debt instruments. The rate of such prepayments,
and hence the life of the asset-backed security, will be primarily a function of
current market rates, although other economic and demographic factors will be
involved. No Fund will invest more than 10% of its total assets in asset-backed
securities. The Money Market Fund will only purchase asset-backed securities
that meet the Fund's applicable quality requirements as described above under
"Investment Objectives and Policies -- Investment Objectives and Policies of the
Money Market Fund." See "Mortgage-Backed and Asset-Backed Securities" in the
Statement of Additional Information.

MORTGAGE-BACKED SECURITIES

The High Quality Bond and Asset Allocation Funds may invest in
mortgage-backed securities (including collateralized mortgage obligations) that
represent pools of mortgage loans assembled for sale to investors by various
governmental agencies and government-related organizations, such as the
Government National Mortgage Association ("GNMA"), the Federal National
Mortgage Association ("FNMA"), and the Federal Home Loan Mortgage Corporation
("FHLMC"). Mortgage-backed securities provide a monthly payment consisting of
interest and principal payments. Additional payment may be made out of
unscheduled repayments of principal resulting from the sale of the underlying
residential property, refinancing or foreclosure, net of fees or costs that may
be incurred. Prepayments of principal on mortgage-backed securities may tend
to increase due to refinancing of mortgages as interest rates decline. To the
extent that a Fund purchases mortgage-backed securities at a premium, mortgage
foreclosures and prepayments of principal by mortgagors (which may be made at
any time without penalty) may result in some loss of the Fund's principal
investment to the extent of the premium paid. The yield of a Fund, should it
invest in mortgage-backed securities, may be affected by reinvestment of
prepayments at higher or lower rates than the original investment. See
"Mortgage-Backed and Asset-Backed Securities" in the Statement of Additional
Information.

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Other mortgage-backed securities are issued by private issuers, generally
originators of and investors in mortgage loans, including savings associations,
mortgage bankers, commercial banks, investment bankers, and special purpose
entities. These private mortgage-backed securities may be supported by U.S.
Government mortgage-backed securities or some form of non-government credit
enhancement. Mortgage-backed securities have either fixed or adjustable
interest rates. The rate of return on mortgage-backed securities may be
affected by prepayments of principal on the underlying loans, which generally
increase as interest rates decline; as a result, when interest rates decline,
holders of these securities normally do not benefit from appreciation in market
value to the same extent as holders of other non-callable debt securities. In
addition, like other debt securities, the values of mortgage-related
securities, including government and government related mortgage pools,
generally will fluctuate in response to market interest rates. To the extent
that collateralized mortgage obligations are considered to be investment
companies, investments in such obligations will be subject to the percentage
limitations described above under "Investment Company Securities."

STRIPPED OBLIGATIONS

To the extent consistent with their investment objectives, the High Quality
Bond and Asset Allocation Funds may purchase Treasury receipts and other
"stripped" securities that evidence ownership in either the future interest
payments or the future principal payments on U.S. Government and other
obligations. These participations, which may be issued by the U.S. Government
or by private issuers, such as banks and other institutions, are issued at
their "face value," and may include stripped mortgage-backed securities
("SMBS"), which are derivative multi-class mortgage securities. Stripped
securities, particularly SMBS, may exhibit greater price volatility than
ordinary debt securities because of the manner in which their principal and
interest are returned to investors.

SMBS are usually structured with two or more classes that receive different
proportions of the interest and principal distributions from a pool of
mortgage-backed obligations. A common type of SMBS will have one class
receiving all of the interest, while the other class will receive all of the
principal. However, in some instances, one class will receive some of the
interest and most of the principal while the other class will receive most of
the interest and the remainder of the principal. If the underlying obligations
experience greater than anticipated prepayments of principal, the High Quality
Bond and Asset Allocation Funds may fail to fully recoup their initial
investments in these securities. The market value of the class consisting
entirely of principal payments generally is extremely volatile in response to
changes in interest rates. The yields on a class of SMBS that receives all or
most of the interest are generally higher than prevailing market yields on
other mortgage-backed obligations because their cash flow patterns are more
volatile and there is a greater risk that the initial investment will not be
fully recouped. SMBS which are not issued by the U.S. Government (or a U.S.
Government agency or instrumentality) are considered illiquid. Obligations
issued by the U.S. Government may be considered liquid under guidelines
established by GALAXY VIP's Board of Trustees if they can be disposed of
promptly in the ordinary course of business at a value reasonably close to that
used in the calculation of net asset value per share. Fleet may determine that
SMBS acquired by the High Quality Bond and Asset Allocation Funds are liquid
under guidelines established by the Board of Trustees.

COVERED CALL OPTIONS

To further increase return on their portfolio securities, in accordance with
their investment objectives and policies, the Equity and Asset Allocation Funds
may engage in writing covered call options (options on securities owned by a
Fund) and may enter into closing purchase transactions with respect to such
options. Such options must be listed on a national securities exchange and
issued by the Options Clearing Corporation. The aggregate

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value of the securities subject to options written by a Fund may not exceed 25%
of the value of its net assets. By writing a covered call option, a Fund
forgoes the opportunity to profit from an increase in the market price of the
underlying security above the exercise price, except insofar as the premium
represents such a profit, and it will not be able to sell the underlying
security until the option expires or is exercised or the Fund effects a closing
purchase transaction by purchasing an option of the same series. The use of
covered call options is not a primary investment technique of the Funds, and
such options will normally be written on underlying securities as to which the
investment adviser does not anticipate significant short-term capital
appreciation.

AMERICAN AND EUROPEAN DEPOSITORY RECEIPTS

The Equity and Asset Allocation Funds may each invest up to 20% of their
total assets in ADRs and EDRs. ADRs are receipts issued in registered form by a
U.S. bank or trust company evidencing ownership of underlying securities issued
by a foreign issuer. EDRs are receipts issued in Europe typically by non-U.S.
banks or trust companies and foreign branches of U.S. banks that evidence
ownership of foreign or U.S. securities. ADRs may be listed on a national
securities exchange or may be traded in the over-the-counter market. EDRs are
designed for use in European exchange and over-the-counter markets. ADRs and
EDRs traded in the over-the-counter market which do not have an active or
substantial secondary market will be considered illiquid and therefore will be
subject to the Funds' limitation with respect to such securities. ADR prices
are denominated in U.S. dollars although the underlying securities are
denominated in a foreign currency. Investments in ADRs and EDRs involve risks
similar to those accompanying direct investments in foreign securities. Certain
of these risks are described above under "Investment Objectives and Policies --
Special Risk Considerations -- Asset Allocation Fund."

FOREIGN CURRENCY EXCHANGE TRANSACTIONS

Because the Asset Allocation Fund may buy and sell securities and receive
interest, dividends and sale proceeds in currencies other than the U.S. dollar,
the Fund from time to time may enter into foreign currency exchange
transactions to convert the U.S. dollar to foreign currencies, to convert
foreign currencies to the U.S. dollar and to convert foreign currencies to
other foreign currencies. The Fund either enters into these transactions on a
spot (i.e. cash) basis at the spot rate prevailing in the foreign currency
exchange market, or uses forward contracts to purchase or sell foreign
currencies. Forward foreign currency exchange contracts are agreements to
exchange one currency for another -- for example, to exchange a certain amount
of U.S. dollars for a certain amount of Japanese yen -- at a future date and at
a specified price. Typically, the other party to a currency exchange contract
will be a commercial bank or other financial institution.

Forward foreign currency exchange contracts also allow the Fund to hedge the
currency risk of portfolio securities denominated in a foreign currency. By
separating the asset and the currency decision, this technique permits the
assessment of the merits of a security separately from the currency risk.
Although forward foreign currency exchange contracts are of short duration,
generally between one and twelve months, the forward foreign currency exchange
contracts are rolled over in a manner consistent with a more long-term currency
decision. Because there is a risk of loss to the Fund if the other party does
not complete the transaction, forward foreign currency exchange contracts will
be entered into only with parties approved by the Fund's Board of Trustees.

The Fund may maintain "short" positions in forward foreign currency exchange
transactions, which would involve the Fund's agreeing to exchange currency that
it currently does not own for another currency -- for example, to exchange an
amount of Japanese yen that it does not own for a certain amount of U.S.
dollars -- at a future date and at a specified price in anticipation of a
decline in the value of the currency sold short relative to the currency that
the Fund has contracted to receive in the exchange. In order to ensure that
the short position is not

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used to achieve leverage with respect to the Fund's investments, the Fund would
establish with its custodian a segregated account consisting of cash, U.S.
Government securities or other liquid high-grade debt securities equal in value
to the fluctuating market value of the currency as to which the short position
is being maintained. The value of the securities in the segregated account
will be adjusted at least daily to reflect changes in the market value of the
short position. See the Statement of Additional Information for additional
information regarding Foreign Currency Exchange Transactions.

FUTURES CONTRACTS

The High Quality Bond Fund may enter into contracts (both purchases and
sales) for the future delivery of fixed-income securities (commonly known as
interest rate futures contracts). The Fund will not engage in future
transactions for speculation, but only to hedge against changes in the market
values of securities which the Fund holds or intends to purchase. The Fund
will engage in futures transactions only to the extent permitted by the
Commodity Futures Trading Commission and the SEC. The purchase of futures
instruments in connection with securities which the Fund intends to purchase
will require an amount of cash and/or U.S. Government obligations, equal to the
market value of the outstanding futures contracts, to be deposited in a
segregated account to collateralize the position and thereby insure that the
use of such futures is unleveraged. The Fund will limit its hedging
transactions in futures contracts so that, immediately after any such
transaction, the aggregate initial margin that is required to be posted by the
Fund under the rules of the exchange on which the futures contract is traded
does not exceed 5% of the Fund's total assets after taking into account any
unrealized profits and unrealized losses on the Fund's open contracts. In
addition, no more than one-third of the Fund's total assets may be covered by
such contracts.

Transactions in futures as a hedging device may subject the Fund to a number
of risks. Successful use of futures by the Fund is subject to the ability of
the investment adviser to predict correctly movements in the direction of the
market. In addition, there may be an imperfect correlation, or no correlation
at all, between movements in the price of futures contracts and movements in
the price of the instruments being hedged. There is no assurance that a liquid
market will exist for any particular futures contract at any particular time.
Consequently, the Fund may realize a loss on a futures transaction that is not
offset by a favorable movement in the price of securities which it holds or
intends to purchase or may be unable to close a futures position in the event
of adverse price movements. Any income from investments in futures contracts
will be taxable. Additional information concerning futures transactions is
contained in the Statement of Additional Information and in Appendix B thereto.

WHEN-ISSUED, FORWARD COMMITMENT AND DELAYED SETTLEMENT TRANSACTIONS

The High Quality Bond Fund may purchase eligible securities on a
"when-issued" basis and may purchase or sell eligible securities on a "forward
commitment" basis. The Fund may also purchase and sell eligible securities on
a "delayed settlement" basis. When-issued and forward commitment transactions,
which involve a commitment by the Fund to purchase or sell particular
securities with payment and delivery taking place at a future date (perhaps one
or two months later), permit a Fund to lock in a price or yield on a security
it owns or intends to purchase regardless of future changes in interest rates.
Delayed settlement describes settlement of a securities transaction in the
secondary market which will occur sometime in the future. When-issued, forward
commitment and delayed settlement transactions involve the risk, however, that
the yield or price obtained in a transaction may be less favorable than the
yield or price available in the market when the securities delivery takes
place. It is expected that forward commitments, when-issued purchases and
delayed settlements will not exceed 25% of the Fund's total assets absent
unusual market conditions. In the event a Fund's forward commitments,
when-issued purchases and delayed settlements ever exceeded 25% of the value of
its assets, the Fund's liquidity and the ability

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of the investment adviser to manage the Fund might be adversely affected. The
Fund will not engage in when-issued purchases, forward commitments and delayed
settlements for speculative purposes, but only in furtherance of its investment
objective.

STAND-BY COMMITMENTS

The High Quality Bond Fund may acquire "stand-by commitments" with respect
to Municipal Securities held by it. Under a stand-by commitment, a dealer
agrees to purchase, at the Fund's option, specified Municipal Securities at a
specified price. The Fund will acquire stand-by commitments solely to
facilitate portfolio liquidity and does not intend to exercise its rights
thereunder for trading purposes. The Fund expects that stand-by commitments
will generally be available without the payment of any direct or indirect
consideration. However, if necessary or advisable, the Fund may pay for a
stand-by commitment either separately in cash or by paying a higher price for
portfolio securities which are acquired subject to the commitment (thus
reducing the yield otherwise available for the same securities). Stand-by
commitments acquired by the Fund would be valued at zero in determining the
Fund's net asset value.

PORTFOLIO TURNOVER

Each Fund may sell a portfolio investment soon after its acquisition if the
investment adviser believes that such a disposition is consistent with the
Fund's investment objective. Portfolio investments may be sold for a variety
of reasons, such as a more favorable investment opportunity or other
circumstances bearing on the desirability of continuing to hold such
investments. The rate of portfolio turnover will not be a limiting factor in
making portfolio decisions.

INVESTMENT LIMITATIONS

The following investment limitations are matters of fundamental policy and
may not be changed with respect to any Fund without the affirmative vote of the
holders of a majority of its outstanding shares (as defined under
"Miscellaneous"). Other investment limitations that also cannot be changed
without such a vote of shareholders are contained in the Statement of
Additional Information under "Investment Objectives and Policies."

No Fund may:

1. Make loans, except that (i) each Fund may purchase or hold
debt instruments in accordance with its investment objective and policies,
and may enter into repurchase agreements with respect to portfolio
securities, and (ii) each Fund may lend portfolio securities against
collateral consisting of cash or securities which are consistent with the
Fund's permitted investments, where the value of the collateral is equal
at all times to at least 100% of the value of the securities loaned.

2. Borrow money or issue senior securities, except from domestic
banks for temporary purposes (such as to obtain cash to meet redemption
requests when the liquidation of portfolio securities is deemed
disadvantageous by the investment adviser) and then in amounts not in
excess of 10% with respect to the Money Market and High Quality Bond
Funds, or 33% with respect to the

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Equity and Asset Allocation Funds, of the value of its total assets at the
time of such borrowing (provided that each Fund may borrow pursuant to
reverse repurchase agreements in accordance with its investment policies
and in amounts not in excess of 10% with respect to the Money Market and
High Quality Bond Funds, or 33% with respect to the Equity and Asset
Allocation Funds, of the value of its total assets at the time of such
borrowing); or mortgage, pledge, or hypothecate any assets except in
connection with any such borrowing and in amounts not in excess of the
lesser of the dollar amounts borrowed or 10% with respect to the Money
Market and High Quality Bond Funds, or 33% with respect to the Equity and
Asset Allocation Funds, of the value of the Fund's total assets at the
time of such borrowing. No Fund will purchase securities while borrowings
(including reverse repurchase agreements) in excess of 5% of its total
assets are outstanding. With respect to the Equity, Asset Allocation and
High Quality Bond Funds, if the securities held by one of these funds
should decline in value while borrowings are outstanding, the net asset
value of the Fund's outstanding shares will decline in value by more than
the proportionate decline in value suffered by the Fund's securities.

3. Invest more than 10% of the value of its net assets in
illiquid securities, including repurchase agreements with remaining
maturities in excess of seven days, time deposits with maturities in
excess of seven days, restricted securities, non-negotiable time deposits
and other securities which are not readily marketable.

4. Purchase securities of any one issuer, other than obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, if immediately after such purchase more than 5% of the
value of its total assets would be invested in such issuer (the "5%
Limitation"), except that up to 25% of the value of the total assets of
the Equity Fund, Asset Allocation Fund and High Quality Bond Fund may be
invested without regard to such 5% limitation, PROVIDED that the Money
Market Fund will be able to invest more than 5% (but no more than 25%) of
its total assets in the securities of a single issuer for a period of up
to three business days after the purchase thereof, but the Fund may not
hold more than one such investment at any one time.

