GALAXY VIP FUND, 485APOS, 1999-02-26

GALAXY VIP FUND
485APOS, 1999-02-26

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<PAGE>

As filed with the Securities and Exchange Commission on February 26, 1999
Securities Act File No. 33-49290
Investment Company Act File No. 811-6726

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/

Pre-Effective Amendment No.
Post-Effective Amendment No. 8 /x/

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. 10 /x/

The Galaxy VIP Fund
(Exact Name of Registrant as Specified in Charter)
4400 Computer Drive
Westborough, Massachusetts 01581
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (800) 628-0414

W. Bruce McConnel, III
DRINKER BIDDLE & REATH LLP
1345 Chestnut Street, Suite 1100
Philadelphia, Pennsylvania 19107
(Name and Address of Agent for Service)

Copies to:
Jylanne Dunne, Vice President
First Data Investor Services Group, Inc.
4400 Computer Drive
P.O. Box 5108
Westborough, Massachusetts 01581

It is proposed that this filing will become effective (check appropriate box)

/ / immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/x/ 60 days after filing pursuant to paragraph (a)(i)
/ / on (date) pursuant to paragraph (a)(i)
/ / 75 days after filing pursuant to paragraph (a)(ii)
/ / on (date) pursuant to paragraph (a)(ii) of rule 485.

If appropriate, check the following box:

/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

Title of Securities Being Registered: Shares of beneficial interest.

<PAGE>

[Front cover page]

The Galaxy VIP Fund

Prospectus
April ___, 1999

Money Market Fund

Equity Fund

Growth and Income Fund

Small Company Growth Fund

Columbia Real Estate Equity Fund II

Asset Allocation Fund

High Quality Bond Fund

Columbia High Yield Fund II

As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved any shares of these Funds or determined if this
prospectus is accurate or complete. Anyone who tells you otherwise is
committing a crime.

<PAGE>

Contents

Risk/return summary. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Money Market Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Growth and Income Fund . . . . . . . . . . . . . . . . . . . . . . . . .
Small Company Growth Fund. . . . . . . . . . . . . . . . . . . . . . . .
Columbia Real Estate Equity Fund II. . . . . . . . . . . . . . . . . . .
Asset Allocation Fund. . . . . . . . . . . . . . . . . . . . . . . . . .
High Quality Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . .
Columbia High Yield Fund II. . . . . . . . . . . . . . . . . . . . . . .
Additional information about risk. . . . . . . . . . . . . . . . . . . .

Fund management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

How to invest in the Funds . . . . . . . . . . . . . . . . . . . . . . . .
Pricing of shares. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buying and selling shares. . . . . . . . . . . . . . . . . . . . . . . .

Dividends, distributions and taxes . . . . . . . . . . . . . . . . . . . .

Financial highlights . . . . . . . . . . . . . . . . . . . . . . . . . . .

-i-
<PAGE>

RISK/RETURN SUMMARY

INTRODUCTION

This Prospectus describes the investment portfolios (the "Funds") of The Galaxy
VIP Fund ("Galaxy VIP"). Shares of the Funds may be offered only to various
life insurance companies to fund benefits under their variable annuity contracts
and variable life insurance policies. As of the date of this Prospectus, shares
of the Funds are offered only to American Skandia Life Assurance Corporation and
its affiliated life insurance companies to fund benefits under their variable
annuity contracts.

Beginning on the next page, you'll find the following important information
about each Fund:

- - The Fund's investment objective (sometimes called the Fund's goal) and the
main investment strategies used by the Fund's investment adviser in trying
to achieve that objective
- - The main risks associated with an investment in the Fund
- - The Fund's past performance measured on both a year-by-year and long-term
basis

THE FUNDS' INVESTMENT ADVISERS

Fleet Investment Advisors Inc. ("Fleet") is the investment adviser for the Money
Market Fund, Equity Fund, Growth and Income Fund, Small Company Growth Fund,
Asset Allocation Fund and High Quality Bond Fund. Fleet was established in 1984
and has its main office at 75 State Street, Boston, Massachusetts 02109. Fleet
also provides investment management and advisory services to individual and
institutional clients and manages the portfolios of The Galaxy Fund and Galaxy
Fund II.

Columbia Management Co. ("Columbia") serves as investment adviser to the
Columbia Real Estate Equity Fund II and Columbia High Yield Fund II. Columbia
was established in 1969 and has its main office at 1300 S.W. Sixth Avenue, P.O.
Box 1350, Portland, Oregon 97207. Columbia also manages the investment
portfolios of Columbia Funds.

Fleet and Columbia are indirect wholly-owned subsidiaries of Fleet Financial
Group, Inc., a registered bank holding company with total assets of
approximately $_____ at December 31, 1998.

[Sidenote:]
An investment in the Funds isn't a Fleet Bank deposit and it isn't insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Money Market Fund seeks to preserve the value of your
investment at $1.00 per share, it's possible to lose money by investing in the
Fund. You could also lose money by investing in any of the other Funds.

<PAGE>

Money Market Fund

THE FUND'S INVESTMENT OBJECTIVE

The Fund seeks as high a level of current income as is consistent with liquidity
and stability of principal.

THE FUND'S MAIN INVESTMENT STRATEGIES

The Fund invests in a diversified portfolio of money market instruments,
including commercial paper, notes and bonds issued by U.S. corporations,
obligations issued by the U.S. Government and its agencies and
instrumentalities, and obligations issued by U.S. and foreign banks, such as
certificates of deposit. The Fund also invests in repurchase agreements backed
by U.S. Government obligations.

[Sidenote:]
MONEY MARKET INSTRUMENTS are short-term debt obligations issued by banks,
corporations, the U.S. Government and state and local governments. Money market
instruments purchased by the Money Market Fund must meet strict requirements as
to investment quality, maturity and diversification. The Fund does not invest
in securities with remaining maturities of more than 397 days (subject to
certain exceptions) and the average maturity of all securities held by the Fund
must be 90 days or less. Prior to purchasing a money market instrument for the
Fund, Fleet must determine that the instrument carries very little risk.

[Sidenote:]
REPURCHASE AGREEMENTS are transactions in which a Fund buys securities from a
seller (usually a bank or broker-dealer) who agrees to buy them back from the
Fund on a certain date and at a certain price.

The Fund will only buy a security if it has the highest short-term rating from
at least two nationally recognized statistical rating organizations, or one such
rating if only one organization has rated the security. If the security is not
rated, it must be determined by the Adviser to be of comparable credit quality.

THE MAIN RISKS OF INVESTING IN THE FUND

While money market funds are considered to be among the safest of all
investments, they are not risk free. Here are the main risks associated with an
investment in the Fund:

- - INTEREST RATE RISK: The yield paid by the Fund will vary with changes in
short-term interest rates.

-2-
<PAGE>

- - CREDIT RISK: Although credit risk is very low because the Fund only invests
in high quality obligations, if an issuer fails to pay interest or repay
principal, the value of your investment could decline.
- - REPURCHASE AGREEMENTS: Repurchase agreements carry the risk that the other
party may not fulfill its obligations under the agreement. This could
cause the value of your investment to decline.
- - SHARE PRICE: There's no guarantee the Fund will be able to preserve the
value of your investment at $1.00 per share.
- - SELECTION OF INVESTMENTS: Fleet evaluates the risks and rewards presented
by all securities purchased by the Fund and how they advance the Fund's
investment objective. It's possible, however, that these evaluations will
prove to be inaccurate.

HOW THE FUND HAS PERFORMED

The bar chart and table below show how the Fund has performed in the past. Both
assume that all dividends and distributions are reinvested in the Fund. How the
Fund has performed in the past doesn't necessarily show how it will perform in
the future.

The returns set forth below include the effect of deducting the Fund's expenses,
but do not include the charges and expenses attributable to a particular
variable annuity contract or variable life insurance policy. You should
carefully review the prospectus for the variable annuity contract or variable
life insurance policy you have chosen for information on relevant charges and
expenses. Including these charges and expenses would reduce the Fund's returns.

YEAR-BY-YEAR RETURNS

The bar chart shows how the performance of the Fund has varied from year to
year, thereby giving some indication of the risk of investing in the Fund.

[bar chart goes here]

Best quarter:--% for the quarter ending Month, Day, Year
Worst quarter:--% for the quarter ending Month, Day, Year

-3-
<PAGE>

AVERAGE ANNUAL TOTAL RETURNS

The table shows the Fund's average annual total returns for the periods ended
December 31, 1998.

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Since inception
1 year 5 years on February 2, 1993
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<S> <C> <C> <C>
- ---------------------------------------------------------------------------
Money Market Fund --% --% --%
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</TABLE>

To obtain the Fund's current 7-day yield, please call 1-877-BUY-GALAXY
(1-877-289-4252).

-4-
<PAGE>

Equity Fund

THE FUND'S INVESTMENT OBJECTIVE

The Fund seeks long-term growth by investing in companies that the Fund's
investment adviser believes have above-average earnings potential.

THE FUND'S MAIN INVESTMENT STRATEGIES

The Fund normally invests at least 75% of its total assets in a broadly
diversified portfolio of equity securities issued by U.S. companies, primarily
common stocks and securities that can be converted into common stocks.

The Fund invests mainly in companies which Fleet believes will have faster
earnings growth than the economy in general. Fleet looks for
large-capitalization companies (generally over $2 billion) in growing
industries, focusing on technological advances, good product development, strong
management and other factors which support future growth. Fleet seeks out
companies that have a history of strong earnings growth and are projected to
continue a similar pattern of growth over the next three to five years.

The Fund will sell a security when there is an adverse change in the projected
earnings growth of the company issuing the security. A security will also be
sold when, as a result of changes in the economy or the performance of the
security in certain circumstances, Fleet believes that holding the security is
no longer consistent with the Fund's investment objective.

[Sidenote:]
GROWTH STOCKS
Growth stocks offer strong revenue and earnings potential, and accompanying
capital growth, with less dividend income than value stocks.

THE MAIN RISKS OF INVESTING IN THE FUND

Changes in the U.S. or foreign economies can cause the value of stocks and other
investments held by the Fund to fall. Stock prices may decline over short or
extended periods. Stock markets tend to move in cycles, with periods of rising
prices and periods of falling prices.

The value of your investment in the Fund will go up and down with the value of
the investments which the Fund holds. The Fund's investments may not perform as
well as other investments, even in times of rising markets.

In addition, the Fund also carries the following main risks:

-5-
<PAGE>

- - CONVERTIBLE SECURITIES: Securities that can be converted into common stock,
such as certain debt securities and preferred stock, are subject to the
usual risks associated with fixed income investments, such as interest rate
risk and credit risk. In addition, because they react to changes in the
value of the equity securities into which they will convert, convertible
securities are also subject to stock market risk.
- - SELECTION OF INVESTMENTS: Fleet evaluates the risks and rewards presented
by all securities purchased by the Fund and how they advance the Fund's
investment objective. It's possible, however, that these evaluations will
prove to be inaccurate.

HOW THE FUND HAS PERFORMED

YEAR-BY-YEAR RETURNS

The bar chart shows how the performance of the Fund has varied from year to
year, thereby giving some indication of the risk of investing in the Fund.

[bar chart goes here]

Best quarter:--% for the quarter ending Month, Day, Year
Worst quarter:--% for the quarter ending Month, Day, Year

AVERAGE ANNUAL TOTAL RETURNS

The table shows the Fund's average annual total returns for the periods ended
December 31, 1998 as compared to a broad-based market index.

- ---------------------------------------------------------------------------
Since inception
1 year 5 years on January 11, 1993
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Equity Fund --% --% --%
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S&P 500* --% --% --%
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</TABLE>

-6-
<PAGE>

* The Standard & Poor's 500 Composite Stock Price Index (commonly referred to
as the S&P 500) is an unmanaged index that tracks the performance of 500
widely held common stocks listed on the New York Stock Exchange, the
American Stock Exchange and NASDAQ. The S&P 500 is heavily weighted with
the stocks of large companies.

[Sidenote:]
PORTFOLIO MANAGER

The Fund's portfolio manager is Robert G. Armknecht, CFA, an Executive Vice
President of Fleet since 1988. He's primarily responsible for the day-to-day
management of the Fund's investment portfolio. Mr. Armknecht has been the
Fund's portfolio manager since July 1998. He has been with Fleet and its
predecessors since 1988.

-7-
<PAGE>

Growth and Income Fund

THE FUND'S INVESTMENT OBJECTIVE

The Fund seeks to provide a relatively high total return through long-term
capital appreciation and current income.

[Sidenote:]
CURRENT INCOME

Current income includes both dividends from stocks and interest income from
fixed income securities, less Fund expenses.

THE FUND'S MAIN INVESTMENT STRATEGIES

The Fund normally invests at least 65% of its total assets in the common stocks
of U.S. companies with large market capitalizations (generally over $2.0
billion) that have prospects for above-average growth and dividends. Fleet
focuses on stocks which are believed to be attractively priced relative to
expectations for the future performance of the issuing company. Fleet also
seeks a current yield greater than that of the S&P 500, although not all Fund
investments will pay dividends.

The Fund will sell a portfolio security when, as a result of changes in the
economy, Fleet believes that holding the security is no longer consistent with
the Fund's investment objective. A security may also be sold as a result of a
deterioration in the performance of the security or in the financial condition
of the issuer of the security.

[Sidenote:]
MARKET CAPITALIZATION
A company's market capitalization is the price of a share of its stock,
multiplied by the number of shares held by investors.

THE MAIN RISKS OF INVESTING IN THE FUND

In addition, the Fund also carries the following main risk:

-8-
<PAGE>

- - SELECTION OF INVESTMENTS: Fleet evaluates the risks and rewards presented
by all securities purchased by the Fund and how they advance the
Fund's investment objective. It's possible, however, that these
evaluations will prove to be inaccurate.

HOW THE FUND HAS PERFORMED

The Fund doesn't have a long-term performance record since it has been in
operation for less than one calendar year.

[Sidenote:]
PORTFOLIO MANAGER

The Fund's portfolio manager is Gregory M. Miller, a Vice President of Fleet
since 1996. He's been primarily responsible for the day-to-day management of
the Fund's investment portfolio since July of 1998. Before that, Mr. Miller
assisted in managing Fleet's other growth and income equity products for seven
years. He joined Fleet in 1985.

-9-
<PAGE>

Small Company Growth Fund

THE FUND'S INVESTMENT OBJECTIVE

The Fund seeks capital appreciation.

THE FUND'S MAIN INVESTMENT STRATEGIES

The Fund normally invests at least 65% of its total assets in the equity
securities, primarily common stocks, of small companies that have market
capitalizations of $1.5 billion or less. The Fund invests primarily in the
common stock of U.S. companies, but may invest up to 20% of its total assets in
foreign equity securities.

In selecting investments for the Fund, Fleet looks for promising industries. It
then looks within those industries for what are judged to be reasonably priced
companies that have above-average growth potential. Fleet consults a wide range
of sources, including management, competitors, other industry sources and
regional brokerage analysts.

[Sidenote:]
MARKET CAPITALIZATION
A company's market capitalization is the price of a share of its stock,
multiplied by the number of shares held by investors.

[Sidenote:]
GROWTH STOCKS
Growth stocks offer strong revenue and earnings potential, and accompanying
capital growth, with less dividend income than value stocks.

THE MAIN RISKS OF INVESTING IN THE FUND

-10-
<PAGE>

- - SMALL COMPANIES RISK: Smaller companies tend to have limited resources,
product lines and market share. As a result, their share prices tend to
fluctuate more than those of larger companies. Their shares may also trade
less frequently and in limited volume, making them potentially less liquid.
The price of small company stocks might fall regardless of trends in the
broader market.
- - FOREIGN INVESTMENTS: Foreign investment may be riskier than U.S.
investments because of factors such as foreign government restrictions,
changes in currency exchange rates, incomplete financial information about
the issuers of securities, and political or economic instability. Foreign
stocks may be more volatile and less liquid than U.S. stocks.
- - SELECTION OF INVESTMENTS: Fleet evaluates the risks and rewards presented
by all securities purchased by the Fund and how they advance the Fund's
investment objective. It's possible, however, that these evaluations will
prove to be inaccurate.

HOW THE FUND HAS PERFORMED

The Fund doesn't have a long-term performance record since it has been in
operation for less than one calendar year.

[Sidenote:]
PORTFOLIO MANAGER

The Fund's portfolio manager is Stephen D. Barbaro, CFA, a Senior Vice President
of Fleet since 1996. He's primarily responsible for the day-to-day management
of the Fund's investment portfolio. Mr. Barbaro has been the Fund's portfolio
manager since it commenced operations in April 1998. He has been in the
investment management business with Fleet and its predecessors since 1976.

-11-
<PAGE>

Columbia Real Estate Equity Fund II

THE FUND'S INVESTMENT OBJECTIVE

The Fund seeks, with equal emphasis, capital appreciation and above-average
current income by investing primarily in the equity securities of companies in
the real estate industry.

THE FUND'S MAIN INVESTMENT STRATEGIES

The Fund normally invests at least 65% of its total assets in the equity
securities, primarily common stocks, of companies principally engaged in the
real estate industry, primarily real estate investment trusts ("REITs"). The
Fund invests primarily in the securities of U.S. companies, although it may
invest up to 20% of its total assets in foreign companies that are principally
engaged in the real estate industry.

[Sidenote:]
REITS pool investors' funds for investment primarily in real estate or related
loans. REITs are usually classified as either equity REITs, mortgage REITs or
hybrid REITs. Equity REITs invest directly in real estate and derive most of
their income from rental and lease payments, although the can also realize
capital gains by selling real estate that has appreciated in value. Mortgage
REITs make loans to commercial real estate developers and derive most of their
income from interest payments on the loans. Hybrid REITs combine the
characteristics of both equity REITs, and mortgage REITs.

In selecting portfolio securities for the Fund, Columbia focuses on total
return, with an emphasis on growth companies that offer both a strong balance
sheet and a dividend yield exceeding that of the S&P 500. The Fund's holdings
are diversified across several geographic regions and types of real estate.

The Fund will sell a portfolio security when, as a result of changes in the
economy or the performance of the security or other circumstances, Columbia
believes that holding the security is no longer consistent with the Fund's
investment objective.

[Sidenote:]
TOTAL RETURN consists of net income (dividend and/or interest income from
portfolio securities, less expenses of the Fund) and capital gains and losses,
both realized and unrealized, from portfolio securities.

THE MAIN RISKS OF INVESTING IN THE FUND

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<PAGE>

In addition, the Fund also carries the following main risks:

- - REAL ESTATE SECURITIES GENERALLY: Although the Fund will not invest in
real estate directly, it may be subject to risks similar to those
associated with the direct ownership of real estate because of its policy
of concentration in the securities of companies in the real estate
industry. These risks include declines in the value of real estate,
possible lack of availability of mortgage funds, overbuilding, extended
vacancies of properties, increases in property taxes and operating
expenses, changes in zoning laws, changes in neighborhood values, and
changes in interest rates. These risks may be more significant to the
extent the Fund's investments are concentrated in a particular geographic
region.
- - REITS: REITs are also subject to the risks associated with direct
ownership of real estate. Generally, an increase in interest rates will
decrease the value of high yielding securities and increase the cost of
obtaining financing, which could decrease the value of a REIT's
investments. Equity REITs may be affected by changes in the value of the
underlying property owned by the REIT, while mortgage REITs may be affected
by the quality of any credit extended. REITs are dependent upon management
skills, may not be diversified and are subject to heavy cash flow
dependency and defaults of borrowers. In addition, because REITs pay
dividends to their shareholders based upon available funds from operations,
it is quite common for a portion of these dividends to be designated as a
return of capital. Since the Fund includes dividends from REITs in its
distributions to shareholders, a portion of the Fund's dividends may also
be designated as a return of capital.
- - FOREIGN INVESTMENTS: Foreign investments may be riskier than U.S.
investments because of factors such as foreign government restrictions,
changes in currency exchange rates, incomplete financial information about
the issuers of securities, and political or economic instability. Foreign
stocks may be more volatile and less liquid than U.S. stocks.
- - SELECTION OF INVESTMENTS: Columbia evaluates the risks and rewards
presented by all securities purchased by the Fund and how they advance the
Fund's investment objective. It's possible, however, that these
evaluations will prove to be inaccurate.

HOW THE FUND HAS PERFORMED

The Fund doesn't have a long-term performance record since it has been in
operation for less than one calendar year.

[Sidenote:]
PORTFOLIO MANAGER

The Fund's portfolio manager is David W. Jellison, CFA, a Senior Vice President
of Columbia. He's primarily responsible for the day-to-day management of the
Fund's investment portfolio.

-13-
<PAGE>

Mr. Jellison has been the Fund's portfolio manager since it began operations in
March 1998. Prior to joining Columbia in 1992, Mr. Jellison was a Senior
Research Associate for RCM Capital Management.

-14-
<PAGE>

Asset Allocation Fund

THE FUND'S INVESTMENT OBJECTIVE

The Fund seeks a high total return by providing both a current level of income
that is greater than that provided by the popular stock market averages, as well
as long-term growth in the value of the Fund's assets.

[Sidenote:]
CURRENT INCOME
Current income includes both dividends from stocks and interest income from
fixed income securities, less Fund expenses.

THE FUND'S MAIN INVESTMENT STRATEGIES

The Fund aims to provide income that is higher than that provided by the popular
stock market averages. Fleet interprets this to mean the Dow Jones Industrial
Average of 30 major companies and the S&P 500. Due to the Fund's expenses,
however, net income paid to investors may be less than that. The Fund also
seeks long-term growth in the value of its assets. Fleet attempts to achieve
these goals and reduce risk by allocating the Fund's assets among short-term
debt securities, common stocks, preferred stocks and bonds.

The Fund seeks a mix of stocks and bonds that will produce both income and
long-term capital growth. This mix will change from time to time as a result of
economic and market conditions. However, the Fund keeps at least 25% of its
total assets in fixed income investments, including debt securities and
preferred stocks, at all times.

Debt securities purchased by the Fund will be of investment grade quality, which
means that they will have one of the top four ratings assigned by Standard &
Poor's Ratings Group ("S&P") or Moody's Investors Service, Inc. ("Moody's") or
will be unrated securities which Fleet has determined to be of comparable
quality. Occasionally, the rating of a security held by the Fund may be
downgraded below investment grade. If that happens, the Fund doesn't have to
sell the security unless Fleet determines the under the circumstances the
security is no longer an appropriate investment for the Fund.

In selecting portfolio securities for the Fund, Fleet's investment policy
committee develops an economic outlook and sets guidelines for the industries
and sectors in which the Fund should invest. It also forecasts the direction
and degree of change in long-term interest rates to help in the selection of
fixed income securities.

The Fund will sell a security when, as a result of changes in the economy, Fleet
determines it appropriate to revise the allocation of the Fund's assets between
stocks and bonds. A security

-15-
<PAGE>

may also be sold as a result of a deterioration in the performance of the
security or in the financial condition of the issuer of the security.

THE MAIN RISKS OF INVESTING IN THE FUND

In addition, the Fund also carries the following main risks:

- - INTEREST RATE RISK: The value of fixed income investments such as bonds are
affected by movements in interest rates. Bond prices tend to fall when
interest rates rise and to rise when interest rates fall. Generally, the
longer the time until maturity, the more sensitive the price of a bond is
to interest rate changes.
- - CREDIT RISK: The value of fixed income investments also depends on the
ability of an issuer to make principal and interest payments. If an issuer
can't meet its payment obligations or if its credit rating is lowered, the
value of its securities will decline. Debt securities which have the
lowest of the top four ratings assigned by S&P or Moody's have speculative
characteristics. Changes in the economy are more likely to affect the
ability of the issuers of these securities to make payments of principal
and interest than is the case with higher-rated securities.
- - PREPAYMENT/EXTENSION RISK: Changes in interest rates may cause certain
fixed income investments held by the Fund to be paid off much sooner or
later than expected, which could adversely affect the Fund's value.
- - PORTFOLIO COMPOSITION: The level of risk could increase if a larger
percentage of the Fund is invested in one particular asset class, such as
stocks or bonds. However, asset allocation funds are generally less
volatile than portfolios that contain only stocks.
- - SELECTION OF INVESTMENTS: Fleet evaluates the risks and rewards presented
by all securities purchased by the Fund and how they advance the Fund's
investment objective. It's possible, however, that these evaluations will
prove to be inaccurate.

HOW THE FUND HAS PERFORMED

-16-
<PAGE>

contract or variable life insurance policy you have chosen for information on
relevant charges and expenses. Including these charges and expenses would
reduce the Fund's returns.

YEAR-BY-YEAR RETURNS

The bar chart shows how the performance of the Fund has varied from year to
year, thereby giving some indication of the risk of investing in the Fund.

