GE INSTITUTIONAL FUNDS
SEMI-ANNUAL REPORT
[GE LOGO OMITTED]
March 31, 1999
[GE LOGO OMITTED]
WE BRING GOOD THINGS TO LIFE.
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GE INSTITUTIONAL FUNDS
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UNDERSTANDING YOUR REPORT
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A LETTER FROM THE PRESIDENT ............................................. 1
REVIEW OF PERFORMANCE AND SCHEDULES OF INVESTMENTS
GE Institutional Funds' Portfolio Managers' Q&A and
Schedules of Investments
EQUITY FUNDS
U.S. EQUITY FUND ............................................... 3
S&P 500 INDEX FUND ............................................. 8
MID-CAP GROWTH FUND ............................................14
MID-CAP VALUE EQUITY FUND ......................................18
SMALL-CAP VALUE EQUITY FUND ....................................21
INTERNATIONAL EQUITY FUND ......................................24
EUROPE EQUITY FUND .............................................29
EMERGING MARKETS FUND ..........................................33
INCOME FUNDS
INCOME FUND ....................................................38
MONEY MARKET FUND ..............................................45
NOTES TO PERFORMANCE AND NOTES TO SCHEDULES OF
INVESTMENTS .....................................................47
FINANCIAL STATEMENTS
Financial Highlights ...............................................48
Notes to Financial Highlights ......................................49
Statements of Assets and Liabilities,
Operations, and Changes in Net Assets ..............................50
NOTES
Notes to Financial Statements ......................................56
GE INSTITUTIONAL FUNDS' INVESTMENT TEAM .................................62
This report has been prepared for shareholders and may be distributed to others
only if preceded or accompanied by a current prospectus.
<PAGE>
A LETTER FROM THE PRESIDENT
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DEAR SHAREHOLDER:
Markets continue their roller-coaster ride. The closely-watched S&P 500 Index,
which lost almost 20% of its value during August's global currency crisis, ended
1998 more than 28% ahead, and gained another 5% in the first quarter of 1999.
Our strategy of favoring stock picks over sector bets paid off during this
period of financial upheaval.
As stock prices rise and fall, the best course is to invest for the long term
and diversify to minimize risk.
MARKET REVIEW
In 1998, U.S. equities returned more than 20% for the fourth consecutive year,
the first time this has ever happened. In fact, this is the best four year
period since 1932-1936 when the market was recovering from the 1929 crash. This
bull market shows no signs of letting up as we enter the second quarter of 1999.
An aging American population investing for retirement is one force propelling
the stock market higher. The U.S. economy, now in its ninth year of growth, is
another. Consumer spending is fueling the economic expansion, spurred by low
interest rates, strong job growth and low inflation. Strong economic growth
coupled with disinflation is very positive for the stock market.
MARKET OUTLOOK
Looking ahead, we believe the fundamentals that underpin market performance
remain sound. We will maintain our overweight position in European stocks. We
expect corporate consolidations and the recent adoption of a common currency to
create European companies with strong earnings potential. Parts of Asia appear
to be improving and some investors have started to put money back in Japan.
However, we do not think the Japanese economy has turned around yet. We wait
cautiously for signs of change.
We expect the U.S. economy to slow to a more sustainable growth rate in the
second half of 1999. Additionally, with less difficult global economic
conditions, U.S. corporate profits are poised to resume a modest growth
trajectory. Since it is likely that inflation will remain low, we do not believe
the U.S. Federal Reserve will alter current interest rate policy.
During periods of volatility, it is critical to maintain a well-diversified
portfolio. Although we do not expect equity returns to be what they have been in
the past few years, equities are still the best long-term investment if you need
growth of capital. Stock selection will be a major factor as the market broadens
to embrace value stocks and small- and mid-cap stocks. Fixed income investments
can provide modest capital growth as well as current income, and should provide
balance to your overall investment portfolio.
As markets rise and fall, the best advice is still to know your tolerance for
risk and focus on long-term objectives rather than short-term market
fluctuations.
YEAR 2000
On a final note, many shareholders have inquired about the impact the year 2000
(Y2K) problem may have with respect to their financial investments and
recordkeeping. The GE Institutional Funds' adviser, GE Investment Management
Incorporated (GEIM) has incorporated Y2K readiness capability into its analysis
processes for the investment portfolios. In addition, it has been engaged in a
multi-year effort to address Y2K date-related issues in a broad range of areas
including applications, process-enabling systems and facilities. GEIM also
benefits from the Y2K efforts of its parent, General Electric Company, which
systematically monitors the implementation of the Y2K programs of all GE
businesses and facilitates the sharing of best practices. With respect to
third-party systems, GEIM like many similar companies, must largely rely on the
efforts and affirmations of others; however, it will continue to work closely in
partnership with our most critical vendors, State Street Bank and Trust Company,
the funds' Custodian and National Financial Data Services, Inc., the funds'
Transfer Agent. Although the interaction of
1
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A LETTER FROM THE PRESIDENT
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various software and hardware elements is highly complex -- and the possibility
of Y2K related problems cannot be totally eliminated -- GEIM believes it is
taking the appropriate steps.
Sincerely,
/S/SIGNATURE
Michael J. Cosgrove
Mike Cosgrove is the President of the Investment Services Group of GE Financial
Assurance Holdings, Inc., and of GE Investment Distributors, Inc., the funds'
distributor, and serves as a Trustee of the GE Pension Trust and GE's employee
savings program. Previously Chief Financial Officer of GE Investments and
Assistant Treasurer-GE Company, Mike joined GE in 1970 and held a number of
managerial positions in finance and sales in the International Operation and in
GE Trading Company. He has a B.S. in Economics from Fordham University and an
M.B.A. from St. John's University.
2
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U.S. EQUITY FUND
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Q&A
Gene Bolton is responsible for the overall management of the U.S. equity
investment process at GE Investments with total U.S. equity assets of over $35
billion. He leads a team of portfolio managers for the U.S. Equity Fund. Gene
joined GE in 1964. After completing GE's Financial Management Program, he held a
number of financial and strategic planning positions in the U.S. and Europe.
Joining GE Investments in 1984 as Chief Financial Officer, he moved to equities
as a Portfolio Manager in 1986 and was named to his present position in 1991.
Gene is a Trustee of the GE Pension Trust and GE's employee savings program, as
well as Chairman of the Asset Allocation Committee of GE Investments. He also
serves as a Trustee of the Investment Management Workshop, sponsored by the
Association for Investment Management and Research. Gene is a graduate of
Mundelein College with a B.A. in Business Management.
Q. HOW DID THE U.S. EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK FOR THE
SIX-MONTH PERIOD ENDED MARCH 31, 1999?
A. The U.S. Equity Fund posted a return of 26.71% for the six-month period
ended March 31, 1999 while the Standard & Poor's 500 Composite Price Index
returned 27.32% for the same period.
Q. WHAT DROVE THE FUND'S PERFORMANCE?
A. The stock market remained quite narrow by historical standards. However, the
market did broaden out enough to make winners out of a number of our
holdings with good underlying fundamentals that fared poorly last year. Two
market sectors that performed well during the period were the
Consumer-Cyclical and Financial.
Q. WHICH INVESTMENTS STAND OUT?
A. In the Retail Trade sector, Wal-Mart Stores; Dayton Hudson and Lowes Cos.,
the home improvement retailer, benefited from ongoing consumer confidence
and low unemployment. Among financial stocks, credit card use and consumer
spending drove earnings at Citigroup and American Express, while Morgan
Stanley Dean Witter showed post-merger growth thanks to a rising stock
market and strong investment banking profits.
On the downside, the fund was underweighted in the technology sector, which
had very strong returns but contains a number of stocks selling at excessive
valuation levels. Among the technology stocks we own, those that performed
well during the period include bank payment-services provider First Data
Corporation; EMC, a maker of computer storage products; and Sun
Microsystems, which produces computer workstations. It should be noted that
the fund performed well without holding any speculative internet stocks
which, in our opinion, are overvalued.
We believe the Capital Goods sector is being overlooked. The fund's holdings
include Emerson Electric, an electrical and electronic products
manufacturer; Dover, a diversified manufacturer; and Waste Management.
Q. PLEASE COMMENT ON ANY CHANGES YOU MADE IN THE PORTFOLIO.
A. Early in 1999, we made some changes to the portfolio's structure. We believe
that these changes should generate better returns without altering the
fund's basis investment objectives. The fund remains balanced between value
and growth stocks. The bulk of the fund's assets moved from utilizing four
portfolio managers to the two most senior managers. This resulted in a
portfolio that is more concentrated, with holdings declining from 250
companies to approximately 160. We also added a research portfolio
component, comprising about 15% of the fund. This component reflects the
best ideas of our research analysts, who have been managing a very
successful broad research portfolio for the past seven years. The fund uses
a more concentrated version of the research portfolio which approximates 60
companies. The goal is to amplify positions that the two portfolio managers
already own. This places more emphasis on stock selection, which has been
our strength historically, rather than sector allocation. We believe these
changes will set the stage for better performance going forward. We will
continue to focus on fundamental research and stock selection, with more
concentration in fewer stocks that we believe have the best potential to
outperform the market over the long term.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
A. The U.S. economy's strong underpinnings are encouraging for the long-term.
If the global economy picks up, inflation remains low and earnings gains
broaden, we believe that the stock market should perform in line with
earnings growth over the next several years. In the short-term, we expect
market volatility and smaller gains than in the past few years. We believe
the fund is well-positioned for the short-term and the long-term.
3
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U.S. EQUITY FUND
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COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT
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[LINE GRAPH OMITTED]
U.S. EQUITY FUND S&P 500
11/25/97 $10000.00 $10000.00
10030.00 10052.90
10298.16 10222.19
JAN-98 10318.18 10337.91
11028.74 11080.89
MAR-98 11529.14 11649.34
11729.30 11770.03
MAY-98 11499.12 11565.58
11819.37 12035.49
JUL-98 11679.26 11907.80
10007.93 10188.31
SEP-98 10628.43 10844.74
11499.12 11722.19
NOV-98 12149.63 12432.32
12743.71 13155.76
JAN-99 13146.80 13700.41
12919.41 13274.32
MAR-99 13467.20 13807.55
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AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED MARCH 31, 1999
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SIX ONE SINCE
MONTHS YEAR INCEPTION COMMENCEMENT
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U.S. Equity Fund 26.71% 16.81% 24.71% 11/25/97
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S&P 500 27.32% 18.53% 27.04%
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INVESTMENT PROFILE
A mutual fund designed for investors who seek
long-term growth of capital by investing
primarily in equity securities of U.S.
companies.
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SECTOR ALLOCATION
AS OF MARCH 31, 1999
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[PIE CHART OMITTED]
TECHNOLOGY 18.2%
FINANCIAL SERVICES 16.5%
CONSUMER 15.1%
HEALTHCARE 14.4%
UTILITIES 8.8%
CAPITAL GOODS 8.5%
ENERGY 7.0%
RETAIL TRADE 5.9%
CASH & OTHER 1.7%+
TRANSPORTATION 2.1%
BASIC MATERIALS 1.8%
+INCLUDES CASH EQUALIZED WITH FUTURES OF 0.2%
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TOP TEN LARGEST HOLDINGS
AT MARCH 31, 1999
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Citigroup Inc. 3.45%
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Merck & Co. Inc. 2.70%
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Bristol-Myers Squibb Co. 2.32%
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International Business Machines 2.00%
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Cisco Systems Inc. 1.92%
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AlliedSignal Inc. 1.90%
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Microsoft Corp. 1.81%
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Federal National Mortgage Assoc. 1.79%
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First Data Corp. 1.63%
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Dayton Hudson Corp. 1.60%
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SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
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SCHEDULE OF INVESTMENTS MARCH 31, 1999 (UNAUDITED)
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U.S. EQUITY FUND
NUMBER
OF SHARES VALUE
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COMMON STOCK -- 97.8%
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BASIC MATERIALS -- 1.8%
Air Products & Chemicals Inc. 13,571 $ 464,807
Airgas Inc. 8,565 71,732(a)
Barrick Gold Corp. 18,632 317,908
Du Pont de Nemours (E.I.)
& Co. 14,738 855,725(e)
Great Lakes Chemical Corp. 9,094 334,204
Morton International Inc. 8,085 297,124
Newmont Mining Corp. 18,075 316,313
Rayonier Inc. 5,645 226,153
2,883,966
CAPITAL GOODS -- 8.5%
AlliedSignal Inc. 62,095 3,054,298(e)
Deere & Co. 9,871 381,267
Dover Corp. 53,725 1,766,209
Emerson Electric Co. 20,106 1,064,361
Gulfstream Aerospace Corp. 3,671 159,230(a)
Hubbell Inc. (Class B) 32,318 1,292,720
Lockheed Martin Corp. 7,230 272,481
Martin Marietta Materials Inc. 15,767 899,705
Masco Corp. 12,652 357,419
Molex Inc. (Class A) 20,021 518,043
Textron Inc. 18,408 1,424,319
United Technologies Corp. 6,507 881,292
Waste Management Inc. 37,818 1,678,174
13,749,518
[ICON OMITTED]
CONSUMER - CYCLICAL -- 8.7%
AT&T Corp. - Liberty Media
Group (Class A) 18,075 951,205(a)
Carnival Corp. (Class A) 9,454 459,110
Catalina Marketing Corp. 8,537 733,115(a)
Comcast Corp. (Class A) 24,276 1,527,871
Ford Motor Co. 6,675 378,806
Gannett Inc. 23,748 1,496,124
Harman International
Industries Inc. 3,616 132,888
Interpublic Group Cos. Inc. 20,911 1,628,444
Knight-Ridder Inc. 11,401 570,050
McDonald's Corp. 24,860 1,126,469
MediaOne Group, Inc. 1,390 88,265(a)
NTL Inc. 18,636 1,516,505(a)
Stanley Works 3,532 90,508
Time Warner Inc. 8,704 618,528
Walt Disney Co. 31,025 965,653
Xerox Corp. 31,756 1,694,976
13,978,517
CONSUMER - STABLE -- 6.4%
Anheuser Busch Cos. Inc. 18,228 1,388,746
Avon Products Inc. 21,050 990,666
Bestfoods 7,509 352,923
Coca-Cola Co. 834 51,187
Colgate-Palmolive Co. 1,780 163,760
NUMBER
OF SHARES VALUE
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Conagra Inc. 8,342 $ 213,242
General Mills Inc. 5,645 426,550
Gillette Co. 3,476 206,605
Kimberly Clark Corp. 1,668 79,960
Nestle S.A. (Regd.) 197 358,788
Pepsico Inc. 35,066 1,374,149
Philip Morris Cos. Inc. 32,035 1,127,231
Procter & Gamble Co. 15,238 1,492,372
Ralston Purina Co. 28,754 767,372
Sara Lee Corp. 53,669 1,328,308
10,321,859
ENERGY -- 7.0%
Anadarko Petroleum Corp. 7,036 265,609
Baker Hughes Inc. 12,652 307,602
BP Amoco PLC ADR 3,478 351,015
Burlington Resources Inc. 19,438 776,305
Chevron Corp. 4,171 368,873
Exxon Corp. 34,370 2,425,233
Halliburton Co. 20,578 792,253
Mobil Corp. 12,541 1,103,608
Nabors Industries Inc. 6,479 117,837(a)
Royal Dutch Petroleum Co. 24,694 1,284,088
Schlumberger Ltd. 20,410 1,228,427
Texaco Inc. 6,674 378,749
Total S.A. ADR 8,481 517,341
Unocal Corp. 29,837 1,098,375
USX-Marathon Group 9,454 259,985
11,275,300
[ICON OMITTED]
FINANCIAL -- 11.7%
American Express Co. 21,690 2,548,575
Associates First Capital Corp.
(Class A) 28,503 1,282,635
Bank of New York Inc. 9,594 344,784
BankAmerica Corp. 7,508 530,252
BankBoston Corp. 3,893 168,616
Chase Manhattan Corp. 11,400 926,962
Citigroup Inc. 87,010 5,557,764
Countrywide Credit Industries 2,530 94,875
Federal National Mortgage Assoc. 41,544 2,876,922
First Union Corp. 8,899 475,540
Morgan Stanley Dean Witter & Co. 18,576 1,856,439
National City Corp. 10,984 729,063
State Street Corp. 7,708 633,501(g)
United States Bancorp. 11,290 384,566
Wells Fargo & Co. 10,344 362,687
18,773,181
[ICON OMITTED]
HEALTHCARE -- 14.4%
Abbott Laboratories 40,432 1,892,723
Allergan Inc. 10,817 950,544
American Home Products Corp. 17,352 1,132,218
AmeriSource Health
Corp. (Class A) 5,223 178,561(a)
Amgen Inc. 8,342 624,607(a)
Bristol-Myers Squibb Co. 58,062 3,734,112
Cardinal Health Inc. 33,536 2,213,376
Dentsply International Inc. 7,522 174,887
Eli Lilly & Co. 1,669 141,656
Henry Schein Inc. 8,483 214,196(a)
- --------------
See Notes to Schedule of Investments and Notes to Financial statements.
5
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U.S. EQUITY FUND
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NUMBER
OF SHARES VALUE
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Johnson & Johnson 24,221 $ 2,269,205
Lincare Holdings Inc. 12,097 340,228(a)
Merck & Co. Inc. 54,225 4,348,167
Omnicare Inc. 7,647 145,771
Pfizer Inc. 8,648 1,199,910
Pharmacia & Upjohn Inc. 16,685 1,040,727
Schering Plough Corp. 16,685 922,889
Shire Pharmaceuticals
Group PLC 3,001 68,460(a)
Sybron International Corp. 17,519 437,975(a)
Warner-Lambert Co. 3,337 220,868
Watson Pharmaceuticals Inc. 21,829 963,205(a)
23,214,285
INSURANCE -- 4.8%
American International
Group Inc. 12,903 1,556,425
Berkshire Hathaway Inc.