5. Purchase any securities which would cause 25% or more of the
value of a Fund's total assets at the time of purchase to be invested in
the securities of one or more issuers conducting their principal business
activities in the same industry; provided, however, that (a) there is no
limitation with respect to obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, (b) wholly-owned finance
companies will be considered to be in the industries of their parents if
their activities are primarily related to financing the activities of the
parents, and (c) utilities will be classified according to their services.
(For example, gas, gas transmission, electric and gas, electric and
telephone each will be considered a separate industry.)

If a percentage limitation is satisfied at the time of investment, a later
increase in such percentage resulting from a change in the value of a Fund's
portfolio securities will not constitute a violation of the limitation.

With respect to Investment Limitation No. 4 above: (a) a security is
considered to be issued by the governmental entity or entities whose assets and
revenues back the security, or, with respect to a private activity bond that is
backed only by the assets and revenues of a non-governmental user, such
non-governmental user; (b) in certain circumstances, the guarantor of a
guaranteed security may also be considered to be an issuer in connection with
such guarantee; and (c) securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities (including securities backed by the full
faith and credit of the United States) are deemed to be U.S. Government
obligations.

The SEC has adopted Rule 144A which allows for a broader institutional
trading market for securities otherwise subject to restrictions on resale to
the general public. Rule 144A establishes a "safe harbor" from the
registration requirements of the Securities Act of 1933 for resale of certain
securities to qualified institutional buyers. A Fund's investment in Rule 144A
securities could have the effect of increasing the level of illiquidity of

<PAGE> 21

the Fund during any period that qualified institutional buyers were no longer
interested in purchasing these securities. For purposes of the 10% limitation
on purchases of illiquid instruments described under Investment Limitation No.
3 above, Rule 144A securities will not be considered to be illiquid if the
investment adviser has determined, in accordance with guidelines established by
the Board of Trustees, that an adequate trading market exists for such
securities.

In addition to the restrictions set forth above and those set forth in the
Statement of Additional Information, each Fund may be subject to investment
restrictions imposed under state insurance laws and regulations. These
restrictions are non-fundamental and, in the event of amendments to the
applicable statutes or regulations, each Fund will comply, without the approval
of its shareholders, with the requirements as so modified.

PRICING OF SHARES

Net asset value per share of each Fund is determined as of the close of
regular trading hours on the New York Stock Exchange (the "Exchange"),
currently 4:00 p.m. (Eastern Time). Net asset value per share is determined on
each day on which the Exchange is open for trading. Currently, the holidays
which GALAXY VIP observes are New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Net asset value per share of a Fund for purposes of pricing sales and
redemptions is calculated by dividing the value of all securities and other
assets belonging to the Fund, less the liabilities charged to the Fund, by the
number of outstanding shares of the Fund.

VALUATION OF THE MONEY MARKET FUND

The Fund's assets are valued based upon the amortized cost method. Pursuant
to this method, a security is valued by reference to the Fund's acquisition
cost as adjusted for amortization of premium or accretion of discount,
regardless of the impact of fluctuating interest rates on the market value of
the security. Although GALAXY VIP seeks to maintain the net asset value per
share of the Fund at $1.00, there can be no assurance that the net asset value
per share will not vary.

VALUATION OF THE EQUITY AND ASSET ALLOCATION FUNDS

The assets in the Equity and Asset Allocation Funds 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. Securities quoted on the NASD
National Market System are also valued at the last sale price. Other
securities traded on over-the-counter markets are valued on the basis of their
closing over-the-counter bid prices. Securities for which there were no
transactions are valued at the average of the most recent bid and asked prices.
Investments in debt securities with remaining maturities of 60 days or less are
valued based upon the amortized cost method. Restricted securities, securities
for which market quotations are not readily available, and other assets are
valued at fair value by the investment adviser under the supervision of GALAXY
VIP's Board of Trustees. An option is generally valued at the last sale price
or, in the absence of a last sale price, the last offer price.

VALUATION OF THE HIGH QUALITY BOND FUND

The Fund's assets are valued for purposes of pricing sales and redemptions
by an independent pricing service ("Service") approved by GALAXY VIP's Board of
Trustees. When, in the judgment of the Service, quoted bid prices for
portfolio securities are readily available and are representative of the bid
side of the market, these

<PAGE> 22

investments are valued at the mean between quoted bid prices (as obtained by
the Service from dealers in such securities) and asked prices (as calculated by
the Service based upon its evaluation of the market for such securities).
Other investments are carried at fair value as determined by the Service, based
on methods which include considerations of yields or prices of bonds of
comparable quality, coupon, maturity and type; indications as to values from
dealers; and general market conditions. The Service may also employ electronic
data processing techniques and matrix systems to determine value. Short-term
securities are valued at amortized cost, which approximates market value.

PURCHASE AND REDEMPTION OF SHARES

DISTRIBUTOR

Shares in each Fund are sold on a continuous basis by GALAXY VIP's
distributor, 440 Financial Distributors, Inc. (the "440 Financial"), a
wholly-owned subsidiary of First Data Investor Services Group, Inc. (formerly,
The Shareholder Services Group, Inc., d/b/a 440 Financial) and an indirect
wholly-owned subsidiary of First Data Corporation. The Distributor is a
registered broker/dealer with principal offices located at 4400 Computer Drive,
Westborough, Massachusetts 01581.

PURCHASE AND REDEMPTION OF SHARES

Investors may not purchase or redeem shares of the Funds directly, but only
through variable annuity contracts and variable life insurance policies offered
through the Separate Accounts of Participating Insurance Companies. You should
refer to the prospectus of the Participating Insurance Company's Separate
Account for information on how to purchase a variable annuity contract or
variable life insurance policy, how to select specific Funds of GALAXY VIP as
investment options for your contract or policy and how to redeem monies from
GALAXY VIP.

The Separate Accounts of the Participating Insurance Companies place orders
to purchase and redeem shares of the Funds based on, among other things, the
amount of premium payments to be invested and the amount of surrender and
transfer requests (as defined in the prospectus describing the variable annuity
contracts and variable life insurance policies issued by the Participating
Insurance Companies) to be effected on that day pursuant to variable annuity
contracts and variable life insurance policies. Orders received by GALAXY VIP
are effected on days on which the Exchange is open for trading. Orders for the
purchase of shares of a Fund are effected at the net asset value per share next
calculated after an order is received in good order by the Fund. Redemptions
are effected at the net asset value per share next calculated after receipt in
good order of a redemption request by a Fund. Payment for redemptions will be
made by the Funds within seven days after the request is received. GALAXY VIP
may suspend the right of redemption under certain extraordinary circumstances
in accordance with the rules of the SEC.

The Funds do not assess any fees, either when they sell or redeem their
shares. Surrender charges, mortality and expense risk fees and other charges
may be assessed by Participating Insurance Companies under the variable annuity
contracts or variable life insurance policies. These fees should be described
in the Participating Insurance Companies' prospectuses.

Shares of the Funds may be sold to and held by Separate Accounts that fund
variable annuity and variable life insurance contracts issued by both
affiliated and unaffiliated Participating Insurance Companies. As of the date
of this Prospectus, shares of GALAXY VIP are offered only to Separate Accounts
funding variable annuity contracts

<PAGE> 23

issued by American Skandia Life Assurance Corporation, an indirect wholly-owned
subsidiary of Skandia Insurance Company, Ltd., and its affiliated life
insurance companies. GALAXY VIP currently does not foresee any disadvantages
to the holders of variable annuity contracts and variable life insurance
policies of affiliated and unaffiliated Participating Insurance Companies
arising from the fact that interests of the holders of variable annuity
contracts and variable life insurance policies may differ due to differences of
tax treatment or other considerations or due to conflicts between the
affiliated or unaffiliated Participating Insurance Companies. Nevertheless,
the Trustees will monitor events to seek to identify any material
irreconcilable conflicts which may possibly arise and to determine what action,
if any, should be taken in response to such conflicts. Should a material
unreconcilable conflict arise between the holders of variable annuity contracts
and variable life insurance policies of affiliated or unaffiliated
Participating Insurance Companies, the Participating Insurance Companies may be
required to withdraw the assets allocable to some or all of the Separate
Accounts from the Funds. Any such withdrawal could disrupt orderly portfolio
management to the potential detriment of such holders (see "Miscellaneous" for
more details). The variable annuity contracts and variable life insurance
policies are described in the separate prospectuses issued by the Participating
Insurance Companies. GALAXY VIP assumes no responsibility for such
prospectuses.

DIVIDENDS AND DISTRIBUTIONS

Each Fund expects to distribute substantially all of its net investment
income and capital gains each year. Dividends for the Money Market and High
Quality Bond Funds are declared daily and paid monthly. Dividends for the
Equity Growth and Asset Allocation Funds are declared and paid quarterly. Net
capital gains, if any, will be distributed at least annually. All dividends
and capital gain distributions will be automatically reinvested in additional
shares of a Fund at the net asset value of such shares on the payment date.

TAXES

Each of the Funds qualified during its last taxable year and intends to
continue to qualify as a "regulated investment company" under the Internal
Revenue Code of 1986, as amended (the "Code"), which would generally relieve a
Fund of liability for Federal income taxes to the extent the Fund's earnings
are distributed in accordance with the Code. In order to so qualify, a Fund
must comply with certain distribution, diversification, source of income and
other applicable requirements. If for any taxable year a Fund does not qualify
for the special Federal tax treatment afforded regulated investment companies,
all of the Fund's taxable income would be subject to tax at regular corporate
rates without any deduction for distributions to shareholders. In such event,
a Fund's distributions to segregated asset accounts holding shares of the Fund
would be taxable as ordinary income to the extent of the Fund's current and
accumulated earnings and profits. A failure of a Fund to qualify as a
regulated investment company also could result in the loss of the tax favored
status of variable annuity contracts and variable life insurance policies based
on a segregated asset account which invests in the Fund.

Under Code Section 817(h), a segregated asset account upon which a variable
annuity contract or variable life insurance policy is based must be "adequately
diversified." A segregated asset account will be adequately diversified if it
complies with certain diversification tests set forth in Treasury regulations.
If a regulated investment company satisfies certain conditions relating to the
ownership of its shares, a segregated asset account investing in such
investment company will be entitled to treat its pro rata portion of each asset
of the investment company as an asset for purposes of these diversification
tests. The Fund intends to meet these ownership conditions and to comply with
the diversification tests noted above. Accordingly, a segregated asset account
investing solely in

<PAGE> 24

shares of a Fund will be adequately diversified. However, a failure of the
Fund to meet such conditions and to comply with such tests could cause the
owners of variable annuity contracts and variable life insurance policies based
on such account to recognize ordinary income each year in the amount of any net
appreciation of such contract or policy during the year (including the annual
cost of life insurance, if any, provided under such policy).

Provided that the Fund and a segregated asset account investing in the Fund
satisfy the above requirements, any distributions from the Fund to such account
will be exempt from current Federal income taxation to the extent that such
distributions accumulate in a variable annuity contract or a variable life
insurance contract.

Persons investing in a variable annuity or variable life insurance contract
offered by a segregated asset account investing in a Fund should refer to the
prospectus with respect to such contract for further tax information.

The foregoing discussion of Federal income tax consequences is based on tax
laws and regulations in effect on the date of this Prospectus and is subject to
change by legislative or administrative action. Each prospective investor
should consult his or her own tax adviser as to the tax consequences of
investments in the Funds.

MANAGEMENT OF GALAXY VIP

The business and affairs of GALAXY VIP are managed under the direction of
GALAXY VIP's Board of Trustees. The Board of Trustees approves all significant
agreements between GALAXY VIP and persons or companies furnishing services to
GALAXY VIP. Day-to-day operations of GALAXY VIP are delegated to its elected
officers, subject to the investment objectives and policies of GALAXY VIP, the
general supervision of the Board of Trustees and applicable state law. GALAXY
VIP's Statement of Additional Information contains the names of and general
background information concerning the Trustees.

INVESTMENT ADVISER

Fleet Investment Advisors Inc. ("Fleet" or the "Investment Adviser"), with
principal offices at 75 State Street, Boston, Massachusetts 02109-1810, serves
as the Investment Adviser to the Funds. Fleet, which commenced operations in
1984, also provides investment management and advisory services to individual
and institutional clients and manages the investment portfolios of The Galaxy
Fund and Galaxy Fund II. Fleet is an indirect wholly-owned subsidiary of Fleet
Financial Group, Inc., a registered bank holding company with total assets of
approximately $84.8 billion at December 31, 1995.

Subject to the general supervision of GALAXY VIP's Board of Trustees and in
accordance with each Fund's investment policies, Fleet manages each Fund, makes
decisions with respect to and places orders for all purchases and sales of its
portfolio securities and maintains related records.

Harold A. Mackinney, Jr., Donald Jones and Marie M. Schofield are the
portfolio managers of the Equity, Asset Allocation and High Quality Bond Funds,
respectively. Messrs. MacKinney and Jones have served as the respective
portfolio managers of the Equity and Asset Allocation Funds since commencement
of each Fund's operations. Each portfolio manager is primarily responsible
for the day-to-day management of the respective Fund's investment portfolio.
Mr. Mackinney is Chairman of the Board and Chief Executive Officer of Fleet and
has been engaged in providing investment management services on behalf of Fleet
and/or its affiliates since 1962. Mr. Jones has been associated with Fleet as
a portfolio manager since 1988 and currently serves as Vice President. Ms.
Schofield, who became the portfolio manager of the High Quality Bond Fund on
March 1, 1996, is Vice President of Fleet and has been engaged in providing
investment management services for over 20 years.

24
<PAGE> 25

For the services provided and expenses assumed with respect to the Funds,
Fleet is entitled to receive advisory fees, computed daily and paid monthly, at
the annual rate of .40% of the average daily net assets of the Money Market
Fund, at the annual rate of .75% of the average daily net assets of the Equity
Fund and Asset Allocation Fund, respectively, and at the annual rate of .55% of
the average daily net assets of the High Quality Bond Fund. The advisory fees
for the Funds are higher than fees paid by some other mutual funds, although
the Board of Trustees of GALAXY VIP believes that it is not higher than
average advisory fees paid by funds with similar investment objectives and
policies.

Fleet may from time to time, in its discretion, waive advisory fees payable
by the Funds in order to help maintain a competitive expense ratio and may from
time to time allocate a portion of its advisory fees to Fleet Trust Company or
other subsidiaries of Fleet Financial Group, Inc., in consideration for
administrative and other services which they provide to beneficial
shareholders. Fleet is currently waiving a portion of the advisory fees
payable to it by the Funds, but Fleet may in its discretion revise or
discontinue this waiver at any time. For the fiscal year ended December 31,
1995, Fleet received advisory fees (after fee waivers) at the effective rates
of 0.14% of the Money Market Fund's average daily net assets, 0.73% of the
Equity Fund's average daily net assets, 0.60% of the Asset Allocation Fund's
average daily net assets and 0.12% of the High Quality Bond Fund's average
daily net assets, respectively.

AUTHORITY TO ACT AS INVESTMENT ADVISER

Banking laws and regulations currently prohibit a bank holding company
registered under the Bank Holding Company Act of 1956, as amended, or any bank
or non-bank affiliate thereof from sponsoring, organizing, controlling, or
distributing the shares of a registered, open-end investment company
continuously engaged in the issuance of its shares, and prohibit banks
generally from issuing, underwriting, selling, or distributing securities such
as shares of the Funds, but do not prohibit such a bank holding company or its
affiliates or banks generally from acting as investment adviser, transfer
agent, or custodian to such an investment company or from purchasing shares of
such a company as agent for and upon the order of customers. The Investment
Adviser and custodian are subject to such banking laws and regulations. Should
legislative, judicial, or administrative action prohibit or restrict the
activities of such companies in connection with their services to the Funds,
GALAXY VIP might be required to alter materially or discontinue its
arrangements with such companies and change its method of operation. It is
anticipated, however, that any resulting change in the Funds' method of
operation would not affect a Fund's net asset value per share or result in
financial losses to any shareholder. State securities laws on this issue may
differ from Federal law and banks and financial institutions may be required to
register as dealers pursuant to state law.

ADMINISTRATOR

First Data Investor Services Group, Inc. (formerly, The Shareholder Services
Group, Inc., d/b/a 440 Financial) ("First Data") , a wholly-owned subsidiary of
First Data Corporation, is the Funds' administrator. First Data's offices are
located at 4400 Computer Drive, Westborough, Massachusetts 01581.