[bar chart goes here]

Best quarter: --% for the quarter ending Month, Day, Year
Worst quarter: --% for the quarter ending Month, Day, Year

AVERAGE ANNUAL TOTAL RETURNS

The table shows the Fund's average annual total returns for the periods ended
December 31, 1998 as compared to broad-based market indices.

- ------------------------------------------------------------------------------
1 year 5 years Since inception
on February 6, 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Asset Allocation Fund --% --% --%
- ------------------------------------------------------------------------------
S&P 500* --% --% --%
- ------------------------------------------------------------------------------
DJIA** --% --% --%
- ------------------------------------------------------------------------------
</TABLE>
* The S&P 500 is an unmanaged index that tracks the performance of 500
widely held common stocks listed on the New York Stock Exchange, the
American Stock Exchange and NASDAQ. The S&P 500 is heavily weighted with
the stocks of large companies.

** The Dow Jones Industrial Average (DJIA) is an unmanaged price-weighted
average based on the "price only" performance of 30 blue chip stocks.

[Sidenote:]
PORTFOLIO MANAGER

The Fund's portfolio manager is Donald Jones, a Vice President of Fleet since
1991. He's primarily responsible for the day-to-day management of the Fund's
investment portfolio. Mr. Jones has been with Fleet and its predecessors since
1977 and has been the Fund's portfolio manager since it began operations in
1993.

-17-
<PAGE>

High Quality Bond Fund

THE FUND'S INVESTMENT OBJECTIVE

The Fund seeks a high level of current income consistent with prudent risk of
capital.

THE FUND'S MAIN INVESTMENT STRATEGIES

The Fund invests primarily in obligations issued or guaranteed by the U.S.
Government, its agencies and instrumentalities, as well as in corporate debt
obligations such as notes and bonds. The Fund also invests in asset-backed and
mortgage-backed securities and in money market instruments, such as commercial
paper and bank obligations.

In selecting portfolio securities for the Fund, Fleet monitors and evaluates
economic trends. It establishes duration targets, ranges of interest rates on
bonds of various maturities and determines the appropriate allocation of the
Fund's investments among various market sectors.

Nearly all Fund investments will be of investment grade quality. These are
securities which have one of the top four ratings of Standard & Poor's Rating
Group ("S&P") or Moody's Investors Service, Inc. ("Moody's"), or are unrated
securities determined by Fleet to be of comparable quality. Under normal market
conditions, the Fund will invest at least 65% of its total assets in high
quality debt obligations that have one of the two highest ratings assigned by
S&P or Moody's, or unrated securities determined by Fleet to be of comparable
quality. High quality securities tend to pay less income than lower-rated
securities. Occasionally, the rating of a security held by the Fund may be
downgraded to below investment grade. If that happens, the Fund doesn't have to
sell the security unless Fleet determines that under the circumstances the
security is no longer an appropriate investment for the Fund.

The Fund's average weighted maturity will vary from time to time depending on
current market and economic conditions and Fleet's assessment of probable
changes in interest rates.

The Fund will sell a portfolio security when, as a result of changes in the
economy or the performance of the security or other circumstances, Fleet
believes that holding the security is no longer consistent with the Fund's
investment objective.

[Sidenote:]
Average weighted maturity gives you the average time until all debt obligations
in a Fund come due or MATURE. It is calculated by averaging the time to maturity
of all debt obligations held by a Fund with each maturity "weighted" according
to the percentage of assets it represents.

-18-
<PAGE>

THE MAIN RISKS OF INVESTING IN THE FUND

All mutual funds are affected by changes in the economy and swings in investment
markets. These can occur within or outside the U.S. or worldwide, and may
affect only particular companies or industries.

In addition, the Fund also carries the following main risks:

- - INTEREST RATE RISK: The prices of debt securities generally tend to move in
the opposite direction to interest rates. When rates are rising, the
prices of debt securities tend to fall. When rates are falling, the prices
of debt securities tend to rise. Generally, the longer the time until
maturity, the more sensitive the price of a debt security is to interest
rate changes.
- - CREDIT RISK: The value of debt securities also depends on the ability of
issuers to make principal and interest payments. If an issuer can't meet
its payment obligations or if its credit rating is lowered, the value of
its debt securities may fall. Debt securities which have the lowest of the
top four ratings assigned by S&P or Moody's have speculative
characteristics. Changes in the economy are more likely to affect the
ability of the issuers of these securities to make payments of principal
and interest than is the case with higher-rated securities.
- - PREPAYMENT/EXTENSION RISK: Changes in interest rates may cause certain debt
securities held by the Fund, particularly asset-backed and mortgage-backed
securities, to be paid off much sooner or later than expected, which could
adversely affect the Fund's value.
- - SELECTION OF INVESTMENTS: Fleet evaluates the risks and rewards presented
by all securities purchased by the Fund and how they advance the Fund's
investment objective. It's possible, however, that these evaluations will
prove to be inaccurate.
- - FREQUENT TRADING: The Fund may trade its investments frequently in trying
to achieve its investment goal. This usually increase the chance that the
Fund will pay investors short-term capital gains. These gains are taxable
at higher rates than long-term capital gains. Frequent trading could also
mean higher brokerage commissions and other transaction costs, which could
reduce the Fund's returns.

HOW THE FUND HAS PERFORMED

The bar chart and the table below show how the Fund has performed in the past.
Both assume that all dividends and distributions are reinvested in the Fund.
How the Fund has performed in the past doesn't necessarily show how it will
perform in the future.

-19-
<PAGE>

YEAR-BY-YEAR RETURNS

The bar chart shows how the performance of the Fund has varied from year to
year, thereby giving some indication of the risk of investing in the Fund.

[bar chart goes here]

Best quarter: --% for the quarter ending Month, Day, Year
Worst quarter: --% for the quarter ending Month, Day, Year

AVERAGE ANNUAL TOTAL RETURNS

The table shows the Fund's average annual total returns for the periods ended
December 31, 1998 as compared to a broad-based market index.

- ------------------------------------------------------------------------------
Since inception
1 year 5 years on January 21, 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
High Quality Bond Fund --% --% --%
- ------------------------------------------------------------------------------
Lehman Brothers
Government/Corporate
Bond Index* --% --% --%
- ------------------------------------------------------------------------------
</TABLE>
* The Lehman Brothers Government/Corporate Bond Index is an unmanaged index
which tracks the performance of U.S. Government and corporate bonds.

[Sidenote:]
THE PORTFOLIO MANAGER

The Fund's portfolio manager is Marie M. Schofield, CFA, a Senior Vice President
of Fleet. She's primarily responsible for the day-to-day management of the
Fund's investment portfolio. Ms. Schofield, who has over 20 years of investment
experience, has been with Fleet since 1990 and served as a Vice President and
Manager of Fixed Income Investments until February 1999. She has managed the
Fund since March 1996.

-20-
<PAGE>

Columbia High Yield Fund II

THE FUND'S INVESTMENT OBJECTIVE

The Fund seeks a high level of current income by investing primarily in
lower-rated fixed income securities. Capital appreciation is a secondary
objective when consistent with the objective of high current income.

THE FUND'S MAIN INVESTMENT STRATEGIES

The Fund normally invests at least 65% of its total assets in high yielding
corporate debt securities, such as bonds, debentures and notes. These
securities will generally be rated BB or lower by Standard & Poor's Rating Group
("S&P") or Ba or lower by Moody's Investors Service, Inc. ("Moody's") or will be
unrated securities which Columbia has determined to be of comparable quality.
Such lower rated securities are not considered to be of investment grade quality
and are commonly referred to as "junk bonds." The Fund invests primarily in
lower-rated securities that are considered to be "upper tier", which means
securities that are rated BB or B by S&P or Ba or B by Moody's. No more than
10% of the Fund's total assets will normally be invested in securities rated CCC
or lower by S&P or Caa or lower by Moody's.

While credit ratings are an important factor in evaluating lower-rated
securities, Columbia also considers a variety of other factors when selecting
portfolio securities for the Fund. These factors may include the issuer's
experience and managerial strength, its changing financial condition, its
borrowing requirements and debt maturity schedules, and its responsiveness to
changes in business conditions and interest rates. Because of the number of
considerations involved in investing in lower-rated debt securities, the success
of the Fund in achieving its investment objective may be more dependent upon
Columbia's credit analysis than would be the case if the Fund invested in higher
quality debt securities.

The Fund's average weighted maturity will vary from time to time depending on
current market conditions and Columbia's assessment of probable changes in
interest rates.

THE MAIN RISKS OF INVESTING IN THE FUND

-21-
<PAGE>

[SIDENOTE:]
THE FUND IS DESIGNED FOR INVESTORS WHO ARE WILLING TO ASSUME THE RISK OF
SIGNIFICANT FLUCTUATIONS IN THE VALUE OF THEIR INVESTMENT IN ORDER TO ACHIEVE A
HIGH LEVEL OF CURRENT INCOME. THE FUND SHOULD REPRESENT ONLY A PORTION OF A
BALANCED INVESTMENT PROGRAM.

In addition, the Fund also carries the following main risks:

- - LOWER-RATED SECURITIES: Lower rated securities may be issued in connection
with certain corporate restructurings, such as leveraged buyouts, mergers
or acquisitions, or by smaller less creditworthy companies or companies
with substantial debt. Such securities are subject to a high degree of
risk and are considered speculative by S&P and Moody's with respect to the
issuer's ability to make principal and interest payments. An economic
downturn or increase in interest rates is likely to have a greater negative
effect on the issuers of lower-rated securities and result in more defaults
than is the case for higher-rated securities. In addition, the markets for
lower-rated securities may be less liquid and less active than the markets
for higher rated securities, which may limit the ability of the Fund to
sell lower-rated securities at their expected value.
- - INTEREST RATE RISK: The prices of debt securities generally tend to move
in the opposite direction to interest rates. When rates are rising, the
prices of debt securities tend to fall. When rates are falling, the prices
of debt securities tend to rise. Generally, the longer the time until
maturity, the more sensitive the price of a debt security is to interest
rate changes.
- - CREDIT RISK: The value of debt securities also depends on the ability of
issuers to make principal and interest payments. If an issuer can't meet
its payment obligations or if its credit rating is lowered, the value of
its debt securities may fall.
- - PREPAYMENT/EXTENSION RISK: Changes in interest rates may cause certain debt
securities held by the Fund to be paid off much sooner or later than
expected, which could adversely affect the Fund's value.
- - SELECTION OF INVESTMENTS: Columbia evaluates the risks and rewards
presented by all securities purchased by the Fund and how they advance the
Fund's investment objective. It's possible, however, that these
evaluations will prove to be inaccurate.

HOW THE FUND HAS PERFORMED

The Fund doesn't have a long-term performance record since it has been in
operation for less than one calendar year.

[Sidenote:]
PORTFOLIO MANAGER

The Fund's portfolio manager is Jeffrey L. Rippey, CFA, a Vice President of
Columbia. He's primarily responsible for the day-to-day management of the
Fund's investment portfolio. Mr. Rippey has managed the Fund since it began
operations in March 1998. He has been with Columbia since 1981.

-22-
<PAGE>

ADDITIONAL INFORMATION ABOUT RISK

The main risks associated with an investment in each Fund have been described
above. The following supplements that discussion.

- - TEMPORARY DEFENSIVE POSITIONS: Each Fund may temporarily hold up to 100%
of its total assets in investments that are not part of its principal
investment strategy to try to avoid losses during unfavorable market
conditions. These investments may include cash (which will not earn any
income) and, with respect to those Funds which are not money market funds,
money market instruments, debt securities issued or guaranteed by the U.S.
Government or its agencies and repurchase agreements. This strategy could
prevent a Fund from achieving its investment objective and could reduce the
Fund's return and affect its performance during a market upswing.

- - OTHER TYPES OF INVESTMENTS: This prospectus describes each Fund's
principal investment strategies and the particular types of securities in
which each Fund principally invests. Each Fund may, from time to time,
pursue other investment strategies and make other types of investments in
support of its overall investment goal. These supplemental investment
strategies - and the risks involved - are described in detail in the
Statement of Additional Information (SAI) which is referred to on the back
cover of this prospectus.

- - YEAR 2000 RISKS: As with other mutual funds, financial and business
organizations and individuals around the world, the Funds could be
adversely affected if the computer systems used by Fleet, Columbia and the
Funds' other service providers don't properly process and calculate
date-related information and data from and after January 1, 2000. This is
commonly known as the "Year 2000" or "Y2K" problem. Fleet and Columbia are
taking steps to address the Y2K problem with respect to the computer
systems that they use and to obtain assurances that comparable steps are
being taken by the Funds' other major service providers. At this time,
however, there can be no assurance that these steps will be sufficient to
avoid any adverse impact on the Funds. The Y2K problem could have a
negative impact on the issuers of securities in which the Funds invest,
which could hurt the Funds' investment returns.

-23-
<PAGE>

FUND MANAGEMENT

ADVISERS. Fleet and Columbia, subject to the general supervision of Galaxy
VIP's Board of Trustees, manage the Funds in accordance with their respective
investment objectives and policies, make decisions with respect to and place
orders for all purchases and sales of portfolio securities, and maintain related
records.

ALLOCATION OF ORDERS FOR PORTFOLIO SECURITIES. Fleet and Columbia may allocate
orders for the purchase and sale of portfolio securities to certain financial
institutions, including those that are affiliated with Fleet or Columbia or that
have sold shares of the Funds, to the extent permitted by law or by order of the
Securities and Exchange Commission. Fleet and Columbia will allocate orders to
such institutions only if they believe that the quality of the transaction and
the commission are comparable to what they would be with other qualified
brokerage firms.

MANAGEMENT FEES. The management fees paid to Fleet or Columbia, as the case may
be, by the Funds during the last fiscal year are set forth below. The Growth
and Income Fund, Small Company Growth Fund, Columbia Real Estate Equity Fund II
and Columbia High Yield Fund II began operations during the last fiscal year and
the fee shown is that which is currently in effect.

- --------------------------------------------------------------------------------
FUND MANAGEMENT FEE AS A % OF NET ASSETS
- --------------------------------------------------------------------------------
<S> <C>
Money Market Fund --%
- --------------------------------------------------------------------------------
Equity Fund --%
- --------------------------------------------------------------------------------
Growth and Income Fund --%
- --------------------------------------------------------------------------------
Small Company Growth Fund --%
- --------------------------------------------------------------------------------
Columbia Real Estate Equity Fund II --%
- --------------------------------------------------------------------------------
Asset Allocation Fund --%
- --------------------------------------------------------------------------------
High Quality Bond Fund --%
- --------------------------------------------------------------------------------
Columbia High Yield Fund II --%
- --------------------------------------------------------------------------------
</TABLE>

-24-
<PAGE>

HOW TO INVEST IN THE FUNDS

PRICING OF SHARES

The net asset value per share ("NAV") of each Fund is determined as of the close
of regular trading hours on the New York Stock Exchange ("NYSE"), currently 4:00
p.m. Eastern time, on each day the NYSE is open for trading. The NYSE is
generally open for business every Monday through Friday, except for national
holidays. Each Fund's NAV 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 shares of the Fund held by investors.

The investments of the Money Market Fund are valued at amortized cost, which is
approximately equal to market value. The investments of the other Funds are
valued according to market value. When a market quote is not readily available,
the security's value is based on "fair value" as determined by Fleet or
Columbia, as the case may be, under the supervision of Galaxy VIP's Board of
Trustees.

BUYING AND SELLING SHARES

Investors may not purchase or redeem shares of the Funds directly, but only
through variable annuity contracts and variable life insurance policies offered
by the separate accounts of participating insurance companies. You should refer
to your insurance company's prospectus 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 NYSE is open for trading. Orders for the purchase of shares
of a Fund are effected at the NAV next calculated after an order is received in
good order by the Fund. Redemptions are effected at the NAV next calculated
after receipt of a redemption request in good order 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 Securities and
Exchange Commission.

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.

-25-
<PAGE>

As of the date of this Prospectus, shares of the Funds are offered only to
separate accounts funding variable annuity contracts issued by American Skandia
Life Assurance Corporation, an indirect wholly-owned subsidiary of Skandia
Insurance Company, Ltd., and its affiliated life insurance companies. However,
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. 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, Galaxy VIP's Board of 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 irreconcilable 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. 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.

-26-
<PAGE>

DIVIDENDS, DISTRIBUTION AND TAXES

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 Fund, High Quality Bond Fund and Columbia High Yield Fund II are
declared daily and paid monthly. Dividends for the Equity Fund, Growth and
Income Fund, Small Company Growth Fund, Columbia Real Estate Equity Fund II and
Asset Allocation Fund are declared and paid quarterly. Net capital gains, if
any, are distributed at least once a year. All dividends and capital gain
distributions with respect to a particular Fund will be automatically reinvested
in additional shares of that Fund at the NAV of such shares on the payment date.

TAXES. Each Fund qualified during its last taxable year, and intends to
continue to qualify, as a "regulated investment company" for federal income tax
purposes by satisfying the requirements under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). As a regulated investment
company, a Fund generally will not be subject to federal income tax on its
ordinary income and net realized capital gains, provided that the Fund
distributes them each year.

Each Fund also intends to comply with the diversification requirements of
Section 817(h) of the Code for variable annuity contracts and variable life
insurance policies so that the owners of such contracts and policies should not
be subject to federal income tax on dividends and distributions from the Fund to
the participating insurance companies' separate accounts.

Owners of variable annuity contracts and variable life insurance policies should
review the prospectus for their contract or policy for further tax information.

The foregoing is only a summary of certain tax considerations under current law,
which may be subject to change in the future. You should consult your tax
adviser for further information regarding the tax consequences of investments in
the Funds.

-27-
<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights tables shown below will help you understand the Funds'
financial performance for the past five years (or the period since a particular
Fund began operations). Certain information reflects the financial performance
of a single share. The total returns in the tables represent the rate that an
investor would have earned (or lost) on an investment in each Fund, assuming all
dividends and distributions were reinvested. This information has been audited
by [____________________], independent accountants, whose report, along with the
Funds' financial statements, are included in the Funds' Annual Report and
[__________________________________] into the SAI. The Annual Report and the
SAI are available free of charge upon request.

-28-

<PAGE>

MONEY MARKET FUND
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period . . . . . . . $1.00 $1.00 $1.00 $1.00
----- ----- ----- -----

Income from Investment Operations:
Net investment income(1) . . . . . . . . . . . . 0.05 0.05 0.05 0.04

Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . . . -- -- -- --
----- ----- ----- -----

Total from Investment Operations:. . . . . . . 0.05 0.05 0.05 0.04
----- ----- ----- -----

Less Dividends:
Dividends from net investment income . . . . . . (0.05) (0.05) (0.05) (0.04)

Dividends from net realized capital gains. . . . -- -- -- --
----- ----- ----- -----

Total Dividends: . . . . . . . . . . . . . . . . (0.05) (0.05) (0.05) (0.04)
----- ----- ----- -----

Net increase (decrease) in net asset value . . . . -- -- -- --
----- ----- ----- -----

Net Asset Value, End of Period . . . . . . . . . . $1.00 $1.00 $1.00 $1.00
----- ----- ----- -----
----- ----- ----- -----

Total Return . . . . . . . . . . . . . . . . . . . 4.99% 4.91% 5.38% 3.89%

Ratios/Supplemental Data:

Net Assets, End of Period (000's). . . . . . . . . $15,330 $16,295 $17,925 $13,276

Ratios to average net assets:
Net investment income including
reimbursement/waiver . . . . . . . . . . . . . 4.88% 4.80% 5.25% 3.85%

Operating expenses including
reimbursement/waiver . . . . . . . . . . . . . 0.67% 0.60% 0.63% 0.42%

Operating expenses excluding
reimbursement/waiver . . . . . . . . . . . . . 1.12% 1.02% 1.11% 1.21%
</TABLE>

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

(1) Net investment income per share before reimbursement/waiver of fees by the
investment adviser and/or administrator for the years ended December 31,
1998, 1997, 1996, 1995 and 1994 were $_____, $0.05, $0.05, $0.05 and $0.03,
respectively.

-29-
<PAGE>

EQUITY FUND
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . . . 4.10 2.59 2.59 0.15
------ ------ ------ ------

Total from Investment Operations:. . . . . . . 4.31 2.78 2.77 0.35
------ ------ ------ ------

Less Dividends:
Dividends from net investment income . . . . . . (0.21) (0.19) (0.18) (0.20)

Dividends from net realized capital gains. . . . -- -- -- --
------ ------ ------ ------

Total Dividends: . . . . . . . . . . . . . . . (0.21) (0.19) (0.18) (0.20)
------ ------ ------ ------

Net increase (decrease) in net asset value . . . . 4.10 2.59 2.59 0.15
------ ------ ------ ------

Net Asset Value, End of Period . . . . . . . . . . $19.68 $15.58 $12.99 $10.40
------ ------ ------ ------
------ ------ ------ ------

Total Return . . . . . . . . . . . . . . . . . . . 27.74% 21.49% 26.76% 3.47%

Ratios/Supplemental Data:

Net Assets, End of Period (000's). . . . . . . . . $69,863 $46,242 $30,826 $19,391

Ratios to average net assets:
Net investment income including
reimbursement/waiver . . . . . . . . . . . . . 1.20% 1.34% 1.55% 2.06%

Operating expenses including
reimbursement/waiver . . . . . . . . . . . . . 1.08% 1.10% 1.21% 0.71%

Operating expenses excluding
reimbursement/waiver . . . . . . . . . . . . . 1.08% 1.10% 1.24% 1.42%

Portfolio Turnover Rate. . . . . . . . . . . . . . 1% 8% 3% 2%
</TABLE>

-30-
<PAGE>

GROWTH AND INCOME FUND
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1998(1)
--------------------
<S> <C>
Net Asset Value, Beginning of Period . . . . . . . . . . . . . . . . . . .
Income from Investment Operations:
Net investment income(2) . . . . . . . . . . . . . . . . . . . . . . .
Net realized and unrealized gain on investments. . . . . . . . . . . .
Total from Investment Operations . . . . . . . . . . . . . . . . . .
Less Dividends:
Dividends from net investment income . . . . . . . . . . . . . . . .
Dividends in excess of net investment income . . . . . . . . . . . .
Dividends from net realized capital gains. . . . . . . . . . . . . .
Total Dividends. . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in net asset value . . . . . . . . . . . . . . . .
Net Asset Value, End of Period . . . . . . . . . . . . . . . . . . . . . .
Total Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ratios/Supplemental Data:
Net Assets, End of Period (000's). . . . . . . . . . . . . . . . . . .
Ratios to average net assets:
Net investment income (loss) including reimbursement/waiver. . . . . .
Operating expenses including reimbursement/waiver. . . . . . . . . . .
Operating expenses excluding reimbursement/waiver. . . . . . . . . . .
Portfolio Turnover Rate. . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>

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

(1) The Fund commenced operations on March 4, 1998.
(2) Net investment (loss) per share before reimbursement/waiver of fees by the
investment adviser and/or administrator for the period ended December 31,
1998 was $______.
(3) Not Annualized.
(4) Annualized.

-31-
<PAGE>

SMALL COMPANY GROWTH FUND
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1998(1)
--------------------
<S> <C>
Net Asset Value, Beginning of Period . . . . . . . . . . . . . . . . . . .
Income from Investment Operations:
Net investment (loss)(2) . . . . . . . . . . . . . . . . . . . . . . .
Net realized and unrealized (loss) on investments. . . . . . . . . . .
Total from Investment Operations . . . . . . . . . . . . . . . . . .
Less Dividends:
Dividends from net investment income . . . . . . . . . . . . . . . .
Dividends in excess of net investment income . . . . . . . . . . . .
Dividends from net realized capital gains. . . . . . . . . . . . . .
Total Dividends. . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in net asset value . . . . . . . . . . . . . . . .
Net Asset Value, End of Period . . . . . . . . . . . . . . . . . . . . . .
Total Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ratios/Supplemental Data:
Net Assets, End of Period (000's). . . . . . . . . . . . . . . . . . .
Ratios to average net assets:
Net investment (loss) including reimbursement/waiver . . . . . . . . .
Operating expenses including reimbursement/waiver. . . . . . . . . . .
Operating expenses excluding reimbursement/waiver. . . . . . . . . . .
Portfolio Turnover Rate. . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>

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

(1) The Fund commenced operations on April 17, 1998.
(2) Net investment (loss) per share before reimbursement/waiver of fees by the
investment adviser and/or administrator for the period ended December 31,
1998 was $______.
(3) Not Annualized.
(4) Annualized.