(Class B) 812 1,909,012(a)
Chicago Title Corp. 86 3,128
Hartford Financial Services
Group Inc. 11,818 671,410
Lincoln National Corp. 7,509 742,452
Loews Corp. 10,011 747,071
Marsh & McLennan Cos. Inc. 7,452 552,845
Provident Cos. Inc. 14,876 514,152
Reliastar Financial Corp. 17,498 745,852
St. Paul Cos. Inc. 7,203 223,743
UNUM Corp. 1,807 85,946
7,752,036
RETAIL TRADE -- 5.9%
Costco Cos. Inc. 7,507 687,360(a)
CVS Corp. 3,156 149,910
Dayton Hudson Corp. 38,653 2,575,256
Federated Department
Stores Inc. 13,626 546,743(a)
Home Depot Inc. 22,774 1,417,682
Lowes Cos. Inc. 24,193 1,463,676
Sears Roebuck & Co. 9,454 427,203
Wal-Mart Stores Inc. 24,470 2,255,828
9,523,658
[ICON OMITTED]
TECHNOLOGY - ELECTRONICS & EQUIPMENT -- 10.0%
Analog Devices Inc. 28,419 845,465(a)
Applied Materials Inc. 10,428 643,277(a)
Cisco Systems Inc. 28,225 3,092,401(a)
Gateway 2000 Inc. 7,509 514,836(a)
Hewlett Packard Co. 11,707 793,881
Intel Corp. 18,520 2,201,565
International Business Machines 18,131 3,213,720
Northern Telecom Ltd. 31,143 1,934,759
Pitney Bowes Inc. 11,596 739,245
Sun Microsystems Inc. 16,797 2,100,675(a)
16,079,824
TECHNOLOGY - SOFTWARE & SERVICES -- 7.7%
Automatic Data Processing Inc. 34,954 1,446,222
Computer Sciences Corp. 10,289 567,824
EMC Corp. 17,520 2,238,180(a)
Equifax Inc. 46,022 1,582,006
First Data Corp. 61,455 2,627,201
NUMBER
OF SHARES VALUE
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Microsoft Corp. 32,536 $ 2,916,039(a)
Reuters Holdings PLC 7,148 620,983
Unisys Corp. 14,738 408,058(a)
12,406,513
TRANSPORTATION -- 2.1%
Burlington Northern
Santa Fe Corp. 31,590 1,038,521
Canadian Pacific Ltd. 16,964 329,738
Continental Airlines Inc.
(Class B) 21,495 816,810(a)
Delta Air Lines Inc. 16,128 1,120,896
Pittston Brinks Group 834 19,599
3,325,564
UTILITIES -- 8.8%
Airtouch Communications Inc. 12,793 1,236,124(a)
American Electric Power Inc. 8,342 331,073
AT&T Corp. 18,082 1,443,170
Bell Atlantic Corp. 18,909 977,359
Bellsouth Corp. 4,171 167,101
CMS Energy Corp. 19,200 769,200
Duke Energy Corp. 11,290 616,716
Edison International 16,685 371,241
El Paso Energy Corp. 5,562 181,808
Florida Progress Corp. 8,898 335,899
FPL Group Inc. 7,647 407,203
Frontier Corp. 8,759 454,373
GTE Corp. 22,941 1,387,930
MCI WorldCom Inc. 9,733 861,979(a)
New Century Energies Inc. 13,625 464,102
Northern States Power Co. 9,399 217,939
Qwest Communications
International Inc. 3,199 230,628(a)
SBC Communications Inc. 45,160 2,128,165
Sonat Inc. 2,781 83,430
Sprint Corp. 4,728 463,935
Texas Utilities Co. 9,733 405,744
U.S. WEST Inc. 13,071 719,722
14,254,841
TOTAL COMMON STOCK
(COST $130,761,583) 157,539,062
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PREFERRED STOCK -- 0.5%
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Microsoft Corp. (Series A), 2.75%
(Cost $ 757,768) 8,148 802,578
TOTAL INVESTMENTS IN SECURITIES
(COST $131,519,351) 158,341,640
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SHORT-TERM INVESTMENTS -- 1.7%
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GEI Short Term Investment Fund
(COST $ 2,673,873) 2,673,873 2,673,873
OTHER ASSETS AND LIABILITIES,
NET 0.0% 46,852
------------
NET ASSETS-- 100% $161,062,365
============
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See Notes to Schedule of Investments and Notes to Financial statements.
6
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SCHEDULE OF INVESTMENTS MARCH 31, 1999 (UNAUDITED)
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OTHER INFORMATION
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The U.S. Equity Fund had the following long Futures Contracts open at March 31,
1999:
NUMBER
EXPIRATION OF UNDERLYING UNREALIZED
DESCRIPTION DATE CONTRACTS FACE VALUE LOSS
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S&P 500 June 1999 1 $323,250 $(5,963)
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See Notes to Schedule of Investments and Notes to Financial statements.
[ICON OMITTED]
ICONS REPRESENT THE TOP FIVE INDUSTRY WEIGHTINGS IN THE U.S. EQUITY FUND AT
MARCH 31, 1999.
7
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S&P 500 INDEX FUND
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Q&A
JAMES B. MAY LEADS A TEAM OF PORTFOLIO MANAGERS AT STATE STREET GLOBAL ADVISORS,
THE SUB-ADVISER FOR THE S&P 500 INDEX FUND. SINCE 1994, JAMES HAS BEEN AN
INVESTMENT OFFICER AND PORTFOLIO MANAGER IN THE U.S. STRUCTURED PRODUCTS GROUP
AT STATE STREET BANK AND TRUST COMPANY WITH TOTAL ASSETS UNDER MANAGEMENT
EXCEEDING $489 BILLION. FROM 1991 TO 1993, JAMES SERVED AS AN INVESTMENT SUPPORT
ANALYST IN THE U.S. PASSIVE SERVICES GROUP AT STATE STREET. JAMES HOLDS A B.S.
IN FINANCE FROM BENTLEY COLLEGE AND AN M.B.A. FROM BOSTON COLLEGE.
Q. HOW DID THE S&P 500 INDEX FUND PERFORM COMPARED TO ITS BENCHMARK FOR THE
SIX-MONTH PERIOD ENDED MARCH 31, 1999?
A. The S&P 500 Index Fund posted a return of 27.85% for the six-month period
ended March 31, 1999. This compares with a 27.32% return for the S&P 500
Index for the same period.
Q. WHY DID THE FUND OUT-PERFORM ITS BENCHMARK?
A. The fund out performance is credited to the optimization technique (as
further described) used to manage the fund. As a result of this technique,
slight misweights of securities to the benchmark will occur. Those
misweights cause fund performance to deviate from the benchmark. Portfolio
optimization attempts to keep the tracking error to a minimum while creating
the most efficient portfolio possible.
Q. WHICH INVESTMENTS STAND OUT?
A. Although the U.S. equity market is experiencing increased volatility, the
S&P 500 continued its upward trend over the past six months. The Dow Jones
Industrial Average surpassed the psychologically important 10,000 point
milestone, while the S&P 500 also reached all time highs. As has been the
history of the current U.S. equity market rally, the strength remained
narrow as large market capitalization ("large-cap") growth stocks continued
to power returns. Over the past six months the S&P/Barra Growth Index out
performed the S&P/Barra Value Index by 12.32%. Large cap growth has
performed better than large-cap value for the past five quarters. Large-cap
stocks, as represented by the S&P 500 Index, outperformed their mid- and
small-cap counterparts. The S&P 500 Index returned 27.32% over the past six
months, while the S&P MidCap 400 and Russell 2000 returned 19.04% and
10.00%, respectively.
The best performing sector was technology. Despite having a dismal February,
posting a return of -11.61%, the sector earned a return of 51.80% for the
six-month period. Driven by the strength of Microsoft and America Online,
the technology sector outperformed the Consumer -- Cyclical sector, the next
best performing sector, by 13.79%. The strength of the U.S. equity market
received a major test as the crisis in Kosovo came to a head. The market
remained unscathed as NATO began taking action.
Q. WHAT HAS YOUR INVESTMENT STRATEGY BEEN?
A. We continue to utilize an optimization technique to manage the GE
Institutional S&P 500 Index Fund. With this strategy, a portfolio of
approximately 350 stocks has been created to represent the characteristics
of the underlying benchmark, the S&P 500 Index. This allows a fund of
limited asset size to track the index while keeping custody and trading
costs to a minimum. This methodology has provided consistent tracking.
Q. WHAT IS THE OUTLOOK FOR THE FUND AND HOW HAVE YOU POSITIONED THE FUND GOING
FORWARD?
A. Due to the passive investment style of the fund, it will remain fully
exposed to the S&P 500 to provide as close tracking as possible.
8
<PAGE>
S&P 500 INDEX FUND
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COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[LINE GRAPH OMITTED]
S&P 500 INDEX FUND S&P 500
11/25/97 $10000.00 $10000.00
10040.00 10052.90
10212.03 10222.19
JAN-98 10332.17 10337.91
11073.05 11080.89
MAR-98 11643.72 11649.34
11763.86 11770.03
MAY-98 11563.62 11565.58
12044.19 12035.49
JUL-98 11914.04 11907.80
10202.02 10188.31
SEP-98 10862.80 10844.74
11763.86 11722.19
NOV-98 12474.70 12432.32
13198.03 13155.76
JAN-99 13736.11 13700.41
13330.01 13274.32
MAR-99 13888.39 13807.55
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED MARCH 31, 1999
- --------------------------------------------------------------------------------
SIX ONE SINCE
MONTHS YEAR INCEPTION COMMENCEMENT
- --------------------------------------------------------------------------------
S&P 500 Index Fund 27.85% 19.28% 27.59% 11/25/97
- --------------------------------------------------------------------------------
S&P 500 27.32% 18.53% 27.04%
- --------------------------------------------------------------------------------
INVESTMENT PROFILE
A mutual fund designed for investors who seek growth of
capital and accumulation of income that corresponds to the
investment return of the Standard & Poor's 500 Composite Stock
Price Index by investing in common stocks comprising that Index.
- --------------------------------------------------------------------------------
SECTOR ALLOCATION
AS OF MARCH 31, 1999
- --------------------------------------------------------------------------------
[PIE CHART OMITTED]
TECHNOLOGY 18.8%
FINANCIAL SERVICES 14.9%
CONSUMER 15.9%
HEALTHCARE 11.8%
UTILITIES 10.3%
CAPITAL GOODS 7.7%
ENERGY 5.6%
RETAIL TRADE 6.1%
CASH & OTHER 6.1%+
BASIC MATERIALS 2.8%
+INCLUDES CASH EQUALIZED WITH FUTURES OF 5.0%.
- --------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS
AT MARCH 31, 1999
- --------------------------------------------------------------------------------
Microsoft Corp. 3.96%
- --------------------------------------------------------------------------------
General Electric Co. 3.26%
- --------------------------------------------------------------------------------
Wal-Mart Stores Inc. 1.82%
- --------------------------------------------------------------------------------
Intel Corp. 1.75%
- --------------------------------------------------------------------------------
Merck & Co. Inc. 1.74%
- --------------------------------------------------------------------------------
Pfizer Inc. 1.61%
- --------------------------------------------------------------------------------
Exxon Corp. 1.59%
- --------------------------------------------------------------------------------
American Telephone & Telegraph Corp. 1.58%
- --------------------------------------------------------------------------------
International Business Machines 1.58%
- --------------------------------------------------------------------------------
Cisco Systems Inc. 1.53%
- --------------------------------------------------------------------------------
SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
9
<PAGE>
SCHEDULE OF INVESTMENTS MARCH 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
S&P 500 INDEX FUND
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 94.8%
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 2.8%
Air Products & Chemicals Inc. 800 $ 27,400
Alcan Aluminum Ltd. 900 23,231
Alcoa Inc. 1,400 57,662
Barrick Gold Corp. 1,500 25,594
Champion International Corp. 400 16,425
Dow Chemical Co. 600 55,913
Du Pont de Nemours (E.I.) & Co. 2,600 150,962
Eastman Chemical Co. 400 16,825
Fort James Corp. 700 22,181
Freeport McMoran Copper &
Gold Inc. (Class B) 1,500 16,313
Georgia Pacific Corp. 300 22,275
Hercules Inc. 400 10,100
International Paper Co. 800 33,750
Monsanto Co. 1,400 64,312
Phelps Dodge Corp. 400 19,700
PPG Industries Inc. 600 30,750
Praxair Inc. 500 18,031
Rohm & Haas Co. 600 20,138
Union Camp Corp. 400 26,850
Union Carbide Corp. 500 22,594
Weyerhaeuser Co. 600 33,300
714,306
CAPITAL GOODS -- 7.7%
AlliedSignal Inc. 1,400 68,862
AMP Inc. 611 32,803
Boeing Co. 2,300 78,487
Browning-Ferris Industries Inc. 700 26,994
Case Corp. 300 7,613
Caterpillar Inc. 900 41,344
Cooper Industries Inc. 500 21,313
Corning Inc. 600 36,000
Danaher Corp. 300 15,675
Deere & Co. 700 27,038
Dover Corp. 800 26,300
Eaton Corp. 300 21,450
Emerson Electric Co. 1,100 58,231
Fluor Corp. 200 5,400
General Electric Co. 7,600 840,750(e)
Grainger (W.W.) Inc. 400 17,225
Honeywell Inc. 400 30,325
Illinois Tool Works Inc. 700 43,312
Ingersoll Rand Co. 600 29,775
Lockheed Martin Corp. 1,000 37,687
Masco Corp. 1,200 33,900
Minnesota Mining &
Manufacturing Co. 900 63,675
Northrop Grumman Corp. 200 11,975
PACCAR Inc. 200 8,238
Parker Hannifin Corp. 500 17,125
Raytheon Co. (Class B) 800 46,900
Rockwell International Corp. 600 25,463
Sherwin-Williams Co. 700 19,688
Tenneco Inc. 600 16,763
Textron Inc. 500 38,687
Thermo Electron Corp. 500 6,781(a)
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Tyco International Ltd. 1,452 $ 104,181
United Technologies Corp. 600 81,262
Waste Management Inc. 870 38,606
1,979,828
CONSUMER - CYCLICAL -- 7.9%
Black & Decker Corp. 200 11,088
Block H & R Inc. 200 9,475
Carnival Corp. (Class A) 1,400 67,987
CBS Corp. 1,800 73,687(a)
Cendant Corp. 2,061 32,461(a)
Clear Channel
Communications Inc. 600 40,238(a)
Comcast Corp. (Class A) 1,000 62,938
Dana Corp. 400 15,200
Donnelley (R.R.) & Sons Co. 600 19,313
Dow Jones & Co. Inc. 400 18,875
Dun & Bradstreet Corp. 900 32,063
Eastman Kodak Co. 800 51,100
Ford Motor Co. 2,700 153,225
Fortune Brands Inc. 700 27,081
Gannett Inc. 700 44,100
General Motors Corp. 1,700 147,687
Genuine Parts Co. 900 25,931
Goodyear Tire & Rubber Co. 500 24,906
Hasbro Inc. 450 13,022
Hilton Hotels Corp. 800 11,250
Marriott International Inc.
(Class A) 800 26,900
Mattel Inc. 800 19,900
McDonald's Corp. 3,200 145,000
McGraw Hill Cos. Inc. 600 32,700
MediaOne Group Inc. 1,700 107,950(a)
New York Times Co. 600 17,100
Newell Rubbermaid Inc. 815 38,728
Nike Inc. (Class B) 800 46,150
Omnicom Group Inc. 300 23,981
Seagram Ltd. 1,000 50,000
Service Corp. International 800 11,400
Time Warner Inc. 2,600 184,762
Times Mirror Co. 400 21,625
Tribune Co. 400 26,175
Tricon Global Restaurants Inc. 600 42,150(a)
TRW Inc. 500 22,750
VF Corp. 600 28,313
Viacom Inc. (Class B) 1,000 83,937(a)
Walt Disney Co. 4,500 140,062
Xerox Corp. 1,600 85,400
2,036,610
[ICON OMITTED]
CONSUMER - STABLE -- 8.0%
Anheuser Busch Cos. Inc. 1,100 83,806
Archer-Daniels Midland Co. 1,470 21,591
Avon Products Inc. 800 37,650
Bestfoods 600 28,200
Campbell Soup Co. 1,100 44,756
Clorox Co. 300 35,156
Coca-Cola Co. 5,700 349,837(e)
Colgate-Palmolive Co. 700 64,400
Conagra Inc. 1,100 28,119
Crown Cork & Seal Inc. 400 11,425
General Mills Inc. 400 30,225
Gillette Co. 2,600 154,537
Heinz (H.J.) Co. 800 37,900
- ------------
See Notes to Schedule of Investments and Notes to Financial statements.
10
<PAGE>
SCHEDULE OF INVESTMENTS MARCH 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Hershey Foods Corp. 400 $ 22,400
Kellogg Co. 1,000 33,813
Kimberly Clark Corp. 1,300 62,319
Owens-Illinois Inc. 400 10,000(a)
Pepsico Inc. 3,500 137,156
Philip Morris Cos. Inc. 5,500 193,531(e)
Pioneer Hi-Bred
International Inc. 500 18,813
Procter & Gamble Co. 3,100 303,606
Quaker Oats Co. 500 31,281
Ralston Purina Co. 900 24,019
RJR Nabisco Holdings Corp. 700 17,500
Safeway Inc. 1,100 56,444(a)
Sara Lee Corp. 2,200 54,450
Sysco Corp. 1,200 31,575
Unilever N.V. 1,400 93,013
UST Inc. 800 20,900
Wrigley (W.M.) Junior Co. 300 27,131
2,065,553
ENERGY -- 5.6%
Amerada Hess Corp. 400 20,125
Anadarko Petroleum Corp. 400 15,100
Atlantic Richfield Co. 800 58,400
Baker Hughes Inc. 770 18,721
Burlington Resources Inc. 600 23,963
Chevron Corp. 1,600 141,500
Exxon Corp. 5,800 409,262(e)
Halliburton Co. 1,200 46,200
Mobil Corp. 1,900 167,200
Occidental Petroleum Corp. 1,100 19,800
Phillips Petroleum Co. 700 33,075
Reliant Energy Inc. 1,100 28,669
Royal Dutch Petroleum Co. ADR 5,100 265,200
Schlumberger Ltd. 1,100 66,206
Texaco Inc. 1,400 79,450
Union Pacific Resources
Group Inc. 1,000 11,875
Unocal Corp. 900 33,131
USX-Marathon Group 800 22,000
1,459,877
[ICON OMITTED]
FINANCIAL -- 11.9%
American Express Co. 1,100 129,250
American General Corp. 600 42,300
Associates First Capital Corp.