First Data generally assists the Funds in their administration and
operation. First Data also serves as administrator to the portfolios of The
Galaxy Fund and Galaxy Fund II. For the services provided to the Funds, First
Data is entitled to receive administration fees, computed daily and paid
monthly, at the annual rate of .085% of the first $1 billion of the combined
average daily net assets of the Funds, and declining percentages of assets in

<PAGE> 26

excess of $1 billion. The minimum aggregate annual fee payable for
administration services is $100,000. In addition, First Data also receives a
separate annual fee from each Fund for certain fund accounting services and is
paid by each Fund for custody services provided by The Chase Manhattan Bank,
N.A. From time to time, First Data may waive all or a portion of the
administration fee payable to it by the Funds, either voluntarily or pursuant
to applicable statutory expense limitations.

DESCRIPTION OF GALAXY VIP AND ITS SHARES

GALAXY VIP was organized as a Massachusetts business trust on May 27, 1992.
GALAXY VIP is a series fund authorized to issue the following four classes of
units of beneficial interest: Class A shares, representing interests in the
Money Market Fund; Class B shares, representing interests in the Equity Fund;
Class C shares, representing interests in the Asset Allocation Fund; and Class
D shares, representing interests in the High Quality Bond Fund. Each share of
GALAXY VIP has a par value of $.001 per share, represents an equal
proportionate interest in the related Fund with other shares of the same class,
and is entitled to such dividends and distributions out of the income earned on
the assets belonging to such Fund as are declared in the discretion of the
Board of Trustees. GALAXY VIP's Agreement and Declaration of Trust authorizes
the Board of Trustees to classify or reclassify any class or series of shares
into one or more classes or series of shares.

Shareholders are entitled to one vote for each full share held, and a
proportionate fractional vote for each fractional 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. The rights
accompanying Fund shares are legally vested in the Separate Accounts. However,
Participating Insurance Companies will vote Fund shares held in their Separate
Accounts in a manner consistent with timely voting instructions received from
the holders of variable annuity contracts and variable life insurance policies.
Each Participating Insurance Company will vote Fund shares held in its Separate
Accounts for which no timely instructions are received from the holders of
variable annuity contracts and variable life insurance policies, as well as
shares it owns, in the same proportion as those shares for which voting
instructions are received. Additional information concerning voting rights of
the participants in the Separate Accounts are more fully set forth in the
prospectuses relating to those Accounts issued by the Participating Insurance
Companies.

GALAXY VIP is not required under Massachusetts law to hold annual
shareholder meetings and intends to do so only if required by the 1940 Act.
Shareholders have the right to call a meeting of shareholders to consider the
removal of one or more trustees and such meeting will be called when requested
by the holders of record of 10% or more of GALAXY VIP's outstanding shares.
To the extent required by law, GALAXY VIP will assist in shareholder
communications in such matters.

<PAGE> 27

CUSTODIAN

The Chase Manhattan Bank, N.A. ("Chase"), located at 1 Chase Manhattan
Plaza, New York, New York 10081, a wholly-owned subsidiary of The Chase
Manhattan Corporation, serves as the custodian of the Funds' assets. Services
performed by Chase for the Funds are described in the Statement of Additional
Information.

EXPENSES

Except as noted below, Fleet and First Data will bear all expenses in
connection with the performance of their services for the Funds. GALAXY VIP
bears the expenses in connection with the Funds' operations, whether incurred
directly or on its behalf by Fleet, First Data or the Participating Insurance
Companies, including taxes; interest; fees (including fees paid to its Trustees
and officers who are not affiliated with First Data); SEC fees; state
securities qualification fees; costs of preparing and printing prospectuses for
regulatory purposes and for distribution to existing shareholders; advisory,
administration, fund accounting and custody fees; certain insurance premiums;
outside auditing and legal expenses; costs of shareholders' reports and
shareholder meetings; and any extraordinary expenses. The Funds also pay for
brokerage fees and commissions in connection with the purchase of portfolio
securities.

PERFORMANCE AND YIELD INFORMATION

From time to time, in advertisements or in reports to shareholders, the
performance and yields of the Funds may be quoted and compared to those of
other mutual funds with similar investment objectives and to stock or other
relevant bond indexes or to rankings prepared by independent services or other
financial or industry publications that monitor the performance of mutual
funds.

Performance and yield data as reported in national financial publications
including, but not limited to, Money Magazine, Forbes, Barron's, The Wall
Street Journal and The New York Times, as well as in publications of a local or
regional nature may be used in comparing the performance and yields of the
Funds.

The yield of the Money Market Fund will refer to the income generated over a
seven-day period identified in the advertisement. This income is annualized,
i.e. the income during a particular week is assumed to be generated each week
over a 52-week period, and is shown as a percentage of the investment. The
Money Market Fund may also advertise its effective yield which is calculated
similarly but, when annualized, the income from an investment in the Fund is
assumed to be reinvested. Consequently, the "effective yield" will be slightly
higher because of the compounding effect.

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

The Funds may also advertise their performance using "average annual total
return" over various periods of time. Such total return figure reflects the
average percentage change in the value of an investment in a Fund from the
beginning date of the measuring period to the end of the measuring period.
Average total return figures will be given for the most recent one-, five- and
ten-year periods (if applicable), and may be given for other periods as

27
<PAGE> 28

well, such as from the commencement of a Fund's operations, or on a
year-by-year basis. Each Fund may also use "aggregate total return" figures
for various periods, representing the cumulative change in the value of an
investment in a Fund for the specified period. Both methods of calculating
total return assume that dividend and capital gains distributions made by a
Fund during the period are reinvested in Fund shares.

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

Yields and total returns quoted for the Funds include the effect of
deducting the Funds' expenses, but may not include charges and expenses
attributable to a particular variable annuity contract or variable life
insurance policy. Since shares of the Funds can be purchased only through a
variable annuity contract or variable life insurance policy, you should
carefully review the prospectus of the variable annuity contract or variable
life insurance policy you have chosen for information on relevant charges and
expenses. Including these charges in the quotations of the Funds' yield and
total return would have the effect of decreasing performance. Performance
information for the Funds must always be accompanied by, and be reviewed with,
performance information for the insurance product which invests in the Funds.

MISCELLANEOUS

As used in this Prospectus, a "vote of the holders of a majority of the
outstanding shares" of GALAXY VIP or a particular Fund means, with respect to
the approval of an investment advisory agreement, a distribution plan or a
change in a fundamental investment policy, the affirmative vote of the holders
of the lesser of (a) more than 50% of the outstanding shares of GALAXY VIP or
such Fund, or (b) 67% or more of the shares of GALAXY VIP or such Fund present
at a meeting if more than 50% of the outstanding shares of GALAXY VIP or such
Fund are represented at the meeting in person or by proxy.

Inquiries regarding GALAXY VIP should be made to GALAXY VIP's office at
4400 Computer Drive, Westborough, Massachusetts 01581. Holders of variable
annuity contracts or variable life insurance policies issued by Participating
Insurance Companies for which shares of the Funds are the investment vehicle
will receive from the Participating Insurance Companies unaudited semi-annual
financial statements and year-end financial statements audited by the Funds'
independent certified public accountants. Each report will show the
investments owned by the Funds and the market values of the investments and
will provide other information about the Funds and their operations.

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

28
<PAGE> 29

THE GALAXY VIP FUND

Statement of Additional Information

Money Market Fund

Equity Fund

Asset Allocation Fund

High Quality Bond Fund

April 30, 1996
<PAGE> 30
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the current prospectus (the "Prospectus") for the
investment portfolios of The Galaxy VIP Fund ("GALAXY VIP") dated April 30, 1996
as it may from time to time be supplemented or revised. This Statement of
Additional Information is incorporated by reference in its entirety into such
Prospectus. No investment in shares of the Funds should be made without
reading the Prospectus. Copies of the Prospectus may be obtained by writing
GALAXY VIP C/O FIRST DATA INVESTOR SERVICES GROUP, INC., 4400 COMPUTER DRIVE,
WESTBOROUGH, MASSACHUSETTS 01581 or by calling your Participating Insurance
Company.
<PAGE> 31
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Variable and Floating Rate Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Bank Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Mortgage-Backed and Asset-Backed Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
When-Issued, Forward Commitment and Delayed Settlement Transactions . . . . . . . . . . . . . . . . . . . 3
Stand-By Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Repurchase Agreements; Reverse Repurchase Agreements; Loans of
Portfolio Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Government Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Option Writing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Foreign Currency Exchange Transactions -- Asset Allocation Fund . . . . . . . . . . . . . . . . . . . . . 6
Portfolio Securities Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Additional Investment Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

NET ASSET VALUE - MONEY MARKET FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

DIVIDENDS - MONEY MARKET FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

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

DESCRIPTION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

TRUSTEES AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Shareholder and Trustee Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

ADVISORY, ADMINISTRATION AND CUSTODIAN AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

PERFORMANCE AND YIELD INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>

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<PAGE> 32
<TABLE>
<S> <C>
Yield Quotations -- Money Market Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Yield and Performance of the Equity, Asset Allocation
and High Quality Bond Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

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

APPENDIX B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1

FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FS-1
</TABLE>

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<PAGE> 33
INVESTMENT OBJECTIVES AND POLICIES

GALAXY VIP offers units of beneficial interest ("Shares") representing
interests in four investment portfolios: the Money Market , Equity, Asset
Allocation and High Quality Bond FUNDS (collectively, the "Funds"). This
Statement of Additional Information provides additional investment information
with respect to all Funds and should be read in conjunction with the current
Prospectus.

VARIABLE AND FLOATING RATE OBLIGATIONS

The Money Market Fund may purchase variable and floating rate
instruments as described in the Prospectus. If such an instrument is not
rated, the investment adviser to the Fund, Fleet Investment Advisors Inc.
("Fleet" or the "Investment Adviser"), must determine that such instrument is
comparable to rated instruments eligible for purchase by the Fund and will
consider the earning power, cash flows and other liquidity ratios of the
issuers and guarantors of such notes and will continuously monitor their
financial status in order to meet payment on demand. In determining average
weighted portfolio maturity of the Fund, a variable or floating rate instrument
issued or guaranteed by the U.S. Government or an agency or instrumentality
thereof will be deemed to have a maturity equal to the period remaining until
the obligation's next interest rate adjustment.

Variable and floating rate obligations held by the Money Market Fund
may have maturities of more than thirteen months, provided the Fund is entitled
to payment of principal upon not more than 30 days' notice or at specified
intervals not exceeding one year (upon not more than 30 days' notice).

Variable and floating rate obligations with a demand feature held by
the Money Market Fund will be deemed to have a maturity equal to the longer of
the period remaining to the next interest rate adjustment or the demand notice
period.

The Equity, Asset Allocation and High Quality Bond Funds may also
purchase variable and floating rate instruments in accordance with their
investment objectives and policies as described in the Prospectus.

BANK OBLIGATIONS

For purposes of the Money Market Fund's investment policy with respect
to bank obligations, the assets of a bank or savings institution will be deemed
to include the assets of its U.S. and foreign branches. Investments by the
Equity, Asset Allocation and High Quality Bond Funds in non-negotiable time
deposits are limited to no more than 5% of each such Fund's total assets at the
time of purchase.
<PAGE> 34
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES

Mortgage-backed securities include fixed and adjustable Mortgage
Pass-Through Certificates, which provide the holder with a pro-rata share of
interest and principal payments on a pool of mortgages, ordinarily on
residential properties. There are a number of important differences among the
agencies and instrumentalities of the U.S. Government that issue
mortgage-backed securities and among the securities that they issue.
Pass-Through Certificates guaranteed by GNMA (also known as "Ginnie Maes") are
guaranteed as to the timely payment of principal and interest by GNMA, whose
guarantee is backed by the full faith and credit of the United States.
Mortgage-backed securities issued by FNMA include FNMA guaranteed Mortgage
Pass-Through Certificates (also known as "Fannie Maes") which are guaranteed as
to timely payment of principal and interest by FNMA. They are not backed by or
entitled to the full faith and credit of the United States, but are supported
by the right of the FNMA to borrow from the Treasury. Mortgage-backed
securities issued by FHLMC include FHLMC Mortgage Participation Certificates
(also known as "Freddie Macs"). Freddie Macs are not guaranteed by the United
States or by any Federal Home Loan Banks and do not constitute a debt or
obligation of the United States or of any Federal Home Loan Bank. Freddie Macs
entitle the holder to timely payment of interest, which is guaranteed by the
FHLMC. FHLMC guarantees either ultimate collection or timely payment of all
principal payments on the underlying mortgage loans. When FHLMC does not
guarantee timely payment of principal, FHLMC is required to remit the amount
due on account of its guarantee of ultimate payment of principal no later than
one year after it becomes payable.

Asset-backed securities are generally issued as pass-through
certificates, which represent undivided fractional ownership interests in an
underlying pool of assets, or as debt instruments, which are also known as
collateralized obligations, and are generally issued as the debt of a special
purpose entity organized solely for the purpose of owning such assets and
issuing such debt. Asset-backed securities are often backed by a pool of
assets representing the obligations of a number of different parties.

The yield characteristics of mortgage-backed and asset-backed
securities differ from traditional debt securities. A major difference is that
the principal amount of the obligations may be prepaid at any time because the
underlying assets (i.e., loans) generally may be prepaid at any time. As a
result, a decrease in interest rates in the market may result in increases in
the level of prepayments as borrowers, particularly mortgagors, refinance and
repay their loans. An increased prepayment rate will have the effect of
shortening the maturity of the security. If the Fund has purchased a
mortgage-backed or asset-backed security at a premium, a faster than
anticipated prepayment rate could result in a loss of principal to the extent
of the premium paid. Conversely, an increase in interest rates may result in
lengthening the anticipated maturity because expected prepayments are reduced.
A prepayment rate that is faster than expected will reduce yield to maturity,
while a prepayment rate that is slower than expected may have the opposite
effect of increasing yield to maturity.

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<PAGE> 35
In general, the assets supporting non-mortgage asset-backed securities
are of shorter maturity than the assets supporting mortgage-backed securities.
Like other fixed-income securities, when interest rates rise the value of an
asset-backed security generally will decline; however, when interest rates
decline, the value of an asset-backed security with prepayment features may not
increase as much as that of other fixed-income securities, and, as noted above,
changes in market rates of interest may accelerate or retard prepayments and
thus affect maturities.

These characteristics may result in a higher level of price volatility
for these assets under certain market conditions. In addition, while the
trading market for short-term mortgages and asset-backed securities is
ordinarily quite liquid, in times of financial stress the trading market for
these securities sometimes becomes restricted.

WHEN-ISSUED, FORWARD COMMITMENT AND DELAYED SETTLEMENT TRANSACTIONS

When the High Quality Bond Fund agrees to purchase securities on a
"when-issued", "forward commitment" or "delayed settlement" basis, the Fund's
custodian will set aside cash or liquid portfolio securities equal to the
amount of the commitment in a separate account. In the event of a decline in
the value of the securities that the custodian has set aside, the Fund may be
required to place additional assets in the separate account in order to ensure
that the value of the account remains equal to the amount of the Fund's
commitment. The Fund's net assets may fluctuate to a greater degree if it sets
aside portfolio securities to cover such purchase commitments than if it sets
aside cash. Because the Fund sets aside liquid assets to satisfy its purchase
commitments in the manner described, its liquidity and ability to manage its
portfolio might be affected in the event its commitments to purchase "forward
commitments", commitments to purchase "when-issued" securities or commitments
to purchase securities on a "delayed settlement" basis exceeds 25% of the value
of its assets.

When the Fund engages in "when-issued", "forward commitment" or
"delayed settlement" transactions, it relies on the seller to consummate the
trade. Failure of the seller to do so may result in the Fund's incurring a loss
or missing an opportunity to obtain a price considered to be advantageous for a
security. For purposes of determining the average weighted maturity of the
Fund's portfolio, the maturity of "when-issued" securities is calculated from
the date of settlement of the purchase to the maturity date.