-32-
<PAGE>

COLUMBIA REAL ESTATE EQUITY FUND II
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1998(1)
--------------------
<S> <C>
Net Asset Value, Beginning of Period . . . . . . . . . . . . . . . . . . .
Income from Investment Operations:
Net investment income(2) . . . . . . . . . . . . . . . . . . . . . . .
Net realized and unrealized (loss) on investments. . . . . . . . . . .
Total from Investment Operations . . . . . . . . . . . . . . . . . .
Less Dividends:
Dividends from net investment income . . . . . . . . . . . . . . . .
Dividends from net realized capital gains. . . . . . . . . . . . . .
Total Dividends. . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in net asset value . . . . . . . . . . . . . . . .
Net Asset Value, End of Period . . . . . . . . . . . . . . . . . . . . . .
Total Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ratios/Supplemental Data:
Net Assets, End of Period (000's). . . . . . . . . . . . . . . . . . .
Ratios to average net assets:. . . . . . . . . . . . . . . . . . . . . . .
Net investment income (loss) including reimbursement/waiver. . . . . .
Operating expenses including reimbursement/waiver. . . . . . . . . . .
Operating expenses excluding reimbursement/waiver. . . . . . . . . . .
Portfolio Turnover Rate. . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>

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

(1) The Fund commenced operations on March 3, 1998.
(2) Net investment (loss) per share before reimbursement/waiver of fees by the
investment adviser and/or administrator for the period ended December 31,
1998 was $______.
(3) Not Annualized.
(4) Annualized.

-33-
<PAGE>

ASSET ALLOCATION FUND
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . . . 2.11 1.53 2.58 0.53
------ ------ ------ ------

Total from Investment Operations:. . . . . . . 2.51 1.83 2.86 0.22
------ ------ ------ ------

Less Dividends:
Dividends from net investment income . . . . . . (0.40) (0.30) (0.28) (0.31)

Dividends in excess of net investment income . . -- -- -- --

Dividends from net realized capital gains. . . . (0.94) (0.54) -- --

Dividends in excess of net realized
capital gains. . . . . . . . . . . . . . . . . -- -- -- --
------ ------ ------ ------

Total Dividends: . . . . . . . . . . . . . . . . (1.34) (0.84) (0.28) (0.31)
------ ------ ------ ------

Net increase (decrease) in net asset Value . . . . 1.17 0.99 2.58 (0.53)
------ ------ ------ ------

Net Asset Value, End of Period . . . . . . . . . . $14.54 $13.37 $12.38 $9.80
------ ------ ------ ------
------ ------ ------ ------

Total Return . . . . . . . . . . . . . . . . . . . 19.03% 14.64% 29.42% (2.15)%

Ratios/Supplemental Data:

Net Assets, End of Period (000's). . . . . . . . . $42,535 $24,114 $17,246 $10,572

Ratios to average net assets:
Net investment income including
Reimbursement/waiver . . . . . . . . . . . . . . 2.90% 2.31% 2.54% 3.02%

Operating expenses including
Reimbursement/waiver . . . . . . . . . . . . . . 1.19% 1.33% 1.37% 0.78%

Operating expenses excluding
Reimbursement/waiver . . . . . . . . . . . . . . 1.25% 1.33% 1.54% 1.68%

Portfolio Turnover Rate. . . . . . . . . . . . . . 74% 45% 46% 28%
</TABLE>

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

-34-
<PAGE>

HIGH QUALITY BOND FUND
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Income from Investment Operations:
Net investment income(1) . . . . . . . . . . . . 0.58 0.58 0.57 0.56

Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . . . 0.32 (0.38) 1.40 (1.14)
------ ------ ------ ------

Total from Investment Operations:. . . . . . . 0.90 0.20 1.97 (0.58)
------ ------ ------ ------

Less Dividends:
Dividends from net investment income . . . . . . (0.58) (0.58) (0.57) (0.56)

Dividends from net realized capital gains. . . . -- -- -- --
------ ------ ------ ------

Total Dividends: . . . . . . . . . . . . . . . . (0.58) (0.58) (0.57) (0.56)
------ ------ ------ ------

Net increase (decrease) in net asset value . . . . 0.32 0.38 1.40 (1.14)
------ ------ ------ ------

Net Asset Value, End of Period . . . . . . . . . . $10.31 $9.99 $10.37 $8.97
------ ------ ------ ------
------ ------ ------ ------

Total Return . . . . . . . . . . . . . . . . . . . 9.36% 1.57% 22.55% (5.85)%

Ratios/Supplemental Data:

Net Assets, End of Period (000's). . . . . . . . . $14,457 $11,814 $11,067 $8,012

Ratios to average net assets:
Net investment income including
reimbursement/waiver . . . . . . . . . . . . . . 5.82% 5.78% 5.86% 5.90%

Operating expenses including
reimbursement/waiver . . . . . . . . . . . . . . 0.77% 0.72% 0.80% 0.57%

Operating expenses excluding
reimbursement/waiver . . . . . . . . . . . . . . 1.44% 1.38% 1.57% 1.63%

Portfolio Turnover Rate. . . . . . . . . . . . . . 160% 132% 21% 32%
</TABLE>

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

-35-
<PAGE>

COLUMBIA HIGH YIELD FUND II
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1998(1)
--------------------
<S> <C>
Net Asset Value, Beginning of Period . . . . . . . . . . . . . . . . . . .
Income from Investment Operations:
Net investment income(2) . . . . . . . . . . . . . . . . . . . . . . .
Net realized and unrealized gain on investments. . . . . . . . . . . .
Total from Investment Operations . . . . . . . . . . . . . . . . . .
Less Dividends:
Dividends from net investment income . . . . . . . . . . . . . . . .
Dividends from net realized capital gains. . . . . . . . . . . . . .
Total Dividends. . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in net asset value . . . . . . . . . . . . . . . .
Net Asset Value, End of Period . . . . . . . . . . . . . . . . . . . . . .
Total Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ratios/Supplemental Data:
Net Assets, End of Period (000's). . . . . . . . . . . . . . . . . . .
Ratios to average net assets:
Net investment income (loss) including reimbursement/waiver. . . . . .
Operating expenses including reimbursement/waiver. . . . . . . . . . .
Operating expenses excluding reimbursement/waiver. . . . . . . . . . .
Portfolio Turnover Rate. . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>

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

(1) The Fund commenced operations on March 3, 1998.
(2) Net investment income per share before reimbursement/waiver of fees by the
investment adviser and/or administrator for the period ended December 31,
1998 was $______.
(3) Not Annualized.
(4) Annualized.

-36-
<PAGE>

[Back Cover Page]

Where to find more information

You'll find more information about the Funds in the following documents:

ANNUAL AND SEMI-ANNUAL REPORTS
Galaxy VIP's annual and semi-annual reports contain more information about each
Fund and a discussion about the market conditions and investment strategies that
had a significant effect on each Fund's performance during the last fiscal year.

STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI contains detailed information about the Funds and their policies. By
law, it's incorporated by reference into (considered to be part of) this
prospectus.

You can get a free copy of these documents, request other information about the
Funds and make shareholder inquiries by calling Galaxy VIP at 1-877-BUY-GALAXY
(1-877-289-4252) or by writing to:

The Galaxy VIP Fund
4400 Computer Drive
Westborough, MA 01581-9896

You may also contact your insurance company for more information.

You can write to the Securities and Exchange Commission (SEC) Public Reference
Section and ask them to mail you information about the Funds, including the SAI.
They'll charge you a fee for this service. You can also visit the SEC Public
Reference Room and copy the documents while you're there. For information about
the operation of the Public Reference Room, call the SEC.

Public Reference Section of the SEC
Washington, DC 20549-6009
1-800-SEC-0330

Reports and other information about the Funds are also available on the SEC's
website at http://www.sec.gov.

Galaxy VIP's Investment Company Act File No. is 811-6726.

<PAGE>

THE GALAXY VIP FUND
STATEMENT OF ADDITIONAL INFORMATION
APRIL __, 1999

MONEY MARKET FUND
EQUITY FUND
GROWTH AND INCOME FUND
SMALL COMPANY GROWTH FUND
COLUMBIA REAL ESTATE EQUITY FUND II
ASSET ALLOCATION FUND
HIGH QUALITY BOND FUND
COLUMBIA HIGH YIELD FUND II

This Statement of Additional Information is not a prospectus. The
prospectus for the Funds dated April __, 1999, as it may be supplemented or
revised from time to time (the "Prospectus"), as well as the Funds' Annual
Report to Shareholders dated December 31, 1998 (the "Annual Report"), may be
obtained, without charge, by writing:

The Galaxy VIP Fund
c/o First Data Distributors, Inc.
4400 Computer Drive
Westborough, MA 01581-5108

or by calling 1-877-BUY-GALAXY (1-800-289-4252)

The financial statements included in the Annual Report and the report
thereon of [____________________], The Galaxy VIP Fund's independent
accountants, are [_______________] into this Statement of Additional
Information.

<PAGE>

TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . .
DESCRIPTION OF THE GALAXY VIP FUND AND ITS SHARES. . . . . . . . . . . . .
INVESTMENT STRATEGIES, POLICIES AND RISKS. . . . . . . . . . . . . . . . .
In General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Money Market Fund . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Growth and Income Fund. . . . . . . . . . . . . . . . . . . . . . . .
Small Company Growth Fund . . . . . . . . . . . . . . . . . . . . . .
Columbia Real Estate Equity Fund II . . . . . . . . . . . . . . . . .
Asset Allocation Fund . . . . . . . . . . . . . . . . . . . . . . . .
High Quality Bond Fund. . . . . . . . . . . . . . . . . . . . . . . .
Columbia High Yield Fund II . . . . . . . . . . . . . . . . . . . . .
Special Risk Considerations . . . . . . . . . . . . . . . . . . . . .
Other Investment Policies and Risk Considerations . . . . . . . . . .
Investment Limitations. . . . . . . . . . . . . . . . . . . . . . . .
VALUATION OF PORTFOLIO SECURITIES. . . . . . . . . . . . . . . . . . . . .
Valuation of the Money Market Fund. . . . . . . . . . . . . . . . . .
Valuation of the Equity Fund, Growth and Income Fund, . . . . . . . .
Small Company Growth Fund, Columbia Real Estate . . . . . . . . .
Equity Fund II, Asset Allocation Fund and Columbia . . . . . . . .
High Yield Fund II . . . . . . . . . . . . . . . . . . . . . . . .
Valuation of the High Quality Bond Fund . . . . . . . . . . . . . . .
DIVIDENDS - MONEY MARKET FUND. . . . . . . . . . . . . . . . . . . . . . .
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION . . . . . . . . . . . . . .
ADDITIONAL INFORMATION ON TAXES. . . . . . . . . . . . . . . . . . . . . .
TRUSTEES AND OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholder and Trustee Liability . . . . . . . . . . . . . . . . . .
INVESTMENT ADVISERS. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Authority to Act as Investment Adviser. . . . . . . . . . . . . . . .
DISTRIBUTOR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ADMINISTRATOR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CUSTODIAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . .
AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
COUNSEL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

-i-
<PAGE>

TABLE OF CONTENTS
(CONTINUED)

PAGE
----

PERFORMANCE AND YIELD INFORMATION. . . . . . . . . . . . . . . . . . . . .
Yield Quotations - Money Market Fund. . . . . . . . . . . . . . . . .
Yield And Total Returns Quotations - Non-Money Market Funds . . . . .
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . .
APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
APPENDIX B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
</TABLE>

-ii-
<PAGE>

GENERAL INFORMATION

This Statement of Additional Information relates to the Prospectus for
shares of the eight Funds listed on the cover page and should be read in
conjunction with that Prospectus. This Statement of Additional Information is
incorporated by reference in its entirety into the Prospectus. No investment in
shares of the Funds should be made without reading the Prospectus.

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

DESCRIPTION OF THE GALAXY VIP FUND AND ITS SHARES

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. Galaxy VIP is currently
offering shares of beneficial interest in eight investment portfolios: Money
Market Fund, Equity Fund, Growth and Income Fund, Small Company Growth Fund,
Columbia Real Estate Equity Fund II, Asset Allocation Fund, High Quality Bond
Fund and Columbia High Yield Fund II.

Galaxy VIP was organized as a Massachusetts business trust on May 27,
1992. Galaxy VIP's Agreement and 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 or series 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. Galaxy
VIP is a series fund authorized to issue the following eight 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; Class D
shares, representing interests

<PAGE>

in the High Quality Bond Fund; Class E shares, representing interests in the
Small Company Growth Fund; Class F shares, representing interests in the
Growth and Income Fund; Class G shares, representing interests in the
Columbia Real Estate Equity Fund II; and Class H shares, representing
interests in the Columbia High Yield Fund II. 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.

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.

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. 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. 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.

Rule 18f-2 under the Investment Company Act of 1940, as amended (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 an investment objective, if
fundamental, or in a 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 accountants, the approval of principal

-2-
<PAGE>

underwriting contracts and the election of trustees may be effectively acted
upon by shareholders of Galaxy VIP voting without regard to class.

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.

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.

INVESTMENT STRATEGIES, POLICIES AND RISKS

IN GENERAL

Fleet Investment Advisors Inc. ("Fleet"), the investment adviser for the
Money Market Fund, Equity Fund, Growth and Income Fund, Small Company Growth
Fund, Asset Allocation Fund and High Quality Bond Fund, and Columbia Management
Co. ("Columbia"), the investment adviser for the Columbia Real Estate Equity
Fund II and Columbia High Yield Fund II, will use their best efforts to achieve
the investment objectives of the respective Funds, although such achievement
cannot be assured. The investment objective of each Fund is fundamental and 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. The following description of the Funds'
investment strategies, policies and risks supplements the description set forth
in the Prospectus.

-3-
<PAGE>

MONEY MARKET FUND

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; corporate bonds, 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 397 days or less
(except for certain variable and floating rate notes and securities underlying
certain repurchase agreements) and the average maturity of all securities held
by the Fund will be 90 days or less. For more information, see "Other
Investment Policies and Risk Considerations" below.

In accordance with a rule promulgated by the Securities and Exchange
Commission ("SEC"), the Fund will purchase only those instruments which meet the
applicable quality requirements described below. In general, the Fund will not
purchase a security (other than a U.S. Government security) unless the security
(or, in certain cases, the guarantee) or the issuer (or guarantee provider) with
respect to comparable securities (i) is rated by at least two nationally
recognized statistical rating organizations ("Rating Agencies") (such as
Standard & Poor's Ratings Group ("S&P"), Moody's Investors Service, Inc.
("Moody's") or Fitch IBCA, Inc. ("Fitch IBCA") in the highest category for
short-term debt securities, (ii) is rated by the only Rating Agency that has
issued a rating with respect to such security or issuer in such Rating Agency's
highest category for short-term debt, or (iii) if not rated, the security is
determined to be of comparable quality. These rating categories are determined
without regard to sub-categories and gradations. Fleet will follow applicable
regulations in determining whether a security rated by more than one Rating
Agency can be treated as being in the highest short-term rating category. See
"Investment Limitations" below.

Determinations of comparable quality shall be made in accordance with
procedures established by the Board of Trustees, Generally, if a security has
not been rated by a Rating Agency, the Fund may acquire the security if Fleet
determines that the security is of comparable quality to securities that have
received the requisite ratings. Fleet also considers other relevant information
in its evaluation of unrated short-term securities. See Appendix A to this
Statement of Additional Information for a description of the rating categories
of S&P, Moody's, Fitch IBCA and certain other Rating Agencies.

The Fund will maintain a dollar-weighted average portfolio maturity of 90
days or less in an effort to maintain a stable net asset value per share of
$1.00. The value of the Fund's portfolio Securities will generally vary
inversely with changes in prevailing interest rates.

See "Other Investment Policies and Risk Considerations" below for
information regarding additional investment policies of the Money Market Fund.

-4-
<PAGE>

EQUITY FUND

Under normal market and economic conditions, the Equity Fund will invest 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. By investing in convertible
securities, the Fund will seek the opportunity, through 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 assigned 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 Fleet. 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
this Statement of Additional Information for a description of S&P's and Moody's
rating categories.

The Fund may invest up to 20% of its total assets indirectly in foreign
securities through the purchase of American Depository Receipts ("ADRs") and
European Depository Receipts ("EDRs") as described below under "Other Investment
Policies and Risk Considerations -- American, European and Global Depository
Receipts." 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 "Other Investment Policies and Risk
Considerations -- Options and Futures Contracts" below.

See "Other Investment Policies and Risk Considerations" below for
information regarding additional investment policies of the Equity Fund.

GROWTH AND INCOME FUND

Under normal market conditions, the Growth and Income Fund will invest at
least 65% of its total assets in common stock, preferred stock, common stock
warrants and securities convertible into common stock. The Fund may purchase
convertible securities, including convertible preferred stock, convertible bonds
or debentures, units consisting of bonds and warrants or a combination of the
features of several of these securities. Convertible bonds purchased by the
Fund will be rated BB or higher by S&P or Fitch IBCA or Ba or higher by Moody's
at the time of investment. See "Other Investment Policies and Risk
Considerations -- Convertible Securities" below for a discussion of the risks of
investing in convertible bonds rated "BB" by S&P or Fitch IBCA or "Ba" by
Moody's. See Appendix A to this Statement of Additional Information for a
description of S&P's, Fitch IBCA's and Moody's rating categories. The Fund may
also buy and sell options and futures contracts and utilize stock index futures

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contracts, options, swap agreements, indexed securities and options on futures
contracts. See "Other Investment Policies and Risk Considerations -- Derivative
Securities" below.

The Fund may invest up to 20% of its total assets in foreign
securities, either directly or indirectly through ADRs, EDRs and Global
Depository Receipts ("GDRs"). Securities of foreign issuers may present greater
risks in the form of nationalization, confiscation, domestic marketability, or
other national or international restrictions. As a matter of practice, the Fund
will not invest in the securities of foreign issuers if any such risk appears to
Fleet to be substantial. See "Special Risk Considerations -- Foreign
Securities" and "Other Investment Policies and Risk Considerations -- American,
European and Global Depository Receipts" below.

See "Other Investment Policies and Risk Considerations" below for
information regarding additional investment policies of the Growth and Income
Fund.

SMALL COMPANY GROWTH FUND

Under normal market conditions, at least 65% of the Small Company Growth
Fund's total assets will be invested in the equity securities of companies with
market capitalizations of $1.5 million or less ("small-cap securities").
Small-cap securities in which the Fund may invest include common stock,
preferred stock, securities convertible into common stock, rights and warrants.
For temporary defensive purposes, the Fund may also invest in corporate debt
obligations. All debt obligations purchased by the Fund will be rated at the
time of purchase in one of the four highest rating categories assigned by S&P
("AAA," "AA," "A" and "BBB") or Moody's ("Aaa," "Aa," "A" and "BBB") or, if not
rated, will be determined to be of an equivalent quality by Fleet. See "Equity
Fund" above for a description of the risks associated with investments in
securities rated BBB by S&P or Baa by Moody's. See Appendix A to this Statement
of Additional Information for a description of S&P's and Moody's rating
categories.

The issuers of small-cap securities tend to be companies which are smaller
or newer than those listed on the New York or American Stock Exchanges. As a
result, small-cap securities are primarily traded on the over-the-counter
market, although they may also be listed for trading on the New York or American
Stock Exchanges. Because the issuers of small-cap securities tend to be smaller
or less well-established companies, they may have limited product lines, markets
or financial resources. As a result, small-cap securities are often less
marketable and may experience a higher level of price volatility than the
securities of larger or more well-established companies.

The Fund may invest up to 20% of its total assets in foreign securities,
either directly or indirectly through ADRs, EDRs and GDRs. See "Special Risk
Considerations -- Foreign Securities" and "Other Investment Policies and Risk
Considerations -- American, European and Global Depository Receipts" below.

The Fund may also buy and sell options and futures contracts and utilize
stock index futures contracts, options, swap agreements, indexed securities and
options on futures contracts. See "Other Investment Policies and Risk
Considerations -- Derivative Securities" below.

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<PAGE>

See "Other Investment Policies and Risk Considerations" below for
information regarding additional investment policies of the Small Company Growth
Fund.

COLUMBIA REAL ESTATE EQUITY FUND II

Under normal market and economic conditions, the Columbia Real Estate
Equity Fund II will invest at least 65% of its total assets in the equity
securities of companies principally engaged in the real estate industry. A
company is "principally engaged" in the real estate industry if at least 50% of
its gross income or net profits are attributable to the ownership, construction,
management, or sale of residential, commercial, or industrial real estate.
Equity securities include common stock, preferred stock and debt or equity
securities that are convertible into common stock. The Fund may invest without
limit in real estate investment trusts ("REITs") and may invest up to 20% of its
total assets in foreign companies that are principally engaged in the real
estate industry. The Fund will not invest directly in real estate but may be
subject to risks similar to those associated with the direct ownership of real
estate because of its policy of concentration in the securities of companies in
the real estate industry. See "Special Risk Considerations -- Real Estate
Securities," "Special Risk Considerations -- Foreign Securities" and "Other
Investment Policies and Risk Considerations -- REITs" below.

The Fund may also invest up to 35% of its total assets in the equity
securities of companies that are not principally engaged in the real estate
industry and in non-convertible debt securities. Columbia anticipates that
investments in companies not principally engaged in the real estate industry
will be primarily in securities of companies some of whose products and services
are related to the real estate industry.

The types of non-convertible debt securities in which the Fund may invest
include corporate debt securities (bonds, debentures and notes), asset-backed
securities, bank obligations, collateralized bonds, loan and mortgage
obligations, commercial paper, repurchase agreements, savings and loan
obligations and U.S. Government and agency obligations. The Fund will only
invest in debt securities which are rated at the time of purchase in one of the
four highest rating categories assigned by S&P ("AAA," "AA," "A" and "BBB") or
Moody's ("Aaa," "Aa," "A" and "Baa") or, if not rated, are determined to be of
an equivalent quality by Columbia. See "Equity Fund" above for a description of
the risks associated with investments in debt securities rated BBB by S&P or Baa
by Moody's. See Appendix A to this Statement of Additional Information for a
description of S&P's and Moody's rating categories.

See "Other Investment Policies and Risk Considerations" below for
information regarding additional investment policies of the Columbia Real Estate
Equity Fund II.

ASSET ALLOCATION FUND

The Asset Allocation Fund may invest up to 20% of its total assets in
foreign securities. Such foreign investments may be made directly, by
purchasing securities issued or guaranteed by foreign corporations, banks, or
governments (or their political subdivisions or instrumentalities),

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<PAGE>

or by supranational banks or other organizations, or indirectly by purchasing
ADRs and EDRs. Supranational entities include international organizations
designated or supported by governmental entities to promote economic
reconstruction and development and international banking institutions and
related governmental agencies. Examples of these include the International Bank
for Reconstruction and Development ("World Bank"), the Asia Development Bank and
the InterAmerican Development Bank. Obligations of supranational banks may be
supported by appropriated but unpaid commitments of their member countries and
there is no assurance that those commitments will be undertaken or met in the
future. See "Special Risk Considerations -- Foreign Securities" and "Other
Investment Policies and Risk Considerations -- American, European and Global
Depository Receipts" below. The Fund may also invest in dollar-denominated high
quality debt obligations of U.S. corporations issued outside the United States.
The Fund may write covered call options, purchase asset-backed securities and
mortgage-backed securities and enter into foreign currency exchange
transactions. See "Other Investment Policies and Risk Considerations --
Derivative Securities" and Other Investment Policies and Risk Considerations --
Asset-Backed and Mortgage-Backed Securities" below.

See "Other Investment Policies and Risk Considerations" below for
information regarding additional investment policies of the Asset Allocation
Fund.

HIGH QUALITY BOND FUND

The High Quality Bond Fund may invest, from time to time, in 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. See "Other Investment Policies and Risk
Considerations -- Municipal Securities" below. In addition, the Fund may
acquire high quality obligations 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 U.S. dollars and have an established over-the-counter market in
the United States. The Fund may also invest in debt obligations of
supranational entitles. See "Asset Allocation Fund" above. The Fund may also
invest in dollar-denominated high quality debt obligations of U.S. corporations
issued outside the United States.

The Fund may enter into interest rate futures contracts to hedge against
changes in the market values of fixed income instruments that the Fund holds or
intends to purchase. See "Other Investment Policies and Risk Considerations --
Derivative Securities" below. 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.

Debt securities purchased by the Fund will be rated in one of the four
highest rating categories assigned by S&P ("AAA," "AA," "A" and "BBB") or
Moody's ("Aaa," "Aa," "A" and "Baa") or will be unrated securities determined by
Fleet to be of comparable quality, provided, however, that under normal market
and economic conditions at least 65% of the Fund's total assets will be invested
in debt securities rated in one of the two highest rating categories

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<PAGE>

assigned by S&P or Moody's or unrated debt securities determined by Fleet to be
of comparable quality. See "Equity Fund" above for a description of the risks
associated with investments in debt securities rated BBB by S&P or Baa by
Moody's. See Appendix A to this Statement of Additional Information for a
description of S&P's and Moody's rating categories.