(Class A) 1,414 63,630
Bank of New York Inc. 1,800 64,687
Bank One Corp. 2,764 152,193
BankAmerica Corp. 4,003 282,712
BankBoston Corp. 800 34,650
Bankers Trust New York Corp. 300 26,475
BB&T Corp. 600 21,712
Charles Schwab Corp. 1,050 100,931
Chase Manhattan Corp. 1,900 154,494
Citigroup Inc. 5,208 332,661
Comerica Inc. 450 28,097
Countrywide Credit Industries 600 22,500
Federal Home Loan
Mortgage Corp. 1,700 97,112
Federal National Mortgage Assoc. 2,400 166,200
Fifth Third Bancorp 600 39,562
First Union Corp. 2,210 118,097
Firstar Corp. 500 44,750
Fleet Financial Group Inc. 1,200 45,150
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Franklin Resources Inc. 600 $ 16,875
Household International Inc. 1,206 55,024
Huntington Bancshares Inc. 660 20,419
KeyCorp 1,000 30,312
Lehman Brothers Holdings Inc. 200 11,950
MBNA Corp. 1,950 46,556
Mellon Bank Corp. 600 42,225
Mercantile Bancorp. Inc. 300 14,250
Merrill Lynch & Co. Inc. 800 70,750
MGIC Investment Corp. 400 14,025
Morgan (J.P.) & Co. Inc. 400 49,350
Morgan Stanley Dean Witter & Co. 1,300 129,919
National City Corp. 800 53,100
Northern Trust Corp. 300 26,644
PNC Bank Corp. 700 38,894
Providian Financial Corp. 300 33,000
Regions Financial Corp. 500 17,313
Republic of New York Corp. 400 18,450
State Street Corp. 400 32,875(g)
Summit Bancorp. 400 15,600
Suntrust Banks Inc. 500 31,125
Synovus Financial Corp. 700 14,306
Transamerica Corp. 400 28,400
United States Bancorp. 1,600 54,500
Wachovia Corp. 500 40,594
Washington Mutual Inc. 1,522 62,212
Wells Fargo & Co. 3,700 129,731
3,065,562
[ICON OMITTED]
HEALTHCARE -- 11.8%
Abbott Laboratories 3,600 168,525
Aetna Inc. 400 33,200
Allergan Inc. 200 17,575
Alza Corp. 200 7,650(a)
American Home Products Corp. 3,000 195,750
Amgen Inc. 1,400 104,825(a)
Baxter International Inc. 700 46,200
Becton Dickinson & Co. 1,000 38,313
Boston Scientific Corp. 1,000 40,563(a)
Bristol-Myers Squibb Co. 4,600 295,837
Cardinal Health Inc. 450 29,700
Columbia/HCA
Healthcare Corp. 1,600 30,300
Eli Lilly & Co. 2,600 220,675(e)
Guidant Corp. 1,000 60,500
Healthsouth Corp. 1,100 11,413(a)
IMS Health Inc. 1,000 33,125
Johnson & Johnson 3,100 290,431(e)
McKesson HBOC Inc. 444 29,304
Medtronic Inc. 1,200 86,100
Merck & Co. Inc. 5,600 449,050
Pfizer Inc. 3,000 416,250
Pharmacia & Upjohn Inc. 1,300 81,087
Schering Plough Corp. 3,400 188,062
Tenet Healthcare Corp. 900 17,044(a)
United Healthcare Corp. 500 26,313
Warner-Lambert Co. 1,900 125,756
3,043,548
INSURANCE -- 3.0%
Allstate Corp. 2,000 74,125
American International
Group Inc. 2,913 351,381
Aon Corp. 400 25,300
Chubb Corp. 400 23,425
CIGNA Corp. 600 50,287
- ---------
See Notes to Schedule of Investments and Notes to Financial statements.
11
<PAGE>
S&P 500 INDEX FUND
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Cincinnati Financial Corp. 400 $ 14,575
Conseco Inc. 774 23,897
Hartford Financial Services
Group Inc. 800 45,450
Lincoln National Corp. 300 29,662
Loews Corp. 300 22,388
Marsh & McLennan Cos. Inc. 600 44,512
Progressive Corp. 200 28,700
St. Paul Cos. Inc. 600 18,638
Torchmark Corp. 300 9,488
UNUM Corp. 400 19,025
780,853
RETAIL TRADE -- 6.1%
Albertsons Inc. 800 43,450
American Stores Co. 600 19,800
Autozone Inc. 300 9,113(a)
Circuit City Stores Inc. 200 15,325
Consolidated Stores Corp. 200 6,063(a)
Costco Cos. Inc. 600 54,937(a)
CVS Corp. 1,000 47,500
Dayton Hudson Corp. 1,200 79,950
Dollar General Corp. 375 12,750
Federated Department
Stores Inc. 600 24,075(a)
Gap Inc. 1,575 106,017
Home Depot Inc. 3,400 211,650
J.C. Penney Co. Inc. 600 24,300
K Mart Corp. 1,600 26,900(a)
Kohl's Corp. 300 21,263(a)
Kroger Co. 700 41,912(a)
Limited Inc. 900 35,662
Lowes Cos. Inc. 1,000 60,500
May Department Stores Co. 900 35,213
Rite Aid Corp. 800 20,000
Sears Roebuck & Co. 1,000 45,187
Tandy Corp. 200 12,763
TJX Cos. Inc. 1,000 34,000
Toys `R Us Inc. 800 15,050(a)
Wal-Mart Stores Inc. 5,100 470,156
Walgreen Co. 2,600 73,450
Winn Dixie Stores Inc. 600 22,425
1,569,411
[ICON OMITTED]
TECHNOLOGY - ELECTRONICS & EQUIPMENT -- 11.3%
3Com Corp. 900 20,981(a)
Advanced Micro Devices Inc. 300 4,650(a)
Apple Computer 300 10,781(a)
Applied Materials Inc. 1,000 61,688(a)
Ascend Communications Inc. 400 33,475(a)
Cabletron Systems Inc. 400 3,275(a)
Cisco Systems Inc. 3,600 394,425(a)
Compaq Computer Corp. 4,072 129,031
Dell Computer Corp. 6,400 261,600(a)
Gateway 2000 Inc. 300 20,569(a)
General Instrument Corp. 300 9,094(a)
Hewlett Packard Co. 2,400 162,750
Ikon Office Solutions Inc. 300 3,844
Intel Corp. 3,800 451,725(e)
International Business Machines 2,300 407,675
LSI Logic Corp. 300 9,356(a)
Lucent Technologies Inc. 3,200 344,800(e)
Micron Technology Inc. 500 24,125(a)
Motorola Inc. 1,400 102,550
National Semiconductor Corp. 500 4,656(a)
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Northern Telecom Ltd. 1,820 $ 113,068
Pitney Bowes Inc. 800 51,000
Seagate Technology 800 23,650(a)
Sun Microsystems Inc. 1,000 125,062(a)
Tellabs Inc. 500 48,875(a)
Texas Instruments Inc. 1,000 99,250
2,921,955
TECHNOLOGY - SOFTWARE & SERVICES -- 7.5%
America Online, Inc. 2,200 321,200(a)
Automatic Data Processing Inc. 1,600 66,200
Ceridian Corp. 200 7,313(a)
Computer Associates
International Inc. 1,350 48,009
Computer Sciences Corp. 600 33,112
Compuware Corp. 800 19,100(a)
Electronic Data Systems Corp. 1,200 58,425
EMC Corp. 1,300 166,075(a)
First Data Corp. 1,200 51,300
Microsoft Corp. 11,400 1,021,725(a,e)
Novell Inc. 800 20,150(a)
Oracle Systems Corp. 3,450 90,994(a)
Parametric Technology Corp. 800 15,800(a)
Unisys Corp. 500 13,844(a)
1,933,247
TRANSPORTATION -- 0.9%
AMR Corp. 600 35,137(a)
Burlington Northern
Santa Fe Corp. 1,200 39,450
CSX Corp. 600 23,363
Delta Air Lines Inc. 800 55,600
FDX Corp. 300 27,844(a)
Norfolk Southern Corp. 1,000 26,375
U.S. Airways Group Inc. 100 4,881(a)
Union Pacific Corp. N.V. 600 32,063
244,713
[ICON OMITTED]
UTILITIES -- 10.3%
Airtouch Communications Inc. 1,400 135,275(a)
Alltel Corp. 700 43,662
American Electric Power Inc. 500 19,844
American Telephone &
Telegraph Corp. 5,108 407,682
Ameritech Corp. 2,600 150,475
Bell Atlantic Corp. 3,600 186,075
Bellsouth Corp. 4,600 184,287
Central & South West Corp. 1,000 23,438
Coastal Corp. 800 26,400
Consolidated Edison Inc. 700 31,719
Consolidated Natural Gas Co. 400 19,475
Dominion Resources Inc. 500 18,469
Duke Energy Corp. 800 43,700
Edison International 1,000 22,250
Enron Corp. 700 44,975
Entergy Corp. 1,000 27,500
FirstEnergy Corp. 500 13,969
FPL Group Inc. 400 21,300
Frontier Corp. 800 41,500
GPU Inc. 700 26,119
GTE Corp. 2,200 133,100
MCI WorldCom Inc. 4,014 355,490(a)
Nextel Communications Inc. 600 21,975(a)
Pacificorp 700 12,075
- -----------
See Notes to Schedule of Investments and Notes to Financial statements.
12
<PAGE>
SCHEDULE OF INVESTMENTS MARCH 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Peco Energy Co. 1,100 $ 50,875
PG&E Corp. 1,100 34,169
Public Service EnterpriseGroup 500 19,094
SBC Communications Inc. 4,200 197,925
Southern Co. 1,500 34,969
Sprint Corp. 1,100 107,937
Sprint Corp. 550 24,372(a)
Texas Utilities Co. 700 29,181
U.S. WEST Inc. 1,246 68,608
Unicom Corp. 1,000 36,562
Williams Cos. Inc. 1,000 39,500
2,653,946
TOTAL INVESTMENTS IN SECURITIES
(COST $18,116,559) 24,469,409
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 5.2%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund 911,928 911,928
Money Market Obligations Trust 335,383 335,383
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
U.S. GOVERNMENT
United States Treasury Bill
4.544% 06/17/99 85,000 84,195
TOTAL SHORT-TERM INVESTMENTS
(COST $1,331,506) 1,331,506
OTHER ASSETS AND LIABILITIES,
NET 0.0% 2,065
-----------
NET ASSETS-- 100% $25,802,980
===========
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
The S&P 500 Index Fund had the following long Futures Contracts open at March
31, 1999:
NUMBER
EXPIRATION OF UNDERLYING UNREALIZED
DESCRIPTION DATE CONTRACTS FACE VALUE LOSS
- --------------------------------------------------------------------------------
S&P 500 June 1999 4 $1,293,300 $(23,500)
- ---------
See Notes to Schedule of Investments and Notes to Financial statements.
[ICON OMITTED]
ICONS REPRESENT THE TOP FIVE INDUSTRY WEIGHTINGS IN THE S&P 500 INDEX FUND AT
MARCH 31, 1999.
13
<PAGE>
MID-CAP GROWTH FUND
- --------------------------------------------------------------------------------
Q&A
RALPH (CHIP) E. WHITMAN IS THE PORTFOLIO MANAGER OF THE MID-CAP GROWTH FUND
EFFECTIVE DECEMBER 1998. HE IS CURRENTLY A SENIOR VICE PRESIDENT OF GE
INVESTMENTS. CHIP HAS MORE THAN 11 YEARS OF INVESTMENT EXPERIENCE AND HAS HELD
POSITIONS WITH GE INVESTMENTS SINCE 1987. CHIP IS A CHARTERED FINANCIAL ANALYST.
HE HOLDS A B.A. IN MATHEMATICS FROM HAMILTON COLLEGE AND A M.S. IN MANAGEMENT
FROM THE SLOAN SCHOOL AT MIT.
BETWEEN OCTOBER 1997 AND NOVEMBER 1998, ELAINE G. HARRIS WAS THE PORTFOLIO
MANAGER OF THE FUND.
Q. HOW DID THE MID-CAP GROWTH FUND PERFORM COMPARED TO ITS BENCHMARK FOR THE
SIX-MONTH PERIOD ENDED MARCH 31, 1999?
A. The Mid-Cap Growth Fund returned 19.39% for the six-month period ended March
31, 1999. For the same period, the Standard & Poor's MidCap 400 Index posted
a 19.04% return.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. Strong stock performance during the first quarter of 1999 helped the fund
perform in line with its benchmark during the six-month period. The fund
benefited from good results in the telecommunications sector and a rebound
in selected Basic Materials stocks. Several companies in the portfolio were
involved in merger transactions. On the downside, underweighting in
market-leading technology stocks hurt performance. Despite strong prospects
for these stocks, we believe many of their valuations are excessive.
Q. WHICH INVESTMENTS STAND OUT?
A. In telecommunications, Qwest Communications International gained 130%. The
company is rolling out a broad-band fiber-optic data network based on
Internet protocols. AirTouch Communications, a wireless communications
company that has agreed to be acquired by United Kingdom-based Vodaphone,
advanced 70%. In Basic Materials, Morton International, the specialty
chemical company being acquired by Rohm & Haas, appreciated 68%. Returns for
packaging manufacturer Sealed Air, up 54%, show that its recent merger with
Cryovac should be a long-term win for both companies.
Q. WHAT CHANGES HAVE YOU MADE TO THE FUND?
A. In December, we changed the fund's composition to sharpen its focus. We
reduced by more than half the number of stocks in the portfolio and trimmed
our cash position. The fund's investment strategy remains the same. We seek
out companies with strong earnings growth, reasonable valuations and
high-quality management. New additions to the portfolio must be reasonably
priced in relation to their growth rates. Given the uncertainty of the
current economic environment, we are overweight in the sectors where
valuations discount potential negative events, yet are poised to benefit
from a stronger than expected climate. These sectors include Capital Goods,
Financial, Retail Trade and Healthcare.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
A. We believe the fund is well-positioned to take advantage of the expected
rotation into stocks in fields outside technology, telecommunications and
the internet. Technology stocks produced astounding returns over the last
few years but they trade at exceptionally high valuations. While the
portfolio contains technology stocks, recent additions have been in capital
goods, specialty chemicals, financial companies and healthcare. By investing
more money in fewer stocks and choosing the highest quality stocks in each
sector, the fund has performed well so far in 1999.
14
<PAGE>
MID-CAP GROWTH FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[LINE GRAPH OMITTED]
MID-CAP GROWTH FUND S&P 400 MID CAP
11/25/97 $10000.00 $10000.00
10020.00 10049.00
10136.02 10446.94
JAN-98 9975.93 10243.23
10876.46 11087.27
MAR-98 11276.70 11591.74
11306.72 11800.39
MAY-98 10776.40 11270.55
10856.45 11353.95
JUL-98 10396.18 10915.01
8465.03 8901.19
SEP-98 8875.28 9743.19
9385.58 10566.80
NOV-98 9875.87 11100.42
10605.93 12395.84
JAN-99 10525.43 11902.48
10102.81 11272.84
MAR-99 10595.87 11598.63
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED MARCH 31, 1999
- --------------------------------------------------------------------------------
SIX ONE SINCE
MONTHS YEAR INCEPTION COMMENCEMENT
- --------------------------------------------------------------------------------
Mid-Cap Growth Fund 19.39% (6.04)% 4.39% 11/25/97
- --------------------------------------------------------------------------------
S&P MidCap 400 19.04% 0.06% 11.63%
- --------------------------------------------------------------------------------
INVESTMENT PROFILE
A mutual fund designed for investors who seek
long-term growth of capital by investing primarily in equity
securities of companies with medium-sized market
capitalization that have the potential for above-average growth.