STAND-BY COMMITMENTS

Under a "stand-by commitment," a dealer agrees to purchase from a
Fund, at the Fund's option, specified securities at a specified price.
"Stand-by commitments" are exercisable by the Fund at any time before the
maturity of the underlying security, and may be sold, transferred or assigned
by the Fund only with respect to the underlying instruments.

Although "stand-by commitments" are often available without the
payment of any direct or indirect consideration, if necessary or advisable, a
Fund may pay for a "stand-by

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<PAGE> 36
commitment" either separately in cash or by paying a higher price for
securities which are acquired subject to the commitment. Where the Fund pays
any consideration directly or indirectly for a "stand-by commitment," its cost
will be reflected as unrealized depreciation for the period during which the
commitment is held by the Fund.

The High Quality Bond Fund will enter into "stand-by commitments" only
with banks and broker/dealers which present minimal credit risks. In
evaluating the creditworthiness of the issuer of a "stand-by commitment," the
Fund's Investment Adviser will review periodically the issuer's assets,
liabilities, contingent claims and other relevant financial information.

The Fund will acquire "stand-by commitments" solely to facilitate
liquidity and does not intend to exercise its rights thereunder for trading
purposes. "Stand-by commitments" will be valued at zero in determining the
Fund's net asset value.

REPURCHASE AGREEMENTS; REVERSE REPURCHASE AGREEMENTS; LOANS OF PORTFOLIO
SECURITIES

Each Fund may enter into repurchase agreements. The repurchase price
under repurchase agreements generally equals the price paid by a Fund plus
interest negotiated on the basis of current short-term rates (which may be more
or less than the rate on the securities underlying the repurchase agreement).
Securities subject to repurchase agreements will be held by a Fund's custodian
or sub-custodian in a segregated account or in the Federal Reserve/Treasury
book-entry system. Repurchase agreements are considered to be loans by a Fund
under the Investment Company Act of 1940, as amended (the "1940 Act").

All Funds may enter into reverse repurchase agreements. Whenever a
Fund enters into a reverse repurchase agreement, it will place in a segregated
custodial account liquid assets such as cash, U.S. Government securities or
other liquid high grade debt securities equal to the repurchase price
(including accrued interest). The Fund will monitor the account to ensure such
equivalent value is maintained. Reverse repurchase agreements are considered
to be borrowings by a Fund under the 1940 Act.

A Fund that loans portfolio securities would continue to accrue
interest on the securities loaned and would also earn income on the loans. Any
cash collateral received by the Funds in connection with such loans would be
invested in high quality, short-term "money market" instruments.

GOVERNMENT SECURITIES

Examples of the types of obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities (hereinafter, "U.S. Government
obligations") that may be held by the Funds include, without limitation, direct
obligations of the U.S. Treasury, and securities issued or guaranteed by the
Federal Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, Federal
Housing Administration, Farmers Home Administration,

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<PAGE> 37
Export-Import Bank of the United States, Small Business Administration,
Government National Mortgage Association, Federal National Mortgage
Association, General Services Administration, Student Loan Marketing
Association, Central Bank for Cooperatives, Federal Home Loan Mortgage
Corporation, Federal Intermediate Credit Banks, Resolution Trust Corporation
and Maritime Administration.

OPTION WRITING

The Equity and Asset Allocation Funds may write listed covered call
options. A listed call option gives the purchaser of the option the right to
buy from a clearing corporation, and obligates the writer to sell to the
clearing corporation, the underlying security at the stated exercise price at
any time prior to the expiration of the option, regardless of the market price
of the security. The premium paid to the writer is consideration for
undertaking the obligations under the option contract. If an option expires
unexercised, the writer realizes a gain in the amount of the premium. Such a
gain may be offset by a decline in the market price of the underlying security
during the option period.

A Fund may terminate its obligation to sell prior to the expiration
date of the option by executing a closing purchase transaction which is
effected by purchasing on an exchange an option of the same series (i.e., same
underlying security, exercise price and expiration date) as the option
previously written. Such a purchase does not result in the ownership of an
option. A closing purchase transaction will ordinarily be effected to realize
a profit on an outstanding call option, to prevent an underlying security from
being called, to permit the sale of the underlying security or to permit the
writing of a new call option containing different terms on such underlying
security. The cost of such a liquidating purchase plus transaction costs may
be greater than the premium received upon the original option, in which event
the writer will have incurred a loss in the transaction. An option position
may be closed out only on an exchange which provides a secondary market for an
option of the same series. There is no assurance that a liquid secondary market
on an exchange will exist for any particular option. A covered option writer,
unable to effect a closing purchase transaction, will not be able to sell the
underlying security until the option expires or the underlying security is
delivered upon exercise. The writer in such circumstances will be subject to
the risk of market decline of the underlying security during such period. A
Fund will write an option on a particular security only if Fleet believes that
a liquid secondary market will exist on an exchange for options of the same
series, which will permit the Fund to make a closing purchase transaction in
order to close out its position.

When a Fund writes an option, an amount equal to the net premium (the
premium less the commission) received by the Fund is included as a deferred
credit in the liability section of the Fund's statement of assets and
liabilities. The amount of the deferred credit will be subsequently
marked-to-market to reflect the current value of the option written. The
current value of the traded option is the last sale price or, in the absence of
a sale price, the average of the closing bid and asked prices. If an option
expires on the stipulated expiration date or if a Fund enters into a closing
purchase transaction, it will realize a gain (or loss if the cost

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<PAGE> 38
of a closing purchase transaction exceeds the net premium received when the
option is sold) and the deferred credit related to such option will be
eliminated. If an option is exercised, the Fund may deliver the underlying
security from its portfolio and purchase the underlying security in the open
market. In either event, the proceeds of the sale will be increased by the net
premium originally received and the Fund will realize a gain or loss. Premiums
from expired call options written by a Fund and net gains from closing purchase
transactions are treated as short-term capital gains for Federal income tax
purposes, and losses on closing purchase transactions are treated as short-term
capital losses.

FOREIGN CURRENCY EXCHANGE TRANSACTIONS -- ASSET ALLOCATION FUND

Because the Asset Allocation Fund may buy and sell securities
denominated in currencies other than the U.S. dollar, and receive interest,
dividends and sale proceeds in currencies other than the U.S. dollar, the Fund
may enter into foreign currency exchange transactions to convert United States
currency to foreign currency and foreign currency to United States currency as
well as convert foreign currency to other foreign currencies. The Fund either
enters into these transactions on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market, or uses forward contracts
to purchase or sell foreign currencies.

A forward foreign currency exchange contract is an obligation by the
Fund to purchase or sell a specific currency at a specified price and future
date, which may be any fixed number of days from the date of the contract.
Forward foreign currency exchange contracts establish an exchange rate at a
future date. These contracts are transferable in the interbank market
conducted directly between currency traders (usually large commercial banks)
and their customers. A forward foreign currency exchange contract generally
has no deposit requirement, and is traded at a net price without commission.
Neither spot transactions nor forward foreign currency exchange contracts
eliminate fluctuations in the prices of the Fund's portfolio securities or in
foreign exchange rates, or prevent loss if the prices of these securities
should decline.

The Fund may enter into foreign currency hedging transactions in an
attempt to protect against changes in foreign currency exchange rates between
the trade and settlement dates of specific securities transactions or changes
in foreign currency exchange rates that would adversely affect a portfolio
position or an anticipated portfolio position. Since consideration of the
prospect for currency parities will be incorporated into the Fund's long-term
investment decisions, the Fund will not routinely enter into foreign currency
hedging transactions with respect to portfolio security transactions; however,
it is important to have the flexibility to enter into foreign currency hedging
transactions when it is determined that the transactions would be in the Fund's
best interest. Although these transactions tend to minimize the risk of loss
due to a decline in the value of the hedged currency, at the same time they
tend to limit any potential gain that might be realized should the value of the
hedged currency increase. The precise matching of the forward contract amounts
and the value of the securities involved will not generally be possible because
the future value of

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<PAGE> 39
these securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward
contract is entered into and the date it matures. The projection of currency
market movements is extremely difficult, and the successful execution of a
hedging strategy is highly uncertain.

PORTFOLIO SECURITIES GENERALLY

Subsequent to its purchase by the Money Market Fund, an issue of
securities may cease to be rated or its rating may be reduced below the minimum
rating required for purchase by the Fund. The Board of Trustees or the
Investment Adviser, pursuant to guidelines established by the Board, will
promptly consider such an event in determining whether the Fund should continue
to hold the obligation. The Board of Trustees or the Investment Adviser may
continue to hold the obligation if retention is in accordance with the
interests of the Fund and applicable regulations of the Securities and Exchange
Commission ("SEC").

ADDITIONAL INVESTMENT LIMITATIONS

In addition to the investment limitations disclosed in the Prospectus,
the Funds are subject to the following investment limitations which may be
changed with respect to a particular Fund only by a vote of the holders of a
majority of such Fund's outstanding Shares (as defined under "Miscellaneous" in
the Prospectus).

Each Fund may not:

1. Purchase securities on margin (except such short-term credits
as may be necessary for the clearance of purchases), make
short sales of securities, or maintain a short position.

2. Act as an underwriter within the meaning of the Securities Act
of 1933; except insofar as a Fund might be deemed to be an
underwriter upon disposition of restricted portfolio
securities; and except to the extent that the purchase of
securities directly from the issuer thereof in accordance with
the Fund's investment objective, policies and limitations may
be deemed to be underwriting.

3. Purchase or sell real estate; except that each Fund may
purchase securities which are secured by real estate and may
purchase securities of issuers which deal in real estate or
interests therein; however, the Funds will not purchase or
sell interests in real estate limited partnerships.

4. Purchase or sell commodities or commodity contracts or invest
in oil, gas, or other mineral exploration or development
programs or mineral leases; provided however, that the High
Quality Bond Fund may enter into interest

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<PAGE> 40
rate futures contracts to the extent permitted under the
Commodity Exchange Act and the 1940 Act; and further provided
that the Asset Allocation Fund may enter into forward currency
contracts and foreign currency futures contracts and related
options to the extent permitted by its investment objective
and policies.

5. Invest in or sell put options, call options, straddles,
spreads, or any combination thereof; provided, however, that
the Equity and Asset Allocation Funds may write covered call
options with respect to their portfolio securities that are
traded on a national securities exchange, and may enter into
closing purchase transactions with respect to such options if,
at the time of the writing of such options, the aggregate
value of the securities subject to the options written by the
Fund does not exceed 25% of the value of its total assets; and
further provided that the Equity and Asset Allocation Funds
may purchase put and call options to the extent permitted by
their investment objectives and policies.

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

7. Purchase securities of other investment companies except in
connection with a merger, consolidation, reorganization, or
acquisition of assets; provided, however, that the Equity,
Asset Allocation and High Quality Bond Funds may acquire such
securities in accordance with the 1940 Act.

In addition to the above limitations:

1. The Money Market Fund may not purchase any securities other
than "money-market" instruments, some of which may be subject
to repurchase agreements, but the Fund may make
interest-bearing savings deposits not in excess of 5% of the
value of its total assets at the time of deposit and may make
time deposits.

2. The Money Market, Equity and High Quality Bond Funds may not
purchase foreign securities, except certificates of deposit,
bankers' acceptances, or other similar obligations issued by
U.S. branches of foreign banks or foreign branches of U.S.
banks; provided, however, that the High Quality Bond Fund may
also purchase obligations of Canadian Provincial Governments
in accordance with the Fund's investment objective and
policies; that the Equity Fund may purchase securities issued
by foreign banks, commercial paper issued by Canadian issuers
and other securities of Canadian companies in accordance with
its investment objective and policies; and that the Equity and
Asset Allocation Funds may each invest up to 20% of its total
assets in American Depository Receipts and European Depository
Receipts.

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<PAGE> 41
The investment restrictions described below are not fundamental
policies of GALAXY VIP and may be changed by GALAXY VIP'S Board of Trustees.
These non-fundamental investment policies require that:

(A) covered call options written by the Equity and Asset Allocation
Funds will not exceed (at the time when written) 25% of the net (rather than
total) assets of the Fund. See Investment Limitation No. 5 above;

(B) the Funds may not purchase any security if, as a result, the Fund
would then have more than 5% of its total assets invested in securities of
companies (including predecessors) that have been in continuous operation for
less than three years; and

(C) the Funds may not invest in warrants (other than warrants acquired
by a Fund as part of a unit or attached to securities at the time of purchase)
if, as a result, the investments (valued at the lower of cost or market) would
exceed 5% of the value of a Fund's net assets or if, as a result, more than 2%
of a Fund's net assets would be invested in warrants not listed on a recognized
United States or foreign stock exchange, to the extent permitted by applicable
state securities laws.

In order to permit the sale of Fund Shares in certain states, GALAXY
VIP may make other commitments more restrictive than the investment policies
and limitations described above and in the Prospectus.

NET ASSET VALUE - MONEY MARKET FUND

GALAXY VIP uses the amortized cost method of valuation to value Shares
of the Money Market Fund. In order to use the amortized cost method, the Fund
complies with the various quality and maturity restrictions specified in Rule
2a-7 ("Rule 2a-7") promulgated under the 1940 Act. Pursuant to this method, a
security is valued at its initial acquisition cost, as adjusted for
amortization of premium or accretion of discount, regardless of the impact of
fluctuating interest rates on the market value of the security. Where it is
not appropriate to value a security by the amortized cost method, the security
will be valued either by market quotations or by fair value as determined by or
under the direction of GALAXY VIP'S Board of Trustees. This method may result
in periods during which value, as determined by amortized cost, is higher or
lower than the price the Fund would receive if it sold the security. The value
of securities in the Fund can be expected to vary inversely with changes in
prevailing interest rates. Thus, if interest rates have increased from the
time a security was purchased, such security, if sold, might be sold at a price
less than its cost. Similarly, if interest rates have declined from the time a
security was purchased, such security, if sold, might be sold at a price
greater than its purchase cost. In either instance, if the security is held to
maturity, no gain or loss will be realized.

The Money Market Fund invests only in instruments which meet the
applicable quality requirements of Rule 2a-7 and maintains a dollar-weighted
average portfolio maturity

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<PAGE> 42
appropriate to its objective of maintaining a stable net asset value per Share,
provided that the Funds will not purchase any security deemed to have a
remaining maturity (as defined in the 1940 Act) of more than thirteen months
nor maintain a dollar-weighted average portfolio maturity which exceeds 90
days. GALAXY VIP'S Board of Trustees has established procedures reasonably
designed, taking into account current market conditions and the Fund's
investment objective, to stabilize the net asset value per Share of the Fund
for purposes of sales and redemptions at $1.00. These procedures include
review by the Board of Trustees, at such intervals as it deems appropriate, to
determine the extent, if any, to which the net asset value per Share of the
Fund, calculated by using available market quotations, deviates from $1.00 per
share. In the event such deviation exceeds one-half of one percent, the Board
of Trustees will promptly consider what action, if any, should be initiated.
If the Board of Trustees believes that the extent of any deviation from the
Fund's $1.00 amortized cost price per Share may result in material dilution or
other unfair results to new or existing investors, it has agreed to take such
steps as it considers appropriate to eliminate or reduce, to the extent
reasonably practicable, any such dilution or unfair results. These steps may
include selling portfolio instruments prior to maturity; shortening the average
portfolio maturity; withholding or reducing dividends; redeeming Shares in
kind; reducing the number of the Fund's outstanding Shares without monetary
consideration; or utilizing a net asset value per Share determined by using
available market quotations.

DIVIDENDS - MONEY MARKET FUND

As stated, GALAXY VIP uses its best efforts to maintain the net asset
value per Share of the Money Market Fund at $1.00. As a result of a
significant expense or realized or unrealized loss incurred by the Fund, it is
possible that the Fund's net asset value per Share may fall below $1.00.
Should GALAXY VIP incur or anticipate any unusual or unexpected significant
expense or loss which would affect disproportionately the income of the Fund
for a particular period, the Board of Trustees would at that time consider
whether to adhere to the present dividend policy with respect to the Fund or to
revise it in order to ameliorate to the extent possible the disproportionate
effect of such expense or loss on the income of the Fund. Such expense or loss
may result in a shareholder's receiving no dividends for the period in which it
holds Shares of the Fund and in its receiving upon redemption a price per Share
lower than that which it paid.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Shares of the Funds are sold on a continuous basis by 440 Financial
Distributors, Inc. ("440 FINANCIAL"). As described in the Prospectus, Shares
of the Funds are sold and redeemed at their net asset value as next determined
after receipt of the purchase or redemption order. Each purchase is confirmed
to the Separate Account in a written statement of the number of shares
purchased and the aggregate number of shares currently held.