See "Other Investment Policies and Risk Considerations" below for
information regarding additional investment policies of the High Quality Bond
Fund.

COLUMBIA HIGH YIELD FUND II

The Columbia High Yield Fund II may invest in a broad range of fixed income
securities, consisting of corporate debt securities, asset-backed securities,
bank obligations, collateralized bonds, loan and mortgage obligations,
commercial paper, preferred stock, repurchase agreements, savings and loan
obligations and U.S. Government and agency obligations. The Fund generally will
invest at least 65% of its total assets in high yielding fixed income securities
rated BB or lower by S&P or Ba or lower by Moody's. The Fund intends to invest
primarily in "upper tier" non-investment grade securities (that is, securities
rated BB/Ba or B) and no more than 10% of the Fund's total assets will be
invested in fixed income securities rated CCC or lower by S&P or Caa or lower by
Moody's. The Fund may also invest in unrated fixed income securities when
Columbia believes the security is of comparable quality to that of securities
eligible for purchase by the Fund. See "Special Risk Considerations --
Lower-Rated Securities" below. See Appendix A to this Statement of Additional
Information for a description of S&P's and Moody's rating categories.

The Fund may invest in corporate debt securities or preferred stocks that
are convertible into or exchangeable for common stock. The Fund may acquire
common stock in the following circumstances: (i) in connection with the
purchase of a unit of securities that includes both fixed income securities and
common stock; (ii) when fixed income securities held by the Fund are converted
by the issuer into common stock; (iii) upon the exercise of warrants attached to
fixed income securities held by the Fund; and (iv) when purchased as a part of a
corporate transaction in which the holders of common stock will receive newly
issued fixed income securities. Common stock acquired by the Fund in these
circumstances may be held to permit orderly disposition or to establish
long-term holding periods for federal income tax purposes.

The Fund may invest up to 20% of its total assets in fixed income
securities of foreign issuers, including foreign governments, denominated in
U.S. dollars.

Special tax considerations are associated with investing in lower-rated
debt securities structured as zero coupon or pay-in-kind securities. A zero
coupon security has no cash coupon payments. Instead, the issuer sells the
security at a substantial discount from its maturity value. The interest
equivalent received by the investor from holding this security to maturity is
the difference between the maturity value and the purchase price. Pay-in-kind
securities are securities that pay interest in either cash or additional
securities, at the issuer's option, for a specified period. The price of
pay-in-kind securities is expected to reflect the market value of the

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<PAGE>

underlying debt plus an amount representing accrued interest since the last
payment. Zero coupon and pay-in-kind securities are more volatile than cash pay
securities. The Fund accrues income on these securities prior to the receipt of
cash payments. The Fund intends to distribute substantially all of its income
to its shareholders to qualify for pass-through treatment under the tax laws and
may, therefore, need to use its cash reserves to satisfy distribution
requirements.

See "Other Investment Policies and Risk Considerations" below for
information regarding additional investment policies of the Columbia High Yield
Fund II.

SPECIAL RISK CONSIDERATIONS

MARKET RISK

The Equity Fund, Growth and Income Fund, Small Company Growth Fund and
Columbia Real Estate Equity Fund II invest primarily, and the Asset Allocation
Fund invests to a significant degree, in equity securities. As with other
mutual funds that invest primarily or to a significant degree in equity
securities, the Funds are subject to market risk. That is, the possibility
exists that common stocks will decline over short or even extended periods of
time and both the U.S. and certain foreign equity markets tend to be cyclical,
experiencing both periods when stock prices generally increase and periods when
stock prices generally decrease. As of the date of this Statement of Additional
Information, U.S. equity markets were trading at or close to record high levels
and there can be no guarantee that such levels will continue.

INTEREST RATE RISK

To the extent that the Funds invest in fixed income securities, including
municipal securities, their holdings of such securities are sensitive to changes
in interest rates and the interest rate environment. Generally, the prices of
bonds and debt securities fluctuate inversely with interest rate changes.

CREDIT RISK

Credit risk refers to the ability of a bond issuer to meet interest and
principal payments when due. Generally, lower-rated (but higher yielding)
bonds, such as those acquired by the Columbia High Yield Fund II, are subject to
a greater credit risk than higher quality (but lower yielding) bonds, such as
those acquired by the High Quality Bond Fund. See "Lower-Rated Securities"
below. The ratings of fixed income securities by S&P, Moody's and other Rating
Agencies are a generally accepted barometer of credit risk. See Appendix A to
this Statement of Additional Information for a description of the rating
categories of S&P, Moody's and certain other Rating Agencies.

FOREIGN SECURITIES

Investments in foreign securities involve higher costs for the Growth and
Income Fund, Small Company Growth Fund, Columbia Real Estate Equity Fund II,
Asset Allocation Fund and

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<PAGE>

Columbia High Yield Fund II than investments in U.S. securities, including
higher transaction costs as well as the imposition in some cases of additional
taxes by foreign governments. 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 dividends or principal and interest on foreign
obligations.

Although the Growth and Income Fund, Small Company Growth Fund, Columbia
Real Estate Equity Fund II and Asset Allocation Fund may invest in securities
denominated in foreign currencies, the Funds value their securities and other
assets in U.S. dollars. As a result, the net asset value of the Funds' shares
may fluctuate with U.S. dollar exchange rates as well as with price changes of
the Funds' 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
Funds make their investments could reduce the effect of increases and magnify
the effect of decreases in the price of the Funds' 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 Funds' securities in their local markets. In
addition to favorable and unfavorable currency exchange rate developments, the
Funds are subject to the possible imposition of exchange control regulations or
freezes on convertibility of currency.

Certain of the risks associated with investments in foreign securities are
heightened with respect to investments in countries with emerging economies or
emerging securities markets. The risks of expropriation, nationalization and
social, political and economic instability are greater in those countries than
in more developed capital markets.

REAL ESTATE SECURITIES

As stated in the Prospectus, the Columbia Real Estate Equity Fund II will
not invest in real estate directly. However, it may be subject to risks similar
to those associated with the direct ownership of real estate because of its
policy of concentration in the securities of companies in the real estate
industry. These risks include, in addition to those described in the
Prospectus, risks related to general, local, and regional economic conditions,
dependence on management skills and heavy cash flow, increased competition,
losses due to costs resulting from the clean-up of environmental problems,
liability to third parties for damages resulting from environmental problems,
casualty or condemnation losses, natural disasters, limitations on rents and
changes in the appeal of properties to tenants.

In addition to the risks described above and in the Prospectus, a REIT
could fail to qualify for pass-through of income under the Internal Revenue Code
of 1986, as amended, (the "Code"), or fail to maintain its exemption from
registration under the 1940 Act. The risk factors affecting REITs may also
adversely affect a borrower's or a lessee's ability to meet its obligations to
the REIT. If a borrower or lessee defaults, a REIT may experience delays in
enforcing its

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<PAGE>

rights as a mortgagee or lessor and may incur substantial costs associated with
protecting its investments.

LOWER-RATED SECURITIES

The recent growth in the market for lower-rated debt securities has
paralleled a long economic expansion. Past experience, therefore, may not
provide an accurate indication of future performance of this market,
particularly during a significant economic recession. An economic downturn or
increase in interest rates is likely to have a greater negative effect on the
ability of the issuers of the Columbia High Yield Fund II's securities to pay
principal and interest, meet projected business goals, and obtain additional
financing. These circumstances also may result in a higher incidence of
defaults compared to higher-rated securities. As a result, adverse changes in
economic conditions and increases in interest rates may adversely affect the
market for lower-rated debt securities, the value of such securities in the
Fund's portfolio, and, therefore, the Fund's net asset value. As a result,
investment in the Fund is more speculative than investment in a fund that
invests primarily in higher-rated debt securities.

Although the Columbia High Yield Fund II intends generally to purchase
lower-rated securities that have secondary markets, these markets may be less
liquid and less active than markets for higher-rated securities. These factors
may limit the ability of the Fund to sell lower-rated securities at their
expected value. Adverse publicity and investor perceptions, whether or not
based on fundamental analysis, may decrease the values and liquidity of
lower-rated debt securities, especially in a thinly traded market.

OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS

Investment methods described in the Prospectus and this Statement of
Additional Information are among those which one or more of the Funds have the
power to utilize. Some may be employed on a regular basis; others may not be
used at all. Accordingly, reference to any particular method or technique
carries no implication that it will be utilized or, if it is, that it will be
successful.

U.S. GOVERNMENT OBLIGATIONS AND MONEY MARKET INSTRUMENTS

Each Fund may, in accordance with its investment policies, invest from time
to time in obligations issued or guaranteed by the U.S. Government, its agencies
or instrumentalities and in "money market" instruments, which include bank
obligations and corporate obligations, including commercial paper and corporate
bonds with remaining maturities of 397 days or less.

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, Export-Import Bank of the
United States, Small Business Administration, Government National Mortgage

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<PAGE>

Association, Federal National Mortgage Association, General Services
Administration, Central Bank for Cooperatives, Federal Home Loan Mortgage
Corporation, Federal Intermediate Credit Banks, Resolution Trust Corporation and
Maritime Administration.

U.S. Treasury securities differ only in their interest rates, maturities
and time of issuance: Treasury Bills have initial maturities of one year or
less; Treasury Notes have initial maturities of one to ten years; and Treasury
Bonds generally have initial maturities of more than ten years. Obligations of
certain agencies and instrumentalities of the U.S. Government, such as those of
the Government National Mortgage Association, are supported by the full faith
and credit of the U.S. Treasury; others, such as those of the Federal Home Loan
Banks, 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 Federal Home Loan
Mortgage Corporation, 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 of these instruments may be variable or floating rate
instruments. See "Variable and Floating Rate Obligations" below.

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 which is a member of the Federal
Reserve System or is insured by the Federal Deposit Insurance Corporation
("FDIC"), or by a savings and loan association or savings bank which is insured
by the FDIC. 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. 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.

Time deposits with a maturity longer than seven days or that do not provide
for payment within seven days after notice will be limited to 10% (15% with
respect to the Growth and Income Fund, Small Company Growth Fund, Columbia Real
Estate Equity Fund II and Columbia High Yield Fund II) of a Fund's net assets.
Investments by the Money Market Fund, Equity Fund, Small Company Growth Fund,
Asset Allocation Fund and High Quality Bond Fund in non-negotiable time deposits
are limited to no more than 5% of each such Fund's total assets at the time of
purchase.

Domestic and foreign banks are subject to extensive but different
government regulation 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 U.S.
branches of foreign banks may subject a Fund to additional risks, including
future political and economic

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<PAGE>

developments, the possible imposition of withholding taxes on interest income,
possible seizure or nationalization of foreign deposits, the possible
establishment of exchange controls, or the adoption of 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. Such investments may
also subject a Fund to investment risks similar to those accompanying direct
investments in foreign securities. See "Special Risk Considerations -- Foreign
Securities." The Funds will invest in the obligations of U.S. branches of
foreign banks or foreign branches of U.S. banks only when Fleet or Columbia, as
the case may be, believes that the credit risk with respect to the instrument is
minimal.

Commercial paper may include securities issued by corporations without
registration under the Securities Act of 1933, as amended, the (the "1933 Act")
in reliance on the so-called "private placement" exemption in Section 4(2)
("Section 4(2) Paper"). Section 4(2) Paper is restricted as to disposition
under the federal securities laws in that any resale must similarly be made in
an exempt transaction. Section 4(2) Paper is normally resold to other
institutional investors through or with the assistance of investment dealers
which make a market in Section 4(2) Paper, thus providing liquidity. For
purposes of each Fund's limitation on purchases of illiquid instruments
described under "Investment Limitations" below, Section 4(2) Paper will not be
considered illiquid if Fleet or Columbia, as the case may be, has determined, in
accordance with the guidelines approved by Galaxy VIP's Board of Trustees, that
an adequate trading market exists for such securities. 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 Bond 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

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<PAGE>

such a reserve fund could adversely affect the ability of an issuer of moral
obligation securities to meet its payment obligations.

VARIABLE AND FLOATING RATE OBLIGATIONS

The Funds may purchase variable and floating rate instruments as described
in the Prospectus and this Statement of Additional Information. 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 that an issuer of a
variable or floating rate obligation defaulted on its payment obligation, a Fund
might be unable to dispose of the note because of the absence of a secondary
market and could, for this or other reasons, suffer a loss to the extent of the
default.

If a variable or floating rate instrument is not rated, Fleet or Columbia,
as the case may be, must determine that such instrument is comparable to rated
instruments eligible for purchase by a Fund and will consider the earning power,
cash flows and other liquidity ratios of the issuers and guarantors of such
instruments and will continuously monitor their financial status in order to
meet payment on demand. In determining average weighted portfolio maturity of a
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 397 days, 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).

Long-term 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.

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 Fleet or Columbia, as the case may be, under guidelines approved
by Galaxy VIP's Board of Trustees. No Fund will enter into repurchase
agreements with Fleet or Columbia or any of their affiliates. 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 each

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Fund's 10% limit (15% with respect to the Growth and Income Fund, Small Company
Growth Fund, Columbia Real Estate Equity Fund II and Columbia High Yield
Fund II) on such investments described under "Investment Limitations" below.
Repurchase agreements are considered to be loans by a Fund under the 1940 Act.

The repurchase price under a repurchase agreement 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 a 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.

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.

Whenever a Fund enters into a reverse repurchase agreement, it will place
in a segregated custodial account liquid assets such as cash or liquid portfolio
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.

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. 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 would be invested in high
quality, short-term "money market" instruments. 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 Fleet or Columbia to be
of good standing and only when, in Fleet's or Columbia's judgment, the income to
be earned from

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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 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 Fund, other
investment portfolios of Galaxy VIP, or any other investment companies advised
by Fleet or Columbia.

REITS

The Columbia Real Estate Equity Fund II may invest without limit in real
estate investment trusts ("REITs"). The Equity Fund, Growth and Income Fund,
Small Company Growth Fund and Asset Allocation Fund may invest up to 10% of
their respective net assets in REITs. REITs pool investors' funds for
investment primarily in income-producing real estate or real estate-related
loans or interests. A REIT is not taxed on income distributed to shareholders
if it complies with several requirements relating to its organization,
ownership, assets and income, and a requirement that it distribute to its
shareholders at least 95% of its taxable income (other than net capital gains)
for each taxable year.

As described in the Prospectus under "Columbia Real Estate Equity Fund II,"
REITs can generally be classified as equity REITs, mortgage REITs and hybrid
REITs. Equity REITs invest the majority of their assets directly in real
property and derive their income principally from rental and lease payments.
Equity REITs can also realize capital gains by selling properties that have
appreciated in value. Mortgage REITs make loans to commercial real estate
developers and derive their income primarily from interest payments on such
loans. Hybrid REITs combine the characteristics of both equity and mortgage
REITs. REITs may be subject to certain risks associated with the direct
ownership of real estate, including declines in the value of real estate, risks
related to general and local economic conditions, overbuilding and increased
competition, increases in property taxes and operating expenses, and variations
in rental income. Generally, increases in interest rates will decrease the
value of high yielding securities and increase the costs of obtaining financing,
which could decrease the value of a REIT's investments. In addition,

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equity REITs may be affected by changes in the value of the underlying property
owned by the REITs, while mortgage REITs may be affected by the quality of
credit extended. Equity and mortgage REITs are dependent upon management skill,
are not diversified and are subject to the risks of financing projects. REITs
are also subject to heavy cash flow dependency, defaults by borrowers, self
liquidation and the possibility of failing to qualify for tax-free pass-through
of income under the Internal Revenue Code of 1986, as amended (the "Code"), and
to maintain exemption from the 1940 Act.

REITs pay dividends to their shareholders based upon available funds from
operations. It is quite common for these dividends to exceed a REIT's taxable
earnings and profits resulting in the excess portion of such dividends being
designated as a return of capital. Each Fund intends to include the gross
dividends from any investments in REITs in its periodic distributions to its
shareholders and, accordingly, a portion of the Fund's distributions may also be
designated as a return of capital.

GUARANTEED INVESTMENT CONTRACTS

The Money Market Fund and High Quality Bond Fund may invest in guaranteed
investment contracts ("GICs") issued or guaranteed by U. S. 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 in the Prospectus. 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% 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 "U. S. Government Obligations and 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

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<PAGE>

there is an active and substantial secondary market for the particular
instrument and market quotations are readily available.

ASSET-BACKED AND MORTGAGE-BACKED SECURITIES

The Money Market Fund, Columbia Real Estate Equity Fund II, Asset
Allocation Fund, High Quality Bond Fund and Columbia High Yield Fund II 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, home equity loans, manufactured
housing loans, and other securitized assets. 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. The Money Market Fund will invest not
more than 10% of its total assets in asset-backed securities and will only
purchase asset-backed securities that meet the Fund's applicable quality
requirements as described in the Prospectus.

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 Asset Allocation Fund, High Quality Bond Fund and Columbia High Yield
Fund II may invest in mortgage-backed securities that represent pools of
mortgage loans assembled for sale to investors by various governmental agencies
and government-related organizations, such as the GNMA, the FNMA, and the
Federal Home Loan Mortgage Corporation. Mortgage-baked 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.

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

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<PAGE>

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 the Government National
Mortgage Association ("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 the Federal National Mortgage Association ("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 the Federal Home Loan Mortgage Corporation
("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 Bank 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.

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.

Mortgage-backed securities also include collateralized mortgage obligations
("CMOs"), which provide the holder with a specified interest in the cash flow of
a pool of underlying mortgages or other mortgage-backed securities. Issuers of
CMOs frequently elect to be taxed as pass-through entities known as real estate
mortgage investment conduits, or REMICs. CMOs are issued in multiple classes,
each with a specified fixed or floating interest rate and a final distribution
date. Although the relative payment rights of these classes can be structured
in a number of different ways, most often payments of principal are applied to
the CMO classes in order of respective stated maturities. CMOs can expose a
Fund to more volatility and interest rate risk than other types of
mortgage-backed securities.

The yield characteristics of asset-backed and mortgage-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

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<PAGE>

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 a Fund has purchased
an asset-backed or mortgage-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.

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.

MORTGAGE DOLLAR ROLLS

The Asset Allocation Fund, High Quality Bond Fund and Columbia High Yield
Fund II may enter into mortgage "dollar rolls" in which a Fund sells securities
for delivery in the current month and simultaneously contracts with the same
counterparty to repurchase similar (same type, coupon and maturity) but not
identical securities on a specified future date not exceeding 120 days. During
the roll period, a Fund loses the right to receive principal and interest paid
on the securities sold. However, a Fund would benefit to the extent of any
difference between the price received for the securities sold and the lower
forward price for the future purchase (often referred to as the "drop") or fee
income plus the interest earned on the cash proceeds of the securities sold
until the settlement date of the forward purchase. Unless such benefits exceed
the income, capital appreciation and gain or loss due to mortgage prepayments
that would have been realized on the securities sold as part of the mortgage
dollar roll, the use of this technique will diminish the investment performance
of a Fund compared with what such performance would have been without the use of
mortgage dollar rolls. All cash proceeds will be invested in instruments that
are permissible investments for each Fund. The Funds will hold and maintain in
a segregated account until the settlement date, cash or liquid securities in an
amount equal to the forward purchase price.

For financial reporting and tax purposes, the Funds propose to treat
mortgage dollar rolls as two separate transactions, one involving the purchase
of a security and a separate transaction

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<PAGE>

involving a sale. The Funds do not currently intend to enter into mortgage
dollar rolls that are accounted for as a financing.

Mortgage dollar rolls involve certain risks. If the broker-dealer to whom
a Fund sells the security becomes insolvent, the Fund's right to purchase or
repurchase the mortgage-related securities may be restricted and the instrument
which the Fund is required to repurchase may be worth less than an instrument
which the Fund originally held. Successful use of mortgage dollar rolls may
depend upon Fleet's or Columbia's ability to predict correctly interest rates
and mortgage prepayments. For these reasons, there is no assurance that
mortgage dollar rolls can be successfully employed.

STRIPPED OBLIGATIONS

To the extent consistent with their investment objectives, the Asset
Allocation Fund, High Quality Bond Fund and Columbia High Yield Fund II 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 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 or
Columbia, as the case may be, may determine that SMBS acquired by a Fund are
liquid under guidelines established by the Board of Trustees.

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<PAGE>

DERIVATIVE SECURITIES

The Funds may from time to time, in accordance with their respective
investment policies, purchase certain "derivative" securities. Derivative
securities are instruments that derive their value from the performance of
underlying assets, interest or currency exchange rates, or indices, and include,
but are not limited to, options, futures, indexed securities, swap agreements
and foreign currency exchange contracts.

Derivative securities present, to varying degrees, market risk that the
performance of the underlying assets, interest or exchange rates or indices will
decline; credit risk that the dealer or other counterparty to the transaction
will fail to pay its obligations; volatility and leveraging risk that, if
interest or exchange rates change adversely, the value of the derivative
security will decline more than the assets, rates or indices on which it is
based; liquidity risk that a Fund will be unable to sell a derivative security
when it wants because of lack of market depth or market disruption; pricing risk
that the value of a derivative security will not correlate exactly to the value
of the underlying assets, rates or indices on which it is based; and operations
risk that loss will occur as a result of inadequate systems and controls, human
error or otherwise. Some derivative securities are more complex than others,
and for those instruments that have been developed recently, data are lacking
regarding their actual performance over complete market cycles.

Fleet or Columbia, as the case may be, will evaluate the risks presented by
the derivative securities purchased by the Funds, and will determine, in
connection with their day-to-day management of the Funds, how such securities
will be used in furtherance of the Funds' investment objectives. It is
possible, however, that Fleet's or Columbia's evaluations will prove to be
inaccurate or incomplete and, even when accurate and complete, it is possible
that the Funds will, because of the risks discussed above, incur loss as a
result of their investments in derivative securities.

OPTIONS. Each Fund other than the Money Market Fund and High Quality Bond
Fund may write covered call options on securities. The Equity Fund, Growth and
Income Fund, Small Company Growth Fund, Columbia Real Estate Equity Fund II,
Asset Allocation Fund and Columbia High Yield Fund II may also buy put options,
buy call options and, with respect to each such Fund other than the Equity Fund
and Asset Allocation Fund, sell, or "write", secured put options on particular
securities or various securities indices or foreign currencies. Options trading
is a highly specialized activity which entails greater than ordinary investment
risks. Regardless of how much the market price of the underlying security,
index or currency increases or decreases, the option buyer's risk is limited to
the amount of the original investment for the purchase of the option. However,
options may be more volatile than the underlying instruments, and therefore, on
a percentage basis, an investment in options may be subject to greater
fluctuation than an investment in the underlying instruments themselves. Put
and call options purchased by a Fund will be valued at the last sale price each
day or, in the absence of such a price, at the mean between bid and asked
prices.

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<PAGE>

Options purchased by a Fund will not exceed 5%, and options written by a
Fund will not exceed 25%, of its net assets. Options must be listed on a
national securities exchange and issued by the Options Clearing Corporation.

A listed call option for a particular security gives the purchaser of the
option the right to buy from a clearing corporation, and a writer has the
obligation 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 in consideration for undertaking the obligations under the option contract.
A listed put option gives the purchaser the right to sell to a clearing
corporation the underlying security at the stated exercise price at any time
prior to the expiration date of the option, regardless of the market price of
the security. In contrast to an option on a particular security, an option on
an index provides the holder with the right to make or receive a cash settlement
upon exercise of the option. The amount of this settlement will be equal to the
difference between the closing price of the index at the time of exercise and
the exercise price of the option expressed in dollars, times a specified
multiple.

The call options written by a Fund will be "covered", which means that the
Fund writing the option owns the security underlying the call or has an absolute
and immediate right to acquire that security without additional cash
consideration (or, if additional cash consideration is required, liquid assets
in such amount as are held in a segregated account by its custodian) upon
conversion or exchange of other securities held by it. For a call option on an
index, the option is covered if the Fund involved owns securities whose price
changes, in the opinion of Fleet or Columbia, as the case may be, are expected
to be substantially similar to those of the index or it maintains with its
custodian liquid assets equal to the contract value. A call option is also
covered if the Fund involved holds a call on the same security or index as the
call written where the exercise price of the call held is (i) equal to or less
than the exercise price of the call written, or (ii) greater than the exercise
price of the call written provided the difference is maintained by the Fund in
liquid assets in a segregated account with its custodian. A secured put option
written by a Fund means that the Fund maintains in a segregated account with the
custodian cash or liquid portfolio securities in an amount not less than the
exercise price of the option at all times during the option period.

The principal reason for writing call options on a securities portfolio is
the attempt to realize, through the receipt of premiums, a greater current
return than would be realized on the securities alone. In return for the
premium, the covered option writer gives up the opportunity for profit from a
price increase in the underlying security above the exercise price so long as
its obligation as a writer continues, but retains the risk of loss should the
price of the security decline. Unlike one who owns securities not subject to an
option, the covered option writer has no control over when it may be required to
sell its securities, since it may be assigned an exercise notice at any time
prior to the expiration of its obligation as a writer.