- --------------------------------------------------------------------------------
SECTOR ALLOCATION AS OF MARCH 31, 1999
- --------------------------------------------------------------------------------
[PIE CHART OMITTED]
FINANCIAL SERVICES 20.7%
CAPITAL GOODS 15.1%
CONSUMER 12.5%
TECHNOLOGY 11.9%
HEALTHCARE 11.6%
RETAIL TRADE 8.8%
CASH & OTHER 6.4%
UTILITIES 5.9%
ENERGY 3.6%
BASIC MATERIALS 3.5%
- --------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS AT MARCH 31, 1999
- --------------------------------------------------------------------------------
Nokia Corp. ADR 3.13%
- --------------------------------------------------------------------------------
Airtouch Communications Inc. 2.76%
- --------------------------------------------------------------------------------
Dial Corp. 2.50%
- --------------------------------------------------------------------------------
Martin Marietta Materials Inc. 2.38%
- --------------------------------------------------------------------------------
Bank of New York Inc. 2.24%
- --------------------------------------------------------------------------------
Analog Devices Inc. 2.16%
- --------------------------------------------------------------------------------
Viad Corp. 2.15%
- --------------------------------------------------------------------------------
Costco Cos. Inc. 2.12%
- --------------------------------------------------------------------------------
Masco Corp. 2.05%
- --------------------------------------------------------------------------------
Firstar Corp. 1.94%
- --------------------------------------------------------------------------------
SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
15
<PAGE>
SCHEDULE OF INVESTMENTS MARCH 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
MID-CAP GROWTH FUND
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 93.6%
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 3.5%
Crompton & Knowles Corp. 12,195 $ 192,072
Morton International Inc. 4,695 172,541
Sealed Air Corp. 3,659 179,977(a)
544,590
[ICON OMITTED]
CAPITAL GOODS -- 15.1%
Allied Waste Industries Inc. 3,260 47,066(a)
AlliedSignal Inc. 3,963 194,930
Dover Corp. 5,000 164,375
Gerber Scientific Inc. 2,591 52,306
Hubbell Inc. (Class B) 3,476 139,040
Martin Marietta Materials Inc. 6,585 375,756
Masco Corp. 11,463 323,830
Mettler-Toledo International Inc. 8,171 202,232(a)
Molex Inc. (Class A) 5,183 134,110
Textron Inc. 3,293 254,796
Thermo Electron Corp. 3,902 52,921(a)
Tyco International Ltd. 4,085 293,099
U.S. Filter Corp. 4,573 140,048(a)
2,374,509
[ICON OMITTED]
CONSUMER - CYCLICAL -- 12.5%
Dial Corp. 11,463 394,041
Interpublic Group Cos. Inc. 3,354 261,193
ITT Industries Inc. 6,585 232,944
Jacor Communications Inc. 3,415 259,540(a)
Jones Apparel Group Inc. 6,280 175,447(a)
Service Corp. International 6,975 99,398
U.S. Industries Inc. 13,110 215,496
Viad Corp. 12,195 339,173
1,977,232
ENERGY -- 3.6%
BJ Services Co. 4,146 97,172(a)
Nabors Industries Inc. 4,207 76,515(a)
Schlumberger Ltd. 2,012 121,097
Tosco Corp. 6,585 163,390
USX-Marathon Group 4,146 114,015
572,189
[ICON OMITTED]
FINANCIAL -- 12.9%
Bank of New York Inc. 9,817 352,798
CIT Group Inc. (Class A) 6,585 201,254
Comdisco Inc. 15,244 272,486
FINOVA Group Inc. 5,488 284,690
First American Corp. 3,476 128,178
Firstar Corp. 3,415 305,642
GATX Corp. 5,122 168,706
SouthTrust Corp. 3,049 113,766
Waddell & Reed Financial
Inc. (Class A) 9,817 201,249
2,028,769
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
[ICON OMITTED]
HEALTHCARE -- 11.6%
Allergan Inc. 1,829 $ 160,723
Cardinal Health Inc. 3,537 233,442
Covance Inc. 7,805 195,613(a)
HCR Manor Care Inc. 10,671 243,432(a)
Henry Schein Inc. 9,146 230,937(a,e)
McKesson HBOC Inc. 3,293 217,338
Sybron International Corp. 9,146 228,650(a,e)
Tenet Healthcare Corp. 8,171 154,738(a,e)
Watson Pharmaceuticals Inc. 3,658 161,409(a)
1,826,282
INSURANCE -- 7.8%
American Bankers Insurance
Group Inc. 4,574 237,848
American International
Group Inc. 2,439 294,205(e)
Equitable Cos. Inc. 3,963 277,410
Hartford Financial Services
Group Inc. 3,780 214,751
Provident Cos. Inc. 6,098 210,762(e)
1,234,976
[ICON OMITTED]
RETAIL TRADE -- 8.8%
Costco Cos. Inc. 3,658 334,936(a)
Federated Department
Stores Inc. 6,097 244,642(a)
Kroger Co. 4,939 295,723(a)
Office Depot Inc. 8,171 300,795(a)
Zale Corp. 5,976 204,304(a)
1,380,400
TECHNOLOGY - ELECTRONICS & EQUIPMENT -- 8.1%
ADC Telecommunications Inc. 5,244 250,073(a)
Analog Devices Inc. 11,463 341,024(a)
Nokia Corp. ADR 3,171 493,883
Northern Telecom Ltd. 3,171 196,999
1,281,979
TECHNOLOGY - SOFTWARE & SERVICES -- 3.8%
Cadence Design Systems Inc. 6,158 158,569(a)
Compuware Corp. 7,926 189,233(a)
SunGard Data Systems Inc. 6,463 258,520(a)
606,322
UTILITIES -- 5.9%
Airtouch Communications Inc. 4,512 435,972(a,e)
El Paso Energy Corp. 4,573 149,480
Qwest Communications
International Inc. 3,963 285,708(a)
Sonat Inc. 2,157 64,710
935,870
TOTAL INVESTMENTS IN SECURITIES
(COST $13,345,772) 14,763,118
- ------------
See Notes to Schedule of Investments and Notes to Financial statements.
16
<PAGE>
SCHEDULE OF INVESTMENTS MARCH 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 8.6%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund
(COST $ 1,355,765) 1,355,765 $ 1,355,765
OTHER ASSETS AND LIABILITIES,
NET (2.2)% (344,970)
-----------
NET ASSETS-- 100% $15,773,913
===========
- ----------
See Notes to Schedule of Investments and Notes to Financial statements.
[ICON OMITTED]
ICONS REPRESENT THE TOP FIVE INDUSTRY WEIGHTINGS IN THE MID-CAP GROWTH FUND AT
MARCH 31, 1999.
17
<PAGE>
MID-CAP VALUE EQUITY FUND
- --------------------------------------------------------------------------------
Q&A
JON D. BOSSE OF NWQ INVESTMENT COMPANY (NWQ). NWQ IS THE PORTFOLIO MANAGER OF
THE MID-CAP VALUE EQUITY FUND, THE FUND'S SUB-ADVISER, WHICH HAS TOTAL ASSETS
UNDER MANAGEMENT EXCEEDING $7 BILLION, PRIOR TO JOINING NWQ IN 1996, JON SPENT
TEN YEARS WITH ARCO INVESTMENT MANAGEMENT COMPANY WHERE HE WAS DIRECTOR OF
EQUITY RESEARCH AND MANAGED A VALUE-ORIENTED FUND. PREVIOUS TO THIS, HE SPENT
FOUR YEARS IN THE CORPORATE FINANCE DEPARTMENT OF ARCO. JON RECEIVED HIS B.A.
(SUMMA CUM LAUDE) IN ECONOMICS FROM WASHINGTON UNIVERSITY IN ST. LOUIS WHERE HE
RECEIVED THE JOHN M. OLIN AWARD FOR EXCELLENCE IN ECONOMICS AND HIS M.B.A. FROM
WHARTON BUSINESS SCHOOL, UNIVERSITY OF PENNSYLVANIA. JON IS ALSO A CHARTERED
FINANCIAL ANALYST AND A MEMBER OF THE ASSOCIATION FOR INVESTMENT MANAGEMENT AND
RESEARCH AND THE LOS ANGELES SOCIETY OF FINANCIAL ANALYSTS.
Q. HOW DID THE MID-CAP VALUE EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK FOR
THE PERIOD SINCE THE FUND'S INCEPTION (DECEMBER 31, 1998) THROUGH MARCH 31,
1999?
A. During the period since inception of the fund (December 31, 1998) through
March 31, 1999, the Mid-Cap Value Equity Fund posted an aggregate total
return of 1.20%. This compares with a -6.43% return for the Standard &
Poor's MidCap 400 Index for the same period.
Q. WHY DID THE FUND OUT-PERFORM ITS BENCHMARK?
A. Notwithstanding a market environment that favored growth and large market
capitalization technology stocks, the Mid-Cap Value Equity Fund performed
strongly during the quarter, outperforming both its benchmark. Performance
was driven by our focus in several sectors and strong individual stock
selection. Our investments in the telecommunications and media sectors
contributed greatly, as well as several of our investments in the Energy
sector. MediaOne Group, a global cable and telecommunications company,
received a takeover offer from Comcast, propelling this particular
investment 33% higher in the period. The fund's investments in the Energy
sector benefited from production cuts among the Organization of Petroleum
Exporting Countries, which have helped to stabilize world oil prices and
have aided in the reduction of excessive global inventory levels.
Q. WHICH INVESTMENTS STAND OUT?
A. In addition to the MediaOne Group holding, our investments in NTL, CoreComm,
Cellular Communications of Puerto Rico and Telephone & Data Systems
appreciated handsomely as some of the catalysts we had identified in the
telecommunications and cellular business propelled valuations higher. Other
strong performers include energy services companies such as Noble Affiliates
and BJ Services, toy industry leaders Hasbro and Toys `R Us, and bank
institutions BankAmerica and Chase Manhattan.
Q. HOW DO YOU PICK STOCKS?
A. Our investment philosophy is to identify undervalued stocks with catalysts
present to improve profitability and unlock value. We continue to find
significant investment opportunities in today's market. We are not
participating in the current market mania for internet, technology, and
other growth stocks where we find risk/reward and valuation parameters
extremely unattractive.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
A. We are encouraged by developing signs of economic stability in Asia and
Latin America as well as signs of increasing market breadth. Both
developments have very positive implications.
18
<PAGE>
MID-CAP VALUE EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[LINE GRAPH OMITTED]
Mid-Cap Value Fund S&P 400 MidCap
12/31/98 $10000.00 $10000.00
Jan-99 10070.00 9602.00
Feb-99 9590.00 9094.05
Mar-99 10120.00 9356.87
- --------------------------------------------------------------------------------
AGGREGATE TOTAL RETURN FOR THE PERIOD ENDED MARCH 31, 1999
- --------------------------------------------------------------------------------
SINCE
INCEPTION COMMENCEMENT
- --------------------------------------------------------------------------------
Mid-Cap Value Equity Fund 1.20% 12/31/98
- --------------------------------------------------------------------------------
S&P MidCap 400 (6.43)%
- --------------------------------------------------------------------------------
INVESTMENT PROFILE
A mutual fund designed for investors who seek
long-term growth of capital by investing primarily in equity
securities of companies with medium-sized market
capitalization that the fund's management considers as undervalue by the market
and have above-average growth potential.
- --------------------------------------------------------------------------------
SECTOR ALLOCATION AS OF MARCH 31, 1999
- --------------------------------------------------------------------------------
[PIE GRAPH OMITTED]
FINANCIAL SERVICES 32.8%
CONSUMER 32.5%
TELECOMMUNICATIONS 6.7%
ENERGY 6.3%
CAPITAL GOODS 4.4%
HEALTHCARE 4.2%
BASIC MATERIALS 4.0%
TECHNOLOGY 3.2%
UTILITIES 2.5%
CASH & OTHER 1.9%
REIT 1.5%
- --------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS
AT MARCH 31, 1999
- --------------------------------------------------------------------------------
NTL Inc. 4.02%
- --------------------------------------------------------------------------------
Hasbro Inc. 3.15%
- --------------------------------------------------------------------------------
AT&T Corp. - Liberty Media Group 3.12%
- --------------------------------------------------------------------------------
MediaOne Group Inc. 3.08%
- --------------------------------------------------------------------------------
Loews Corp. 3.02%
- --------------------------------------------------------------------------------
Telephone & Data Systems Inc. 3.01%
- --------------------------------------------------------------------------------
Aetna Inc. 2.95%
- --------------------------------------------------------------------------------
BankAmerica Corp. 2.86%
- --------------------------------------------------------------------------------
First Union Corp. 2.80%
- --------------------------------------------------------------------------------
Philip Morris Cos. Inc. 2.78%
- --------------------------------------------------------------------------------
SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
19
<PAGE>
SCHEDULE OF INVESTMENTS MARCH 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
MID-CAP VALUE EQUITY FUND
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 98.1%
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 4.0%
Allegheny Teldyne Inc. 8,000 $ 151,500
Praxair Inc. 6,900 248,831
400,331
CAPITAL GOODS -- 4.4%
Case Corp. 7,000 177,625
Waste Management Inc. 5,900 261,813
439,438
[ICON OMITTED]
CONSUMER - CYCLICAL -- 28.4%
AT&T Corp. - Liberty Media
Group (Class A) 6,000 315,750(a)
Cox Communications Inc. 3,300 249,563(a)
Federal-Mogul Corp. 3,400 146,200
Ford Motor Co. 4,000 227,000
Hasbro Inc. 11,000 318,312
Lear Corp. 4,500 192,094(a)
MediaOne Group Inc. 4,900 311,150(a)
Mirage Resorts Inc. 12,400 263,500(a)
NTL Inc. 5,000 406,875(a)
The E.W. Scripps Co. Inc. 5,800 256,650
Toys `R Us Inc. 10,000 188,125(a)
2,875,219
CONSUMER - STABLE -- 4.1%
Alberto-Culver Co. (Class A) 6,100 129,625
Philip Morris Cos. Inc. 8,000 281,500
411,125
[ICON OMITTED]
ENERGY -- 6.3%
BJ Services Co. 8,700 203,906(a)
Noble Affiliates Inc. 8,200 237,800
Tosco Corp. 8,000 198,500
640,206
[ICON OMITTED]
FINANCIAL -- 21.0%
Bank One Corp. 4,900 269,806
BankAmerica Corp. 4,100 289,562
Bear Stearns Cos. Inc. 5,565 248,686
Chase Manhattan Corp. 3,300 268,331
First Security Corp. 10,700 206,644
First Union Corp. 5,300 283,219
Heller Financial Inc. 6,800 159,800
UnionBanCal Corp. 6,600 224,813
Waddell & Reed Financial Inc.
(Class A) 8,500 174,250
2,125,111
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
HEALTHCARE -- 4.2%
Aetna Inc. 3,600 $ 298,800
Pharmacia & Upjohn Inc. 2,000 124,750
423,550
[ICON OMITTED]
INSURANCE -- 11.8%
Hartford Financial Services
Group Inc. 4,600 261,337
Loews Corp. 4,100 305,962
MGIC Investment Corp. 5,000 175,313
Provident Cos. Inc. 6,500 224,656
Torchmark Corp. 7,300 230,863
1,198,131
REAL ESTATE INVESTMENT TRUST -- 1.5%
Indymac Mortgage Holdings Inc. 14,200 154,425
TECHNOLOGY - ELECTRONICS & EQUIPMENT -- 3.2%
Quantum Corp. 7,200 129,600(a)
Storage Technology Corp. 7,000 195,125(a)
324,725
[ICON OMITTED]
TELECOMMUNICATIONS -- 6.7%
Cellullar Communications of
Puerto Rico 7,400 199,800(a)
CoreComm Ltd. 4,750 174,562(a)
Telephone & Data Systems Inc. 5,400 304,425
678,787
UTILITIES -- 2.5%
Alltel Corp. 4,000 249,500
TOTAL INVESTMENTS IN SECURITIES
(COST $9,719,407) 9,920,548
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.8%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund
(COST $ 184,745) 184,745 184,745
OTHER ASSETS AND LIABILITIES,
NET 0.1% 11,651
---------
NET ASSETS-- 100% $10,116,944
===========
- ------------
See Notes to Schedule of Investments and Notes to Financial statements.
[ICON OMITTED]
ICONS REPRESENT THE TOP FIVE INDUSTRY WEIGHTINGS IN THE MID-CAP VALUE EQUITY
FUND AT MARCH 31, 1999.
20
<PAGE>
SMALL-CAP VALUE EQUITY FUND
- --------------------------------------------------------------------------------
Q&A
PALISADE CAPITAL MANAGEMENT, L.L.C. ("PALISADE"), WITH TOTAL ASSETS UNDER
MANAGEMENT EXCEEDING $2 BILLION, IS THE FUND'S SUB-ADVISER. PALISADE MANAGES BY
AN INVESTMENT ADVISORY COMMITTEE WHICH IS COMPOSED OF THE FOLLOWING MEMBERS:
JACK FEILER, MARTIN L. BERMAN, STEVEN E. BERMAN AND RICHARD MEISENBERG. JACK
FEILER, CHIEF INVESTMENT OFFICER OF PALISADE, HAS DAY-TO-DAY RESPONSIBILITY FOR
MANAGING THE FUND AND WORKS WITH THE SENIOR INVESTMENT COMMITTEE IN DEVELOPING
AND EXECUTING THE FUND'S INVESTMENT PROGRAM.
JACK HAS MORE THAN 30 YEARS OF INVESTMENT EXPERIENCE AND HAS SERVED AS THE
PRINCIPAL SMALL-CAP PORTFOLIO MANAGER AT PALISADE SINCE THE COMMENCEMENT OF
PALISADE'S OPERATIONS IN APRIL 1995. PRIOR TO JOINING PALISADE, JACK WORKED FOR
BURNHAM & CO. AS AN ACCOUNT EXECUTIVE AND WAS PROMOTED TO SENIOR EXECUTIVE VICE
PRESIDENT OF BROAD STREET INVESTMENT MANAGEMENT IN 1981. IN 1990 HE JOINED SMITH
BARNEY AS SENIOR VICE PRESIDENT OF INVESTMENTS. JACK RECEIVED HIS BACHELOR'S
DEGREE IN 1964 FROM CITY COLLEGE OF NEW YORK AND HIS JURIS DOCTOR DEGREE FROM
BROOKLYN LAW SCHOOL IN 1967.
Q. HOW DID THE SMALL-CAP VALUE EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK
FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 1999?
A. The Small-Cap Value Equity Fund posted a total return of -2.57% for the
six-month period ended March 31, 1999. This compares with a 10.00% return
for the Russell 2000 Index for the same period.
Q. WHY DID THE FUND UNDER PERFORM ITS BENCHMARK?
A. The fund under performed the Russell 2000 due to our comparative
underweighting in internet stocks. These stocks, although generally the
strongest performers in the index, have market capitalizations exceeding our
target range. In fact, we anticipate that during Russell's annual index
reconstruction in June, many of these companies will be transferred to the
Russell 1000, an index for companies with large market capitalization
("large-cap").
Q. WHAT HAS OUR INVESTMENT STRATEGY BEEN?
A. In an attempt to capitalize on the strength of the economy, we have
positioned the portfolio in companies we feel will benefit from increased
consumer spending. Overall we became more aggressive in our management of
the portfolio. We previously emphasized a somewhat defensive strategy and
have now shifted to a more aggressive posture by moving into the technology
sector and companies benefiting from the surge in consumer spending
mentioned above.
Q. WHAT DOMESTIC AND/OR WORLD EVENT HAD A MAJOR IMPACT ON THE FINANCIAL MARKETS
IN THE PAST SIX MONTHS AND HOW DID THIS EFFECT THE FUND?
A. As was the case in Latin America, Asia and Russia, the market continued to
ignore international concerns despite the intensifying conflict in the
Balkans. Investors are apparently convinced that the conflict will be
contained within the region and that its economic effects will be minimized.
At times it appears that problems abroad have actually strengthened the
market, as money continues to pour into the U.S. which is considered by many
foreign investors to be a safe haven. The big question is whether or not
this unbridled optimism is well founded. Despite the Dow's climb to record
levels, on closer inspection, many sectors of the market, including both
large-cap and small market capitalization ("small-cap") companies, have
failed to join the party.