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<PAGE> 43
Each Fund determines its net asset value per share by subtracting the
Fund's liabilities (including accrued expenses and dividends payable) from its
total assets (the market value of the securities the Fund holds plus cash and
other assets, including income accrued and not yet received) and dividing the
result by the total number of shares outstanding.

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

DESCRIPTION OF SHARES

GALAXY VIP is a Massachusetts business trust. GALAXY VIP'S
Declaration of Trust authorizes the Board of Trustees to issue an unlimited
number of Shares and to classify or reclassify any unissued Shares into one or
more additional classes by setting or changing in any one or more respects
their respective preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption. Pursuant to such authority, the Board of Trustees
has authorized the issuance of four classes of Shares, each representing
interests in one of four separate investment portfolios: Money Market Fund,
Equity Fund, Asset Allocation Fund and High Quality Bond Fund.

Shares have no preemptive rights and only such conversion or exchange
rights as the Board of Trustees may grant in its discretion. When issued for
payment as described in the Prospectus, Shares will be fully paid and
non-assessable. In the event of a liquidation or dissolution of GALAXY VIP or
an individual Fund, shareholders of a Fund are entitled to receive the assets
available for distribution belonging to the particular Fund, and a
proportionate distribution, based upon the relative asset values of the
respective Funds, of any general assets of GALAXY VIP not belonging to any
particular Fund which are available for distribution.

Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as GALAXY VIP shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding Shares of
each Fund affected by the matter. A particular Fund is deemed to be affected
by a matter unless it is clear that the interests of each Fund in the matter
are substantially identical or that the matter does not affect any interest of
the Fund. Under the Rule, the approval of an investment advisory agreement or
any change in fundamental investment policy would be effectively acted upon
with respect to a Fund only if approved by a majority of the outstanding Shares
of such Fund. However, the Rule also provides that the ratification of the
appointment of independent public

-11-
<PAGE> 44
accountants, the approval of principal underwriting contracts, and the election
of trustees may be effectively acted upon by shareholders of GALAXY VIP voting
without regard to class.

Shareholders are entitled to one vote for each full Share held and
fractional votes for fractional Shares held, and will vote in the aggregate,
and not by class, except as otherwise required by the 1940 Act or other
applicable law or when the matter to be voted upon affects only the interests
of the shareholders of a particular class. Voting rights are not cumulative
and, accordingly, the holders of more than 50% of the aggregate of GALAXY VIP'S
outstanding Shares may elect all of the trustees, irrespective of the votes of
other shareholders.

GALAXY VIP does not intend to hold annual shareholder meetings except
as may be required by the 1940 Act. GALAXY VIP'S Agreement and Declaration of
Trust provides that a meeting of shareholders shall be called by the Board of
Trustees upon the written request of shareholders owning at least 10% of the
outstanding Shares of GALAXY VIP entitled to vote.

GALAXY VIP'S Agreement and Declaration of Trust authorizes the Board
of Trustees, without shareholder approval (unless otherwise required by
applicable law), to (a) sell and convey the assets of a class of Shares to
another management investment company for consideration which may include
securities issued by the purchaser and, in connection therewith, to cause all
outstanding Shares of such class to be redeemed at a price which is equal to
their net asset value and which may be paid in cash or by distribution of the
securities or other consideration received from the sale and conveyance; (b)
sell and convert the assets belonging to a class of Shares into money and, in
connection therewith, to cause all outstanding Shares of such class to be
redeemed at their net asset value; or (c) combine the assets belonging to a
class of Shares with the assets belonging to one or more other classes of
Shares of GALAXY VIP if the Board of Trustees reasonably determines that such
combination will not have a material adverse effect on the shareholders of any
class participating in such combination and, in connection therewith, to cause
all outstanding Shares of any such class to be redeemed at their net asset
value or converted into Shares of another class of GALAXY VIP'S Shares at their
net asset value. However, the exercise of such authority by the Board of
Trustees may be subject to certain restrictions under the 1940 Act. The Board
of Trustees may authorize the termination of any class of Shares after the
assets belonging to such class have been distributed to its shareholders.

TRUSTEES AND OFFICERS

The trustees and executive officers of GALAXY VIP, their addresses,
principal occupations during the past five years, and other affiliations are as
follows:

-12-
<PAGE> 45
<TABLE>
<CAPTION>
Positions Principal Occupation
with During Past 5 Years
Name and Address GALAXY VIP and Other Affiliations
- ---------------- ---------- ----------------------
<S> <C> <C>
Dwight E. Vicks, Jr. Chairman & Trustee President & Director, Vicks Lithograph &
Vicks Lithograph & Printing Corporation (book manufacturing
Printing Corporation and commercial printing); Director, Utica
Commercial Drive Fire Insurance Company; Trustee, Savings
P.O. Box 270 Bank of Utica; Director, Monitor Life
Yorkville, NY 13495 Insurance Company; Director, Commercial
AGE 61 Travelers Mutual Insurance Company;
Trustee, The Galaxy VIP Fund; Trustee,
Galaxy Fund II.

John T. O'Neill(1) President, Treasurer Executive Vice President and CFO, Hasbro,
Hasbro, Inc. & Trustee Inc. (toy and game manufacturer) ;
-
200 Narragansett TRUSTEE, THE GALAXY VIP FUND; TRUSTEE,
Park Drive Galaxy Fund II.
Pawtucket, RI 02862
AGE 54

Louis DeThomasis Trustee President, Saint Mary's College of
Saint Mary's College Minnesota; Director, Bright Day Travel,
of Minnesota Inc.; Trustee, Religious Communities
Winona, MN 55987 Trust; Trustee, The Galaxy VIP Fund;
AGE 54 Trustee, Galaxy Fund II.

Donald B. Miller Trustee Chairman, Horizon Media, Inc. (broadcast
10725 Quail Covey Road services); Director/Trustee, Lexington
Boynton Beach, FL 33436 Funds;Chairman, Executive Committee,
AGE 69 Compton International, Inc. (advertising
agency); Trustee, Keuka College; Trustee,
The Galaxy VIP Fund; Trustee, Galaxy Fund
II.
</TABLE>

-13-
<PAGE> 46
<TABLE>
<CAPTION>
Positions Principal Occupation
with The During Past 5 Years
Name and Address Galaxy Fund and Other Affiliations
- ---------------- ---------- ----------------------
<S> <C> <C>
James M. Seed Trustee Chairman and President, The Astra
The Astra Ventures, Inc. Projects, Incorporated (land development);
One Citizens Plaza President, The Astra Ventures,
Providence, RI 02903 Incorporated (previously, Buffinton Box
AGE 54 Company -manufacturer of cardboard boxes);
Commissioner, Rhode Island Investment
Commission; Trustee, The Galaxy VIP Fund;
Trustee, Galaxy Fund II.

Bradford S. Wellman(1) Trustee Private Investor; Director, Essex County
P.O. Box 2099 Gas Company, until January 1994; Director,
Bangor, ME 04402 Maine Mutual Fire Insurance Co.; Member,
AGE 65 Maine Finance Authority until September 1995;
Trustee, The Galaxy VIP Fund; Trustee, Galaxy
Fund II.

W. Bruce McConnel, III Secretary Partner of the law firm Drinker Biddle &
1345 Chestnut Street unitl September 1995 Reath, Philadelphia, Pennsylvania.
Philadelphia, PA 19107
AGE 53

NEIL FORREST Vice President and FIRST DATA INVESTOR Services Group, Inc.,
FIRST DATA INVESTOR SERVICES GROUP, INC. Assistant Treasurer 1992 TO PRESENT; VICE PRESIDENT,
4400 COMPUTER DRIVE INVESTMENT MARKETING AND STRATEGIC
WESTBOROUGH, MA 01581-5108 PLANNING MANUFACTURERS AND TRADERS TRUST
AGE 35 CO., 1990-1992.
</TABLE>
- -------------------------

(1.) AN INTERESTED PERSON WITHIN THE DEFINITION SET FORTH IN SECTION
2(a)(19) OF THE 1940 ACT.

EACH TRUSTEE OF THE GALAXY FUND, GALAXY VIP AND GALAXY FUND II
RECEIVES AN ANNUAL AGGREGATE FEE OF $23,000 PLUS (i) WITH RESPECT TO THE GALAXY
FUND, A MEETING FEE OF $1,500 FOR EACH BOARD MEETING ATTENDED, (ii) WITH
RESPECT TO GALAXY VIP, A MEETING FEE OF $1,500 FOR EACH BOARD MEETING ATTENDED
WHICH IS NOT HELD CONCURRENTLY WITH A BOARD MEETING OF THE GALAXY FUND, AND
(iii) $500 FOR EACH TELEPHONE BOARD MEETING IN

-14-
<PAGE> 47
WHICH A TRUSTEE PARTICIPATES, IN ADDITION TO REIMBURSEMENT FOR REASONABLE
OUT-OF-POCKET expenses incurred in attending meetings. The Chairman of the
BOARDS OF THE GALAXY FUND AND GALAXY VIP is entitled to an additional annual
AGGREGATE fee in the amount of $4,000 for his services in these CAPACITIES AND
THE PRESIDENT AND TREASURER OF THE GALAXY FUND AND GALAXY VIP IS ENTITLED TO
RECEIVE AN AGGREGATE ANNUAL FEE OF $2,500 FOR HIS SERVICES IN THESE CAPACITIES.
BEGINNING MARCH 1, 1996, EACH TRUSTEE IS ALSO ENTITLED TO PARTICIPATE IN THE
GALAXY FUND, GALAXY VIP AND GALAXY FUND II DEFERRED COMPENSATION PLANS (THE
"PLANS"). THE PLANS, WHICH ARE SUBSTANTIALLY IDENTICAL, PROVIDE THAT A TRUSTEE
MAY DEFER ALL OR A PORTION OF THE COMPENSATION EARNED FROM EACH OF THE TRUSTS
TO A DEFERRED COMPENSATION ACCOUNT. MONIES IN THE DEFERRED COMPENSATION
ACCOUNT WILL BE INVESTED ACCORDING TO THE INVESTMENT OPTIONS SELECTED BY THE
TRUSTEE. NO EMPLOYEE OF FIRST DATA receives any compensation from GALAXY VIP
for acting as AN officer. No person who is an officer, director or employee
of Fleet, or any of its affiliates, serves as a trustee, officer or employee of
GALAXY VIP.

SHAREHOLDER AND TRUSTEE LIABILITY

Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for the
obligations of GALAXY VIP. However, GALAXY VIP'S Agreement and Declaration of
Trust provides that shareholders shall not be subject to any personal liability
in connection with the assets of GALAXY VIP for the acts or obligations of
GALAXY VIP, and that every note, bond, contract, order or other undertaking
made by GALAXY VIP shall contain a provision to the effect that the
shareholders are not personally liable thereunder. The Agreement and
Declaration of Trust provides for indemnification out of GALAXY VIP property of
any shareholder held personally liable solely by reason of his being or having
been a shareholder and not because of his acts or for some other reason. The
Agreement and Declaration of Trust also provides that GALAXY VIP shall, upon
request, assume the defense of any claim made against any shareholder for any
act or obligation of GALAXY VIP, and shall satisfy any judgment thereon. Thus,
the risk of a shareholder's incurring financial loss on account of shareholder
liability is limited to circumstances in which GALAXY VIP itself would be
unable to meet its obligations.

The Agreement and Declaration of Trust states further that no trustee,
officer or agent of GALAXY VIP shall be personally liable for or on account of
any contract, debt, tort, claim, damage, judgment or decree arising out of or
connected with the administration or preservation of GALAXY VIP property or the
conduct of any business of GALAXY VIP; nor shall any trustee be personally
liable to any person for any action or failure to act except by reason of his
own bad faith, willful misfeasance, gross negligence or reckless disregard of
his duties as trustee. The Agreement and Declaration of Trust also provides
that all persons having any claim against the trustees or GALAXY VIP shall look
solely to GALAXY VIP property for payment. With the exceptions stated, the
Agreement and Declaration of Trust provides that a trustee is entitled to be
indemnified against all liabilities and expenses reasonably incurred by him in
connection with the defense or disposition of any

-15-
<PAGE> 48
proceeding in which he may be involved or with which he may be threatened by
reason of his being or having been a trustee, and that the Board of Trustees
shall indemnify representatives and employees of GALAXY VIP to the same extent
to which they themselves are entitled to indemnification.

As of the date of this Statement of Additional Information, the
trustees and officers of GALAXY VIP hold less than 1% of the outstanding shares
of GALAXY VIP.

The following chart provides certain information about the fees
received by GALAXY VIP'S trustees in the most recently completed fiscal year.

<TABLE>
<CAPTION>
============================================================================================================
Pension or
Retirement
Benefits Total Compensation
Accrued as Part from GALAXY VIP and
Aggregate Compensation of Fund Fund Complex* Paid to
Name of Person/Position from GALAXY VIP Expenses Trustees
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bradford S. Wellman $2,000 None $27,500
- ------------------------------------------------------------------------------------------------------------
Dwight E. Vicks, Jr. $3,000 None $31,650
CHAIRMAN
- ------------------------------------------------------------------------------------------------------------
Donald B. Miller $2,000 None $27,500
- ------------------------------------------------------------------------------------------------------------
BROTHER Louis DeThomasis $2,000 None $27,500
- ------------------------------------------------------------------------------------------------------------
John T. O'Neill $2,500 None $30,125
PRESIDENT AND TREASURER
- ------------------------------------------------------------------------------------------------------------
James M. Seed $2,000 None $27,500
============================================================================================================
</TABLE>

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

ADVISORY, ADMINISTRATION AND CUSTODIAN AGREEMENTS

Fleet serves as investment adviser to the Funds. In its advisory
agreement, Fleet has agreed to provide investment advisory services to the
Funds as described in the Prospectus. The Investment Adviser has also agreed
to pay all expenses incurred by it in connection with its activities under the
advisory agreements other than the cost of securities (including brokerage
commissions) purchased for the Funds. See "Expenses" in the Prospectus. For
the services provided and expenses assumed pursuant to the advisory agreement,
GALAXY VIP has agreed to pay Fleet advisory fees, accrued daily and paid
monthly, at the annual rate

-16-
<PAGE> 49
of .40% of the average daily net assets of the Money Market Fund, .75% of the
average daily net assets of the Equity Fund and Asset Allocation Fund,
respectively, and .55% of the average daily net assets of the High Quality Bond
Fund. Fleet may from time to time, in its discretion, waive advisory fees
payable by the Funds in order to maintain a competitive expense ratio.

For the PERIOD ENDED December 31, 1993, Fleet RETAINED NO ADVISORY
FEES FROM GALAXY VIP, AND REIMBURSED EXPENSES OF $39,120, $35,174, $28,479 AND
$30,077 with respect to the Money Market Fund , THE EQUITY FUND, the Asset
Allocation Fund, AND the High Quality Bond Fund, RESPECTIVELY. IN 1994, GALAXY
VIP PAID FLEET NET ADVISORY FEES OF $2,899, $55,558, $32,641 AND $3,966 FOR the
Money Market Fund , THE EQUITY FUND, the Asset Allocation Fund , AND the High
Quality Bond Fund , RESPECTIVELY. IN 1995, GALAXY VIP PAID FLEET NET ADVISORY
FEES OF $20,155, $182,558, $77,415 AND $11,048 FOR THE MONEY MARKET FUND, THE
EQUITY FUND, THE ASSET ALLOCATION FUND, AND THE HIGH QUALITY BOND FUND,
RESPECTIVELY.