A Fund's obligation to sell a security subject to a covered call option
written by it, or to purchase a security subject to a secured put option written
by it, may be terminated prior to the expiration date of the option by the
Fund's executing a closing purchase transaction, which is

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<PAGE>

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 prevent
the underlying security from being called, to permit the sale of the underlying
security, or to permit the writing of a new option containing different terms on
the underlying security. The cost of such a liquidation purchase plus
transaction costs may be greater than the premium received upon the original
option, in which event the Fund 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 call option writer, unable to effect a closing purchase transaction,
would not be able to sell the underlying security until the option expires or
the underlying security is delivered upon exercise. As a result, the writer in
such circumstances would be subject to the risk of market decline in the
underlying security during such period. A Fund will write an option on a
particular security only if Fleet or Columbia 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 a covered call option, an amount equal to the net
premium (the premium less the commission) received by the Fund is included in
the liability section of the Fund's statement of assets and liabilities as a
deferred credit. 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, the average of the closing bid and asked prices. If an option expires
on the stipulated expiration date or if the Fund enters into a closing purchase
transaction, it will realize a gain (or loss if the cost 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. Any gain on a
covered call option may be offset by a decline in the market price of the
underlying security during the option period. If a covered call option is
exercised, the Fund involved may deliver the underlying security held by it or
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. If a secured put option is exercised,
the amount paid by the Fund for the underlying security will be partially offset
by the amount of the premium previously paid to the Fund. Premiums from expired
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 short-term capital losses.

As noted previously, there are several risks associated with transactions
in options on securities and indices. For example, there are significant
differences between these securities and options markets which could result in
an imperfect correlation between these markets, causing a given transaction not
to achieve its objectives. In addition, a liquid secondary market for
particular options, whether traded over-the-counter or on a national securities
exchange may be absent for reasons which include the following: there may be
insufficient trading interest in certain options; restrictions may be imposed by
an exchange on opening transactions, closing transactions or both; trading
halts, suspensions or other restrictions may be imposed with respect

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<PAGE>

to particular classes or series of options or underlying securities; unusual or
unforeseen circumstances may interrupt normal operations on an exchange; the
facilities of an exchange or the Options Clearing Corporation may not at all
times be adequate to handle current trading volume; or one or more exchanges
could, for economic or other reasons, decide or be compelled at some future date
to discontinue the trading of options (or a particular class or series of
options), in which event the secondary market on that exchange (or in that class
or series of options) would cease to exist, although outstanding options that
had been issued by the Options Clearing Corporation as a result of trades on
that exchange would continue to be exercisable in accordance with their terms.

A decision as to whether, when and how to use options involves the exercise
of skill and judgment, and even a well-conceived transaction may be unsuccessful
to some degree because of market behavior or unexpected events.

FUTURES AND RELATED OPTIONS. The Growth and Income Fund, Small Company
Growth Fund, Columbia Real Estate Equity Fund II, High Quality Bond Fund and
Columbia High Yield Fund II may invest to a limited extent in futures contracts,
and the Growth and Income Fund, Small Company Growth Fund, Columbia Real Estate
Equity Fund II and Columbia High Yield Fund II may invest in options on future
contracts in order to gain fuller exposure to movements of securities prices
pending investment, for hedging purposes or to maintain liquidity. Futures
contracts obligate a Fund, at maturity, to take or make delivery of certain
securities or the cash value of a securities index. The High Quality Bond Fund
will only write contracts (both purchases and sales) for the future delivery of
fixed income securities (commonly known as interest rate futures contracts).
The Asset Allocation Fund will only write contracts (both purchases and sales)
for the future delivery of foreign currency. A Fund may not purchase or sell a
futures contracts (or related option) unless immediately after any such
transaction the sum of the aggregate amount of margin deposits on its existing
futures positions and the amount of premiums paid for related options is 5% or
less of its total assets (after taking into account certain technical
adjustments).

The Growth and Income Fund, Small Company Growth Fund, Columbia Real Estate
Equity Fund II and Columbia High Yield Fund II may also purchase and sell call
and put options on futures contracts traded on an exchange or board of trade.
When a Fund purchases an option on a futures contract, it has the right to
assume a position as a purchaser or seller of a futures contract at a specified
exercise price at any time during the option period. When a Fund sells an
option on a futures contract, it becomes obligated to purchase or sell a futures
contract if the option is exercised. In anticipation of a market advance, a
Fund may purchase call options on futures contracts to hedge against a possible
increase in the price of securities which that Fund intends to purchase.
Similarly, if the value of a Fund's portfolio securities is expected to decline,
the Fund might purchase put options or sell call options on futures contracts
rather than sell futures contracts.

Transactions in futures as a hedging device may subject the Funds to a
number of risks. Successful use of futures by a Fund are subject to Fleet's or
Columbia's ability to predict correctly movements in the direction of the
market. In addition, there may be an imperfect

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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
contracts at any particular time. Consequently, a 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.

More information regarding futures contracts and related options can be
found in Appendix B to this Statement of Additional Information.

SWAP AGREEMENTS AND INDEXED SECURITIES - GROWTH AND INCOME FUND AND SMALL
COMPANY GROWTH FUND. The Growth and Income Fund and Small Company Growth Fund
may enter into interest rate swaps, currency swaps and other types of swap
agreements such as caps, collars and floors, as a way to manage their exposure
to different types of investments. In a typical interest rate swap, one party
agrees to make regular payments equal to a floating interest rate times a
"notional principal amount," in return for payments equal to a fixed rate times
the same amount, for a specified period of time. If a swap agreement provides
for payments in different currencies, the parties might agree to exchange the
notional principal amount as well. Swaps may also depend on other prices or
rates, such as the value of an index or mortgage prepayment rates.

In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by the
other party. For example, the buyer of an interest rate cap obtains the right
to receive payments to the extent that a specified interest rate exceeds a
designated level, while the seller of an interest rate floor is obligated to
make payments to the extent that a specified interest rate falls below an agreed
upon level. An interest rate collar combines elements of buying a cap and
selling a floor.

Swap agreements will tend to shift a Fund's investment exposure from one
type of investment to another. For example, if a Fund agreed to exchange
payments in dollars for payments in foreign currency, the swap agreement would
tend to decrease the Fund's exposure to U.S. interest rates and increase its
exposure to foreign currency and interest rates. Caps and floors have an effect
similar to buying or writing options. Depending on how they are used, swap
agreements may increase or decrease the overall volatility of a Fund's
investments and its share price and yield.

Swap agreements are sophisticated hedging instruments that typically
involve a small investment of cash relative to the magnitude of risks assumed.
As a result, swaps can be highly volatile and may have a considerable impact on
a Fund's performance. Swap agreements are subject to risks related to the
counterparty's ability to perform, and may decline in value if the
counterparty's creditworthiness deteriorates. A Fund may also suffer losses if
it is unable to terminate outstanding swap agreement or reduce its exposure
through offsetting transactions.

These Funds may also invest in indexed securities. The value of these
securities is linked to foreign currencies, interest rates, commodities, indices
or other financial indicators. Most

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<PAGE>

indexed securities are short- to intermediate-term fixed income securities whose
values at maturity or interest rates rise or fall according to the change in one
or more specified underlying instruments. Indexed securities may be positively
or negatively indexed (i.e., their value may increase or decrease if the
underlying instrument appreciates), and may have return characteristics similar
to direct investments in the underlying instrument or to one or more options on
the underlying instrument. Indexed securities may be more volatile than the
underlying instrument itself. Neither Fund intends to invest more than 5% of
its total assets in swap agreements or indexed securities.

FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Because the Growth and Income
Fund, Small Company Growth Fund, Columbia Real Estate Equity Fund II and Asset
Allocation Fund may buy and sell securities denominated in currencies other than
the U.S. dollar, and may receive interest, dividends and sale proceeds in
currencies other than the U.S. dollar, the Funds 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. A 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, which may be any fixed number of days from the date of the
contract, 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 a Fund to hedge the
currency risk of portfolio securities denominated in a foreign currency. This
technique permits the assessment of the merits of a security to be considered
separately from the currency risk. By separating the asset and the currency
decision, it is possible to focus on the opportunities presented by the security
apart from the currency risk. Although forward foreign currency exchange
contracts are of short duration, generally between one and twelve months, such
contracts are rolled over in a manner consistent with a more long-term currency
decision. Because there is a risk of loss to a Fund if the other party does not
complete the transaction, forward foreign currency exchange contracts will be
entered into only with parties approved by Galaxy VIP's Board of Trustees.

A 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 used to achieve leverage with respect to the Fund's investments,
the Fund will establish with its custodian a segregated account consisting of
cash or other liquid assets 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.

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<PAGE>

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 a Fund's portfolio securities or in foreign
exchange rates, or prevent loss if the prices of these securities should
decline.

The Funds 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 a Fund's long-term investment
decisions, the Funds 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 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.

AMERICAN, EUROPEAN AND GLOBAL DEPOSITORY RECEIPTS

The Equity Fund, Growth and Income Fund, Small Company Growth Fund and
Asset Allocation Fund may invest in ADRs and EDRs. The Growth and Income Fund
and Small Company Growth Fund may also invest in GDRs. 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. GDRs are
receipts structured similarly to EDRs and are marketed globally. 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. GDRs are designed for trading in non-U.S. securities
markets. ADRs, EDRs and GDRs 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' respective limitations with respect to
such securities. If a Fund invests in an unsponsored ADR, EDR or GDR, there
may be less information available to the Fund concerning the issuer of the
securities underlying the unsponsored ADR, EDR or GDR than is available for an
issuer of securities underlying a sponsored ADR, EDR or GDR. ADR prices are
denominated in U.S. dollars although the underlying securities are denominated
in a foreign currency. Investments in ADRs, EDRs and GDRs involve risks similar
to those accompanying direct investments in foreign securities. Certain of
these risks are described above under "Special Risk Considerations -- Foreign
Securities."

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<PAGE>

CONVERTIBLE SECURITIES

Each Fund, except the Money Market Fund, may from time to time, in
accordance with their respective investment policies, invest in convertible
securities. Convertible securities are fixed income securities which may be
exchanged or converted into a predetermined number of shares of the issuer's
underlying common stock at the option of the holder during a specified time
period. Convertible securities may take the form of convertible preferred
stock, convertible bonds or debentures, units consisting of "usable" bonds and
warrants or a combination of the features of several of these securities.

Convertible bonds and convertible preferred stocks generally retain the
investment characteristics of fixed income securities until they have been
converted but also react to movements in the underlying equity securities. The
holder is entitled to receive the fixed income of a bond or the dividend
preference of a preferred stock until the holder elects to exercise the
conversion privilege. Usable bonds are corporate bonds that can be used in
whole or in part, customarily at full face value, in lieu of cash to purchase
the issuer's common stock. When owned as part of a unit along with warrants,
which are options to buy the common stock, they function as convertible bonds,
except that the warrants generally will expire before the bond's maturity.
Convertible securities are senior to equity securities and therefore have a
claim to the assets of the issuer prior to the holders of common stock in the
case of liquidation. However, convertible securities are generally subordinated
to similar non-convertible securities of the same issuer. The interest income
and dividends from convertible bonds and preferred stocks provide a stable
stream of income with generally higher yields than common stocks, but lower than
non-convertible securities of similar quality. A Fund will exchange or convert
the convertible securities held in its portfolio into shares of the underlying
common stock in instances in which, in Fleet's or Columbia's opinion, the
investment characteristics of the underlying common shares will assist the Fund
in achieving its investment objective. Otherwise, a Fund will hold or trade the
convertible securities. In selecting convertible securities for a Fund, Fleet
and Columbia evaluate the investment characteristics of the convertible security
as a fixed income instrument, and the investment potential of the underlying
equity security for capital appreciation. In evaluating these matters with
respect to a particular convertible security, Fleet and Columbia consider
numerous factors, including the economic and political outlook, the value of the
security relative to other investment alternatives, trends in the determinants
of the issuer's profits, and the issuer's management capability and practices.

The Growth and Income Fund may invest in convertible bonds rated "BB" or
higher by S&P or Fitch IBCA, or "Ba" or higher by Moody's at the time of
investment. Securities rated "BB" by S&P or Fitch IBCA or "Ba" by Moody's
provide questionable protection of principal and interest in that such
securities either have speculative characteristics or are predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. Debt obligations that are not
rated, or not determined to be, investment grade are high-yield, high-risk
bonds, typically subject to greater market fluctuations, and securities in the
lowest rating category may be in danger of loss of income and principal due to
an issuer's default. To a greater extent than investment grade bonds, the
value of lower-rated

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<PAGE>

bonds tends to reflect short-term corporate, economic, and market developments,
as well as investor perceptions of the issuer's credit quality. In addition,
lower-rated bonds may be more difficult to dispose of or to value than
higher-rated, lower-yielding bonds. Fleet will attempt to reduce the risks
described above through diversification of each Fund's portfolio and by credit
analysis of each issuer, as well as by monitoring broad economic trends and
corporate and legislative developments. If a convertible bond is rated below
"BB" or "Ba" after a Fund has purchased it, the Fund is not required to
eliminate the convertible bond from its portfolio, but will consider appropriate
action. The investment characteristics of each convertible security vary
widely, which allows convertible securities to be employed for different
investment objectives. The Funds do not intend to invest in such lower-rated
bonds during the current fiscal year. A description of the rating categories of
S&P, Moody's and Fitch IBCA is contained in Appendix A to this Statement of
Additional Information.

Convertible bonds acquired by the Columbia High Yield Fund II will
generally be rated BB or lower by S&P or Ba or lower by Moody's. See "Special
Risk Considerations - Lower Rated Securities" above for a description of the
risks associated with investments in such lower-rated securities.

WHEN-ISSUED, FORWARD COMMITMENT AND DELAYED SETTLEMENT TRANSACTIONS

Each Fund may purchase eligible securities on a "when-issued" basis and may
purchase or sell eligible securities on a "forward commitment" basis. Each Fund
may also purchase and sell eligible securities on a "delayed settlement" basis.
When-issued and forward commitment transactions, which involve a commitment by a
Fund to purchase or sell particular securities with payment and delivery taking
place at a future date (perhaps one or two months later), permit the 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 a 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. A 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 a Fund sets aside liquid assets
to satisfy its purchase commitments in the manner described, the Fund's
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 total assets.

When a 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

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<PAGE>

advantageous for a security. For purposes of determining the average weighted
maturity of a Fund's portfolio, the maturity of "when-issued" securities is
calculated from the date of settlement of the purchase to the maturity date.

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 a 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 total assets, the Fund's liquidity and the ability of Fleet or Columbia, as
the case may be, to manage the Fund might be adversely affected. The Funds will
not engage in when-issued purchases, forward commitments and delayed settlements
for speculative purposes, but only in furtherance of their respective investment
objectives.

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. 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. 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). 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. Stand-by
commitments acquired by the Fund would be valued at zero in determining the
Fund's net asset value.

The Fund will enter into "stand-by commitments" only with banks and
brokers/dealers which present minimal credit risks. In evaluating the
creditworthiness of the issuer of a "stand-by commitment," Fleet, as 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.

PORTFOLIO SECURITIES GENERALLY - MONEY MARKET FUND

Subsequent to its purchase by the Money Market Fund, the rating for an
issue of securities may be reduced below the minimum rating required for
purchase by the Fund. The Board of Trustees or Fleet, pursuant to guidelines
established by the Board, will promptly

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<PAGE>

consider such an event in determining whether the Fund should continue to hold
the obligation. The Fund may continue to hold the obligation if the Board of
Trustees or Fleet determines that retention is in accordance with the interests
of the Fund and applicable regulations of the Securities and Exchange Commission
("SEC").

PORTFOLIO TURNOVER

Each Fund may sell a portfolio investment soon after its acquisition if
Fleet or Columbia, as the case may be, 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. A portfolio turnover rate of 100% or more is considered high,
although the rate of portfolio turnover will not be a limiting factor in making
portfolio decisions. A high rate of portfolio turnover involves correspondingly
greater brokerage commission expenses and other transaction costs, which must be
ultimately borne by a Fund's shareholders. High portfolio turnover may result
in the realization of substantial net capital gains; distributions derived from
such gains will be treated as ordinary income for federal income tax purposes.

INVESTMENT LIMITATIONS

In addition to each Fund's investment objective as stated in the
Prospectus, the following investment limitations are matters of fundamental
policy and may not be changed with respect to a particular Fund without the
affirmative vote of the holders of a majority of its outstanding shares (as
defined under "Miscellaneous").

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 that each Fund may
borrow 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 Fleet or Columbia) and then in
amounts not in excess of 10% with respect to the Money Market Fund and
High Quality Bond Fund, or 33% with respect to the Equity Fund, Growth
and Income Fund, Small Company Growth Fund, Columbia Real Estate
Equity Fund II, Asset Allocation Fund and Columbia High Yield Fund II,
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

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<PAGE>

excess of 10% with respect to the Money Market Fund and High Quality
Bond Fund, or 33% with respect to the Equity Fund, Growth and Income
Fund, Small Company Growth Fund, Columbia Real Estate Equity Fund II,
Asset Allocation Fund and Columbia High Yield Fund II, 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 Fund and High Quality
Bond Fund, or 33% with respect to the Equity Fund, Growth and Income
Fund, Small Company Growth Fund, Columbia Real Estate Equity Fund II,
Asset Allocation Fund and Columbia High Yield Fund II, 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 each Fund other than the Money Market Fund, if the
securities held by a Fund 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% (15% with respect to the Growth and Income Fund,
Small Company Growth Fund, Columbia Real Estate Equity Fund II and
Columbia High Yield Fund II) 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, Growth and Income Fund, Small Company
Growth Fund, Columbia Real Estate Equity Fund II, Asset Allocation
Fund, High Quality Bond Fund and Columbia High Yield Fund II 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
its 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

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<PAGE>

example, gas, gas transmission, electric and gas, electric and
telephone each will be considered a separate industry); and further
provided that the Columbia Real Estate Equity Fund II will invest at
least 65% of its total assets in the equity securities of companies
principally engaged in the real estate industry.

6. 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.

7. Act as an underwriter within the meaning of the 1933 Act, 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 a Fund's investment objective, policies and
limitations may be deemed to be underwriting.

8. 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 other than the Columbia Real Estate Equity Fund II
and the Columbia High Yield Fund II will not purchase or sell
interests in real estate limited partnerships.

9. 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 (i) the High Quality Bond Fund may
enter into interest rate futures contracts to the extent permitted
under the Commodity Exchange Act and the 1940 Act; (ii) the Growth and
Income Fund, Small Company Growth Fund, Columbia Real Estate Equity
Fund II and Columbia High Yield Fund II may enter into futures
contracts and options on futures contracts; and (iii) the Growth and
Income Fund, Small Company Growth Fund, Columbia Real Estate Equity
Fund II and Asset Allocation Fund may enter into forward currency
contracts and foreign currency futures contracts and related options
to the extent permitted by their respective investment objectives and
policies.

10. Invest in or sell put options, call options, straddles, spreads, or
any combination thereof; provided, however, that (i) the Equity Fund,
Growth and Income Fund, Small Company Growth Fund, Columbia Real
Estate Equity Fund II, Asset Allocation Fund and Columbia High Yield
Fund II 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 Funds does not
exceed 25% of the value of their respective total assets; (ii) the
Equity Fund and Asset Allocation Fund may purchase put and call
options to the extent permitted by their respective investment
objectives and policies; and (iii) the Growth and Income Fund, Small
Company Growth Fund, Columbia Real Estate Equity Fund II and Columbia
High

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<PAGE>

Yield Fund II may purchase put and call options and sell or write
secured put options to the extent permitted by their respective
investment objectives and policies.

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

12. Purchase securities of other investment companies except in connection
with a merger, consolidation, reorganization, or acquisition of
assets; provided, however, that each Fund other than the Money Market
Fund may acquire such securities in accordance with the 1940 Act.

In addition to the above limitations:

13. 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.

14. 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 (i) the High Quality Bond Fund may also purchase obligations of
Canadian Provincial Governments in accordance with the Fund's
investment objective and policies; (ii) 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 (iii) the
Equity Fund may invest up to 20% of its total assets in American
Depository Receipts and European Depository Receipts.

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.

With respect to Investment Limitation No. 4 above, adherence by the Money
Market Fund to the diversification requirements of Rule 2a-7 under the 1940 Act
is deemed to constitute adherence to the diversification requirements of Section
5(b)(i) of the 1940 Act.

Rule 144A under the 1933 Act 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 1933 Act for resales of

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<PAGE>

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 the Fund during any period that qualified institutional buyers
were no longer interested in purchasing these securities. For purposes of the
limitations on purchases of illiquid instruments described in Investment
Limitation No. 3 above, Rule 144A securities will not be considered to be
illiquid if Fleet or Columbia, as the case may be, 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, 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.

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.

VALUATION OF PORTFOLIO SECURITIES

VALUATION OF THE MONEY MARKET FUND

As stated in the Prospectus, the Money Market 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.

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. 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 appropriate to its objective of maintaining a stable net
asset value per share, provided that the

-37-
<PAGE>

Fund will not purchase any security deemed to have a remaining maturity (as
defined in the 1940 Act) of more than 397 days 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.

VALUATION OF THE EQUITY FUND, GROWTH AND INCOME FUND, SMALL COMPANY GROWTH FUND,
COLUMBIA REAL ESTATE EQUITY FUND II, ASSET ALLOCATION FUND AND COLUMBIA HIGH
YIELD FUND II

In determining market value, the assets in the Equity Fund, Growth and
Income Fund, Small Company Growth Fund, Columbia Real Estate Equity Fund II,
Asset Allocation Fund and Columbia High Yield Fund II 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 Fleet or Columbia, as the case may be, 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.

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<PAGE>

VALUATION OF THE HIGH QUALITY BOND FUND

In determining market value, the assets in the High Quality Bond Fund 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
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.

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 in each Fund are sold on a continuous basis by Galaxy VIP's
distributor, First Data Distributors, Inc. ("FD Distributors"), a wholly-owned
subsidiary of First Data Investor Services Group, Inc. FD Distributors is a
registered broker/dealer with principal offices located at 4400 Computer Drive,
Westborough, Massachusetts 01581. FD Distributors has agreed to use appropriate
efforts to solicit all purchase orders.

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.

-39-
<PAGE>

ADDITIONAL INFORMATION ON TAXES

In order to qualify as a regulated investment company under the Code, 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 may 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.
Each Fund intends to meet these ownership conditions and to comply with the
diversification tests noted above. Accordingly, a segregated asset account
investing solely in shares of a Fund will be adequately diversified. However, a
failure of a 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 a 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 policy.

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

-40-
<PAGE>

TRUSTEES AND OFFICERS

The business and affairs of the Funds are managed under the direction of
Galaxy VIP's Board of Trustees in accordance with the laws of the Commonwealth
of Massachusetts and the Trust's Agreement and Declaration of Trust. The
trustees and executive officers of Galaxy VIP, their addresses, principal
occupations during the past five years, and other affiliations are as follows:

Principal Occupation
Positions with During Past 5 Years
Name and Address The Galaxy VIP Fund and Other Affiliations
---------------- ------------------- ----------------------

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

John T. O'Neill(1) President, Treasurer Executive Vice President and
Hasbro, Inc. & Trustee CFO, Hasbro, Inc. (toy and game
1011 Newport Avenue manufacturer); Trustee, The
Pawtucket, RI 02862 Galaxy Fund; Trustee, Galaxy
Age 54 Fund II.

Louis DeThomasis Trustee President, Saint Mary's College
Saint Mary's College of Minnesota; Director, Bright
of Minnesota Day Travel, Inc.; Trustee,
Winona, MN 55987 Religious Communities Trust;
Age 58 Trustee, The Galaxy Fund;
Trustee, Galaxy Fund II.

Donald B. Miller Trustee Chairman, Horizon Media, Inc.
10725 Quail Covey Road (broadcast services);
Boynton Beach, FL 33436 Director/Trustee, Lexington
Age 73 Funds; Chairman, Executive
Committee, Compton
International, Inc.
(advertising agency); Trustee,
Keuka College; Trustee, The
Galaxy Fund; Trustee, Galaxy
Fund II.

-41-
<PAGE>

Principal Occupation
Positions with During Past 5 Years
Name and Address The Galaxy VIP Fund and Other Affiliations
---------------- ------------------- ----------------------

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

Bradford S. Wellman(1) Trustee Private Investor; Vice
2468 Ohio Street President and Director, Acadia
Bangor, ME 04401 Management Company (investment
Age 67 services); Director, Essex
County Gas Company, until
January 1994; Director, Maine
Mutual Fire Insurance Co.;
Member, Maine Finance
Authority; Trustee, The Galaxy
Fund; Trustee, Galaxy Fund II.