Q. WHAT IS THE OUTLOOK FOR THE FUND AND HOW HAVE YOU POSITIONED THE FUND GOING
FORWARD?
A. Although it may seem as if small-cap value oriented investing has fallen out
of favor, there have been numerous times in the past when value equity
stocks have outperformed growth stocks. Numerous studies have shown that
over time, stocks with lower price/earning ratios tend to outperform those
with higher ratios and that small-cap companies have posted superior returns
as compared to large-cap companies. Though no one can predict when the tide
will turn, it is hard to believe the lofty valuations we are seeing in the
blue chips and the internet stocks can be maintained indefinitely.
21
<PAGE>
SMALL-CAP VALUE EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[LINE GRAPH OMITTED]
SMALL-CAP VALUE FUND RUSSELL 2000
8/3/98 $10000.00 $10000.00
8380.00 8058.00
SEP-98 8910.00 8688.62
9160.00 9042.94
NOV-98 9760.00 9516.79
10316.52 10105.88
JAN-99 9624.07 10240.29
8761.01 9410.83
MAR-99 8680.73 9557.63
- --------------------------------------------------------------------------------
AGGREGATE TOTAL RETURN FOR THE PERIODS ENDED MARCH 31, 1999
- --------------------------------------------------------------------------------
SIX SINCE
MONTHS INCEPTION COMMENCEMENT
- --------------------------------------------------------------------------------
Small-Cap Value Equity Fund (2.57)% (13.19)% 8/3/98
- --------------------------------------------------------------------------------
Russell 2000 10.00% (4.42)%
- --------------------------------------------------------------------------------
INVESTMENT PROFILE
A mutual fund designed for investors who seek long-term
growth of capital by investing primarily in equity
securities of companies with small-sized market
capitalizations that the
fund's Management considers to be undervalued by the market.
- --------------------------------------------------------------------------------
SECTOR ALLOCATION AS OF MARCH 31, 1999
- --------------------------------------------------------------------------------
[PIE GRAPH OMITTED]
CONSUMER 38.9%
TECHNOLOGY 18.9%
FINANCIAL SERVICES 13.4%
UTILITIES 9.3%
MATERIALS AND PROCESSING 5.8%
PRODUCER DURABLES 5.8%
HEALTHCARE 4.0%
CASH & OTHER 2.0%
AUTO AND TRANSPORTATION 1.5%
ENERGY 0.4%
- --------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS
AT MARCH 31, 1999
- --------------------------------------------------------------------------------
Sterling Software Inc. 4.77%
- --------------------------------------------------------------------------------
Eastern Enterprises 3.68%
- --------------------------------------------------------------------------------
ShopKo Stores Inc. 3.22%
- --------------------------------------------------------------------------------
Handleman Co. 2.89%
- --------------------------------------------------------------------------------
Intermedia Communications Inc. 2.87%
- --------------------------------------------------------------------------------
Fresh Del Monte Produce Inc. 2.76%
- --------------------------------------------------------------------------------
Park Electrochemical Corp. 2.70%
- --------------------------------------------------------------------------------
Mossimo Inc. 2.64%
- --------------------------------------------------------------------------------
ABM Industries Inc. 2.63%
- --------------------------------------------------------------------------------
New England Business Service Inc. 2.57%
- --------------------------------------------------------------------------------
SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
22
<PAGE>
SCHEDULE OF INVESTMENTS MARCH 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
SMALL-CAP VALUE EQUITY FUND
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 98.0%
- --------------------------------------------------------------------------------
AUTO & TRANSPORTATION -- 1.5%
AAR Corp. 4,600 $ 81,938
Hub Group Inc. 2,100 49,875(a)
131,813
[ICON OMITTED]
CONSUMER - DISCRETIONARY -- 35.2%
ABM Industries Inc. 7,600 231,800
Applebee's International, Inc. 4,000 99,250
Carey International Inc. 4,800 78,000(a)
Claire's Stores Inc. 2,100 63,263
Coach USA Inc. 3,200 88,000(a)
Copart Inc. 1,500 31,125(a)
Corporate Express Inc. 25,400 131,762(a)
Dayton Hudson Corp. 2,600 173,225
GTECH Holdings Corp. 3,900 95,063(a)
Handleman Co. 19,000 254,125(a)
Haverty Furniture
Companies Inc. 7,600 192,850
InterTAN Inc. 18,600 181,350(a)
Korn/Ferry International 4,700 61,688(a)
MAXIMUS Inc. 3,200 93,200(a)
Mossimo Inc. 23,100 232,444(a)
New Horizons Worldwide Inc. 5,300 105,337(a)
Park Place Entertainment Corp. 22,000 166,375(a)
Pierce Leahy Corp. 6,300 156,712(a)
Pillowtex Corp. 1,400 19,863
Quest Education Corp. 5,300 48,363(a)
Regis Corp. 6,300 167,737
ShopKo Stores Inc. 9,500 283,812(a)
Volt Information Sciences Inc. 9,000 147,937(a)
3,103,281
CONSUMER - STABLE -- 3.7%
Fresh Del Monte Produce Inc. 13,100 243,169(a)
Richfood Holdings Inc. 3,700 79,781
322,950
ENERGY -- 0.4%
Piedmont Natural Gas Co, Inc. 1,100 38,500
[ICON OMITTED]
FINANCIAL SERVICES -- 13.4%
BARRA Inc. 7,300 179,762(a)
Capital Re Corp. 2,700 46,575
Cash America International Inc. 13,100 168,662
Dain Rauscher Corp. 5,000 170,000
Duff & Phelps Credit Rating Co. 3,200 167,600
Jefferies Group Inc. 2,400 113,850
National Data Corp. 1,900 79,800
NOVA Corp. 2,800 73,500(a)
Penn Treaty American Corp. 3,500 86,844(a)
Roslyn Bancorp Inc. 2,500 42,188
U.S. Trust Corp. 700 51,931
1,180,712
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
HEALTHCARE -- 4.0%
Chattem Inc. 4,300 $ 134,375(a)
DVI Inc. 2,900 43,138(a)
Sola International Inc. 3,200 38,600(a)
Techne Corp. 4,600 132,825(a)
348,938
MATERIALS & PROCESSING -- 5.8%
Ball Corp. 1,300 61,019
Cambrex Corp. 3,200 70,800
Kaydon Corp. 3,600 104,175
New England Business
Service Inc. 7,900 226,631
Texas Industries Inc. 2,000 49,625
512,250
PRODUCER DURABLES -- 5.8%
Anaren Microwave, Inc. 7,100 172,175(a)
HEICO Corp. (Class A) 4,800 102,600
L- 3 Communications
Holdings Inc.. 2,100 97,125(a)
Scott Technologies Inc. 7,800 135,525(a)
507,425
[ICON OMITTED]
TECHNOLOGY - ELECTRONICS & EQUIPMENT-- 8.1%
Arrow Electronics Inc. 7,100 106,500(a)
DII Group Inc. 1,900 55,575(a)
KEMET Corp. 6,500 74,750(a)
Park Electrochemical Corp. 10,100 237,350
Vishay Intertechnology Inc. 10,300 149,994(a)
VWR Scientific Products Corp. 3,900 87,750(a)
711,919
[ICON OMITTED]
TECHNOLOGY - SOFTWARE & SERVICES -- 10.8%
Advanced Communications
Systems Inc. 6,300 73,237(a)
Affiliated Computer Services Inc. 2,800 128,100(a)
Kronos Inc. 4,850 118,825(a)
National Computer Systems Inc. 8,800 215,600
Sterling Software Inc. 17,700 420,375(a)
956,137
[ICON OMITTED]
UTILITIES -- 9.3%
Eastern Enterprises 8,900 323,737
ICG Communications Inc. 3,000 60,000(a)
Intermedia Communications Inc. 9,500 252,938(a)
Philadelphia Suburban Corp. 7,900 179,231
815,906
TOTAL INVESTMENTS IN SECURITIES
(COST $8,648,424) 8,629,831
SHORT-TERM INVESTMENTS -- 2.1%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund
(COST $ 183,060) 183,060 $ 183,060
OTHER ASSETS AND LIABILITIES,
NET (0.1)% (7,289)
------------
NET ASSETS-- 100% $8,805,602
============
- ----------
See Notes to Schedule of Investments and Notes to Financial statements.
[ICON OMITTED]
ICONS REPRESENT THE TOP FIVE INDUSTRY WEIGHTINGS IN THE SMALL-CAP VALUE EQUITY
FUND AT MARCH 31, 1999.
23
<PAGE>
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
Q&A
RALPH LAYMAN MANAGES THE INTERNATIONAL EQUITY INVESTMENT PROCESS AT GE
INVESTMENTS. TOTAL ASSETS UNDER HIS MANAGEMENT EXCEED $9 BILLION. HE LEADS A
TEAM OF PORTFOLIO MANAGERS FOR THE INTERNATIONAL EQUITY FUND. PRIOR TO JOINING
GE INVESTMENTS IN 1991, RALPH WAS EXECUTIVE VICE PRESIDENT, PARTNER AND
PORTFOLIO MANAGER OF INTERNATIONAL EQUITY OPERATIONS AT NORTHERN CAPITAL
MANAGEMENT. PREVIOUSLY, HE WAS A VICE PRESIDENT AND PORTFOLIO MANAGER AT
TEMPLETON INVESTMENT COUNSEL, INC. HE WAS INSTRUMENTAL IN FORMING TEMPLETON'S
EMERGING MARKETS FUND, THE FIRST LISTED EMERGING MARKETS EQUITY FUND IN THE U.S.
RALPH IS A TRUSTEE OF THE GE PENSION TRUST, AND GE'S EMPLOYEE SAVINGS PROGRAM,
AND SERVES ON THE GE INVESTMENTS' ASSET ALLOCATION COMMITTEE. HE IS A CHARTERED
FINANCIAL ANALYST, A CHARTER MEMBER OF THE INTERNATIONAL SOCIETY OF SECURITY
ANALYSTS AND A MEMBER OF THE NEW YORK SOCIETY OF SECURITY ANALYSTS. RALPH IS A
GRADUATE OF THE UNIVERSITY OF WISCONSIN WITH A B.S. IN ECONOMICS AND A M.S. IN
FINANCE.
Q. HOW DID THE INTERNATIONAL EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK FOR
THE SIX-MONTH PERIOD ENDED MARCH 31, 1999?
A. The International Equity Fund posted a return of 23.90% for the six-month
period ended March 31, 1999. For the same period, the MSCI EAFE Index rose
22.34%.
Q. WHAT FACTORS INFLUENCED THE FUND'S PERFORMANCE?
A. The International Equity Fund slightly underperformed its benchmark.
Holdings in the United Kingdom, where markets rose 4% in the first quarter
of 1999, had a major positive effect on performance. Continental European
stocks also did well and the fund's positions in Asia and Latin America made
small contributions. Japan's market gain of 42% between October and the end
of March had a minor negative effect. The fund had a 5% investment in Japan,
compared with 20% for the benchmark. Investments started to flow back into
Japan when its banks and corporations began to discuss restructuring.
However, we thought the moves were speculative and the stocks overvalued.
Since then, some companies have restructured. Holdings in Toshiba and Sony,
both restructuring companies, performed well during the first quarter of
1999.
Q. WHICH INVESTMENTS STAND OUT?
A. Preussag, the German travel company, turned in strong results for the
International Equity Fund. Other outstanding performers include Nokia of
Finland and Mannesmann of Germany, both in telecommunications, and Total of
France, a diversified global oil company benefiting from surging demand.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
A. The fund's European stocks should continue to produce results. We are buying
European utility companies, such as Viag and Veba of Germany, which are
growing as they restructure and sell assets. The fund also has taken
positions in European banks. Two recent additions are Credit Suisse and The
Bank of Ireland. Ireland recently cut corporate tax rates from 30% to 12%,
encouraging companies to move into the country.
We do not plan to increase the fund's exposure in Japan, except to buy
stocks that are taking measures to restructure operations. We currently have
small stakes in Latin American companies that do business with the United
States, but will continue to look for opportunities in the region.
24
<PAGE>
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[LINE GRAPH OMITTED]
INTERNATIONAL EQUITY FUND MSCI EAFE
11/25/97 $10000.00 $10000.00
10090.00 10119.00
10266.29 10207.24
JAN-98 10446.40 10674.01
11266.90 11358.97
MAR-98 12027.37 11708.71
12387.59 11801.21
MAY-98 12527.67 11743.97
12237.50 11832.87
JUL-98 12537.68 11952.86
10366.35 10472.14
SEP-98 10066.17 10151.26
10856.65 11209.43
NOV-98 11647.13 11783.69
12044.22 12248.56
JAN-99 12493.00 12212.42
12054.65 11921.40
MAR-99 12472.13 12419.00
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED MARCH 31, 1999
- --------------------------------------------------------------------------------
SIX ONE SINCE
MONTHS YEAR INCEPTION COMMENCEMENT
- --------------------------------------------------------------------------------
International Equity Fund 23.90% 3.70% 17.81% 11/25/97
- --------------------------------------------------------------------------------
MSCI EAFE 22.34% 6.07% 17.44%
- --------------------------------------------------------------------------------
INVESTMENT PROFILE
A mutual fund designed for investors who
seek long-term growth of capital by
investing primarily in foreign equity
securities.
- --------------------------------------------------------------------------------
REGIONAL ALLOCATION AS OF MARCH 31, 1999
- --------------------------------------------------------------------------------
[PIE GRAPH OMITTED]
EUROPE 79.0%
OTHER REGIONS 8.2%
JAPAN 5.7%
PACIFIC RIM 3.9%
CASH & OTHER 3.2%
- --------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS
AT MARCH 31, 1999
- --------------------------------------------------------------------------------
Mannesmann AG 3.16%
- --------------------------------------------------------------------------------
Preussag AG 2.96%
- --------------------------------------------------------------------------------
BTR Siebe PLC 2.93%
- --------------------------------------------------------------------------------
AXA-UAP 2.86%
- --------------------------------------------------------------------------------
ING Groep N.V. 2.45%
- --------------------------------------------------------------------------------
Cap Gemini S.A. 2.43%
- --------------------------------------------------------------------------------
Total S.A. 2.36%
- --------------------------------------------------------------------------------
Airtours PLC 1.85%
- --------------------------------------------------------------------------------
Autoliv Inc. SDR 1.81%
- --------------------------------------------------------------------------------
Nokia Oyj 1.76%
- --------------------------------------------------------------------------------
SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
25
<PAGE>
SCHEDULE OF INVESTMENTS MARCH 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 96.7%
- --------------------------------------------------------------------------------
AUSTRALIA -- 1.5%
Brambles Industries Ltd. 80,243 $ 2,039,769
AUSTRIA -- 0.3%
VA Technologie AG 5,022 361,912
BRAZIL -- 0.5%
Uniao de Bancos Brasilieros
S.A. GDR 32,553 626,645
CANADA -- 1.7%
CGI Group Inc. (Class A) 41,109 891,898(a)
Newcourt Credit Group Inc. 20,020 539,790
Northern Telecom Ltd. 13,511 839,371
2,271,059
DENMARK -- 0.8%
Novo-Nordisk AS (Series B) 9,895 1,107,853
FINLAND -- 4.0%
Helsingin Puhelin Oyj 2,560 125,390
Merita Ltd. (Series A) 214,748 1,151,693
Nokia Oyj (Series A) 14,930 2,406,929
Pohjola Group Insurance Ltd. Co.
(Series B) 6,691 354,498
Sampo Insurance Co. Ltd.
(Series A) 44,254 1,387,639
5,426,149
[ICON OMITTED]
FRANCE -- 18.5%
Alstom 74,823 2,224,814(a)
AXA-UAP 29,501 3,917,067
Cap Gemini S.A. 19,848 3,328,545
Carrefour S.A. 2,139 1,651,334
Coflexip S.A. ADR 26,091 900,140
Elf Aquitaine S.A. ADR 7,145 971,871
Lyonnaise Des Eaux S.A. 7,574 1,403,660
Michelin CGDE (Regd.)
(Class B) 39,343 1,767,520
Rhone-Poulenc S.A. (Class A) 49,584 2,246,371
Schneider S.A. 32,104 1,779,012
Societe Generale 9,560 1,839,940
Total S.A. (Class B) 26,115 3,221,822
25,252,096
[ICON OMITTED]
GERMANY -- 12.9%
Bayerische Vereinsbank AG 32,495 1,946,490
DaimlerChrysler AG 22,591 1,968,755
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Fresenius Medical Care AG 23,829 $ 1,442,845
Mannesmann AG 33,810 4,324,698
Muenchener Rueckversicherungs-
Gesellschaft AG 4,017 812,212
Muenchener Rueckversicherungs-
Gesellschaft AG (Regd.) 4,126 823,098(a)
Preussag AG 7,544 4,054,002
Veba AG 23,227 1,223,060
Viag AG 1,108 612,071
Volkswagen AG 6,423 428,498
17,635,729
GREECE -- 1.2%
Alpha Credit Bank (Regd.) 2,536 168,798
Hellenic Telecommunication
Organization S.A. ADR 43,674 510,440
Hellenic Telecommunication
Organization S.A. 38,620 939,467
1,618,705
HONG KONG -- 0.7%
Giordano International Ltd. 672,000 208,117
Johnson Electric Holdings 285,900 806,105
1,014,222
IRELAND -- 1.5%
Bank of Ireland 58,373 1,213,852
CRH PLC 52,331 898,957
2,112,809
ISRAEL -- 3.5%
Comverse Technology Inc. 15,571 1,323,535(a)
ECI Telecommunications Ltd. 61,461 2,151,135
Teva Pharmaceutical Industries
Ltd. ADR 26,469 1,255,623
4,730,293
[ICON OMITTED]
ITALY -- 7.3%
Assicurazioni Generali 38,484 1,543,761
Banca Intesa S.p.A. 282,940 1,670,371
Montedison S.p.A. 1,127,155 1,169,986
Saipem 270,190 1,051,714
Telecom Italia Mobile S.p.A. 261,626 1,762,361
Telecom Italia S.p.A 216,025 2,298,397
Telecom Italia S.p.A. 10,915 64,910(j)
Unicredito Italiano S.p.A. 90,663 490,146
10,051,646
JAPAN -- 5.7%
Canon Inc. 58,000 1,435,122
Honda Motor Co. 18,000 813,241
Minebea Co. Ltd. 98,000 1,012,980
NTT Data Corp. 2 15,471
- ------------
See Notes to Schedule of Investments and Notes to Financial statements.