The advisory agreement provides that the Investment Adviser shall not
be liable for any error of judgment or mistake of law or for any loss suffered
by the Funds in connection with the performance of its duties under the
advisory agreement, except a loss resulting from a breach of fiduciary duty
with respect to the receipt of compensation for services or a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of the
Investment Adviser in the performance of its duties or from reckless disregard
by it of its duties and obligations thereunder. Unless sooner terminated, the
advisory agreement for the Funds will continue in effect from year to year as
long as such continuance is approved at least annually (i) by the vote of a
majority of trustees who are not parties to such advisory agreement or
interested persons (as defined in the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on such approval; and (ii)
by GALAXY VIP'S Board of Trustees, or by a vote of a majority of the
outstanding Shares of such Fund. The advisory agreement may be terminated by
GALAXY VIP or by Fleet on sixty days' written notice, and will terminate
immediately in the event of its assignment.

FIRST DATA INVESTOR Services Group, Inc.(FORMERLY, THE SHAREHOLDER
SERVICES GROUP, INC., D/B/A/ 440 FINANCIAL) ("FIRST DATA") SERVES AS GALAXY
VIP'S administrator. Under the administration agreement, FIRST DATA has agreed
to maintain office facilities for GALAXY VIP, furnish GALAXY VIP with
statistical and research data, clerical, accounting, and bookkeeping services,
certain other services such as internal auditing services required by GALAXY
VIP, and compute the net asset value and net income of the Funds. FIRST DATA
prepares the Funds' annual and semi-annual reports to the SEC, Federal and
state tax returns, and filings with state securities commissions, arranges for
and bears the cost of processing Share purchase and redemption orders,
maintains the Funds' financial accounts and records, and generally assists in
all aspects of GALAXY VIP'S operations. For the services provided and expenses
assumed pursuant to the Administration Agreement, GALAXY VIP has agreed to pay
FIRST DATA administration fees, computed daily and paid monthly, at the annual
rate of .085% of the

-17-
<PAGE> 50
first $1 billion of the combined average daily net assets of the Funds, plus
.078% of the next $1.5 billion of the combined average daily net assets of the
Funds, plus .073% of the combined average daily net assets of the Funds in
excess of $2.5 billion. In the event that the combined average daily net
assets of the Funds exceed $5 billion, the parties intend to review the level
of compensation payable to FIRST DATA for its administration services. The
minimum aggregate annual fee payable for administration services is $100,000.
In addition, FIRST DATA receives a separate annual fee from each Fund for
certain fund accounting services AND IS PAID BY EACH FUND FOR CUSTODY SERVICES
PROVIDED BY GALAXY VIP'S CUSTODIAN. From time to time, FIRST DATA may waive
all or a portion of the FEES payable to it by the Funds, either voluntarily or
pursuant to applicable statutory expense limitations.

For the PERIOD ENDED DECEMBER 31, 1993, GALAXY VIP PAID FIRST DATA
NET ADMINISTRATION, CUSTODY AND FUND ACCOUNTING FEES OF $4,727, $8,061, $9,931
AND $6,548 FOR the Money Market Fund, THE EQUITY FUND, the Asset Allocation
Fund, AND the High Quality Bond Fund, RESPECTIVELY. IN 1994, GALAXY VIP PAID
FIRST DATA NET ADMINISTRATION, CUSTODY AND FUND ACCOUNTING FEES OF $13,298,
$15,624, $14,314 AND $11,024 FOR the Money Market Fund , THE EQUITY FUND, the
Asset Allocation Fund , AND the High Quality Bond Fund , RESPECTIVELY. IN
1995, GALAXY VIP PAID FIRST DATA NET ADMINISTRATION, CUSTODY AND FUND
ACCOUNTING FEES OF $31,702, $63,860, $62,035 AND $31,092 FOR THE MONEY MARKET
FUND, THE EQUITY FUND, THE ASSET ALLOCATION FUND, AND THE HIGH QUALITY BOND
FUND, RESPECTIVELY.

CUSTODIAN

THE CHASE MANHATTAN BANK, N.A. ("CHASE MANHATTAN") SERVES AS CUSTODIAN
TO THE FUNDS PURSUANT TO A GLOBAL CUSTODY AGREEMENT. CHASE MANHATTAN'S CUSTODY
FEES ARE PAID BY FIRST DATA. UNDER ITS CUSTODY AGREEMENT, CHASE MANHATTAN HAS
AGREED TO: (i) maintain a separate account or accounts in the name of each
Fund; (ii) hold and disburse portfolio securities on account of each Fund;
(iii) collect and make disbursements of money on behalf of each Fund; (iv)
collect and receive all income and other payments and distributions on account
of each Fund's portfolio securities; (v) respond to correspondence from
security brokers and others relating to its duties; and (vi) make periodic
reports to the Board of Trustees concerning the Funds' operations. Chase
Manhattan is authorized to select one or more banks or trust companies to serve
as sub-custodian for the Funds, provided that Chase Manhattan shall remain
responsible for the performance of all of its duties under the custodian
agreement and shall be liable to the Funds for any loss which shall occur as a
result of the failure of a sub-custodian to exercise reasonable care with
respect to the safekeeping of the Funds' assets. In addition, Chase Manhattan
may employ sub-custodians for the Asset Allocation Fund upon prior approval by
the Board of Trustees in accordance with the regulations of the SEC, for the
purpose of providing custodial services for the foreign assets of that Fund
held outside the United States. The assets of the Funds are held under bank
custodianship in compliance with the 1940 Act.

-18-
<PAGE> 51
PORTFOLIO TRANSACTIONS

Debt securities purchased or sold by the Money Market, High Quality
Bond and Asset Allocation Funds are generally traded in the over-the-counter
market on a net basis (i.e., without commission) through dealers, or otherwise
involve transactions directly with the issuer of an instrument. The cost of
securities purchased from underwriters includes an underwriting commission or
concession, and the prices at which securities are purchased from and sold to
dealers include a dealer's mark-up or mark-down.

Transactions in equity securities on U.S. stock exchanges for the
Equity and Asset Allocation Funds involve the payment of negotiated brokerage
commissions. On U.S. stock exchanges on which commissions are negotiated, the
cost of transactions may vary among different brokers. Transactions in the
over-the-counter market are generally principal transactions with dealers and
the costs of such transactions involve dealer spreads rather than brokerage
commissions. With respect to over-the-counter transactions, the Adviser will
normally deal directly with the dealers who make a market in the securities
involved except in those circumstances where better prices and execution are
available elsewhere or as described below.

For the fiscal YEARS ended December 31, 1995 AND 1994 and for the
period January 11, 1993 (commencement of operations) through December 31, 1993,
the Equity Fund paid brokerage commissions aggregating $9,625, $9,446 and
$13,773, respectively. For the fiscal YEARS ended December 31, 1995 AND 1994
and for the period February 6, 1993 (commencement of operations) through
December 31, 1993, the Asset Allocation Fund paid brokerage commissions
aggregating $8,136, $4,403 and $9,663, respectively.

The Equity, Asset Allocation and High Quality Bond Funds may engage in
short-term trading to achieve their investment objectives. Portfolio turnover
may vary greatly from year to year as well as within a particular year. The
Money Market Fund does not intend to seek profits from short-term trading. Its
annual portfolio turnover will be relatively high, but since brokerage
commissions are normally not paid on money market instruments, it should not
have a material effect on the net income of the Fund. The portfolio turnover
rate for each Fund (except the Money Market Fund) for each of the last two
fiscal years AND FOR THE PERIOD ITS FROM ITS COMMENCEMENT OF OPERATIONS is
disclosed in the Prospectus under "Financial Highlights."

In purchasing or selling securities for the Funds, Fleet will seek to
obtain the best net price and the most favorable execution of orders. To the
extent that the execution and price offered by more than one broker/dealer are
comparable, Fleet may effect transactions in portfolio securities with
broker/dealers who provide research, advice or other services such as (1)
advice as to the value of securities, the advisability of investing in,
purchasing or selling securities and the availability of securities or
purchasers or sellers of securities and (2) analyses and reports concerning
industries, securities, economic factors and trends, portfolio strategy and the
performance of accounts. It is possible that certain of the research,

-19-
<PAGE> 52
advice or other services received will primarily benefit one or more other
investment companies or other accounts for which Fleet exercises investment
discretion. Conversely, GALAXY VIP or any given Fund may be the primary
beneficiary of the research, advice or other services received as a result of
portfolio transactions effected for such other accounts or investment
companies.

Except as permitted by the SEC or applicable law, the Funds will not
acquire portfolio securities from, make savings deposits in, enter into
repurchase or reverse repurchase agreements with, or sell securities to, the
Investment Adviser, FIRST DATA, or their affiliates, and will not give
preference to affiliates and correspondent banks of Fleet with respect to such
transactions.

GALAXY VIP is required to identify any securities of its "regular
brokers or dealers" that GALAXY VIP has acquired during its most recent fiscal
year. At December 31, 1995, (a) the Equity Fund held 8,000 OF General Electric
Corp. in the amount of $576,000; (b) the Asset Allocation fund held 54,000 OF
General Electric Corp. IN THE AMOUNT OF $3,880,000; and (c) the High Quality
Bond Fund held 300,000 OF General Capital Corp. IN THE AMOUNT OF $292,500.

Investment decisions for each Fund are made independently from those
for the other Funds and for any other investment companies and accounts advised
or managed by Fleet. When a purchase or sale of the same security is made at
substantially the same time on behalf of a Fund, another portfolio of GALAXY
VIP, and/or another investment company or account, the transaction will be
averaged as to price, and available investments allocated as to amount, in a
manner which Fleet believes to be equitable to the Fund and such other
portfolio, investment company or account. In some instances, this investment
procedure may adversely affect the price paid or received by a Fund or the size
of the position obtained or sold by such Fund. To the extent permitted by law,
Fleet may aggregate the securities to be sold or purchased for a Fund with
those to be sold or purchased for its other portfolios, or other investment
companies or accounts in order to obtain best execution.

EXPENSES

If expenses borne by any Fund in any fiscal year exceed expense
limitations imposed by applicable state securities regulations, Fleet and FIRST
DATA WOULD reimburse GALAXY VIP for any such excess in proportion to the fees
payable to them with respect to each portfolio to the extent required by such
regulations and up to the amount of the fees payable to them, provided,
however, that to the extent required by such state regulations, Fleet and FIRST
DATA have agreed to effect such reimbursement regardless of the amount of fees
payable to them. Any such reimbursement would be made no less frequently than
the payment of fees to each organization. The most restrictive expense
limitation currently in effect is: 2-1/2% of the first $30 million of average
net assets, 2% of the next $70 million of

-20-
<PAGE> 53
average net assets and 1-1/2% of the remaining average net assets of an
investment company.

DISTRIBUTOR

Unless otherwise terminated, the Distribution Agreement between GALAXY
VIP, 440 FINANCIAL and its parent, FIRST DATA, remains in effect until February
28, 1997, and thereafter will continue from year to year upon annual approval
by GALAXY VIP'S Board of Trustees, or by the vote of a majority of the
outstanding Shares of GALAXY VIP and by the vote of a majority of the Board of
Trustees of GALAXY VIP who are not parties to the Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose
of voting on such approval. The Agreement will terminate in the event of its
assignment, as defined in the 1940 Act.

AUDITORS

Coopers & Lybrand L.L.P., independent certified public accountants,
with offices at One Post Office Square, Boston, Massachusetts 02109, serve as
auditors to GALAXY VIP. Coopers & Lybrand L.L.P. performs an annual audit of
the Funds' financial statements and provides other services related to filings
with respect to securities regulations. Reports of its activities are provided
to the Board of Trustees.

COUNSEL

Drinker Biddle & Reath (of which Mr. McConnel, Secretary of GALAXY
VIP, is a partner), PHILADELPHIA NATIONAL BANK BUILDING, 1345 Chestnut Street,
Philadelphia, Pennsylvania 19107, are counsel to GALAXY VIP and will pass upon
certain legal matters pertaining to the Shares offered hereby.

PERFORMANCE AND YIELD INFORMATION

YIELD QUOTATIONS -- MONEY MARKET FUND

The standardized annualized seven-day yield for the Money Market Fund
is computed by: (1) determining the net change, exclusive of capital changes,
in the value of a hypothetical pre-existing account in the Fund having a
balance of one Share at the beginning of a seven-day period, for which the
yield is to be quoted, (2) dividing the net change in account value by the
value of the account at the beginning of the base period to obtain the base
period return, and (3) annualizing the results (i.e., multiplying the base
period return by (365/7)). The net change in the value of the account in the
Fund includes the value of additional Shares purchased with dividends from the
original Share and dividends declared on both the original Share and any such
additional Shares, and all fees that are charged by the Fund to all shareholder
accounts in proportion to the length of the base period, other than
nonrecurring account and sales charges. For any account fees that vary with
the size of the

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<PAGE> 54
account, the amount of fees charged is computed with respect to the Fund's mean
(or median) account size. The capital changes to be excluded from the
calculation of the net change in account value are realized gains and losses
from the sale of securities and unrealized appreciation and depreciation. The
effective compound yield quotation for the Fund is computed by adding 1 to the
unannualized base period return (calculated as described above), raising the
sum to a power equal to 365 divided by 7, and subtracting 1 from the result.

The current yield for the Money Market Fund may be obtained by calling
GALAXY VIP at 1-800-628-0414. For the seven-day period ended December 31,
1995, the annualized yield of the Money Market Fund was 5.20% and the effective
yield was 5.34%.

YIELD AND PERFORMANCE OF THE EQUITY, ASSET ALLOCATION AND HIGH QUALITY BOND
FUNDS

The Equity Fund's, Asset Allocation Fund's or High Quality Bond Fund's
30-day (or one month) yield described in the Prospectus is calculated for each
Fund in accordance with the method prescribed by the SEC for mutual funds:

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

Where: a = dividends and interest earned by a Fund during the
period;

b = expenses accrued for the period (net of
reimbursements);

c = average daily number of Shares outstanding during the
period, entitled to receive dividends; and

d = maximum offering price per Share on the last day of
the period.

For the purpose of determining net investment income earned during the period
(variable "a" in the formula), dividend income on equity securities held by a
Fund is recognized by accruing 1/360 of the stated dividend rate of the
security each day that the security is in the Fund. Except as noted below,
interest earned on debt obligations held by a Fund is calculated by computing
the yield to maturity of each obligation based on the market value of the
obligation (including actual accrued interest) at the close of business on the
last business day of each month, or, with respect to obligations purchased
during the month, the purchase price (plus actual accrued interest) and
dividing the result by 360 and multiplying the quotient by the market value of
the obligation (including actual accrued interest) in order to

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<PAGE> 55
determine the interest income on the obligation for each day of the subsequent
month that the obligation is held by the Fund. For purposes of this
calculation, it is assumed that each month contains 30 days. The maturity of
an obligation with a call provision is the next call date on which the
obligation reasonably may be expected to be called or, if none, the maturity
date. With respect to debt obligations purchased at a discount or premium, the
formula generally calls for amortization of the discount or premium. The
amortization schedule will be adjusted monthly to reflect changes in the market
value of such debt obligations. Expenses accrued for the period (variable "b"
in the formula) include all recurring fees charged by a Fund to all shareholder
accounts in proportion to the length of the base period and the Fund's mean (or
median) account size. Undeclared earned income will be subtracted from the
offering price per Share (variable "d" in the formula).

With respect to mortgage or other receivables-backed obligations which
are expected to be subject to monthly payments of principal and interest
("pay-downs") (i) gain or loss attributable to actual monthly pay downs are
accounted for as an increase or decrease to interest income during the period
and (ii) each Fund may elect either (a) to amortize the discount and premium on
the remaining security, based on the cost of the security, to the weighted
average maturity date, if such information is available, or to the remaining
term of the security, if any, if the weighted average date is not available or
(b) not to amortize discount or premium on the remaining security.

Based on the foregoing calculation, the yields of the Equity, Asset
Allocation and High Quality Bond Funds for the 30-day period ended December 31,
1995 were 1.26%, 2.39% and 5.32%, respectively.

Each Fund that advertises its "average annual total return" computes
such return by determining the average annual compounded rate of return during
specified periods that equates the initial amount invested to the ending
redeemable value of such investment according to the following formula:

ERV l/n
T = [(-----) - 1]
P

Where: T = average annual total return;

ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the
l, 5 or 10 year (or other) periods at the end
of the applicable period (or a fractional
portion thereof);

P = hypothetical initial payment of $1,000; and

n = period covered by the computation, expressed
in years.