W. Bruce McConnel, III Secretary Partner of the law firm Drinker
Philadelphia National Biddle & Reath LLP,
Bank Building Philadelphia, Pennsylvania.
1345 Chestnut Street.
Philadelphia, PA 19107
Age 56

Jylanne Dunne Vice President and Vice President, First Data
First Data Investor Assistant Treasurer Investor Services Group, Inc.,
Services Group, Inc. 1990 to present.
4400 Computer Drive
Westborough, MA
01581-5108
Age 39

-42-
<PAGE>

Principal Occupation
Positions with During Past 5 Years
Name and Address The Galaxy VIP Fund and Other Affiliations
---------------- ------------------- ----------------------

William Greilich Vice President Vice President, First Data
First Data Investor Investor Services Group, Inc.,
Services Group, Inc. 1991-96; Vice President and
4400 Computer Drive Division Manager, First Data
Westborough, MA Investor Services Group, Inc.,
01581-5108 1996-present.
Age 45

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

1. May be deemed to be an "interested person" within the definition set forth
in Section 2(a)(19) of the 1940 Act.

Effective March 5, 1998, each trustee receives an annual aggregate fee of
$40,000 for his services as a trustee of Galaxy VIP, The Galaxy Fund ("Galaxy")
and Galaxy Fund II ("Galaxy II") (collectively, the "Trusts"), plus an
additional $2,250 for each in-person Galaxy Board meeting attended and $1,500
for each in-person Galaxy VIP or Galaxy II Board meeting attended not held
concurrently with an in-person Galaxy meeting, and is reimbursed for expenses
incurred in attending all meetings. Each trustee also receives $750 for each
telephone Board meeting in which the trustee participates, $1,000 for each
in-person Board committee meeting attended and $500 for each telephone Board
committee meeting in which the trustee participates. The Chairman of the Boards
of the Trusts is entitled to an additional annual aggregate fee in the amount of
$4,000, and the President and Treasurer of the Trusts is entitled to an
additional annual aggregate fee of $2,500 for their services in these respective
capacities. The foregoing trustees' and officers' fees are allocated among the
portfolios of the Trusts based on their relative net assets. Prior to March 5,
1998, (i) each trustee received an annual aggregate fee of $29,000 for his
services as a trustee of the Trusts, plus an additional $2,250 for each
in-person Galaxy Board meeting attended and $1,500 for each in-person Galaxy VIP
or Galaxy II Board meeting attended not held concurrently with an in-person
Galaxy Board meeting, and (ii) the President and Treasurer of the Trusts
received the same fees as they are currently paid for their services in these
capacities.

Effective March 1, 1996, each trustee became entitled to participate in The
Galaxy Fund, The Galaxy VIP Fund and Galaxy Fund II Deferred Compensation Plans
(the "Original Plans"). Effective January 1, 1997, the Original Plans were
merged into The Galaxy Fund/The Galaxy VIP Fund/Galaxy Fund II Deferred
Compensation Plan (together with the Original Plans, the "Plan"). Under the
Plan, a trustee may elect to have his deferred fees treated as if they had been
invested by the Trusts in the shares of one or more portfolios in the Trusts, or
other types of investment options, and the amount paid to the trustees under the
Plan will be determined based upon the performance of such investments.
Deferral of trustees' fees will have no effect on a portfolio's assets,
liabilities, and net income per share, and will not obligate the Trusts to
retain

-43-
<PAGE>

the services of any trustee or obligate a portfolio to any level of compensation
to the trustee. The Trusts may invest in underlying securities without
shareholder approval.

No employee of First Data Investor Services Group, Inc. ("Investor Services
Group"), receives any compensation from Galaxy VIP for acting as an officer. No
person who is an officer, director or employee of Fleet, Columbia or any of
their affiliates, serves as a trustee, officer or employee of Galaxy VIP. The
trustees and officers of Galaxy VIP own less than 1% of its outstanding shares.

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 Total
Benefits Compensation
Aggregate Accrued as from Fund
Compensation from Part of Fund Complex*
Name of Person/Position Galaxy VIP Expenses Paid to Trustees
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Bradford S. Wellman None
Trustee
- --------------------------------------------------------------------------------
Dwight E. Vicks, Jr. None
Chairman and Trustee
- --------------------------------------------------------------------------------
Donald B. Miller** None
Trustee
- --------------------------------------------------------------------------------
Rev. Louis DeThomasis None
Trustee
- --------------------------------------------------------------------------------
John T. O'Neill None
President, Treasurer
and Trustee
- --------------------------------------------------------------------------------
James M. Seed** None
Trustee
- --------------------------------------------------------------------------------
</TABLE>
- -------------------------

* The "Fund Complex" consists of Galaxy, Galaxy VIP and Galaxy II, which
compromise a total of 43 separate portfolios.

** Deferred compensation (including interest) in the amounts of $________ and
$________ accrued during Galaxy VIP's fiscal year ended December 31, 1998
for Messrs. Miller and Seed, respectively.

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 the trust. However, Galaxy VIP's Agreement and Declaration of Trust provides
that shareholders shall not be subject

-44-
<PAGE>

to any personal liability 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 the trust property of any shareholder held personally
liable solely by reason of his or her being or having been a shareholder and not
because of his or her acts or omissions outside such capacity or 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 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, claim, damage, judgment or decree arising out of or
connected with the administration or preservation of the trust estate 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 the trust 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 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.

INVESTMENT ADVISERS

Fleet serves as investment adviser to the Money Market Fund, Equity Fund,
Growth and Income Fund, Small Company Growth Fund, Asset Allocation Fund and
High Quality Bond Fund. Columbia serves as investment adviser to the Columbia
Real Estate Equity Fund II and Columbia High Yield Fund II. In their respective
advisory agreements, Fleet and Columbia have agreed to provide investment
advisory services to the respective Funds as described in the Prospectus. Fleet
and Columbia have also agreed to pay all expenses incurred by them in connection
with their activities under the respective advisory agreements other than the
cost of securities (including brokerage commissions) purchased for the Funds.

For the services provided and expenses assumed pursuant to the advisory
agreements, Galaxy VIP has agreed (i) to pay Fleet advisory fees, accrued daily
and paid monthly, at the annual rate of .40% of the average daily net assets of
the Money Market Fund, .75% of the average daily net assets of the Equity Fund,
Growth and Income Fund, Small Company Growth Fund and Asset Allocation Fund,
respectively, and .55% of the average daily net assets of the High Quality Bond
Fund, and (ii) to pay Columbia advisory fees, accrued daily and paid

-45-
<PAGE>

monthly, at the annual rate of .75% of the average daily net assets of the
Columbia Real Estate Equity Fund II and .60% of the average daily net assets of
the Columbia High Yield Fund II. Fleet and Columbia may from time to time, in
their 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 their advisory fees to 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 Money Market Fund and High Quality Bond Fund, but
Fleet may in its discretion revise or discontinue this waiver at any time.

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

For the fiscal years ended December 31, 1998, 1997 and 1996, Galaxy VIP
paid advisory fees (net of fee waivers) to Fleet and Columbia, as the case may
be, as set forth below:

<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED DECEMBER 31:
FUND 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C>
Money Market Fund. . . . . . . . . . . $______ $ 22,042 $ 26,160
Equity Fund. . . . . . . . . . . . . . $______ $440,287 $284,214
Growth and Income Fund . . . . . . . . $______(1) * *
Small Company Growth Fund. . . . . . . $______(2) * *
Columbia Real Estate Equity Fund II. . $______(3) * *
Asset Allocation Fund. . . . . . . . . $______ $219,457 $152,669
High Quality Bond Fund . . . . . . . . $______ $ 15,830 $ 16,778
Columbia High Yield Fund II. . . . . . $______(3) * *
</TABLE>

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

* Not in operation during the period.
(1) For the period from March 4 (commencement of operations) through
December 31, 1998.
(2) For the period from April 17 (commencement of operations) through
December 31, 1998.
(3) For the period from March 3 (commencement of operations through
December 31, 1998.

For the fiscal years ended December 31, 1998, 1997 and 1996, Fleet and
Columbia, as the case may be, waived advisory fees as follows:

<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED OCTOBER 31:
FUND 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C>
Money Market Fund. . . . . . . . . . . $______ $______ $______
Equity Fund. . . . . . . . . . . . . . $______ $______ $______
Growth and Income Fund . . . . . . . . $______(1) * *
Small Company Growth Fund. . . . . . . $______(2) * *
Columbia Real Estate Equity Fund II. . $______(3) * *
Asset Allocation Fund. . . . . . . . . $______ $______ $______
</TABLE>

-46-
<PAGE>
<TABLE>
<CAPTION>

FOR THE FISCAL YEAR ENDED OCTOBER 31:
FUND 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C>
High Quality Bond Fund . . . . . . . . $______ $______ $______
Columbia High Yield Fund II. . . . . . $______(3) * *
</TABLE>

Each advisory agreement provides that Fleet or Columbia 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 Fleet or Columbia in
the performance of its duties or from reckless disregard by it of its duties and
obligations thereunder. Unless sooner terminated, the advisory agreement will
continue in effect with respect to a particular Fund 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 term "majority of the outstanding shares of such Fund" means, with
respect to approval of an advisory agreement, the vote of the lesser of (i) 67%
or more of the shares of the Fund present at a meeting, if the holders of more
than 50% of the outstanding shares of the Fund are present or represented by
proxy, or (ii) more than 50% of the outstanding shares of the Fund. The
advisory agreement may be terminated by Galaxy VIP or by Fleet or by Columbia,
as the case may be, on sixty days' written notice, and will terminate
immediately in the event of its assignment.

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. Fleet, Columbia, the
custodian and institutions which agree to provide shareholder support services
that are banks or bank affiliates are subject to such banking laws and
regulations. Should legislative, judicial or administrative action prohibit or
restrict the activities of such companies in connection with their services to
the Funds, Galaxy 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 loss to any shareholder.

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<PAGE>

DISTRIBUTOR

First Data Distributors, Inc. ("FD Distributors"), a wholly-owned
subsidiary of First Data Investor Services Group, Inc., serves as Galaxy VIP's
distributor. On March 31, 1995, First Data Investor Services Group, Inc.
acquired all of the issued and outstanding stock of FD Distributors. Prior to
that time, FD Distributors was a wholly-owned subsidiary of 440 Financial Group
of Worcester, Inc. and an indirect subsidiary of State Mutual Life Assurance
Company of America.

Unless otherwise terminated, the Distribution Agreement between Galaxy VIP
and FD Distributors remains in effect until May 31, 1999, 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.

ADMINISTRATOR

First Data Investor Services Group, Inc. ("Investor Services Group"),
located at 4400 Computer Drive, Westborough, Massachusetts 01581-5108, serves as
the Funds' administrator. Investor Services Group is a wholly-owned subsidiary
of First Data Corporation.

Under the administration agreement, Investor Services Group 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. Investor Services Group
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. Unless otherwise terminated, the Administration
Agreement will remain in effect until May 1, 2001 and thereafter will continue
from year to year upon annual approval of Galaxy VIP's Board of Trustees.

For the services provided and expenses assumed pursuant to the
Administration Agreement, Galaxy VIP has agreed to pay Investor Services Group
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, 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

-48-
<PAGE>

payable to Investor Services Group for its administration services. The minimum
aggregate annual fee payable for administration services is $100,000. In
addition, Investor Services Group 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, Investor
Services Group 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 fiscal year ended December 31, 1998, each Fund paid
Investor Services Group administration fees at the effective annual rate of
_____% of such Fund's average daily net assets.

For the fiscal years ended December 31, 1998, 1997 and 1996, Investor
Services Group received administration, custody and fund accounting fees (net of
fee waivers) as set forth below:

<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED DECEMBER 31:
FUND 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C>
Money Market Fund. . . . . . . . . . . $______ $37,694 $41,131
Equity Fund. . . . . . . . . . . . . . $______ $74,956 $66,778
Growth and Income Fund . . . . . . . . $______(1) * *
Small Company Growth Fund. . . . . . . $______(2) * *
Columbia Real Estate Equity Fund II. . $______(3) * *
Asset Allocation Fund. . . . . . . . . $______ $78,328 $70,758
High Quality Bond Fund . . . . . . . . $______ $38,071 $36,993
Columbia High Yield Fund II. . . . . . $______(3) * *
</TABLE>

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

For the fiscal years ended December 31, 1998, 1997 and 1996, Investor
Services Group waived administration fees as set forth below:

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

* Not in operation during the period.

-49-
<PAGE>

(1) For the period from March 4 (commencement of operations) through
December 31, 1998.
(2) For the period from April 17 (commencement of operations) through
December 31, 1998.
(3) For the period from March 3 (commencement of operations through
December 31, 1998.

CUSTODIAN

The Chase Manhattan Bank ("Chase Manhattan"), located at One 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
pursuant to a Global Custody Agreement. Chase Manhattan may employ
sub-custodians for the Growth and Income, Small Company Growth, Columbia Real
Estate Equity Fund II, Asset Allocation and Columbia High Yield Fund II Funds
for the purpose of providing custodial services for the Funds' foreign assets
held outside the United States.

Under the Global 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.

EXPENSES

Galaxy VIP bears the expenses in connection with the Funds' operations,
whether incurred directly or on its behalf by Fleet, Columbia, Investor Services
Group or the Participating Insurance Companies, including taxes; interest; fees
(including fees paid to its Trustees and officers who are not affiliated with
Investor Services Group); SEC fees; state securities 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 meetings; and any extraordinary expenses. Otherwise,
Fleet, Columbia and Investor Services Group bear their own expenses incurred in
connection with performing services for the Funds. The Funds also pay for
brokerage fees and commissions in connection with the purchase of portfolio
securities.

-50-
<PAGE>

PORTFOLIO TRANSACTIONS

Debt securities purchased or sold by the Money Market Fund, Asset
Allocation Fund, High Quality Bond Fund and Columbia High Yield Fund II 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
Fund, Growth and Income Fund, Small Company Growth Fund, Columbia Real Estate
Equity Fund II and Asset Allocation Fund 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,
Fleet or Columbia, as the case may be, 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.

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

-51-
<PAGE>

For the fiscal year ended December 31, 1998, the Funds paid soft dollar
commissions as shown below:

FUND SOFT DOLLAR
---- COMMISSIONS
-----------
<S> <C>
Money Market Fund . . . . . . . . . . . . $____
Equity Fund . . . . . . . . . . . . . . . $____
Growth and Income Fund(1) . . . . . . . . $____
Small Company Growth Fund(2). . . . . . . $____
Columbia Real Estate Equity Fund II(3). . $____
Asset Allocation Fund . . . . . . . . . . $____
High Quality Bond Fund. . . . . . . . . . $____
Columbia High Yield Fund II(3). . . . . . $____
</TABLE>

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

For the fiscal years ended December 31, 1998, 1997 and 1996, the Funds paid
brokerage commissions as shown in the table below:

<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED DECEMBER 31:
FUND 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C>
Money Market Fund. . . . . . . . . . . $______ $0 $0
Equity Fund. . . . . . . . . . . . . . $______ $7,285 $13,235
Growth and Income Fund . . . . . . . . $______(1) * *
Small Company Growth Fund. . . . . . . $______(2) * *
Columbia Real Estate Equity Fund II. . $______(3) * *
Asset Allocation Fund. . . . . . . . . $______ $19,552 $9,717
High Quality Bond Fund . . . . . . . . $______ $0 $0
Columbia High Yield Fund II. . . . . . $______(3) * *
</TABLE>

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

The Equity Fund, Growth and Income Fund, Small Company Growth Fund,
Columbia Real Estate Equity Fund II, Asset Allocation Fund, High Quality Bond
Fund and Columbia High Yield Fund II 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.

-52-
<PAGE>

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, Fleet,
Columbia, Investor Services Group or their affiliates, and will not give
preference to affiliates and correspondent banks of Fleet or Columbia with
respect to such transactions.

Galaxy VIP is required to identify any securities of its "regular brokers
or dealers" that the Funds have acquired during Galaxy VIP's most recent fiscal
year. At December 31, 1998, (1) the ________ Fund held ________ with a value of
$________; (2) the ________ Fund held ________ with a value of $________; (3)
the ________ Fund held ________ with a value of $________. __________ and
__________ are considered "regular brokers or dealers" of Galaxy VIP.

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 or Columbia. 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 or Columbia, as the case may be, 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 or Columbia, as the case may be, 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.

AUDITORS

[____________________], independent certified public accountants, with
offices at [__________________________], serve as auditors to Galaxy VIP.

COUNSEL

Drinker Biddle & Reath LLP (of which W. Bruce McConnel, III, Secretary of
Galaxy VIP, is a partner), 1345 Chestnut Street, Suite 1100, Philadelphia,
Pennsylvania 19107, are counsel to Galaxy VIP and will pass upon certain legal
matters on its behalf.

-53-
<PAGE>

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

-54-
<PAGE>

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.

The portfolio managers of the Funds and other investment professionals may
from time to time discuss in advertising, sales literature or other material,
including periodic publications, various topics of interest to shareholders and
prospective investors. The topics may include but are not limited to the
advantages and disadvantages of investing in tax-deferred and taxable
investments; Fund performance and how such performance may compare to various
market indices; shareholder profiles and hypothetical investor scenarios; the
economy; the financial and capital markets; investment strategies and
techniques; investment products; and tax, retirement and investment planning.

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 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 the
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 1-877-BUY-GALAXY (1-877-289-4252). For the seven-day period ended
December 31, 1998, the annualized yield of the Money Market Fund was _____% and
the effective yield was _____%.

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<PAGE>

YIELD AND TOTAL RETURNS QUOTATIONS - NON-MONEY MARKET FUNDS

The Equity Fund's, Growth and Income Fund's, Small Company Growth Fund's,
Columbia Real Estate Equity Fund II's, Asset Allocation Fund's, High Quality
Bond Fund's or Columbia High Yield Fund II's 30-day (or one month) yield is
calculated for each Fund in accordance with the method prescribed by the SEC for
mutual funds:

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

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 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 that 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

-56-
<PAGE>

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 Fund, Asset
Allocation Fund, High Quality Bond Fund, Growth and Income Fund, Small Company
Growth Fund, Columbia Real Estate Equity Fund II and Columbia High Yield Fund II
for the 30-day period ended December 31, 1998 were _____%, _____%, _____%,
_____%,_____%, _____% and _____%, respectively.

Each Fund that advertises its "average annual total return" computes such
return separately for each series of shares 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:

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

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.

Each Fund that advertises its "aggregate total return" computes such
returns separately for each series of shares 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:

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

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, High Quality Bond Fund, Growth and Income Fund (since
commencement of operations on March 3, 1998), Small Company Growth Fund
(since commencement of operations on April 17, 1998), Columbia Real Estate
Equity Fund II (since

-57-
<PAGE>

commencement of operations on March 3, 1998) and Columbia High Yield
Fund II (since commencement of operations on March 3, 1998) for the one year
period ended December 31, 1998 were ____%, ____%, ____%, ____%,_____%, _____%
and _____%, respectively. The average annual total returns for the Equity Fund,
Asset Allocation Fund, High Quality Bond Fund, Growth and Income Fund, Small
Company Growth Fund, Columbia Real Estate Equity Fund II and Columbia High Yield
Fund II 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, January 21, 1993 with respect to the High Quality Bond Fund,
March 4, 1998 with respect to the Growth and Income Fund, April 17, 1998 with
respect to the Small Company Growth Fund, and March 3, 1998 with respect to the
Columbia Real Estate Equity Fund II and the Columbia High Quality Bond Fund II)
through December 31, 1998 were _____%, _____%, _____%, ______%,_____%, _____%
and _____%, respectively.

MISCELLANEOUS

As used in this Statement of Additional Information, "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 _______, 1999, 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.

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

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

-58-
<PAGE>

FINANCIAL STATEMENTS

Galaxy VIP's Annual Report to Shareholders with respect to the Funds for
the fiscal year ended December 31, 1998 has been filed with the SEC. The
financial statements in such Annual Report (the "Financial Statements") are
[___________________] into this Statement of Additional Information. The
Financial Statements included in the Annual Report for the Funds for the fiscal
year ended December 31, 1998 have been audited by [___________________], whose
report thereon also appears in such Annual Report and is [___________________].
The Financial Statements in such Annual Report have been [___________________]
in reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.

-59-
<PAGE>

APPENDIX A

DESCRIPTION OF SECURITIES RATINGS

The following is a description of the securities ratings of Duff & Phelps
Credit Rating Co. ("D&P"), Fitch IBCA, Inc. ("Fitch IBCA"), Standard & Poor's
Ratings Group ("S&P"), Moody's Investors Service, Inc. ("Moody's"), and Thomson
BankWatch, Inc. ("Thomson").

COMMERCIAL PAPER RATINGS

An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. The following summarizes the rating categories used by S&P for
commercial paper:

"A-1" - Obligations are rated in the highest category indicating that
the obligor's capacity to meet its financial commitment on the obligation is
strong. Within this category, certain obligations are designated with a plus
sign (+). This indicates that the obligor's capacity to meet its financial
commitment on these obligations is extremely strong.

"A-2" - Obligations are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations in
higher rating categories. However, the obligor's capacity to meet its financial
commitment on the obligation is satisfactory.

"A-3" - Obligations exhibit adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.

"B" - Obligations are regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.

"C" - Obligations are currently vulnerable to nonpayment and are
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation.

"D" - Obligations are in payment default. The "D" rating category is
used when payments on an obligation 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. The "D" rating will be used upon the
filing of a bankruptcy petition or the taking of a similar action if payments on
an obligation are jeopardized.

* * * *

A-1
<PAGE>

Moody's commercial paper ratings are opinions of the ability of
issuers to repay punctually senior debt obligations not having an original
maturity in excess of one year, unless explicitly noted. The following
summarizes the rating categories used by Moody's for commercial paper:

"Prime-1" - Issuers (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earnings 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" - Issuers (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

"Prime-3" - Issuers (or supporting institutions) have an acceptable
ability for repayment of senior short-term debt obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.

"Not Prime" - Issuers do not fall within any of the Prime rating
categories.

* * *

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

"D-1+" - Debt possesses the 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.

A-2
<PAGE>

"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 issues as to investment grade. Risk factors are larger and
subject to more variation. Nevertheless, timely payment is expected.

"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to insure 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 IBCA short-term ratings apply to debt obligations that have time
horizons of less than 12 months for most obligations, or up to three years for
U.S. public finance securities. The following summarizes the rating categories
used by Fitch IBCA for short-term obligations:

"F1" - Securities possess the highest credit quality. This
designation indicates the strongest capacity for timely payment of financial
commitments and may have an added "+" to denote any exceptionally strong credit
feature.

"F2" - Securities possess good credit quality. This designation
indicates a satisfactory capacity for timely payment of financial commitments,
but the margin of safety is not as great as in the case of the higher ratings.

"F3" - Securities possess fair credit quality. This designation
indicates that the capacity for timely payment of financial commitments is
adequate; however, near-term adverse changes could result in a reduction to
non-investment grade.

"B" - Securities possess speculative credit quality. This designation
indicates minimal capacity for timely payment of financial commitments, plus
vulnerability to near-term adverse changes in financial and economic conditions.

"C" - Securities possess high default risk. This designation
indicates that default is a real possibility and that the capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.

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

* * *

A-3

<PAGE>

Thomson short-term ratings assess the likelihood of an untimely
payment of principal and interest of debt instruments with original maturities
of one year or less. The following summarizes the ratings used by Thomson:

"TBW-1" - This designation represents Thomson's highest category and
indicates a very high likelihood that principal and interest will be paid on a
timely basis.

"TBW-2" - This designation represents Thomson's second-highest
category and indicates that while the degree of safety regarding timely
repayment 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 Thomson's lowest
investment-grade category and indicates that while the obligation is more
susceptible to adverse developments (both internal and external) than those with
higher ratings, the capacity to service principal and interest in a timely
fashion is considered adequate.

"TBW-4" - This designation represents Thomson's lowest rating category
and indicates that the obligation is regarded as non-investment grade and
therefore speculative.

CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS

The following summarizes the ratings used by S&P for corporate and
municipal debt:

"AAA" - An obligation rated "AAA" has the highest rating assigned by
S&P. The obligor's capacity to meet its financial commitment on the obligation
is extremely strong.

"AA" - An obligation rated "AA" differs from the highest rated
obligations only in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong.

"A" - An obligation rated "A" is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher-rated categories. However, the obligor's capacity to meet
its financial commitment on the obligation is still strong.

"BBB" - An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.

Obligations rated "BB," "B," "CCC," "CC" and "C" are regarded as
having significant speculative characteristics. "BB" indicates the least degree
of speculation and "C" the highest. While such obligations will likely have
some quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.