26
<PAGE>
SCHEDULE OF INVESTMENTS MARCH 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Shin-Etsu Chemical Co. 33,000 $ 866,698
Sony Corp. 22,100 2,043,618
Toshiba Corp. 231,000 1,578,170
7,765,300
LUXEMBOURG -- 0.0%
Societe Europeenne de
Communication S.A. ADR
(Class A) 151 1,737(a)
Societe Europeenne de
Communication S.A. ADR
(Class B) 1,365 16,721(a)
18,458
MEXICO -- 1.9%
Desc S.A. de C.V. (Series B) 159,746 191,333
Desc S.A. de C.V. ADR
(Class C) 24,015 640,900
Gruma S.A. de C.V. (Series B) 49,116 106,819(a)
Grupo Carso S.A. de C.V. ADR 95,551 776,352
Grupo Financiero Banamex
Accival S.A. de C.V. (Class B) 418,961 871,552(a)
Grupo Televisa S.A. GDR 1,625 50,984
2,637,940
[ICON OMITTED]
NETHERLANDS -- 6.2%
IHC Caland N.V. 31,773 1,202,409
ING Groep N.V. 60,618 3,345,979
Ispat International N.V. (Regd.)
(Class A) 30,176 224,434
Koninklijke Ahold N.V. 45,230 1,736,124
Philips Electronics N.V. 24,507 1,999,288(a)
8,508,234
PANAMA -- 0.2%
Panamerican Beverages Inc.
(Class A) 13,301 233,599
PHILIPPINES -- 0.2%
San Miguel Corp. S.A. 166,900 277,808
POLAND -- 0.5%
Telekomunikacja Polska S.A.
GDR (Series A) 134,056 710,497(a,b)
PORTUGAL -- 0.9%
Banco Comercial Portugues
(Regd.) 24,068 728,658
Jeronimo Martins, SGPS, S.A. 9,779 348,927
Jeronimo Martins, SGPS, S.A. 3,328 118,747(a)
1,196,332
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SOUTH AFRICA -- 0.4%
Barlow Ltd. 96,110 $ 514,729
SOUTH KOREA -- 0.3%
Pohang Iron & Steel Co. Ltd. 6,126 374,550
SPAIN -- 1.7%
Argentaria S.A. 66,303 1,595,821
Repsol S.A. 8,786 453,143
Telefonica S.A. 5,822 247,332
2,296,296
SWEDEN -- 4.7%
Autoliv Inc. SDR 64,893 2,473,092
Ericsson LM Telephone
(Series B) 54,888 1,336,613
Investor AB (Series B) 4,388 192,339
Invik & Co. AB 3,674 239,327
Kinnevik AB (Series B) 7,352 140,989
NetCom Systems AB (Series B) 15,628 532,794(a)
Pharmacia & Upjohn Inc. 23,748 1,481,281
6,396,435
SWITZERLAND -- 3.1%
ABB AG 629 834,151
Credit Suisse AG 6,095 1,139,368
Novartis AG (Regd.) 814 1,323,725
Zurich Allied AG (Regd.) 1,551 994,817
4,292,061
TAIWAN -- 1.2%
Taiwan Semiconductor
Manufacturing Co. 543,450 1,705,199(a)
[ICON OMITTED]
UNITED KINGDOM -- 15.3%
Airtours PLC 345,023 2,534,530
Bank of Scotland PLC 33,405 444,133
Billiton PLC 151,351 367,756
Cable & Wireless Communication
PLC 156,001 1,763,045(a)
Canary Wharf Group PLC 38,851 207,619(a)
Commercial Union PLC 39,125 615,249
FKI PLC 398,557 1,010,248
Granada Group PLC 119,123 2,404,050
Great University Stores PLC 53,090 557,997
Johnson Matthey PLC 39,066 294,231
Nycomed Amersham PLC 54,894 476,810
Railtrack Group PLC 16,024 366,330
Reed International PLC 68,103 605,837
Royal & Sun Alliance Insurance
Group PLC 190,894 1,802,960
Saatchi & Saatchi PLC 50,546 168,517
- --------------
See Notes to Schedule of Investments and Notes to Financial statements.
27
<PAGE>
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SEMA Group PLC 147,699 $ 1,659,681
BTR Siebe PLC 909,019 4,002,908
Somerfield PLC 194,642 997,742
Vodafone Group PLC 37,571 697,571
20,977,214
Total Common Stock
(COST $122,526,746) 132,153,539
- --------------------------------------------------------------------------------
PREFERRED STOCK -- 0.1%
- --------------------------------------------------------------------------------
Fresenius Medical Care AG
(COST $ 266,592) 4,593 173,816
- --------------------------------------------------------------------------------
WARRANTS -- 0.0%
- --------------------------------------------------------------------------------
GERMANY -- 0.0%
Muenchener Rueckvericherungs-
Gesellschaft AG (Regd.), 06/03/02
(COST $ 0) 181 6,458(a)
TOTAL INVESTMENTS IN SECURITIES
(COST $122,793,338) 132,333,813
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 2.3%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund
(COST $ 3,173,136) 3,173,136 3,173,136
OTHER ASSETS AND LIABILITIES,
NET 0.9% 1,253,891
-------------
NET ASSETS-- 100% $136,760,840
============
- --------------------------------------------------------------------------------
OTHER INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
The International Equity Fund invested in the following sectors
at March 31, 1999:
PERCENTAGE (BASED ON
SECTOR TOTAL NET ASSETS)
- --------------------------------------------------------------------------------
Capital Equipment 24.58%
Finance 22.73%
Services 21.34%
Consumer Goods 15.64%
Energy 6.34%
Multi Industry 4.28%
Materials 3.50%
Cash and Other 1.59%
---------
100.00%
=========
- ------------
See Notes to Schedule of Investments and Notes to Financial statements.
[ICON OMITTED]
ICONS REPRESENT THE TOP FIVE INDUSTRY WEIGHTINGS IN THE INTERNATIONAL EQUITY
FUND AT MARCH 31, 1999.
28
<PAGE>
EUROPE EQUITY FUND
- --------------------------------------------------------------------------------
Q&A
MICHAEL J. SOLECKI IS THE PORTFOLIO MANAGER OF THE EUROPE EQUITY FUND AND HAS
SERVED THE FUND IN THAT CAPACITY SINCE ITS' INCEPTION. MIKE ALSO SERVES AS
PORTFOLIO MANAGER OF THE GEEUROPE EQUITY FUND AND AS CO-PORTFOLIO MANAGER OF THE
GE GLOBAL EQUITY FUND. MIKE HAS MORE THAN 9 YEARS OF INVESTMENT EXPERIENCE AND
JOINED GE INVESTMENTS IN 1990. HE IS CURRENTLY A VICE PRESIDENT OF GE
INVESTMENTS. MIKE IS A CHARTERED FINANCIAL ANALYST AND A MEMBER OF THE NEW YORK
SOCIETY OF SECURITY ANALYSTS. HE HOLDS A B.S. IN FINANCE FROM WESTERN NEW
ENGLAND COLLEGE.
Q. HOW DID THE EUROPE EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK FOR THE
PERIOD SINCE THE FUND'S INCEPTION (JANUARY 29, 1999) THROUGH MARCH 31, 1999?
A. The Europe Equity Fund posted a return of -3.80% for the period since
inception (January 29, 1999) through March 31, 1999. For the same period,
the MSCI Europe Index posted a -1.48% return.
Q. WHAT DROVE THE FUND'S PERFORMANCE?
A. Although European markets declined for the two-month period, a number of the
fund's energy and capital goods stocks did extremely well. Economic growth
rates declined in Europe during the first quarter of 1999 because countries
such as Germany were expecting weaker growth. Investors were also concerned
about internal turmoil at the European Central Bank. Finally, the Euro
premiered January 1, 1999 at 116, then fell to 108. The benefits of the
weaker Euro have yet to be realized.
Q. WHAT IS YOUR INVESTMENT STRATEGY?
A. Before investing in a company, the fund considers the region within Europe
where it is located, its primary securities trading market, the location of
its assets, and where the company derives its revenues and profits. The fund
looks for undervalued growth companies that trade at an attractive price to
cash earnings ratio relative to their growth rate.
Q. WHICH INVESTMENTS STAND OUT?
A. Top performers were in energy and capital goods. Oil prices recovered and
capital goods companies performed well because of recent interest rate
declines. Holdings with high returns included French oil companies Total and
Elf Aquitaine; Alstom, a French capital goods company; and BTR Siebe, a
process controls company in the United Kingdom.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
A. Looking ahead, we believe the cuts in Europe's interest rates will stimulate
long-term growth. The European Central Bank recently lowered rates from 3%
to 2.5%. During the next decade, we expect Europe's markets to mirror the
U.S market where low interest rates, low inflation, and corporate
rationalization spurred growth.
29
<PAGE>
EUROPE EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[LINE GRAPH OMITTED]
EUROPE EQUITY FUND MSCI EUROPE
1/29/99 $10000.00 $10000.00
FEB-99 9460.00 9746.20
MAR-99 9620.00 9852.43
- --------------------------------------------------------------------------------
AGGREGATE TOTAL RETURN
FOR THE PERIOD ENDED MARCH 31, 1999
- --------------------------------------------------------------------------------
SINCE
INCEPTION COMMENCEMENT
- --------------------------------------------------------------------------------
Europe Equity Fund (3.80)% 1/29/99
- --------------------------------------------------------------------------------
MSCI Europe (1.48)%
- --------------------------------------------------------------------------------
INVESTMENT PROFILE
A mutual fund designed for investors who seek
long-term growth of capital by investing primarily in equity
securities of issuers located in developed European
countries.
- --------------------------------------------------------------------------------
REGIONAL ALLOCATION AS OF MARCH 31, 1999
- --------------------------------------------------------------------------------
[PIE GRAPH OMITTED]
DEVELOPED 94.0%
EMERGING 1.8%
CASH AND OTHER 4.2%
- --------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS
AT MARCH 31, 1999
- --------------------------------------------------------------------------------
Total S.A. 3.84%
- --------------------------------------------------------------------------------
Mannesmann AG 3.78%
- --------------------------------------------------------------------------------
Preussag AG 3.65%
- --------------------------------------------------------------------------------
AXA-UAP 3.20%
- --------------------------------------------------------------------------------
BTR Siebe PLC 2.83%
- --------------------------------------------------------------------------------
ING Groep N.V. 2.67%
- --------------------------------------------------------------------------------
Rhone-Poulenc S.A. 2.66%
- --------------------------------------------------------------------------------
Telecom Italia S.p.A. 2.46%
- --------------------------------------------------------------------------------
Philips Electronics N.V. 2.45%
- --------------------------------------------------------------------------------
Cable & Wireless Communication PLC 2.40%
- --------------------------------------------------------------------------------
SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
30
<PAGE>
SCHEDULE OF INVESTMENTS MARCH 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
EUROPE EQUITY FUND
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 98.0%
- --------------------------------------------------------------------------------
DENMARK -- 1.5%
Novo-Nordisk AS (Series B) 818 $ 91,584
Tele Danmark AS (Series B) 544 53,946
145,530
FINLAND -- 5.3%
Helsingin Puhelin Oyj 2,993 146,599
Merita Ltd. (Series A) 9,394 50,380
Nokia Oyj (Series A) 519 83,670
Sampo Insurance Co. Ltd.
(Series A) 4,488 140,727
Sonera Group Oyj 5,285 88,002(a)
509,378
[ICON OMITTED]
FRANCE -- 22.9%
Alstom 6,076 180,666(a)
AXA-UAP 2,320 308,044
Cap Gemini S.A. 1,049 175,919
Carrefour S.A. 165 127,382(a)
Coflexip S.A. ADR 2,696 93,012
Elf Aquitaine S.A. ADR 1,404 190,974
Lyonnaise Des Eaux S.A. 379 70,239
Michelin CGDE (Regd.)
(Class B) 2,347 105,441
Rhone-Poulenc S.A. (Class A) 5,650 255,970
Schneider S.A. 2,556 141,638
Societe Generale 957 184,186
Total S.A. (Class B) 2,996 369,618
2,203,089
[ICON OMITTED]
GERMANY -- 13.3%
Bayerische Vereinsbank AG 2,447 146,578
DaimlerChrysler AG 1,354 117,999
Debitel AG 541 17,783(a)
Fresenius Medical Care AG 2,309 139,810
Mannesmann AG 2,845 363,909
Muenchener Rueckversicherungs-
Gesellschaft AG (Regd.) 143 28,914(a)
Preussag AG 654 351,447
PrimaCom AG 4 138(a)
Veba AG 2,055 108,210
1,274,788
GREECE -- 1.2%
Hellenic Telecommunication
Organization S.A. ADR 3,859 45,102
Hellenic Telecommunication
Organization S.A. 2,800 68,113
113,215
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
IRELAND -- 3.0%
Bank of Ireland 3,629 $ 75,464
CRH PLC 9,532 163,743
Esat Telecom Group PLC ADR 1,137 47,612(a)
286,819
ISRAEL -- 2.7%
Comverse Technology Inc. 1,161 98,685(a)
ECI Telecommunications Ltd. 4,443 155,505
254,190
[ICON OMITTED]
ITALY -- 8.4%
Alleanza Assicurazioni 3,979 47,540
Assicurazioni Generali 3,917 157,128
Banca Intesa S.p.A. 9,788 57,785
Montedison S.p.A. 30,114 31,258(a)
Saipem 31,406 122,248
Telecom Italia Mobile S.p.A. 18,519 124,747
Telecom Italia S.p.A. 5,847 34,772(j)
Telecom Italia S.p.A. 22,196 236,154
811,632
[ICON OMITTED]
NETHERLANDS -- 8.5%
IHC Caland N.V. 3,074 116,332
ING Groep N.V. 4,659 257,166
Koninklijke Ahold N.V. 3,399 130,468
Philips Electronics N.V. 2,894 236,093
Unique International N.V. 1,364 39,452
United Pan-Europe
Communications 1,054 41,369(a)
820,880
NORWAY -- 0.8%
Petroleum Geo Services 4,712 71,995(a)
POLAND -- 0.6%
Telekomunikacja Polska
S.A. GDR 10,735 56,895(a,b)
PORTUGAL -- 0.8%
Jeronimo Martins, SGPS, S.A. 1,690 60,301
Jeronimo Martins, SGPS, S.A. 563 20,089(a)
80,390
SPAIN -- 2.2%
Argentaria S.A. 6,604 158,949
Telefonica S.A. 1,314 55,822
214,771
SWEDEN -- 4.0%
Autoliv Inc. SDR 4,989 190,132
Ericsson LM Telephone
(Series B) 8,057 196,201
386,333
- -----------
See Notes to Schedule of Investments and Notes to Financial statements.
31
<PAGE>
EUROPE EQUITY FUND
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SWITZERLAND -- 3.7%
ABB AG 71 $ 94,157
Credit Suisse AG 416 77,765
Julius Baer Holdings Ltd. 12 39,004
Novartis AG (Regd.) 87 141,479(a)
352,405
[ICON OMITTED]
UNITED KINGDOM -- 19.1%
Airtours PLC 15,060 110,630
Cable & Wireless
Communication PLC 20,412 230,686(a)
Commercial Union PLC 7,109 111,791
Computacenter PLC 8,401 76,633
FKI PLC 29,031 73,587
Granada Group PLC 9,146 184,578
Great Universal Stores PLC 11,460 120,449
Johnson Matthey PLC 7,569 57,007
Mayflower Corp. PLC 18,734 53,233
Next PLC 1,583 18,146
Nycomed Amersham PLC 5,026 43,656
Reed International PLC 12,643 112,471
Royal & Sun Alliance Insurance
Group PLC 15,488 146,282
Select Appointments
Holdings PLC 1,376 18,483
SEMA Group PLC 2,546 28,609
BTRSiebe PLC 61,770 272,007
Somerfield PLC 23,692 121,446
United Assurance Group PLC 4,165 29,520
Williams PLC 4,577 29,558
1,838,772
TOTAL COMMON STOCK
(COST $9,756,959) 9,421,082
- --------------------------------------------------------------------------------
PREFERRED STOCK -- 0.5%
- --------------------------------------------------------------------------------
Fresenius Medical Care AG
(COST $ 49,336) 1,306 49,424
TOTAL INVESTMENTS IN SECURITIES
(COST $9,806,295) 9,470,506
OTHER ASSETS AND LIABILITIES,
NET 1.5% 148,412
-----------
NET ASSETS-- 100% $9,618,918
===========
OTHER INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
The Europe Equity Fund invested in the following sectors at March 31, 1999:
PERCENTAGE (BASED ON
SECTOR TOTAL NET ASSETS)
- --------------------------------------------------------------------------------
Services 26.66%
Capital Equipment 21.57%
Finance 20.97%
Consumer Goods 13.38%
Energy 9.16%
Multi Industry 3.65%
Materials 2.90%
Cash and Other 1.71%
--------
100.00%
--------
--------
- ----------
See Notes to Schedule of Investments and Notes to Financial statements.
[ICON OMITTED]
ICONS REPRESENT THE TOP FIVE INDUSTRY WEIGHTINGS IN THE EUROPE EQUITY FUND AT
MARCH 31, 1999.
32
<PAGE>
EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
Q&A
RALPH LAYMAN LEADS A TEAM OF PORTFOLIO MANAGERS FOR THE EMERGING MARKETS FUND.
REFER TO PAGE 24 FOR HIS BIOGRAPHICAL DETAILS.
Q. HOW DID THE EMERGING MARKETS FUND PERFORM COMPARED TO ITS BENCHMARK FOR THE
SIX-MONTH PERIOD ENDED MARCH 31, 1999?
A. The Emerging Markets Fund posted a return of 39.15% for the six-month period
ended March 31, 1999. For the same period, the MSCI EmergingMarkets Free
Index rose 32.66%.