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<PAGE> 56
Each Fund that advertises its "aggregate total return" computes such
returns by determining the aggregate compounded rates of return during
specified periods that likewise equate the initial amount invested to the
ending redeemable value of such investment. The formula for calculating
aggregate total return is as follows:

ERV
Aggregate Total Return = [(-----) - l]
P

The calculations are made assuming that (1) all dividends and capital
gain distributions are reinvested on the reinvestment dates at the price per
Share existing on the reinvestment date, (2) all recurring fees charged to all
shareholder accounts are included, and (3) for any account fees that vary with
the size of the account, a mean (or median) account size in the Fund during the
periods is reflected. The ending redeemable value (variable "ERV" in the
formula) is determined by assuming complete redemption of the hypothetical
investment after deduction of all nonrecurring charges at the end of the
measuring period. The annual total returns for the Equity Fund, Asset
Allocation Fund and High Quality Bond Fund for the one year period ended
December 31, 1995 were 26.76%, 29.42% and 22.55%, respectively. The average
annual total returns for the Equity Fund, Asset Allocation Fund and
High-Quality Bond Fund for the period from commencement of operations (January
11, 1993 with respect to the Equity Fund, February 6, 1993 with respect to the
Asset Allocation Fund and January 21, 1993 with respect to the High Quality
Bond Fund) through December 31, 1995 were 11.07%, 10.54% and 7.27%,
respectively.

MISCELLANEOUS

As used in the Prospectus, "assets belonging to a Fund" means the
consideration received by GALAXY VIP upon the issuance of Shares in that
particular Fund, together with all income, earnings, profits, and proceeds
derived from the investment thereof, including any proceeds from the sale of
such investments, any funds or payments derived from any reinvestment of such
proceeds and a portion of any general assets of GALAXY VIP not belonging to a
particular Fund. In determining a Fund's net asset value, assets belonging to
the particular Fund are charged with the direct liabilities in respect of that
Fund and with a share of the general liabilities of GALAXY VIP which are
allocated in proportion to the relative asset values of the respective Funds at
the time of allocation. Subject to the provisions of GALAXY VIP'S Agreement
and Declaration of Trust, determinations by the Board of Trustees as to the
direct and allocable liabilities, and the allocable portion of any general
assets with respect to a particular Fund, are conclusive.

As of March 31, 1996, all of the issued and outstanding shares of each
Fund were owned by American Skandia Life Assurance Corporation and held in
Separate Accounts pursuant to variable annuity contracts.

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<PAGE> 57
APPENDIX A

COMMERCIAL PAPER RATINGS

A Standard & Poor's commercial paper rating is a current assessment of
the likelihood of timely payment of debt considered short-term in the relevant
market. The following summarizes the rating categories used by Standard and
Poor's for commercial paper:

"A-1" Issue's degree of safety regarding timely payment is strong.
Those issues determined to possess extremely strong safety
characteristics are denoted "A-1+."

"A-2" Issue's capacity for timely payment is satisfactory. However,
the relative degree of safety is not as high as for issues
designated "A-1."

"A-3" Issue has an adequate capacity for timely payment. It is,
however, somewhat more vulnerable to the adverse effects of
changes IN circumstances than an obligation carrying a higher
designation.

"B" Issue has only a speculative capacity for timely payment.

"C" Issue has a doubtful capacity for payment.

"D" Issue is in payment default.

Moody's commercial paper ratings are opinions of the ability of
issuers to repay punctually promissory obligations not having an original
maturity in excess of 9 months. The following summarizes the rating categories
used by Moody's for commercial paper:

"Prime-1" Issuer or related supporting institutions are considered to
have a superior capacity for repayment of short-term
promissory obligations. Prime-1 repayment capacity will
normally be evidenced by the following characteristics:
leading market positions in well established industries; high
rates of return on funds employed; conservative capitalization
structures with moderate reliance on debt and ample asset
protection; broad margins in earning coverage of fixed
financial charges and high internal cash generation; and well
established access to a range of financial markets and assured
sources of alternate liquidity.

"Prime-2" Issuer or related supporting institutions are considered to
have a strong capacity for repayment of short-term promissory
obligations. This will

A-1
<PAGE> 58
normally be evidenced by many of the characteristics cited
above but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may
be more affected by external conditions. Ample alternative
liquidity is maintained.

"Prime-3" Issuer or related supporting institutions have an acceptable
capacity for repayment of short-term promissory obligations.
The effects of industry characteristics and market composition
may be more pronounced. Variability in earnings and
profitability may result in changes in the level of debt
protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is
maintained.

"Not Prime" Issuer does not fall within any of the Prime rating
categories.

The three rating categories of Duff & Phelps for investment grade
commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff & Phelps
employs three designations, "D-1+," "D-1" and "D-1-," within the highest rating
category. The following summarizes the rating categories used by Duff & Phelps
for commercial paper:

"D-1+" Debt possesses highest certainty of timely payment.
Short-term liquidity, including internal operating factors
and/or access to alternative sources of funds, is outstanding,
and safety is just below risk-free U.S. Treasury short-term
obligations.

"D-1" Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good
fundamental protection factors. Risk factors are minor.

"D-1-" Debt possesses high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental
protection factors. Risk factors are very small.

"D-2" Debt possesses good certainty of timely payment. Liquidity
factors and company fundamentals are sound. Although ongoing
funding needs may enlarge total financing requirements, access
to capital markets is good. Risk factors are small.

"D-3" Debt possesses satisfactory liquidity, and other protection
factors qualify issue as investment grade. Risk factors are
larger and subject to more variation. Nevertheless, timely
payment is expected.

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<PAGE> 59
"D-4" Debt possesses speculative investment characteristics.
Liquidity is not sufficient to ensure against disruption in
debt service. Operating factors and market access may be
subject to a high degree of variation.

"D-5" Issuer has failed to meet scheduled principal and/or interest
payments.

Fitch short-term ratings apply to debt obligations that are payable on
demand or have original maturities of GENERALLY up to three years. The
following summarizes the rating categories used by Fitch for short-term
obligations:

"F-1+" Securities possess exceptionally strong credit quality.
Issues assigned this rating are regarded as having the
strongest degree of assurance for timely payment.

"F-1" Securities possess very strong credit quality. Issues
assigned this rating reflect an assurance of timely payment
only slightly less in degree than issues rated "F-1+."

"F-2" Securities possess good credit quality. Issues assigned this
rating have a satisfactory degree of assurance for timely
payment, but the margin of safety is not as great as the
"F-1+" and "F-1" categories.

"F-3" Securities possess fair credit quality. Issues assigned this
rating have characteristics suggesting that the degree of
assurance for timely payment is adequate; however, near-term
adverse changes could cause these securities to be rated below
investment grade.

"F-S" Securities possess weak credit quality. Issues assigned this
rating have characteristics suggesting a minimal degree of
assurance for timely payment and are vulnerable to near-term
adverse changes in financial and economic conditions.

"D" Securities are in actual or imminent payment default.

Fitch may also use the symbol "LOC" with its short-term ratings to
indicate that the rating is based upon a letter of credit issued by a
commercial bank.

Thomson BankWatch short-term ratings assess the likelihood of an
untimely or incomplete payment of principal or interest of unsubordinated
instruments having a maturity of one year or less which ARE issued by United
States commercial banks, thrifts and non-bank banks; non-United States banks;
and broker-dealers. The following summarizes the ratings used by Thomson
BankWatch:

A-3
<PAGE> 60
"TBW-1" This designation represents Thomson BankWatch's highest rating
category and indicates a very high degree of likelihood that
principal and interest will be paid on a timely basis.

"TBW-2" This designation indicates that while the degree of safety
regarding timely payment of principal and interest is strong,
the relative degree of safety is not as high as for issues
rated "TBW-1."

"TBW-3" This designation represents the lowest investment grade
category and indicates that while the debt is more susceptible
to adverse developments (both internal and external) than
obligations with higher ratings, capacity to service principal
and interest in a timely fashion is considered adequate.

"TBW-4" This designation indicates that the debt is regarded as
non-investment grade and therefore speculative.

IBCA assesses the investment quality of unsecured debt with an
original maturity of less than one year which is issued by bank holding
companies and their principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for short-term debt ratings:

"A1+" Obligations supported by the highest capacity for timely
repayment.

"A1" OBLIGATIONS ARE SUPPORTED BY THE HIGHEST CAPACITY FOR TIMELY
REPAYMENT.

"A2" Obligations are supported by a satisfactory capacity for
timely repayment, ALTHOUGH SUCH CAPACITY MAY BE SUSCEPTIBLE TO
ADVERSE CHANGES IN BUSINESS, ECONOMIC OR FINANCIAL CONDITIONS.

"A3" OBLIGATIONS ARE SUPPORTED BY A SATISFACTORY CAPACITY FOR
TIMELY REPAYMENT. SUCH CAPACITY IS MORE SUSCEPTIBLE TO
ADVERSE CHANGES IN BUSINESS, ECONOMIC OR FINANCIAL CONDITIONS
THAN FOR OBLIGATIONS IN HIGHER CATEGORIES.

"B" OBLIGATIONS FOR WHICH THE CAPACITY FOR TIMELY REPAYMENT IS
SUSCEPTIBLE TO ADVERSE CHANGES IN BUSINESS, ECONOMIC OR
FINANCIAL CONDITIONS.

"C" Obligations for which there is an INADEQUATE capacity to
ensure timely repayment.

"D" Obligations which HAVE a high risk of default or which are
currently in default.

CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS

A-4
<PAGE> 61
The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt:

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

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

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

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

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

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

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

"CCC" Debt has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial and
economic conditions to meet timely

A-5
<PAGE> 62
payment of interest and repayment of principal. In the event
of adverse business, financial or economic conditions, it is
not likely to have the capacity to pay interest and repay
principal. The "CCC" rating category is also used for debt
subordinated to senior debt that is assigned an actual or
implied "B" or "B-" rating.

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

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

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

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

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

"r" This rating is attached to highlight derivative, hybrid, and
certain other obligations that S & P believes may experience
high volatility or high variability in expected returns due to
non-credit risks. Examples of such obligations are:
securities whose principal or interest return is indexed to
equities, commodities, or currencies; certain swaps and
options; and interest only and principal only mortgage
securities.

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

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

A-6
<PAGE> 63
"Aa" Bonds are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally
known as high-grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large as in
"Aaa" securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in
"Aaa" securities.

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

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

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

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

(P)... WHEN APPLIED TO FORWARD DELIVERY BONDS, INDICATES THAT THE
RATING IS PROVISIONAL PENDING DELIVERY OF THE BONDS. THE
RATING MAY BE REVISED PRIOR TO DELIVERY IF CHANGES OCCUR IN
THE LEGAL DOCUMENTS OR THE UNDERLYING CREDIT QUALITY OF THE
BONDS.

The following summarizes the long-term debt ratings used by Duff &
Phelps for corporate and municipal long-term debt:

"AAA" Debt is considered to be of the highest credit quality. The
risk factors are negligible, being only slightly more than for
risk-free U.S. Treasury debt.

A-7
<PAGE> 64
"AA" Debt is considered of high credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to
time because of economic conditions.

"A" Debt possesses protection factors which are average but
adequate. However, risk factors are more variable and greater
in periods of economic stress.

"BBB" Debt possesses below average protection factors but such
protection factors are still considered sufficient for prudent
investment. Considerable variability in risk is present
during economic cycles.

"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of these
ratings is considered to be below investment grade. Although below investment
grade, debt rated "BB" is deemed likely to meet obligations when due. Debt
rated "B" possesses the risk that obligations will not be met when due. Debt
rated "CCC" is well below investment grade and has considerable uncertainty as
to timely payment of principal, interest or preferred dividends. Debt rated
"DD" is a defaulted debt obligation, and the rating "DP" represents preferred
stock with dividend arrearages.

To provide more detailed indications of credit quality, the "AA," "A,"
"BBB," "BB" and "B" ratings may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within these major categories.

The following summarizes the highest four ratings used by Fitch for
corporate and municipal bonds:

"AAA" Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong
ability to pay interest and repay principal, which is unlikely
to be affected by reasonably foreseeable events.

"AA" Bonds considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and
repay principal is very strong, although not quite as strong
as bonds rated "AAA." Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these
issuers is generally rated "F-1+."

"A" Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more
vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.

"BBB" Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and
repay principal is considered to be

A-8
<PAGE> 65
adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have an adverse
impact on these bonds, and therefore, impair timely payment.
The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.

"BB," "B," "CCC," "CC," "C," "DDD," "DD," and "D" - Bonds that possess
one of these ratings are considered by Fitch to be speculative investments.
The ratings "BB" to "C" represent Fitch's assessment of the likelihood of
timely payment of principal and interest in accordance with the terms of
obligation for bond issues not in default. For defaulted bonds, the rating
"DDD" to "D" is an assessment of the ultimate recovery value through
reorganization or liquidation.

To provide more detailed indications of credit quality, the Fitch
ratings from and including "AA" to "C" may be modified by the addition of a
plus (+) or minus (-) sign to show relative standing within these major rating
categories.

IBCA assesses the investment quality of unsecured debt with an
original maturity of more than one year which is issued by bank holding
companies and their principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for long-term debt ratings:

"AAA" Obligations for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal
and interest is substantial such that adverse changes in
business, economic or financial conditions are unlikely to
increase investment risk substantially.

"AA" Obligations for which there is a very low expectation of
investment risk. Capacity for timely repayment of principal
and interest is substantial. Adverse changes in business,
economic or financial conditions may increase investment risk
albeit not very significantly.

"A" Obligations for which there is a low expectation of investment
risk. Capacity for timely repayment of principal and interest
is strong, although adverse changes in business, economic or
financial conditions may lead to increased investment risk.

"BBB" Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal
and interest is adequate, although adverse changes in
business, economic or financial conditions are more likely to
lead to increased investment risk than for obligations in
OTHER categories.

"BB," "B," "CCC," "CC," and "C" - Obligations are assigned one of
these ratings where it is considered that speculative characteristics are
present. "BB" represents the lowest degree of speculation and indicates a
possibility of investment risk developing. "C"

A-9
<PAGE> 66
represents the highest degree of speculation and indicates that the obligations
are currently in default.

IBCA may append a rating of plus (+) or minus (-) to a rating to
denote relative status within major rating categories.

Thomson BankWatch assesses the likelihood of an untimely repayment of
principal or interest over the term to maturity of long term debt and preferred
stock which are issued by United States commercial banks, thrifts and non-bank
banks; non-United States banks; and broker-dealers. The following summarizes
the rating categories used by Thomson BankWatch for long-term debt ratings:

"AAA" This designation represents the highest category assigned by
Thomson BankWatch to long-term debt and indicates that the
ability to repay principal and interest on a timely basis is
EXTREMELY high.

"AA" This designation indicates a VERY STRONG ability to repay
principal and interest on a timely basis with limited
incremental risk COMPARED TO issues rated in the highest
category.

"A" This designation indicates that the ability to repay principal
and interest is strong. Issues rated "A" could be more
vulnerable to adverse developments (both internal and
external) than obligations with higher ratings.

"BBB" This designation represents Thomson BankWatch's lowest
investment grade category and indicates an acceptable capacity
to repay principal and interest. Issues rated "BBB" are,
however, more vulnerable to adverse developments (both
internal and external) than obligations with higher ratings.

"BB," "B," "CCC," and "CC," - These designations are assigned by
Thomson BankWatch to non-investment grade long-term debt. Such issues are
regarded as having speculative characteristics regarding the likelihood of
timely payment of principal and interest. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation.

"D" This designation indicates that the long-term debt is in
default.

PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC" may
include a plus or minus sign designation which indicates where within the
respective category the issue is placed.

MUNICIPAL NOTE RATINGS

A-10
<PAGE> 67
A Standard and Poor's rating reflects the liquidity concerns and
market access risks unique to notes due in three years or less. The following
summarizes the ratings used by Standard & Poor's Ratings Group for municipal
notes:

"SP-1" The issuers of these municipal notes exhibit very strong or strong
capacity to pay principal and interest. Those issues determined to
possess overwhelming safety characteristics are given a plus (+)
designation.