A-4
<PAGE>

"BB" - An obligation rated "BB" is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to the obligor's inadequate capacity to meet its financial commitment on the
obligation.

"B" - An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB", but the obligor currently has the capacity to meet its
financial commitment on the obligation. Adverse business, financial or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.

"CCC" - An obligation rated "CCC" is currently vulnerable to
nonpayment, and is dependent upon favorable business, financial and economic
conditions for the obligor to meet its financial commitment on the obligation.
In the event of adverse business, financial, or economic conditions, the obligor
is not likely to have the capacity to meet its financial commitment on the
obligation.

"CC" - An obligation rated "CC" is currently highly vulnerable to
nonpayment.

"C" - The "C" rating may be used to cover a situation where a
bankruptcy petition has been filed or similar action has been taken, but
payments on this obligation are being continued.

"D" - An obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation 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. The "D" rating also will
be used upon the filing of a bankruptcy petition or the taking of a similar
action if payments on an obligation 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 symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility of
expected returns which are not addressed in the credit rating. Examples
include: obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk - such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.

* * *

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

A-5
<PAGE>

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

"Aa" - Bonds are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than the "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 are considered as 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 speculative elements; "B" indicates a general lack of characteristics
of desirable investment; "Caa" are of 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 operating 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.

Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic
rating classification from "Aa" through "Caa". The modifier 1 indicates that
the obligation ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking
in the lower end of its generic rating category.

* * *

A-6
<PAGE>

The following summarizes the long-term debt ratings used by D&P 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.

"AA" - Debt is considered to be 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 in periods of greater
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 ratings used by Fitch IBCA for corporate
and municipal bonds:

"AAA" - Bonds considered to be investment grade and of the highest
credit quality. These ratings denote the lowest expectation of credit risk and
are assigned only in case of exceptionally strong capacity for timely payment of
financial commitments. This capacity is highly unlikely to be adversely
affected by foreseeable events.

"AA" - Bonds considered to be investment grade and of very high credit
quality. These ratings denote a very low expectation of credit risk and
indicate very strong capacity for timely payment of financial commitments. This
capacity is not significantly vulnerable to foreseeable events.

"A" - Bonds considered to be investment grade and of high credit
quality. These ratings denote a low expectation of credit risk and indicate
strong capacity for timely payment of

A-7

<PAGE>

financial commitments. This capacity may, nevertheless, be more vulnerable to
changes in circumstances or in economic conditions than is the case for higher
ratings.

"BBB" - Bonds considered to be investment grade and of good credit
quality. These ratings denote that there is currently a low expectation of
credit risk. The capacity for timely payment of financial commitments is
considered adequate, but adverse changes in circumstances and in economic
conditions are more likely to impair this capacity.

"BB" - Bonds considered to be speculative. These ratings indicate
that there is a possibility of credit risk developing, particularly as the
result of adverse economic changes over time; however, business or financial
alternatives may be available to allow financial commitments to be met.
Securities rated in this category are not investment grade.

"B" - Bonds are considered highly speculative. These ratings indicate
that significant credit risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity for continued
payment is contingent upon a sustained, favorable business and economic
environment.

"CCC", "CC", "C" - Bonds have high default risk. Default is a real
possibility, and capacity for meeting financial commitments is solely reliant
upon sustained, favorable business or economic developments. "CC" ratings
indicate that default of some kind appears probable, and "C" ratings signal
imminent default.

"DDD," "DD" and "D" - Bonds are in default. Securities are not
meeting obligations and are extremely speculative. "DDD" designates the highest
potential for recovery of amounts outstanding on any securities involved and "D"
represents the lowest potential for recovery.

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

* * *

Thomson 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 for long-term debt ratings:

"AAA" - This designation 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-8
<PAGE>

"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 the lowest investment-grade
category and indicates an acceptable capacity to repay principal and interest.
Issues rated "BBB" are 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 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

An S&P 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 S&P Ratings Group for municipal notes:

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

"SP-2" - The issuers of these municipal notes exhibit satisfactory
capacity to pay principal and interest, with some vulnerability to adverse
financial and economic changes over the term of the notes.

"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

A-9
<PAGE>

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" - This designation denotes best quality. There is
present strong protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.

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

"MIG-3"/"VMIG-3" - This designation denotes 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" - This designation denotes adequate quality.
Protection commonly regarded as required of an investment security is present
and although not distinctly or predominantly speculative, there is specific
risk.

"SG" - This designation denotes speculative quality. Debt instruments
in this category lack of margins of protection.

* * *

Fitch IBCA and D&P use the short-term ratings described under
Commercial Paper Ratings for municipal notes.

A-10
<PAGE>

APPENDIX B

As stated in the Prospectus and this Statement of Additional Information,
certain of the Funds may enter into futures transactions and options thereon for
hedging purposes. Such transactions are described in this Appendix.

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, a 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.

A 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 a Fund, through using futures contracts.

DESCRIPTION OF INTEREST RATE FUTURES CONTRACTS. An interest rate futures
contract sale would create an obligation by a 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 a 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 the making or taking of delivery of
securities. Closing out a futures contract sale is effected by a 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, a Fund immediately is
paid the difference and thus

B-1
<PAGE>

realizes a gain. If the offsetting purchase price exceeds the sale price, a
Fund pays the difference and realizes a loss. Similarly, the closing out of a
futures contract purchase is effected by a Fund entering into a futures contract
sale. If the offsetting sale price exceeds the purchase price, a Fund realizes
a gain, and if the purchase price exceeds the offsetting sale price, a 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. A 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. A 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. A 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 a Fund tends to move
in concert with the futures market prices of long-term United States Treasury
bonds ("Treasury bonds"). Fleet or Columbia, as the case may be, 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 Fleet or
Columbia believes that, because of an anticipated rise in interest rates, the
value will decline to 95. A 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 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.

Fleet or Columbia 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.

B-2
<PAGE>

If interest rate levels did not change, a 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. A 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. A Fund's
basic motivation would be to maintain for a time the income advantage from
investing in the short-term securities; a 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 a Fund may purchase.

For example, assume that the market price of a long-term bond that a Fund
may purchase, currently yielding 10%, tends to move in concert with futures
market prices of Treasury bonds. Fleet or Columbia, as the case may be, 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 Fleet or Columbia
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. A Fund might enter into futures contracts purchases of Treasury bonds
for an equivalent price of 98. At the same time, a 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 a Fund pays for
the long-term bond would be offset by the 5 point gain realized by closing out
the futures contract purchase.

Fleet or Columbia 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 a 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 a 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.

B-3
<PAGE>

II. INDEX FUTURES CONTRACTS.

A stock or bond index assigns relative values to the stocks or bonds
included in the index and the index fluctuates with changes in the market values
of the stocks or bonds included. A stock or bond index futures contract is a
bilateral agreement pursuant to which two parties agree to take or make delivery
of an amount of cash equal to a specified dollar amount times the difference
between the stock index value (which assigns relative values to the common
stocks or bonds included in the index) at the close of the last trading day of
the contract and the price at which the futures contract is originally struck.
No physical delivery of the underlying stocks in the index is made. Some stock
index futures contracts are based on broad market indices, such as the Standard
& Poor's 500 or the New York Stock Exchange Composite Index. In contrast,
certain exchanges offer futures contracts on narrower market indices, such as
the Standard & Poor's 100 or indices based on an industry or market segment,
such as oil and gas stocks. Futures contracts are traded on organized exchanges
regulated by the Commodity Futures Trading Commission. Transactions on such
exchanges are cleared through a clearing corporation, which guarantees the
performance of the parties to each contract.

A Fund will sell index futures contracts in order to offset a decrease
in market value of its portfolio securities that might otherwise result from a
market decline. A Fund may do so either to hedge the value of its portfolio as
a whole, or to protect against declines, occurring prior to sales of securities,
in the value of the securities to be sold. Conversely, a Fund will purchase
index futures contracts in anticipation of purchases of securities. In a
substantial majority of these transactions, a Fund will purchase such securities
upon termination of the long futures position, but a long futures position may
be terminated without a corresponding purchase of securities.

In addition, a Fund may utilize index futures contracts in
anticipation of changes in the composition of its portfolio holdings. For
example, in the event that a Fund expects to narrow the range of industry groups
represented in its holdings it may, prior to making purchases of the actual
securities, establish a long futures position based on a more restricted index,
such as an index comprised of securities of a particular industry group. A Fund
may also sell futures contracts in connection with this strategy, in order to
protect against the possibility that the value of the securities to be sold as
part of the restructuring of their respective portfolios will decline prior to
the time of sale.

The following are examples of transactions in stock index futures (net
of commissions and premiums, if any).

B-4
<PAGE>

ANTICIPATORY PURCHASE HEDGE: Buy the Future
Hedge Objective: Protect Against Increasing Price

<TABLE>
<CAPTION>
Portfolio Futures
--------- -------
<S> <C>
-Day Hedge is Placed-

Anticipate Buying $62,500 Buying 1 Index Futures at 125
Equity Portfolio Value of Futures = $62,500/Contract

-Day Hedge is Lifted-

Buy Equity Portfolio with Sell 1 Index Futures at 130
Actual Cost = $65,000 Value of Futures = $65,000/Contract
Increase in Purchase Price = $2,500 Gain on Futures = $ 2,500
</TABLE>

HEDGING A STOCK PORTFOLIO: Sell the Future
Hedge Objective: Protect Against Declining
Value of the Fund

Factors:

Value of Stock Fund = $1,000,000
Value of Futures Contract = 125 x $500 = $62,500
Fund Beta Relative to the Index = 1.0

<TABLE>
<CAPTION>
Portfolio Futures
--------- -------
<S> <C>
-Day Hedge is Placed-

Anticipate Selling $1,000,000 Sell 16 Index Futures at 125
Equity Portfolio Value of Futures = $1,000,000

-Day Hedge is Lifted-

Equity Portfolio-Own Stock Buy 16 Index Futures at 120
with Value = $960,000 Value of Futures = $960,000
Loss in Fund Value = $ 40,000 Gain on Futures = $ 40,000
</TABLE>

If, however, the market moved in the opposite direction, that is,
market value decreased and a Fund had entered into an anticipatory purchase
hedge, or market value increased and a Fund had hedged its stock portfolio, the
results of the Fund's transactions in stock index futures would be as set forth
below.

B-5
<PAGE>

ANTICIPATORY PURCHASE HEDGE: Buy the Future
Hedge Objective: Protect Against Increasing Price

<TABLE>
<CAPTION>
Portfolio Futures
--------- -------
<S> <C>
-Day Hedge is Placed-

Anticipate Buying $62,500 Buying 1 Index Futures at 125
Equity Portfolio Value of Futures = $62,500/Contract

-Day Hedge is Lifted-

Buy Equity Portfolio with Sell 1 Index Futures at 120
Actual Cost - $60,000 Value of Futures = $60,000/Contract
Decrease in Purchase Price = $2,500 Loss on Futures = $ 2,500
</TABLE>

HEDGING A STOCK PORTFOLIO: Sell the Future
Hedge Objective: Protect Against Declining
Value of the Fund

Factors:

Value of Stock Fund = $1,000,000
Value of Futures Contract = 125 x $500 = $62,500
Fund Beta Relative to the Index = 1.0

<TABLE>
<CAPTION>
Portfolio Futures
--------- -------
<S> <C>
-Day Hedge is Placed-

Anticipate Selling $1,000,000 Sell 16 Index Futures at 125
Equity Portfolio Value of Futures = $1,000,000

-Day Hedge is Lifted-

Equity Portfolio-Own Stock Buy 16 Index Futures at 130
with Value = $1,040,000 Value of Futures = $1,040,000
Gain in Fund Value = $40,000 Loss of Futures = $ 40,000
</TABLE>

B-6
<PAGE>

III. FUTURES CONTRACTS ON FOREIGN CURRENCIES.

A futures contract on foreign currency creates a binding obligation on
one party to deliver, and a corresponding obligation on another party to accept
delivery of, a stated quantity of a foreign currency, for an amount fixed in
U.S. dollars. Foreign currency futures may be used by a Fund to hedge against
exposure to fluctuations in exchange rates between the U.S. dollar and other
currencies arising from multinational transactions.

IV. MARGIN PAYMENTS

Unlike purchases or sales of portfolio securities, no price is paid or
received by a Fund upon the purchase or sale of a futures contract. Initially,
a Fund will be required to deposit with the broker or in a segregated account
with the Fund's custodian an amount of cash or liquid securities, 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 a 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 a 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 a Fund
will be entitled to receive from the broker a variation margin payment equal to
that increase in value. Conversely, where a 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
a Fund would be required to make a variation margin payment to the broker. At
any time prior to expiration of the futures contract, Fleet or Columbia, as the
case may be, may elect to close the position by taking an opposite position,
subject to the availability of a secondary market, which will operate to
terminate a 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 a Fund, and a Fund realizes a loss or gain.

V. RISKS OF TRANSACTIONS IN FUTURES CONTRACTS

There are several risks in connection with the use of futures by a 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, a 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

B-7
<PAGE>

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,
a 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, a 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 Fleet or Columbia, as the case may be. Conversely, a 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 Fleet or Columbia. It is also possible that, where a Fund
had sold futures to hedge its portfolio against a decline in the market, the
market may advance and the vaue of instruments held in a Fund may decline. If
this occurred, a 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 a Fund is able to invest its cash (or cash
equivalents) in an orderly fashion, it is possible that the market may decline
instead; if a Fund then concludes not to invest its cash at that time because of
concern as to possible further market decline or for other reasons, a Fund will
realize a loss on the futures contract that is not offset by a reduction in the
price of the instruments that were to be purchased.

In instances involving the purchase of futures contracts by a Fund, an
amount of liquid assets, equal to the market value of the futures contracts,
will be deposited in a segregated account with the Fund'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 Fleet or Columbia may still not
result in a successful hedging transaction over a short time frame.

B-8
<PAGE>

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 Funds
intend 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, a 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 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 a Fund is also subject to the ability of Fleet
or Columbia, as the case may be, to predict correctly movements in the direction
of the market. For example, if a Fund has hedged against the possibility of a
decline in the market adversely affecting securities held by it and securities
prices increase instead, a 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
a 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. A Fund may
have to sell securities at a time when it may be disadvantageous to do so.

VI. OPTIONS ON FUTURES CONTRACTS.

Certain of the Funds may purchase options on the futures contracts
described above. A futures option gives the holder, in return for the premium
paid, the right to buy (call) from or sell (put) to the writer of the option a
futures contract at a specified price at any time during the period of the
option. Upon exercise, the writer of the option is obligated to pay the
difference between the cash value of the futures contract and the exercise
price. Like the buyer or seller of a futures contract, the holder, or writer,
of an option has the right to terminate its position prior to the scheduled
expiration of the option by selling, or purchasing, an option of the same
series, at which time the person entering into the closing transaction will
realize a gain or loss.

B-9
<PAGE>

Investments in futures options involve some of the same considerations
that are involved in connection with investments in futures contracts (for
example, the existence of a liquid secondary market). In addition, the purchase
or sale of an option also entails the risk that changes in the value of the
underlying futures contract will not be fully reflected in the value of the
option purchased. Depending on the pricing of the option compared to either the
futures contract upon which it is based, or upon the price of the securities
being hedged, an option may or may not be less risky than ownership of the
futures contract or such securities. In general, the market prices of options
can be expected to be more volatile than the market prices on the underlying
futures contract. Compared to the purchase or sale of futures contracts,
however, the purchase of call or put options on futures contracts may frequently
involve less potential risk to the Funds because the maximum amount at risk is
the premium paid for the options (plus transaction costs). The writing of an
option on a futures contract involves risks similar to those risks relating to
the sale of futures contracts. Although permitted by their investment policies,
the Funds do not currently intend to write futures options during the current
fiscal year.

VII. ACCOUNTING AND TAX TREATMENT.

Accounting for futures contracts and options will be in accordance
with generally accepted accounting principles.

Generally, futures contracts held by the Funds at the close of the
Funds' taxable year will be treated for federal income tax purposes as sold for
their fair market value on the last business day of such year, a process known
as "mark-to-market." Forty percent of any gain or loss resulting from such
constructive sale will be treated as short-term capital gain or loss and sixty
percent of such gain or loss will be treated as long-term capital gain or loss
without regard to the length of time a Fund holds the futures contract ("the
40-60 rule"). The amount of any capital gain or loss actually realized by a
Fund in a subsequent sale or other disposition of those futures contracts will
be adjusted to reflect any capital gain or loss taken into account by a Fund in
a prior year as a result of the constructive sale of the contracts. With
respect to futures contracts to sell, which will be regarded as parts of a
"mixed straddle" because their values fluctuate inversely to the values of
specific securities held by a Fund, losses as to such contracts to sell will be
subject to certain loss deferral rules which limit the amount of loss currently
deductible on either part of the straddle to the amount thereof which exceeds
the unrecognized gain (if any) with respect to the other part of the straddle,
and to certain wash sales regulations. Under short sales rules, which will also
be applicable, the holding period of the securities forming part of the straddle
will (if they have not been held for the long-term holding period) be deemed not
to begin prior to termination of the straddle. With respect to certain futures
contracts, deductions for interest and carrying charges will not be allowed.
Notwithstanding the rules described above, with respect to futures contracts to
sell which are properly identified as such, a Fund may make an election which
will exempt (in whole or in part) those identified futures contracts from being
treated for federal income tax purposes as sold on the last business day of a
Fund's taxable year, but gains and losses will be subject to such short sales,
wash sales, loss deferral rules and the requirement to capitalize interest and
carrying charges. Under temporary regulations, a Fund would be allowed (in lieu
of the foregoing) to elect either (1) to

B-10
<PAGE>

offset gains or losses from portions which are part of a mixed straddle by
separately identifying each mixed straddle to which such treatment applies, or
(2) to establish a mixed straddle account for which gains and losses would be
recognized and offset on a periodic basis during the taxable year. Under either
election, the 40-60 rule will apply to the net gain or loss attributable to the
futures contracts, but in the case of a mixed straddle account election, no more
than 50% of any net gain may be treated as long-term and no more than 40% of any
net loss may be treated as short-term. Options on futures contracts generally
receive federal tax treatment similar to that described above.

Certain foreign currency contracts entered into by the Funds may be
subject to the "mark-to-market" process. If a Fund makes a Capital Asset
Election with respect to such contracts, the contracts will be subject to the
40-60 rule, described above. Otherwise, such gain or loss will be treated as
100% ordinary gain or loss. To receive such federal income tax treatment, a
foreign currency contract must meet the following conditions: (1) the contract
must require delivery of a foreign currency of a type in which regulated futures
contracts are traded or upon which the settlement value of the contract depends;
(2) the contract must be entered into at arm's length at a price determined by
reference to the price in the interbank market; and (3) the contract must be
traded in the interbank market. The Treasury Department has broad authority to
issue regulations under the provisions respecting foreign currency contracts.
As of the date of this Statement of Additional Information, the Treasury has not
issued any such regulations. Foreign currency contracts entered into by a Fund
may result in the creation of one or more straddles for federal income tax
purposes, in which case certain loss deferral, short sales, and wash sales rules
and the requirement to capitalize interest and carrying charges may apply.

Some investments may be subject to special rules which govern the
federal income tax treatment of certain transactions denominated in terms of a
currency other than the U.S. dollar or determined by reference to the value of
one or more currencies other than the U.S. dollar. The types of transactions
covered by the special rules include the following: (i) the acquisition of, or
becoming the obligor under, a bond or other debt instrument (including, to the
extent provided in Treasury regulations, preferred stock); (ii) the accruing of
certain trade receivables and payables; and (iii) the entering into or
acquisition of any forward contract, futures contract, option and similar
financial instrument. However, regulated futures contracts and non-equity
options are generally not subject to the special currency rules if they are or
would be treated as sold for their fair market value at year-end under the
"mark-to-market" rules, unless an election is made to have such currency rules
apply. The disposition of a currency other than the U.S. dollar by a U.S.
taxpayer is also treated as a transaction subject to the special currency rules.
With respect to transactions covered by the special rules, foreign currency gain
or loss is calculated separately from any gain or loss on the underlying
transaction and is normally taxable as ordinary gain or loss. A taxpayer may
elect to treat as capital gain or loss foreign currency gain or loss arising
from certain identified forward contracts, futures contracts and options that
are capital assets in the hands of the taxpayer and which are not part of a
straddle. In accordance with Treasury regulations, certain transactions subject
to the special currency rules that are part of a "section 988 hedging
transaction" (as defined in the Code and the Treasury regulations) will be
integrated and treated as a single transaction or otherwise treated consistently
for purposes of the Code. "Section 988 hedging transactions" are not subject to
the mark-to-market or loss

B-11
<PAGE>

deferral rules under the Code. It is anticipated that some of the non-U.S.
dollar denominated investments and foreign currency contracts that a Fund may
make or may enter into will be subject to the special currency rules described
above. Gain or loss attributable to the foreign currency component of
transactions engaged in by the Funds which are not subject to special currency
rules (such as foreign equity investments other than certain preferred stocks)
will be treated as capital gain or loss and will not be segregated from the gain
or loss on the underlying transaction.

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<PAGE>

THE GALAXY VIP FUND

FORM N-1A

PART C. OTHER INFORMATION

ITEM 23. EXHIBITS

(a) Agreement and Declaration of Trust of Registrant dated May 27,
1992 is incorporated herein by reference to Exhibit (1) to
Registrant's Post-Effective Amendment No. 7 as filed with the
Commission on April 30, 1998.

(b) Registrant's Code of Regulations is incorporated herein by
reference to Exhibit (2) to Registrant's Post-Effective
Amendment No. 7 as filed with the Commission on April 30, 1998.

(c) Article V, Section 5.1, and Article VIII, Section 8.1, of
Registrant's Agreement and Declaration of Trust is
incorporated herein by reference as Exhibit (a).

(d) (1) Investment Advisory Agreement dated September 30, 1992 between
Registrant and Fleet Investment Advisors Inc. with respect to
the Money Market, Equity, Asset Allocation and High Quality
Bond Funds is incorporated herein by reference to Exhibit
(5)(a) to Registrant's Post-Effective Amendment No. 7 as filed
with the Commission on April 30, 1998.

(2) Addendum No. 1 dated March 2, 1998 to Investment Advisory
Agreement between Registrant and Fleet Investment Advisors
Inc. with respect to the Growth and Income Fund and Small
Company Growth Fund is incorporated herein by reference to
Exhibit (5)(b) to Registrant's Post-Effective Aendment No. 7
as filed with the Commission on April 30, 1998.

(3) Advisory Agreement dated February 27, 1998 between Registrant
and Columbia Management Co. with respect to the Columbia Real
Estate Equity Fund II and Columbia High Yield Fund II is
incorporated herein by reference to Exhibit (5)(c) to
Registrant's Post-Effective Amendment No. 7 as filed with the
Commission on April 30, 1998.

(e) (1) Distribution Agreement dated as of June 1, 1997 between
Registrant and First Data Distributors, Inc. is incorporated
herein by reference to Exhibit (6)(a) to Registrant's
Post-Effective Amendment No. 6 as filed with the Commission on
November 21, 1997.

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<PAGE>

(2) Amendment No. 1 dated February 27, 1998 to Distribution
Agreement between Registrant and First Data Distributors, Inc.
with respect to the Growth and Income Fund, Small Company
Growth Fund, Columbia Real Estate Equity Fund II and Columbia
High Yield Fund II is incorporated herein by reference to
Exhibit (6)(b) to Registrant's Post-Effective Amendment No. 7
as filed with the Commission on April 30, 1998.

(f) The Galaxy Fund/The Galaxy VIP Fund/Galaxy Fund II Deferred
Compensation Plan and Related Agreement effective as of
January 1, 1997 is incorporated herein by reference to Exhibit
(7) to Registrant's Post-Effective Amendment No. 5 as filed
with the Commission on February 28, 1997.

(g) (1) Global Custody Agreement dated November 13, 1992 between
Registrant and The Chase Manhattan Bank, N.A is incorporated
herein by reference to Exhibit (8)(a) to Registrant's
Post-Effective Amendment No. 7 as filed with the Commission on
April 30, 1998.

(2) Amendment No. 1 to Global Custody Agreement dated March 2,
1998 between Registrant and The Chase Manhattan Bank, N.A.

(h) (1) Administration Agreement dated as of June 1, 1997 between
Registrant and First Data Investor Services Group, Inc. is
incorporated herein by reference to Exhibit (9)(a) to
Registrant's Post-Effective Amendment No. 6 as filed with the
Commission on November 21, 1997.