Q. WHY DID THE FUND OUTPERFORM ITS BENCHMARK?
A. The fund's performance was driven by individual stock selection rather than
by country or regional allocations. Although the fund was slightly
underweight in Latin America, we benefited from neutral weighting in Brazil,
whose currency dropped by 31% during the period. Strong stock selection
compensated for underweighting in Russia, whose market grew by 175%.
Compared to the benchmark, the fund was also underweight in Asian stocks,
which hurt performance. Overall, Asian markets gained 49% during the period.
Q. WHICH INVESTMENTS STAND OUT?
A. Indian-based software companies in the portfolio had high returns. NIIT was
up 106%; Pentafour rose 75%; Satyam advanced 150%. Other notable investments
included Tansas, a Turkish retailer, which was up 235% for the period.
Q. WILL CONFLICT IN THE BALKANS AFFECT FUND PERFORMANCE?
A. Currently, the situation has not had a significant effect on the fund. If
the conflict spreads or Russia gets involved, then it could have serious
consequences for Europe's emerging markets. We have made one change in the
region. Due to Greece's proximity to the Balkans and its high market
valuations, we have steadily reduced our exposure in that country.
Presently, our holdings in Greek-based companies are slightly underweight
compared to the fund's benchmark.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
A. We expect to remain neutral to slightly underweight in Latin America. Right
now, the fund is overweight in Europe and underweight in Asia. With 23% of
our portfolio in Asia, versus the benchmarks 36.8%, we are moving some money
from Europe into Asia. We are identifying Asian growth companies that should
become market leaders five years from now. We plan to pick up some companies
that are still recovering from the region's economic turmoil of the past two
years. Overall, we expect to remain overweight in the technology sector.
Finally, we remain cautious about Russia's macro-economic and political
environment and the lack of corporate disclosure.
33
<PAGE>
EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[LINE GRAPH OMITTED]
Emerging Markets Fund MS Emerging Markets Free
11/25/97 $10000.00 $10000.00
10200.00 10117.00
10215.36 10360.82
Jan-98 9723.66 9548.22
10526.43 10544.86
Mar-98 11068.31 11002.51
11329.21 10882.58
May-98 10125.04 9391.23
9392.51 8406.09
Jul-98 9653.41 8672.65
6723.27 6165.04
Sep-98 6803.55 6556.09
7486.34 7246.52
Nov-98 8168.74 7849.21
8159.95 7735.48
Jan-99 8190.13 7610.70
8260.57 7684.76
Mar-99 9467.96 8697.53
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED MARCH 31, 199
- --------------------------------------------------------------------------------
SIX ONE SINCE
MONTHS YEAR INCEPTION COMMENCEMENT
- --------------------------------------------------------------------------------
Emerging Markets Fund 39.15% (14.46)% (3.97)% 11/25/97
- --------------------------------------------------------------------------------
MSCI EMF 32.66% (20.95)% (9.83)%
- --------------------------------------------------------------------------------
INVESTMENT PROFILE
A mutual fund designed for investors who seek
long-term growth of capital by investing primarily in equity
securities of issuers that are located in emerging markets
countries.
- --------------------------------------------------------------------------------
REGIONAL ALLOCATION AS OF MARCH 31, 1999
- --------------------------------------------------------------------------------
[PIE GRAPH OMITTED]
ASIA 29.3%
LATIN AMERICA 28.1%
EUROPE 22.3%
MIDDLE EAST AND AFRICA 16.7%
CASH AND OTHER 3.6%
- --------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS
AT MARCH 31, 1999
- --------------------------------------------------------------------------------
Telecomunicacoes Brasileiras S.A. ADR 2.83%
- --------------------------------------------------------------------------------
New Dimension Software Ltd. 2.72%
- --------------------------------------------------------------------------------
Pentafour Software & Exports Ltd. GDR 2.52%
- --------------------------------------------------------------------------------
A.G. Petzetakis S.A. 1.87%
- --------------------------------------------------------------------------------
Delta Informatics S.A. (Regd.) 1.81%
- --------------------------------------------------------------------------------
NIIT Ltd. 1.80%
- --------------------------------------------------------------------------------
Grupo Televisa S.A. GDR 1.70%
- --------------------------------------------------------------------------------
Satyam Computer Services Ltd. 1.66%
- --------------------------------------------------------------------------------
Taiwan Semiconductor
Manufacturing Co. 1.53%
- --------------------------------------------------------------------------------
Telefonos De Mexico S.A. ADR 1.50%
- --------------------------------------------------------------------------------
SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
34
<PAGE>
SCHEDULE OF INVESTMENTS MARCH 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
EMERGING MARKETS FUND
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 87.7%
- --------------------------------------------------------------------------------
ARGENTINA -- 2.1%
Banco De Galicia y Buenos
Aires S.R. ADR (Class B) 2,028 $ 32,575
Telefonica de Argentina S.A.
ADR (Class B) 1,469 44,437
YPF S.A. ADR (Class D) 2,210 69,753
146,765
AUSTRALIA -- 0.1%
Premier Telesports Ltd. 1,156 9,649(a)
BRAZIL -- 1.0%
Companhia de Saneamento
Basicode Estado de Sao Paulo 292,689 18,415
Uniao de Bancos Brasilieros
S.A. GDR 2,907 55,960
74,375
CHILE -- 1.2%
Companhia deTelecomunicaciones
de Chile S.A. ADR 1,517 35,744
Sociedad Quimica y Minera de
Chile S.A. ADR 498 15,936
Sociedad Quimica y Minera de
Chile S.A. 58 261(a,f)
Vina Concha Y Toro 1,081 31,755
83,696
CHINA -- 0.3%
Brilliance China Automotive
Holdings Ltd. 354 3,120
Guangdong Kelon Electrical
Holdings Co. Ltd. 4,000 2,942
Huaneng Power International
Inc. ADR 199 1,978(a)
Jiangsu Expressway Co. Ltd. 18,000 3,530
Shenzhen Expressway Co. Ltd. 56,000 10,912
22,482
CROATIA -- 1.4%
Pliva D D GDR (Regd.) 3,595 56,801
Zagrebacka Banka GDR 4,285 40,922(b)
97,723
CZECH REPUBLIC -- 0.6%
Ceske Radiokomunikace GDR 1,225 41,405(a,b)
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
DOMINICAN REPUBLIC -- 0.3%
TRICOM S.A. ADR 2,787 $ 22,993(a)
EGYPT -- 2.3%
Al-Ahram Beverage Co.
S.A.E. GDR 918 28,779(a)
Egypt Mobile Phone 6,342 73,120(a)
Olympic Group Financial
Investment Co. 11,782 51,885
Olympic Group Financial
Investment Co. 1,411 6,214(i)
159,998
ESTONIA -- 0.8%
Estonian Telecom Ltd. GDR
Reg. S 2,435 53,448(a)
GHANA -- 0.0%
Home Finance Co. 13,106 4,065(a)
[ICON OMITTED]
GREECE -- 9.1%
A.G. Petzetakis S.A. 14,462 131,896(a)
Agricultural Bank of Greece 7,380 47,726(a)
Alfa Beta Vassilopoulos S.A.
(Regd.) 3,945 70,650
Alpha Credit Bank (Regd.) 1,156 76,944
Attica Enterprises S.A. 5,533 47,250
Delta Informatics S.A. (Regd.) 3,350 127,765
Intrasoft S.A. 2,420 57,223
Panafon Hellenic Telecom S.A. 1,200 31,241(a)
STET Hellas Telecommunications
S.A. ADR 1,713 50,748(a)
641,443
HONG KONG -- 0.0%
Hengan International
Group Co. Ltd. 3,000 1,161(a)
HUNGARY -- 2.3%
BorsodChem RT 615 11,419(a)
Demaz RT GDR 3,459 52,231
Magyar Tavkozlesi RT ADR 1,094 29,264
Mezogazdasagi Gepgyarto RT 4,784 40,606(a)
OTP Bank RT 684 26,460
159,980
[ICON OMITTED]
INDIA -- 11.7%
Aptech Ltd. 2,200 48,926
Aptech Ltd. 500 11,120(h)
Aptech Ltd. 2,190 45,168(a)
Bharat Heavy Electricals Ltd. 761 4,260
BSES Ltd. 1,450 4,956
Cipla Ltd. 400 13,200(h)
Cipla Ltd. 650 21,449
Dr. Reddy's Laboratories Ltd. 2,400 48,764(a)
HDFC Bank Ltd. 131 7,040
Leading Edge Systems Ltd. 800 9,098(a)
- ----------
See Notes to Schedule of Investments and Notes to Financial statements.
35
<PAGE>
EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Mastek Ltd. 2,200 $ 42,509
NIIT Ltd. 2,867 126,709
NIIT Ltd. 50 2,210(h)
Pentafour Software & Exports
Ltd. GDR 6,000 177,490
Satyam Computer Services Ltd. 3,064 117,144(a)
Sun Pharmaceutical
Industries Ltd. 1,889 21,829
Tata Infotech Ltd. 450 17,886
Wipro Ltd. 342 32,432
Zee Telefilms Ltd. 700 16,281(a)
Zee Telefilms Ltd. 2,500 58,147
826,618
INDONESIA -- 0.5%
PT Astra International Inc. 79,500 7,582(a)
PT Gudang Garam 2,500 3,331
PT Hanjaya Mandala Sampoerna 11,000 9,029(a)
PT International Nickel 13,000 7,139
PT Mulia Industrindo 118,500 4,452
PT Unilever Indonesia 500 1,012
32,545
[ICON OMITTED]
ISRAEL -- 10.6%
Comverse Technology Inc. 999 84,915(a)
ECI Telecommunications Ltd. 2,083 72,905
Fundtech Ltd. 2,939 88,538(a)
Geo Interactive Media
Group PLC 18,330 22,935(a)
New Dimension Software Ltd. 3,694 191,626(a)
Orbotech Ltd. 1,714 84,200(a)
Paradigm Geophysical Ltd. 1,452 7,260(a)
Sapiens International Corp. N.V. 8,218 85,775(a)
Tecnomatix Technologies Ltd. 3,191 42,281(a)
Teva Pharmaceutical Industries
Ltd. ADR 1,415 67,124
747,559
KAZAKHSTAN -- 1.1%
Efes Sinai Yatirim
Holding A.S. 4,163,053 58,029(a)
Kazkommertsbank GDR 4,279 18,186(a)
76,215
[ICON OMITTED]
MEXICO -- 14.7%
Cemex S.A. de C.V. 8,051 33,793
Cifra S.A. de CV 34,179 53,649(a)
Coca-Cola Femsa S.A. de
C.V. ADR 3,338 54,451
Controladora Comercial
Mexicana S.A. de C.V. 44,447 43,709
Desc S.A. de C.V. (Series B) 39,311 47,084
Fomento Economico Mexicano
S.A. de C.V. ADR 1,609 49,778
Geo S.A. de C.V. 24,640 71,709(a)
Gruma S.A. de C.V. (Series B) 14,111 30,689(a)
Grupo Carso S.A. de C.V. ADR 3,305 26,853
Grupo Continental S.A. 19,914 56,491
Grupo Elektra S.A. de C.V. 1,766 11,479
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Grupo Financiero Banamex
Accival S.A. de C.V. (Class B) 25,314 $ 52,660(a)
Grupo Financiero Bancomer
S.A. ADR (Series C) 11,782 78,056(b)
Grupo Financiero Banorte S.A.
de C.V. 73,341 96,011(a)
Grupo Industrial Bimbo S.A.
de CV 20,716 46,142
Grupo Televisa S.A. GDR 3,814 119,664
Kimberly-Clark de Mexico, S.A.
de C.V. 7,430 27,986
Pepsi-Gemex S.A. 1,430 12,959(a)
Telefonos De Mexico S.A. ADR 1,616 105,848
TV Azteca S.A. de C.V. ADR 749 4,681
Vitro S.A. ADR 2,083 12,107
1,035,799
NETHERLANDS -- 0.4%
Indigo N.V. 5,871 30,456(a)
PANAMA -- 0.1%
Banco Latinoamericano de
Exportaciones, S.A. 223 5,798
PHILIPPINES -- 1.9%
Benpres Holdings Corp. 178,700 27,670(a)
Metropolitan Bank & Trust Co. 6,800 53,961
Philippine Commercial
International Bank 4,010 22,663
San Miguel Corp. S.A. 14,700 24,468
Solid Group Inc. 192,600 3,082(a)
SPI Technologies Inc. 8,800 5,904
137,748
POLAND -- 3.2%
Agora S.A. GDR (Regd.) 2,109 22,250(a)
Elektrim Spolka Akcyjna S.A. 4,592 48,851
Prokom Software S.A. GDR 4,310 71,977(b)
Telekomunikacja
Polska S.A. GDR 15,261 80,883(a,b)
223,961
RUSSIA -- 1.2%
Oyj Hartwall Abp 2,110 26,465
PLD Telekom Inc. 12,787 49,549(a)
Sun Brewing Ltd. GDR 3,894 9,930(a)
85,944
SINGAPORE -- 1.4%
Datacraft Asia Ltd. 42,689 99,892
SOUTH AFRICA -- 3.8%
Dimension Data Holdings Ltd. 13,734 61,072(a)
Education Investment Corp. Ltd. 22,752 27,693
M-Cell Ltd. 10,562 16,456
Metro Cash & Carry Ltd. 71,881 55,995
Nedcor Ltd. 3,747 83,676
Network Healthcare
Holdings Ltd. 103,107 20,080
264,972
- -----------
See Notes to Schedule of Investments and Notes to Financial statements.
36
<PAGE>
SCHEDULE OF INVESTMENTS MARCH 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SOUTH KOREA -- 5.7%
Dae Duck Electronics Co. 731 $ 54,453
Medison Co. Ltd. 8,067 81,525(a)
Mirae Co. 7,980 28,876
Pohang Iron & Steel Co.
Ltd. ADR 1,220 74,592
S1 Corp. 217 41,030
Samsung Display Devices Co. 230 11,303
Samsung Electronics 610 47,229
Sindo Ricoh Co. 640 23,315
Youngone Corp. 1,620 42,646
404,969
[ICON OMITTED]
TAIWAN -- 6.1%
Asustek Computer Inc. 4,000 33,791(a)
Chroma Ate Inc. 6,000 13,034(a)
Compal Electronics Inc. 23,000 60,371
Compeq Manufacturing Co. Ltd. 6,000 28,602(a)
D-Link Corp. 20,000 35,601(a)
Far Eastern Textile Ltd. 59,000 58,030
Hon Hai Precision Industry 7,000 37,381(a)
Ritek Inc 6,000 20,093(a)
Taiwan Semiconductor
Manufacturing Co. 34,400 107,938(a)
Taiwan Semiconductor
Manufacturing Co. ADR 515 12,167(a)
Yageo Corp. 30,000 25,886(a)
432,894
THAILAND -- 0.5%
Banpu Public Co. Ltd. 4,400 5,155(a)
Hana Microelectronics Public
Co. Ltd. 4,300 7,443(a)
Siam Cement Public Co. Ltd. 1,000 20,237(a)
32,835
TURKEY -- 3.3%
Aksigorta A.S. 887,892 46,412
Dogan Yayin Holding 4,238,928 29,543(a)
Enka Holding Yatirim A.S. 113,276 17,612
Migros Turk T.A.S. 41,072 53,948
Tansas A.S. 262,957 82,824
230,339
TOTAL COMMON STOCK
(COST $5,356,774) 6,187,727
- --------------------------------------------------------------------------------
PREFERRED STOCK -- 8.7%
- --------------------------------------------------------------------------------
Banco do Estado de Sao
Paulo S.A. 524,024 23,833
Companhia Brasileira de
Distribuicao Grupo Pao
de Acucar 2,546,351 37,564
Companhia Energetica de
Minas Gerais 3,091,553 69,132
Companhia Paranaense de
Energia-Copel 8,667,753 65,400(a)
Companhia Riograndense
de Telecomunicacoes 14,839 4,500
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Companhia Vale Do Rio Doce 1,357 $ 19,979(a)
Embratel Participacoes S.A. ADR 3,230 53,900(a)
Telecomunicacoes de Sao
Paulo S.A. - Telesp 612,479 75,176
Telesp Celular S.A. 598,000 22,316(a)
Tele Centro Sul
Participacoes S.A. ADR 584 26,973(a)
Tele Norte Leste
Participacoes S.A. ADR 442 6,796(a)
Telecomunicacoes
Brasileiras S.A. ADR 2,474 199,466(a)
Telesp Celular Participacoes
S.A. ADR 291 6,093
TOTAL PREFERRED STOCK
(COST $554,926) 611,128
TOTAL INVESTMENTS IN SECURITIES
(COST $5,911,700) 6,798,855
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 0.4%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund
(COST $ 26,485) 26,485 26,485
OTHER ASSETS AND LIABILITIES,
NET 3.2% 223,396
-----------
NET ASSETS-- 100% $7,048,736
===========
OTHER INFORMATION
- --------------------------------------------------------------------------------
The Emerging Markets Fund invested in the following sectors at March 31, 1999:
PERCENTAGE (BASED ON
SECTOR TOTAL NET ASSETS)
- --------------------------------------------------------------------------------
Capital Equipment 29.66%
Services 29.33%
Finance 12.47%
Consumer Goods 12.65%
Materials 5.85%
Energy 3.80%
Multi Industry 2.33%
Cash and Other 3.91%
--------
100.00%
--------
--------
- ----------
See Notes to Schedule of Investments and Notes to Financial statements.
[ICON OMITTED]
ICONS REPRESENT THE TOP FIVE COUNTRY WEIGHTINGS IN THE EMERGING MARKETS FUND
AT MARCH 31, 1999.