"SP-2" The issuers of these municipal notes exhibit satisfactory capacity to
pay principal and interest.

"SP-3" The issuers of these municipal notes exhibit speculative capacity to
pay principal and interest.

Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade ("MIG") and variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG"). Such
ratings recognize the differences between short-term credit risk and long-term
risk. The following summarizes the ratings by Moody's Investors Service, Inc.
for short-term notes:

"MIG-1"/"VMIG-1" Loans bearing this designation are of the best
quality, enjoying strong protection by established
cash flows, superior liquidity support or
demonstrated broad-based access to the market for
refinancing.

"MIG-2"/"VMIG-2" Loans bearing this designation are of high quality,
with margins of protection ample although not so
large as in the preceding group.

"MIG-3"/"VMIG-3" Loans bearing this designation are of favorable
quality, with all security elements accounted for but
lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to
be less well established.

"MIG-4"/"VMIG-4" Loans bearing this designation are of adequate
quality, carrying specific risk but having protection
commonly regarded as required of an investment
security and not distinctly or predominantly
speculative.

"SG" Loans bearing this designation are of speculative
quality and lack margins of protection.

Fitch and Duff & Phelps use the short-term ratings described under
Commercial Paper Ratings for municipal notes.

A-11
<PAGE> 68

APPENDIX B

As stated in the Prospectus, the High Quality Bond Fund may enter
into futures transactions for hedging purposes.

I. Interest Rate Futures Contracts

Use of Interest Rate Futures Contracts. Bond prices are established
in both the cash market and the futures market. In the cash market, bonds are
purchased and sold with payment for the full purchase price of the bond being
made in cash, generally within five business days after the trade. In the
futures market, only a contract is made to purchase or sell a bond in the
future for a set price on a certain date. Historically, the prices for bonds
established in the futures markets have tended to move generally in the
aggregate in concert with the cash market prices and have maintained fairly
predictable relationships. Accordingly, the Fund may use interest rate futures
contracts as a defense, or hedge, against anticipated interest rate changes and
not for speculation. As described below, this would include the use of futures
contract sales to protect against expected increases in interest rates and
futures contract purchases to offset the impact of interest rate declines.

The Fund presently could accomplish a similar result to that which it
hopes to achieve through the use of futures contracts by selling bonds with
long maturities and investing in bonds with short maturities when interest
rates are expected to increase, or conversely, selling short-term bonds and
investing in long-term bonds when interest rates are expected to decline.
However, because of the liquidity that is often available in the futures
market, the protection is more likely to be achieved, perhaps at a lower cost
and without changing the rate of interest being earned by the Fund, through
using futures contracts.

Description of Interest Rate Futures Contracts. An interest rate
futures contract sale would create an obligation by the Fund, as seller, to
deliver the specific type of financial instrument called for in the contract at
a specific future time for a specified price. A futures contract purchase
would create an obligation by the Fund, as purchaser, to take delivery of the
specific type of financial instrument at a specific future time at a specific
price. The specific securities delivered or taken, respectively, at settlement
date, would not be determined until at or near that date. The determination
would be in accordance with the rules of the exchange on which the futures
contract sale or purchase was made.

Although interest rate futures contracts by their terms call for
actual delivery or acceptance of securities, in most cases the contracts are
closed out before the settlement date without

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the making or taking of delivery of securities. Closing out a futures contract
sale is effected by the Fund's entering into a futures contract purchase for
the same aggregate amount of the specific type of financial instrument and the
same delivery date. If the price of the sale exceeds the price of the
offsetting purchase, the Fund immediately is paid the difference and thus
realizes a gain. If the offsetting purchase price exceeds the sale price, the
Fund pays the difference and realizes a loss. Similarly, the closing out of a
futures contract purchase is effected by the Fund entering into a futures
contract sale. If the offsetting sale price exceeds the purchase price, the
Fund realizes a gain, and if the purchase price exceeds the offsetting sale
price, the Fund realizes a loss.

Interest rate futures contracts are traded in an auction environment
on the floors of several exchanges -- principally, the Chicago Board of Trade,
the Chicago Mercantile Exchange and the New York Futures Exchange. The Fund
would deal only in standardized contracts on recognized exchanges. Each
exchange guarantees performance under contract provisions through a clearing
corporation, a nonprofit organization managed by the exchange membership.

A public market now exists in futures contracts covering various
financial instruments including long-term United States Treasury Bonds and
Notes; Government National Mortgage Association (GNMA) modified pass-through
mortgage backed securities; three-month United States Treasury Bills; and
ninety-day commercial paper. The Fund may trade in any interest rate futures
contracts for which there exists a public market, including, without
limitation, the foregoing instruments.

Example of Futures Contract Sale. The Fund would engage in an
interest rate futures contract sale to maintain the income advantage from
continued holding of a long-term bond while endeavoring to avoid part or all of
the loss in market value that would otherwise accompany a decline in long-term
securities prices. Assume that the market value of a certain security held by
the Fund tends to move in concert with the futures market prices of long-term
United States Treasury bonds ("Treasury bonds"). The adviser wishes to fix the
current market value of this portfolio security until some point in the future.
Assume the portfolio security has a market value of 100, and the adviser
believes that, because of an anticipated rise in interest rates, the value will
decline to 95. The Fund might enter into futures contract sales of Treasury
bonds for an equivalent of 98. If the market value of the portfolio security
does indeed decline from 100 to 95, the equivalent futures market price for the
Treasury bonds might also decline from 98 to 93.

In that case, the five point loss in the market value of the portfolio
security would be offset by the five point gain

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realized by closing out the futures contract sale. Of course, the futures
market price of Treasury bonds might well decline to more than 93 or to less
than 93 because of the imperfect correlation between cash and futures prices
mentioned below.

The adviser could be wrong in its forecast of interest rates and the
equivalent futures market price could rise above 98. In this case, the market
value of the portfolio securities, including the portfolio security being
protected, would increase. The benefit of this increase would be reduced by
the loss realized on closing out the futures contract sale.

If interest rate levels did not change, the Fund in the above example
might incur a loss of 2 points (which might be reduced by an offsetting
transaction prior to the settlement date). In each transaction, transaction
expenses would also be incurred.

Example of Futures Contract Purchase. The Fund would engage in an
interest rate futures contract purchase when it is not fully invested in
long-term bonds but wishes to defer for a time the purchase of long-term bonds
in light of the availability of advantageous interim investments, e.g., shorter
term securities whose yields are greater than those available on long-term
bonds. The Fund's basic motivation would be to maintain for a time the income
advantage from investing in the short-term securities; the Fund would be
endeavoring at the same time to eliminate the effect of all or part of an
expected increase in market price of the long-term bonds that the Fund may
purchase.

For example, assume that the market price of a long-term bond that the
Fund may purchase, currently yielding 10%, tends to move in concert with
futures market prices of Treasury bonds. The adviser wishes to fix the current
market price (and thus 10% yield) of the long-term bond until the time (four
months away in this example) when it may purchase the bond. Assume the
long-term bond has a market price of 100, and the adviser believes that,
because of an anticipated fall in interest rates, the price will have risen to
105 (and the yield will have dropped to about 9 1/2%) in four months. The Fund
might enter into futures contracts purchases of Treasury bonds for an
equivalent price of 98. At the same time, the Fund would assign a pool of
investments in short-term securities that are either maturing in four months or
earmarked for sale in four months, for purchase of the long-term bond at an
assumed market price of 100. Assume these short-term securities are yielding
15%. If the market price of the long-term bond does indeed rise from 100 to
105, the equivalent futures market price for Treasury bonds might also rise
from 98 to 103. In that case, the 5 point increase in the price that the Fund
pays for the long-term bond would be offset by the 5 point gain realized by
closing out the futures contract purchase.

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The adviser could be wrong in its forecast of interest rates;
long-term interest rates might rise to above 10%; and the equivalent futures
market price could fall below 98. If short-term rates at the same time fall to
10% or below, it is possible that the Fund would continue with its purchase
program for long-term bonds. The market price of available long-term bonds
would have decreased. The benefit of this price decrease, and thus yield
increase, will be reduced by the loss realized on closing out the futures
contract purchase.

If, however, short-term rates remained above available long-term
rates, it is possible that the Fund would discontinue its purchase program for
long-term bonds. The yield on short-term securities in the portfolio,
including those originally in the pool assigned to the particular long-term
bond, would remain higher than yields on long-term bonds. The benefit of this
continued incremental income will be reduced by the loss realized on closing
out the futures contract purchase. In each transaction, expenses would also be
incurred.

II. Margin Payments

Unlike purchases or sales of portfolio securities, no price is paid or
received by the Fund upon the purchase or sale of a futures contract.
Initially, the Fund will be required to deposit with the broker or in a
segregated account with the Trust's custodian an amount of cash or cash
equivalents, known as initial margin, based on the value of the contract. The
nature of initial margin in futures transactions is different from that of
margin in security transactions in that futures contract margin does not
involve the borrowing of funds by the customer to finance the transactions.
Rather, the initial margin is in the nature of a performance bond or good faith
deposit on the contract which is returned to the Fund upon termination of the
futures contract assuming all contractual obligations have been satisfied.
Subsequent payments, called variation margin, to and from the broker, will be
made on a daily basis as the price of the underlying instruments fluctuates
making the long and short positions in the futures contract more or less
valuable, a process known as marking-to-the-market. For example, when the Fund
has purchased a futures contract and the price of the contract has risen in
response to a rise in the underlying instruments, that position will have
increased in value and the Fund will be entitled to receive from the broker a
variation margin payment equal to that increase in value. Conversely, where
the Fund has purchased a futures contract and the price of the future contract
has declined in response to a decrease in the underlying instruments, the
position would be less valuable and the Fund would be required to make a
variation margin payment to the broker. At any time prior to expiration of the
futures contract, the adviser may elect to close the position by taking an
opposite position, subject to the availability of a secondary

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market, which will operate to terminate the Fund's position in the futures
contract. A final determination of variation margin is then made, additional
cash is required to be paid by or released to the Fund, and the Fund realizes a
loss or gain.

III. Risks of Transactions in Futures Contracts

There are several risks in connection with the use of futures by the
High Quality Bond Fund as hedging devices. One risk arises because of the
imperfect correlation between movements in the price of the futures and
movements in the price of the instruments which are the subject of the hedge.
The price of the futures may move more than or less than the price of the
instruments being hedged. If the price of the futures moves less than the
price of the instruments which are the subject of the hedge, the hedge will not
be fully effective but, if the price of the instruments being hedged has moved
in an unfavorable direction, the Fund would be in a better position than if it
had not hedged at all. If the price of the instruments being hedged has moved
in a favorable direction, this advantage will be partially offset by the loss
on the futures. If the price of the futures moves more than the price of the
hedged instruments, the Fund will experience either a loss or gain on the
futures which will not be completely offset by movements in the price of the
instruments which are the subject of the hedge. To compensate for the
imperfect correlation of movements in the price of instruments being hedged and
movements in the price of futures contracts, the Fund may buy or sell futures
contracts in a greater dollar amount than the dollar amount of instruments
being hedged if the volatility over a particular time period of the prices of
such instruments has been greater than the volatility over such time period of
the futures, or if otherwise deemed to be appropriate by the investment
adviser. Conversely, the Fund may buy or sell fewer futures contracts if the
volatility over a particular time period of the prices of the instruments being
hedged is less than the volatility over such time period of the futures
contract being used, or if otherwise deemed to be appropriate by the Investment
Adviser. It is also possible that, where the Fund had sold futures to hedge
its portfolio against a decline in the market, the market may advance and the
value of instruments held in the Fund may decline. If this occurred, the Fund
would lose money on the futures and also experience a decline in value in its
portfolio securities.

Where futures are purchased to hedge against a possible increase in
the price of securities before the Fund is able to invest its cash (or cash
equivalents) in an orderly fashion, it is possible that the market may decline
instead; if the Fund then concludes not to invest its cash at that time because
of concern as to possible further market decline or for other reasons, the Fund
will realize a loss on the futures contract that is not

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offset by a reduction in the price of the instruments that were to be
purchased.

In instances involving the purchase of futures contracts by the Fund,
an amount of cash and cash equivalents, equal to the market value of the
futures contracts, will be deposited in a segregated account with the Trust's
custodian and/or in a margin account with a broker to collateralize the
position and thereby insure that the use of such futures is unleveraged.

In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the futures and the
instruments being hedged, the price of futures may not correlate perfectly with
movement in the cash market due to certain market distortions. Rather than
meeting additional margin deposit requirements, investors may close futures
contracts through off-setting transactions which could distort the normal
relationship between the cash and futures markets. Second, with respect to
financial futures contracts, the liquidity of the futures market depends on
participants entering into off-setting transactions rather than making or
taking delivery. To the extent participants decide to make or take delivery,
liquidity in the futures market could be reduced thus producing distortions.
Third, from the point of view of speculators, the deposit requirements in the
futures market are less onerous than margin requirements in the securities
market. Therefore, increased participation by speculators in the futures
market may also cause temporary price distortions. Due to the possibility of
price distortion in the futures market, and because of the imperfect
correlation between the movements in the cash market and movements in the price
of futures, a correct forecast of general market trends or interest rate
movements by the adviser may still not result in a successful hedging
transaction over a short time frame.

Positions in futures may be closed out only on an exchange or board of
trade which provides a secondary market for such futures. Although the High
Quality Bond Fund intends to purchase or sell futures only on exchanges or
boards of trade where there appear to be active secondary markets, there is no
assurance that a liquid secondary market on any exchange or board of trade will
exist for any particular contract or at any particular time. In such event, it
may not be possible to close a futures investment position, and in the event of
adverse price movements, the Fund would continue to be required to make daily
cash payments of variation margin. However, in the event futures contracts
have been used to hedge portfolio securities, such securities will not be sold
until the futures contract can be terminated. In such circumstances, an
increase in the price of the securities, if any, may partially or completely
offset losses on the futures contract. However, as described above, there is
no guarantee that the price of the securities will in fact correlate with the

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price movements in the futures contract and thus provide an offset on a futures
contract.

Further, it should be noted that the liquidity of a secondary market
in a futures contract may be adversely affected by "daily price fluctuation
limits" established by commodity exchanges which limit the amount of
fluctuation in a futures contract price during a single trading day. Once the
daily limit has been reached in the contract, no trades may be entered into at
a price beyond the limit, thus preventing the liquidation of open futures
positions. The trading of futures contracts is also subject to the risk of
trading halts, suspensions, exchange or clearing house equipment failures,
government intervention, insolvency of a brokerage firm or clearing house or
other disruptions of normal activity, which could at times make it difficult or
impossible to liquidate existing positions or to recover excess variation
margin payments.

Successful use of futures by the High Quality Bond Fund is also
subject to the adviser's ability to predict correctly movements in the
direction of the market. For example, if the Fund has hedged against the
possibility of a decline in the market adversely affecting securities held by
it and securities prices increase instead, the Fund will lose part or all of
the benefit to the increased value of its securities which it has hedged
because it will have offsetting losses in its futures positions. In addition,
in such situations, if the Fund has insufficient cash, it may have to sell
securities to meet daily variation margin requirements. Such sales of
securities may be, but will not necessarily be, at increased prices which
reflect the rising market. The Fund may have to sell securities at a time when
it may be disadvantageous to do so.

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FINANCIAL STATEMENTS

The audited financial statements for the Money Market, Equity, Asset
Allocation, and High Quality Bond Funds and notes thereto in Galaxy VIP's Annual
Report to Shareholders for the fiscal year ended December 31, 1995 (the "1995
Annual Report") are incorporated in this Statement of Additional Information by
reference. No other parts of the 1995 Annual Report are incorporated by
reference herein. The financial statements included in the 1995 Annual Report
have been audited by the Fund's independent accountants, Coopers & Lybrand
L.L.P., whose reports thereon are incorporated herein by reference. Such
financial statements have been incorporated herein in reliance upon such report
given upon their authority as experts in accounting and auditing. Additional
copies of the 1995 Annual Report may be obtained at no charge by telephoning
the Fund at 800-628-0414.

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