(2) Amendment No. 1 dated February 27, 1998 to Administration
Agreement between Registrant and First Data Investor Services
Group, Inc. with respect to the Growth and Income Fund, Small
Company Growth Fund, Columbia Real Estate Equity Fund II and
Columbia High Yield Fund II is incorporated herein by
reference to Exhibit (9)(b) to Registrant's Post-Effective
Amendment No. 7 as filed with the Commission on April 30, 1998.

(3) Amendment No. 2 dated March 5, 1998 to Administration
Agreement between Registrant and First Data Investor Services
Group Inc.

(4) Amendment No. 3 dated September 10, 1998 to Administration
Agreement between Registrant and First Data Investors Services
Group Inc.

(5) Proposed Sales Agreement between Registrant and American
Skandia Life Assurance Corporation is incorporated herein by
reference to Exhibit (9)(c) to Registrant's Post-Effective
Amendment No. 7 as filed with the Commission on April 30, 1998.

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<PAGE>

(6) Proposed Amendment No. 1 to Sales Agreement between Registrant
and American Skandia Life Assurance Corporation.

(i) Opinion of counsel that shares are validly issued, fully paid
and non-assessable is incorporated herein by reference to
Exhibit (10) to Registrant's Post-Effective No. 7 as filed
with the Commission on April 30, 1998.

(j) (1) Consent of Drinker Biddle & Reath LLP.

(2) Consent of Independent Accountants to be filed by amendment.

(k) None.

(l) (1) Purchase Agreement dated January 8, 1993 between Registrant
and Fleet Investment Advisors Inc. is incorporated herein by
reference to Exhibit (13)(a) to Registrant's Post-Effective
Amendment No. 7 as filed with the Commission on April 30, 1998.

(2) Purchase Agreement dated March 2, 1998 between Registrant and
Fleet Investment Advisors Inc. with respect to the Small
Company Growth Fund and the Growth and Income Fund is
incorporated herein by reference to Exhibit (13)(b) to
Registrant's Post-Effective Amendment No. 7 as filed with the
Commission on April 30, 1998.

(3) Purchase Agreement dated February 27, 1998 between Registrant
and Columbia Management Co. with respect to the Columbia Real
Estate Equity Fund II and the Columbia High Yield Fund II is
incorporated herein by reference to Exhibit (13)(c) to
Registrant's Post-Effective Amendment No. 7 as filed with the
Commission on April 30, 1998.

(m) None.

(n) To be filed by amendment.

(o) None.

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT

Registrant is controlled by its Board of Trustees, the members of which
also serve as members of the Board of Trustees of The Galaxy Fund and
Galaxy Fund II.

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<PAGE>

ITEM 25. INDEMNIFICATION

Indemnification of Registrant's principal underwriter and custodian
against certain losses is provided for, respectively, in Section 1.15 of
the Distribution Agreement, incorporated herein by reference as Exhibit
(e)(1), and in Section 12 of the Global Custody Agreement, incorporated
herein by reference as Exhibit (g)(1). Registrant has obtained from a
major insurance carrier a directors' and officers' liability policy
covering certain types of errors and omissions. In addition, Section
9.3 of Registrant's Agreement and Declaration of Trust, incorporated
herein by reference as Exhibit (a), provides as follows:

9.3 INDEMNIFICATION OF TRUSTEES, REPRESENTATIVES AND EMPLOYEES. The
Trust shall indemnify each of its Trustees against all liabilities
and expenses (including amounts paid in satisfaction of judgments,
in compromise, as fines and penalties, and as counsel fees)
reasonably incurred by him in connection with the defense or
disposition of any action, suit or other proceeding, whether civil
or criminal, in which he may be involved or with which he may be
threatened, while as a Trustee or thereafter, by reason of his
being or having been such a Trustee EXCEPT with respect to any
matter as to which he shall have been adjudicated to have acted in
bad faith, willful misfeasance, gross negligence or reckless
disregard of his duties, PROVIDED that as to any matter disposed of
by a compromise payment by such person, pursuant to a consent
decree or otherwise, no indemnification either for said payment or
for any other expenses shall be provided unless the Trust shall
have received a written opinion from independent legal counsel
approved by the Trustees to the effect that if either the matter of
willful misfeasance, gross negligence or reckless disregard of
duty, or the matter of bad faith had been adjudicated, it would in
the opinion of such counsel have been adjudicated in favor of such
person. The rights accruing to any person under these provisions
shall not exclude any other right to which he may be lawfully
entitled, PROVIDED that no person may satisfy any right of
indemnity or reimbursement hereunder except out of the property of
the Trust. The Trustees may make advance payments in connection
with the indemnification under this Section 9.3, PROVIDED that the
indemnified person shall have given a written undertaking to
reimburse the Trust in the event it is subsequently determined that
he is not entitled to such indemnification.

The Trustees shall indemnify representatives and employees of the
Trust to the same extent that Trustees are entitled to
indemnification pursuant to this Section 9.3.

Insofar as indemnification for liability arising under the Securities
Act of 1933, as amended, may be permitted to trustees, officers and
controlling persons of Registrant pursuant to the foregoing provisions,
or otherwise, Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by Registrant of expenses incurred or paid by a
trustee, officer or controlling person of Registrant in the

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<PAGE>

successful defense of any action, suit or proceeding) is asserted by
such trustee, officer or controlling person in connection with the
securities being registered, Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.

Section 9.6 of the Registrant's Agreement and Declaration of Trust, filed
herein as Exhibit (a), also provides for the indemnification of
shareholders of the Registrant. Section 9.6 states as follows:

9.6 INDEMNIFICATION OF SHAREHOLDERS. In case any Shareholder or former
Shareholder shall be held to be personally liable solely by reason
of his being or having been a Shareholder and not because of his
acts or omissions or for some other reason, the Shareholder or
former Shareholder (or his heirs, executors, administrators or
other legal representatives or, in the case of a corporation or
other entity, its corporate or other general successor) shall be
entitled out of the assets belonging to the classes of Shares with
the same alphabetical designation as that of the Shares owned by
such Shareholder to be held harmless from and indemnified against
all loss and expense arising from such liability. The Trust shall,
upon request by the Shareholder, assume the defense of any claim
made against any Shareholder for any act or obligations of the
Trust and satisfy any judgment thereon from such assets.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISERS

(1) Fleet Investment Advisors Inc. ("Fleet") is an investment adviser
registered under the Investment Advisers Act of 1940 (the "Advisers
Act").

The list required by this Item 26 of officers and directors of
Fleet, together with information as to any business profession,
vocation or employment of a substantial nature engaged in by such
officers and directors during the past two years is incorporated
herein by reference to Schedules A and D of Form ADV filed by Fleet
pursuant to the Advisers Act (SEC File No. 801-20312).

(2) Columbia Management Co. ("Columbia") is an investment adviser
registered under the Advisers Act.

The list required by this Item 26 of the officers and directors of
Columbia, together with the information as to any business
profession, vocation or employment of a substantial nature engaged
in by such officers and directors during the past two years is
incorporated herein by reference to Schedules A and D of Form ADV
filed by Columbia pursuant to the Advisers Act (SEC File No.
801-5930).

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<PAGE>

ITEM 27. PRINCIPAL UNDERWRITER

(a) In addition to The Galaxy VIP Fund, First Data Distributors, Inc.
(the "Distributor") currently acts as distributor for The Galaxy
Fund, Galaxy Fund II, Allegheny Funds (formerly CT & T Funds),
Wilshire Funds, Inc., The Potomac Funds, Panorama Trust,First
Choice Funds Undiscovered Managers Funds, LKCM Funds, BT Insurance
Funds Trust, Ironwood Capital Management Funds, Forward Funds,
Worldwide Index Funds, Weiss, Peck and Greer Funds and IBJ Funds.
The Distributor is registered with the Securities and Exchange
Commission as a broker-dealer and is a member of the National
Association of Securities Dealers. The Distributor is a
wholly-owned subsidiary of First Data Investor Services Group, Inc.
which is located at 4400 Computer Drive, Westborough, Massachusetts
01581.

(b) The information required by this Item 27 (b) with respect to each
director, officer, or partner of the Distributor is incorporated by
reference to Schedule A of Form BD filed by the Distributor with
the Securities and Exchange Commission pursuant to the Securities
Act of 1934 (File No. 8-45467).

(c) The Distributor receives no compensation from the Registrant for
distribution of its shares. The Distributor is an affiliated
person of First Data Investor Services Group, Inc., the
Registrant's administrator, which receives administration fees as
described in parts A and B.

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS

(1) Fleet Investment Advisors Inc., 75 State Street, Boston,
Massachusetts 02109 (records relating to its functions as
investment adviser to Registrant's Money Market, Equity, Growth and
Income, Small Company Growth, Asset Allocation and High Quality
Bond Funds).

(2) Columbia Management Co., 1300 S.W. Sixth Avenue, P.O. Box 1350,
Portland, Oregon 97207-1350 (records relating to its functions as
investment adviser to Registrant's Columbia Real Estate Equity Fund
II and Columbia High Yield Fund II).

(3) First Data Distributors, Inc., 4400 Computer Drive, Westborough,
Massachusetts 01581 (records relating to its functions as
distributor).

(4) First Data Investor Services Group, Inc., 53 State Street, Boston,
Massachusetts 02109 (records relating to its functions as
administrator).

(5) Drinker Biddle & Reath LLP, 1345 Chestnut Street, Philadelphia,
Pennsylvania 19107 (Registrant's Declaration of Trust, Code of
Regulations and Minute Books).

(6) The Chase Manhattan Bank, 1211 Avenue of the Americas, New York,
New York 10036 (records relating to its functions as custodian).

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<PAGE>

ITEM 29. MANAGEMENT SERVICES

Inapplicable.

ITEM 30. UNDERTAKINGS

Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest available Annual
Reports to Shareholders which includes Management's Discussion of the
Registrant's performance, upon request and without charge.

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<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, Registrant has duly
caused this Amendment No. 8 to the Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in Bonita Springs,
Florida, on the 26th day of February, 1999.

THE GALAXY VIP FUND
Registrant

/s/John T. O'Neill
--------------------------
President
John T. O'Neill

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 8 to the Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated.

SIGNATURE TITLE DATE

/s/John T. O'Neill Trustee, President February 26, 1999
- ------------------------- and Treasurer
John T. O'Neill

*Dwight E. Vicks, Jr. Chairman of the Board February 26, 1999
- ------------------------- of Trustees
Dwight E. Vicks, Jr.

*Donald B. Miller Trustee February 26, 1999
- ------------------------
Donald B. Miller

*Louis DeThomasis Trustee February 26, 1999
- ------------------------
Louis DeThomasis

*Bradford S. Wellman Trustee February 26, 1999
- ------------------------
Bradford S. Wellman

*James M. Seed Trustee February 26, 1999
- ------------------------
James M. Seed

/s/John T. O'Neill
- ------------------------
*By: John T. O'Neill
Attorney-in-Fact

<PAGE>

THE GALAXY VIP FUND

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints John
T. O'Neill and W. Bruce McConnel, III, and either of them, his true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution,
for him and in his name, place and stead, in his capacity as trustee or officer,
or both, to execute any and all amendments to the Trust's Registration Statement
on Form N-1A pursuant to the Investment Company Act of 1940, as amended, and the
Securities Act of 1933, as amended (the "Acts"), and all instruments necessary
or incidental in connection therewith pursuant to said Acts and any rules,
regulations, or requirements of the Securities and Exchange Commission in
respect thereof, and to file the same with the Securities and Exchange
Commission, and either of said attorneys shall have full power and authority to
do and perform, in the name and on behalf of the undersigned in any and all
capacities, every act whatsoever requisite or necessary to be done, as fully and
to all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys, or either of them, may lawfully do or
cause to be done by virtue hereof.

Dated: June 11, 1992. /s/ Dwight E. Vicks, Jr.
------------------------------
Dwight E. Vicks, Jr.

<PAGE>

THE GALAXY VIP FUND

POWER OF ATTORNEY

Dated: June 11, 1992. /s/ Donald B. Miller
------------------------------
Donald B. Miller

<PAGE>

THE GALAXY VIP FUND

POWER OF ATTORNEY

Dated: June 11, 1992. /s/ Brother Louis DeThomasis
------------------------------
Brother Louis DeThomasis

<PAGE>

THE GALAXY VIP FUND

POWER OF ATTORNEY

Dated: June 11, 1992. /s/ Bradford S. Wellman
------------------------------
Bradford S. Wellman

<PAGE>

THE GALAXY VIP FUND

POWER OF ATTORNEY

Dated: June 11, 1992. /s/ James M. Seed
------------------------------
James M. Seed
<PAGE>
EXHIBIT INDEX

Exhibit No. Description Page No.
- ----------- ----------- --------

(g) (2) Amendment No. 1 to Global Custody Agreement
dated March 2, 1998 between Registrant and The
Chase Manhattan Bank, N.A.

(h) (3) Amendment No. 2 dated March 5, 1998 to
Administration Agreement between Registrant and
First Data Investor Services Group.

(4) Amendment No. 3 dated September 10, 1998 to
Administration Agreement between Registrant and
First Data Investors Services Group.

(6) Proposed Amendment No. 1 to Sales Agreement
between Registrant and American Skandia Life
Assurance Corporation.

(j) (1) Consent of Drinker Biddle & Reath LLP.

<PAGE>

Exhibit (g)(2)

THE GALAXY VIP FUND

GLOBAL CUSTODY AGREEMENT
Amendment No. 1

March 2, 1998

The Chase Manhattan Bank
Chase Metrotech Center
Brooklyn, NY 11245
Attn: Global Custody Division

Dear Sirs:

This letter is to confirm that the undersigned, The Galaxy VIP Fund (the
"Trust"), a Massachusetts business trust, has agreed that the Global Custody
Agreement ("Agreement") between the Trust and The Chase Manhattan Bank (formerly
The Chase Manhattan Bank, N.A.) ("Chase") dated as of November 13, 1992, is
herewith amended to provide that Chase shall be the custodian for the Trust's
Growth and Income Fund, Small Company Growth Fund, Columbia Real Estate Equity
Fund II and Columbia High Yield Fund II on the terms and conditions contained in
the Agreement.

If the foregoing is in accordance with your understanding, will you so
indicate by signing and returning to us the enclosed copy thereof.

Very truly yours,

THE GALAXY VIP FUND

By: /s/John T. O'Neill
------------------------
Name: John T. O'Neill
Title: President

Accepted:

THE CHASE MANHATTAN BANK

By: /s/Donna Morrell
--------------------------
Name: Donna Morrell
Title: Managing Director

<PAGE>

Exhibit (h)(3)

AMENDMENT NO. 2 TO ADMINISTRATION AGREEMENT

This Amendment No. 2, dated as of March 5, 1998, is entered into
between FIRST DATA INVESTOR SERVICES GROUP, INC., a Massachusetts corporation
("FDISG") and THE GALAXY VIP FUND, a Massachusetts business trust (the
"Company").

WHEREAS, FDISG and the Company have entered into an Administration
Agreement, dated as of June 1, 1997, as amended on February 27, 1998 (the
"Administration Agreement"), pursuant to which the Company appointed FDISG to
act as Administrator for the Company's portfolios; and

WHEREAS, Section 9 of the Administration Agreement provides that no
change, termination, modification, or waiver of any term or condition of the
Administration Agreement shall be valid unless in writing signed by each party;

NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:

1. The following sub-section is added to the Administration
Agreement as sub-section (f) to Section 3:

"(f) FDISG agrees to perform the services set forth herein in
accordance with the performance standards set forth in Appendix I to this
Agreement."

2. Sub-section (f) to Section 8 of the Administration Agreement is
amended and restated in its entirety to read as follows:

"(f) In the event this Agreement is terminated by the Company
pursuant to Sections 8(c) or 8(d) hereof or pursuant to paragraph (b) of the
performance standards set forth in Appendix I hereto, all reasonable expenses
associated with movement of records and materials and conversion thereof to a
successor administrator will be borne by FDISG and the Company shall not be
responsible for FDISG's costs associated with such termination. In the event of
termination of this Agreement pursuant to any other Section of this Agreement,
all reasonable expenses associated with conversation to a successor
administrator will be borne by the Company."

3. Appendix I attached hereto is added as an Appendix to the
Administration Agreement.

<PAGE>

4. The changes effected by this Amendment No. 2 shall be effective
as of May 1, 1998. Except to the extent amended hereby, the Administration
Agreement shall remain unchanged and in full force and effect and is hereby
ratified and confirmed in all respects as amended hereby.

IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 2
as of the day and year first above written.

FIRST DATA INVESTOR SERVICES
GROUP, INC.

By: /s/ Jylanne Dunne
-------------------
Name: Jylanne Dunne
Title: Vice-President

THE GALAXY VIP FUND

By: /s/ John T. O'Neill
------------------------
Name: John T. O'Neill
Title: President

-2-
<PAGE>

Appendix I

Pursuant to Article 3 of this Agreement, FDISG has agreed to perform
the services described in this Agreement in accordance with the Performance
Standards set forth in this Appendix I. The parties agree that such Performance
Standards, which are described below, may be revised from time to time upon the
mutual agreement of the parties.

Each of the performance standards will be monitored by a Quality
Assurance Team:

(a) In the event that FDISG fails to meet a particular Performance
Standard (except for any failure due to circumstances beyond its control) in any
particular month, FDISG agrees to take appropriate corrective action within the
following thirty (30) day period.

(b) In the event that FDISG fails to meet a particular Performance
Standard (except for any failure due to circumstances beyond its control) for
any three (3) months within a six (6) month period, the Company shall have the
right to terminate this Agreement upon forty-five (45) days' written notice to
FDISG.

CATEGORY STANDARD
- -------- --------
All NAV's to NASDAQ by the 98% accuracy rate as measured
NASDAQ reporting deadline by information available on
the day of reporting*

All daily yield and days to 98% accuracy rate as measured
maturity data along with the by information available on
7-day yield data reported to the day of reporting*
NASDAQ by the NASDAQ reporting
deadline

Release of the "Fleet Export 90% of the time**
File" by 8:00 p.m. each
business day

Cash availability provided to 90% accuracy rate as measured
investment advisers each morning by information available on
by 9:45 a.m. the day of reporting***

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

* assumes all vendor-provided data to FDISG is correct and on time; also that
all trade data provided by investment advisers is correct and on time

** assumes that there are normal market conditions and that all

-3-

<PAGE>

vendor-supplied data to FDISG is provided on time

*** assumes that all data provided by any transfer agent or sub-transfer agent
to FDISG is accurate and on time

-4-

<PAGE>

Exhibit (h)(4)

AMENDMENT NO. 3 TO ADMINISTRATION AGREEMENT

This Amendment No. 3, dated as of September 10, 1998, is entered into
between FIRST DATA INVESTOR SERVICES GROUP, INC., a Massachusetts corporation
("FDISG") and THE GALAXY VIP FUND, a Massachusetts business trust (the
"Company").

WHEREAS, FDISG and the Company have entered into an Administration
Agreement, dated as of June 1, 1997, as amended on February 27, 1998 and March
5, 1998 (the "Administration Agreement"), pursuant to which the Company
appointed FDISG to act as Administrator for the Company's portfolios (the
"Funds"); and

NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:

1. Section 8(a) of the Administration Agreement is amended and
restated in its entirety to read as follows:

"(a) This Agreement shall continue in effect with respect to each
Fund until May 31, 2001 (the "Initial Term"), unless earlier
terminated pursuant to the terms of this Agreement. Thereafter, this
Agreement shall continue with respect to each Fund for additional
terms of one (1) year ("Renewal Terms") each, provided such
continuance is specifically reviewed and approved at least annually
(i) by the vote of a majority of the Company's Board of Trustees or by
the vote of a majority of the outstanding voting securities of such
Fund and (ii) by a majority of the Company's Trustees who are not
parties to the Agreement or interested persons (as defined in the 1940
Act) of any party to the Agreement."

2. The following paragraph is added to the Administration Agreement
as Section 17:

"17. YEAR 2000. FDISG's services hereunder shall be rendered,
and its computer systems used in rendering such services shall operate
and function, without any Year 2000 Error. The term "Year 2000 Error"
means:

(a) any failure of FDISG's systems to properly record,
store, process, calculate or present calendar dates falling on and
after (and, if applicable, spans of time including) January 1, 2000 as
a result of the occurrence or use of

<PAGE>

data consisting of such dates;

(b) any failure of FDISG's systems to calculate any
information dependent on or relating to dates on or after January 1,
2000 in the same manner, and with the same functionality, date
integrity and performance, as such systems record, store, process,
calculate and present calendar dates on or before December 31, 1999,
or information dependent on or relating to such dates; or

(c) any loss of functionality or performance with respect
to the introduction of records or processing of data containing dates
falling on or after January 1, 2000."

3. Except to the extent amended hereby, the Administration Agreement
shall remain unchanged and in full force and effect and is hereby ratified and
confirmed in all respects as amended hereby.

IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 3
as of the day and year first above written.

FIRST DATA INVESTOR SERVICES
GROUP, INC.

By: /s/Jylanne M. Dunne
-------------------------------
Name: Jylanne M. Dunne
Title: Senior Vice-President

THE GALAXY VIP FUND

By: /s/John T. O'Neill
-------------------------------
Name: John T. O'Neill
Title: President

-2-

<PAGE>

Exhibit (h)(6)

AMENDMENT NO. 1 TO SALES AGREEMENT

Amendment No. 1 dated as of _________, 1998 to the Sales Agreement (the
"Agreement") dated as of August 26, 1993 by and between The Galaxy VIP Fund
("TRUST") and American Skandia Life Assurance Corporation ("SKANDIA").

WHEREAS, the Agreement currently provides in the recitals thereto that
SKANDIA has established separate accounts registered as unit investment trusts
under the Investment Company Act of 1940 ("`40 Act") to offer variable contracts
and may establish others and that SKANDIA is desirous of having TRUST serve as
one of the funding vehicles for at least one such variable contract, and
possibly others in the future;

WHEREAS, SKANDIA has advised TRUST that it has established separate
accounts exempt from registration under the `40 Act to offer group variable
contracts to certain employee benefit plans and that SKANDIA is desirous of
having TRUST serve as one of the funding vehicles for at least one such group
variable contract, and possibly others in the future; and

WHEREAS, the parties hereto wish to amend the Agreement to reflect that the
separate accounts established by SKANDIA will be registered as unit investment
trusts under the `40 Act or exempt from registration under the `40 Act.

NOW, THEREFORE, intending to be legally bound, the parties hereto agree as
follows:

1. The fourth recital of the Agreement is hereby amended and restated in
its entirety to read as follows:

"WHEREAS, SKANDIA has established separate accounts registered as
unit investment trusts under the `40 Act or exempt from registration
under the `40 Act to offer variable contracts and may establish
others, and is desirous of having TRUST serve as one of the funding
vehicles for at least one such variable contract, and possibly others
in the future."

2. Section 5(b) of the Agreement is amended and restated in its entirety
to read as follows:

"(b) SKANDIA will make available to TRUST at least one complete
copy of all registration statements, prospectuses, statements of
additional information and other disclosure documents, reports,
solicitations for voting instruments, sales literature and other
promotional materials, applications for exemptions, requests for
no-action letters, and all amendments to any of the above, that relate
to the variable contracts or the separate accounts, contemporaneously
with the filing of such documents with the Securities and

<PAGE>

Exchange Commission or, if any of such documents are not required to
be filed with the Securities and Exchange Commission, then as soon as
is reasonably practicable after such documents become available."

3. Except to the extent amended hereby, the Agreement shall remain
unchanged and in full force and effect and is hereby ratified and confirmed in
all respects as amended hereby.

THE GALAXY VIP FUND

By:
----------------------------
Name:
--------------------------
Title:
-------------------------

AMERICAN SKANDIA LIFE
ASSURANCE CORPORATION

By:
----------------------------
Name:
--------------------------
Title:
-------------------------

-2-

<PAGE>
Exhibit (j)(1)

CONSENT OF COUNSEL

We hereby consent to the use of our name and to the references to our firm
under the captions "Trustees and Officers" and "Counsel" in the Statement of
Additional Information included in Post-Effective Amendment No. 8 to the
Registration Statement (No. 33-49290) on Form N-1A under the Securities Act of
1933, as amended, of The Galaxy VIP Fund (Money Market Fund, Equity Fund, Growth
and Income Fund, Small Company Growth Fund, Columbia Real Estate Equity Fund II,
Asset Allocation Fund, High Quality Bond Fund and Columbia High Yield Fund II).
This consent does not constitute a consent under Section 7 of the Securities Act
of 1933, as amended, and in consenting to the use of our name and the references
to our Firm under such captions, we have not certified any part of the
Registration Statement and do not otherwise come within the categories of
persons whose consent is required under Section 7 or the rules and regulations
of the Securities and Exchange Commission thereunder.

/s/Drinker Biddle & Reath LLP
-----------------------------
DRINKER BIDDLE & REATH LLP

Philadelphia, Pennsylvania
February 26, 1999