37
<PAGE>
INCOME FUNDS
- --------------------------------------------------------------------------------
Q&A
ROBERT MACDOUGALL LEADS THE FIXED INCOME TEAM AT GE INVESTMENTS. ASSETS UNDER
HIS MANAGEMENT EXCEED $29 BILLION. HIS RESPONSIBILITIES INCLUDE MANAGING THE
INCOME AND MONEY MARKET FUNDS. BOB JOINED GE INVESTMENTS IN 1986 AS A MUTUAL
FUND PORTFOLIO MANAGER AND WAS APPOINTED TO HEAD THE TAXABLE FIXED INCOME TEAM
IN 1992, AND THE TAX-EXEMPT FIXED INCOME TEAM IN 1997. PREVIOUSLY HE WAS WITH
GE'S CORPORATE TREASURY OPERATION MANAGING THE COMPANY'S $2 BILLION PORTFOLIO OF
MARKETABLE SECURITIES AND SUPPORTING THE TREASURER IN THE AREAS OF DEBT
MANAGEMENT AND CAPITAL STRUCTURE PLANNING. PRIOR TO THAT, BOB HAS HELD VARIOUS
FINANCIAL MANAGEMENT POSITIONS SINCE JOINING GE IN 1973. HE HOLDS BACHELOR'S AND
MASTER'S DEGREES IN BUSINESS ADMINISTRATION FROM THE UNIVERSITY OF
MASSACHUSETTS.
Q. DESCRIBE WHAT HAPPENED IN THE FIXED INCOME MARKETS DURING THE SIX-MONTH
PERIOD ENDED MARCH 31, 1999.
A. The past six months have certainly been volatile for the fixed income
markets. As we entered October the market was still reacting to the turmoil
caused by the Russian debt default in August and the near collapse of Long
Term Capital Management -- a large hedge fund -- in September. Investors'
"flight to quality" drove the yield on 30-Year U.S. Treasury Bonds to a
record low of 4.7%. Lower quality bonds, especially high yield bonds and
emerging market debt significantly underperformed the market. The Federal
Reserve (the "Fed") cut short-term interest rates three times to help
restore stability and confidence to the markets.
As the crisis receded, the market returned its focus to the fundamentals.
Fears of recession were replaced with concerns that an overheating economy
might put upward pressure on inflation. Low unemployment and a buoyant stock
market boosted consumer income, confidence and spending. Low mortgage rates
helped the housing sector reach record levels of activity. Adding to the
bond markets worries were a 40% jump in the price of oil and comments by Fed
Chairman Alan Greenspan that the Fed was re-evaluating the appropriateness
of the three easings of monetary policy of 1998. These factors combined to
send the yield on long U.S. Treasury Bonds to 5.7% in early March -- an
increase of 100 basis points from the October lows. The front end of the
yield curve fared even worse as market expectations of Fed policy switched
from easing to possible tightening. The yield on two-year U.S. Treasury
Notes, which reached a low in October 1998 of 3.8%, rose to 5.2% in March
1999.
INCOME FUND
Q. HOW DID THE INCOME FUND PERFORM AGAINST ITS BENCHMARK FOR THE SIX-MONTH
PERIOD ENDED MARCH 31, 1999?
A. The Income Fund posted a return of -0.15% for the six-month period ended
March 31, 1999. For the same period, the Lehman Brothers Aggregate Bond
Index returned -0.17%.
Q. WHAT WERE THE KEY DRIVERS OF FUND PERFORMANCE?
A. The widening of corporate and mortgage spreads to U.S. Treasury securities
which occurred in the third quarter of 1998 presented many opportunities for
value. We increased our exposure to those sectors and benefited as they
outperformed Treasuries. On the other hand, our greater interest rate
exposure (duration) was a drag on performance as interest rates rose.
MONEY MARKET FUND
Q. HOW DID THE MONEY MARKET FUND PERFORM AGAINST ITS BENCHMARK FOR THE
SIX-MONTH PERIOD ENDED MARCH 31, 1999?
A. The Money Market Fund posted a return of 2.45% for the six-month period
ended March 31, 1999. For the same period, the 90-day Treasury Bill was
2.23%.
Q. WHAT WERE THE KEY DRIVERS OF FUND PERFORMANCE?
A. During the fourth quarter of 1998, we extended the average maturity of the
fund due to the steepness of the money market yield curve and to lock-in the
higher yields available over year-end. As these investments matured in the
first quarter of 1999, we allowed the average maturity to shorten as the
yield curve flattened and expectations of further Fed monetary policy easing
diminished.
OVERALL
Q. WHAT IS YOUR OUR LOOK FOR THE BOND MARKET?
A. At this time we have a very benign inflation outlook as global excess
capacity and new technologies, such as the internet, limit corporations'
pricing power. Real interest rates are attractive. If, however, the level of
economic activity continues to grow at the robust rate we've seen of late,
the Federal Reserve may decide to tighten monetary policy so as to prevent a
resurgence of inflation. Until we see clearer indication of the direction we
are headed -- slower growth or higher inflation -- the market will continue
to trade in a range around current levels.
38
<PAGE>
INCOME FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[LINE GRAPH OMITTED]
Income Fund LB Aggregate
11/21/97 $10000.00 $10000.00
10014.43 10000.00
10112.09 10101.00
Jan-98 10252.98 10230.29
10241.99 10222.11
Mar-98 10290.76 10256.86
10339.73 10310.20
May-98 10451.54 10408.15
10544.23 10496.62
Jul-98 10566.63 10518.66
10691.39 10690.11
Sep-98 10921.11 10940.26
10836.11 10882.28
Nov-98 10919.54 10944.31
10967.82 10977.14
Jan-99 11053.01 11055.08
10819.59 10861.61
Mar-99 10904.74 10921.35
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED MARCH 31, 1999
- --------------------------------------------------------------------------------
SIX ONE SINCE
MONTHS YEAR INCEPTION COMMENCEMENT
- --------------------------------------------------------------------------------
Income Fund (0.15)% 5.97% 6.58% 11/21/97
- --------------------------------------------------------------------------------
LB Aggregate (0.17)% 6.48% 6.86%
- --------------------------------------------------------------------------------
INVESTMENT PROFILE
A mutual fund designed for investors who seek
maximum income consistent with prudent investment
management and the preservation of capital by
investing in fixed income securities.
- --------------------------------------------------------------------------------
SECTOR ALLOCATION AS OF MARCH 31, 1999
- --------------------------------------------------------------------------------
[PIE GRAPH OMITTED]
MORTGAGE BACKED 35.0%
U.S. GOVERNMENTS 34.7%
CORPORATE NOTES 22.4%
CASH & OTHER 7.9%
- --------------------------------------------------------------------------------
QUALITY RATINGS AT
MARCH 31, 1999
- --------------------------------------------------------------------------------
Moody's/ Percentage of
S&P Rating+ Net Assets
- --------------------------------------------------------------------------------
Aaa/AAA 76.7%
- --------------------------------------------------------------------------------
A to A/A 10.6%
- --------------------------------------------------------------------------------
Below A/A 10.0%
- --------------------------------------------------------------------------------
Other 2.7%
- --------------------------------------------------------------------------------
+ MOODY'S INVESTORS SERVICES, INC. AND STANDARD & POOR'S ARE NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATIONS.
SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
39
<PAGE>
SCHEDULE OF INVESTMENTS MARCH 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
INCOME FUND
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
BONDS AND NOTES -- 97.0%
- --------------------------------------------------------------------------------
U.S. TREASURIES -- 15.7%
U.S. Treasury Bonds
10.625% 08/15/15 $ 346,000 $ 518,512 (e)
8.125% 08/15/19 1,862,000 2,344,668 (e)
8.125% 05/15/21 1,151,000 1,461,413 (e)
5.25% 11/15/28 629,000 586,643 (e)
5.25% 02/15/29 2,389,000 2,258,346 (e)
7,169,582
U.S. Treasury Notes
5.375% 06/30/00 156,000 156,805 (e)
5.25% 08/31/00 133,000 133,207 (e)
4.50% 01/31/01 940,000 931,775 (e)
6.50% 08/31/01 519,000 535,541 (e)
4.75% 02/15/04 630,000 620,355 (e)
5.625% 05/15/08 1,019,000 1,037,311 (e)
4.75% 11/15/08 125,000 120,410 (e)
3,535,404
U.S. Treasury STRIP
5.91% 02/15/12 1,020,000 482,154 (e)
TOTAL U.S. TREASURIES
(COST $11,374,584) 11,187,140
FEDERAL AGENCIES -- 19.0%
Federal Home Loan Bank
5.62% 08/10/00 1,000,000 1,003,910
5.625% 03/19/01 260,000 261,503
1,265,413
Federal Home Loan Mortgage Corp.
5.00% 02/15/01 1,140,000 1,135,725
6.22% 03/18/08 230,000 229,462
5.75% 04/15/08 360,000 356,738
5.125% 10/15/08 280,000 264,732
6.50% TBA 3,706,541 3,692,641 (c)
7.00% TBA 145,000 146,971 (c)
5,826,269
Federal National Mortgage Assoc.
5.67% 05/26/00 900,000 905,625
5.56% 07/24/00 695,000 697,064
5.10% 09/25/00 646,000 643,978
5.38% 01/16/01 185,000 185,231
5.75% 04/15/03 71,000 71,610
5.125% 02/13/04 655,000 643,230
6.99% 07/09/07 300,000 308,061
5.64% 12/10/08 290,000 282,634
6.04% 02/25/09 1,105,000 1,088,767
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
6.247% 03/25/21 $ 223,000$ 221,955
6.16% 08/07/28 615,000 605,105
5,653,260
Small Business Administration
6.55% 12/01/17 460,194 465,659
6.125% 01/01/18 322,390 319,921
785,580
TOTAL FEDERAL AGENCIES
(COST $13,561,364) 13,530,522
AGENCY MORTGAGE BACKED -- 29.4%
Federal Home Loan Mortgage Corp.
7.50% 09/01/12 241,875 249,509
8.00% 08/01/24 23,642 24,595
8.00% 10/01/25 21,308 22,167
8.00% 11/01/26 29,518 30,708
8.00% 02/01/28 34,738 36,138
363,117
Federal National Mortgage Assoc.
9.00% 06/01/09 245,820 263,949
8.00% 01/01/13 1,132,336 1,165,943
6.50% 04/01/13 930,955 939,389
7.50% 01/01/14 506,218 522,352
5.50% 01/01/14 - 03/01/14 1,439,999 1,402,199
9.00% 04/01/16 134,919 144,911
7.50% 12/01/18 120,383 123,990
7.50% 12/01/23 484,281 498,049
6.42% 12/25/23 1,480,000 1,482,775
5.94% 10/01/24 681,274 684,040
9.00% 11/01/25 597,014 634,701
8.50% 12/01/26 268,739 282,176
7.50% 10/01/27 1,534,269 1,576,461
7.00% 01/01/27 - 12/01/27 3,095,115 3,147,145
9.00% 01/01/29 405,041 430,714
9.50% 01/01/29 548,104 587,128
6.50% 01/01/29 - 03/01/29 1,117,795 1,112,553
6.50% TBA 190,000 189,139 (c)
8.00% TBA 1,210,000 1,258,594 (c)
16,446,208
Government National Mortgage Assoc.
7.00% 03/15/12 678,698 696,086
9.00% 11/15/16 95,458 102,348
8.50% 10/15/17 310,690 329,621
9.00% 01/15/17 - 11/15/17 272,731 292,510
9.50% 12/15/17 53,905 57,940
9.00% 12/15/21 40,666 43,652
9.50% 08/15/22 509,543 551,898
9.50% 08/15/23 101,737 109,971
6.50% 03/15/24 497,103 496,169
7.00% 10/15/27 174,287 176,955
- ------------
See Notes to Schedule of Investments and Notes to Financial statements.
40
<PAGE>
SCHEDULE OF INVESTMENTS MARCH 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
6.50% 04/15/28 $ 583,232 $ 580,677
7.00% 04/15/28 402,089 408,245
9.50% 03/15/29 300,000 326,531
4,172,603
TOTAL AGENCY MORTGAGE BACKED
(COST $21,028,857) 20,981,928
AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.9%
Federal Home Loan Mortgage Corp.
5.75% 06/15/23 155,000 153,499
Federal National Mortgage Assoc. REMIC
6.23% 05/25/14 449,929 452,038 (d)
TOTAL AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS
(COST $606,670) 605,537
ASSET BACKED -- 2.1%
Capital One Master Trust
5.43% 01/15/07 145,000 142,848
Chase Credit Card Master Trust
6.00% 08/15/05 140,000 141,312
Citibank Credit Card Master Trust
5.75% 01/15/03 22,000 22,055
5.50% 02/01/06 137,000 135,214
Discover Card Master Trust I
5.75% 10/16/03 101,000 100,936
5.30% 08/15/04 83,000 82,001
5.60% 05/15/06 395,000 391,112
First USA Credit Card Master Trust
5.28% 09/18/06 214,000 209,585
Ford Credit Auto Loan Master Trust
5.50% 02/15/03 59,000 58,959
Green Tree Financial Corp. Series 1993-1
6.90% 04/15/18 88,790 90,122
Peco Energy Transport Trust
5.80% 03/01/07 65,000 64,513
6.05% 03/01/09 65,000 64,431
TOTAL ASSET BACKED
(COST $1,516,146) 1,503,088
CORPORATE NOTES -- 22.4%
Abbey National PLC
7.35% 10/29/49 200,000 202,658
Arizona Public Service Co.
6.25% 01/15/05 80,000 80,262
Associates Corporation of
North America
6.375% 10/15/02 400,000 407,020
5.75% 11/01/03 125,000 124,192
AT&T Corp.
6.00% 03/15/09 80,000 79,482
6.50% 03/15/29 65,000 63,541
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Atlantic City Electric Co.
6.19% 01/17/06 $ 205,000 $ 203,196
Bank of Scotland
7.00% 11/29/49 75,000 74,944 (b)
Beckman Instruments Inc.
7.10% 03/04/03 105,000 103,895
Bell Telephone Co. - Pennsylvania
8.35% 12/15/30 368,000 445,170
Bellsouth Telecomm Inc.
6.375% 06/01/28 250,000 238,085
Bertelsmann US Finance
5.375% 01/28/04 150,000 145,111 (a)
Boston University
7.625% 07/15/97 250,000 271,500
Brascan Ltd.
7.375% 10/01/02 80,000 80,192
Carnival Corp.
5.65% 10/15/00 300,000 300,021
Champion International Corp.
6.40% 02/15/26 55,000 54,445
Coastal Corp.
6.375% 02/01/09 100,000 99,148
Coca-Cola Enterprises Inc.
7.00% 10/01/26 90,000 94,622
Conseco Inc.
6.40% 06/15/01 191,000 187,825
6.80% 06/15/05 120,000 115,715
8.70% 11/15/26 59,000 53,474
Continental Cablevision Inc.
8.30% 05/15/06 100,000 110,367
Corporacion Andina De Fomento
6.75% 03/15/05 130,000 123,181
Crown Cork & Seal Co. Inc.
8.375% 01/15/05 45,000 48,267
CSX Corp.
6.25% 10/15/08 300,000 294,876
Dayton Hudson Corp.
5.895% 06/15/37 105,000 105,301
Dow Chemical Co.
8.55% 10/15/09 80,000 93,378
Duke Energy Corp.
5.375% 01/01/09 100,000 94,448
Duquesne Light Co.
8.70% 06/01/16 67,912 74,277
Fairfax Financial Holdings Ltd.
7.375% 04/15/18 200,000 187,392
Federated Department Stores Inc.
6.125% 09/01/01 110,000 110,870
Ford Motor Credit Co.
5.80% 01/12/09 95,000 91,258
- -----------
See Notes to Schedule of Investments and Notes to Financial statements.
41
<PAGE>
INCOME FUND
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
General Motors Acceptance Corp.
5.75% 11/10/03 $ 70,000 $ 69,394
6.15% 04/05/07 160,000 159,461
Goldman Sachs Group L.P.
6.20% 12/15/00 130,000 130,571 (b)
HCR Manor Care
7.50% 06/15/06 75,000 74,879
Heritage Media Corp.
8.75% 02/15/06 130,000 138,775
Household Finance Corp.
6.125% 07/15/02 50,000 50,338
Hydro-Quebec
8.05% 07/07/24 302,000 349,378
Israel Electric Corp. Ltd.
7.125% 07/15/05 60,000 60,276 (b)
J.C. Penny Co. Inc.
7.40% 04/01/37 85,000 88,615
J.P. Morgan & Co.
6.00% 01/15/09 125,000 120,600
Landesbank Baden-Wuerttember
7.875% 04/15/04 292,000 315,941
Lasmo USA Inc.
6.75% 12/15/07 65,000 63,361
LCI International Inc.
7.25% 06/15/07 90,000 91,696
Lehman Brothers Holdings Inc.
6.90% 03/30/01 112,000 113,356
8.50% 08/01/15 220,000 244,578
7.50% 08/01/26 145,000 150,200
LG&E Capital Corp.
5.75% 11/01/01 120,000 119,537 (b)
Liberty Property Ltd. Partnership
7.50% 01/15/18 90,000 78,086
Lubermens Mutual Casualty
8.30% 12/01/37 40,000 40,776 (b)
MBNA Corp.
6.306% 04/22/03 150,000 148,450
MCI Communications Corp.
6.125% 04/15/02 200,000 201,824
MCI WorldCom Inc.
6.13% 08/15/01 70,000 70,648
6.40% 08/15/05 105,000 106,224
8.875% 01/15/06 150,000 161,559
Merita Bank Ltd.
7.15% 12/29/49 250,000 249,680 (b)
Monsanto Co.
5.75% 12/01/05 80,000 78,132
6.60% 12/01/28 80,000 76,714 (b)
Morgan Stanley, Dean Witter
5.625% 01/20/04 65,000 64,189
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Nabisco Inc.
6.125% 02/01/33 $ 95,000 $ 91,759
Natexis AMBS Co. LLC
8.44% 12/29/49 85,000 83,967 (b)
National Rural Utilities Cooperative
6.046% 04/15/03 100,000 100,656
5.50% 01/15/05 45,000 44,082
National Westminster Bank PLC
7.75% 04/29/49 271,000 282,293
Newcourt Credit Group Inc.
6.875% 02/16/05 70,000 71,628
Newell Co.
6.35% 07/15/08 105,000 105,076
News America Holdings Inc.
8.15% 10/17/36 368,000 399,140
Noram Energy Corp.
6.375% 11/01/03 80,000 78,962
Norfolk Southern Corp.
7.90% 05/15/97 119,000 131,114
Northrop-Grumman Corp.
8.625% 10/15/04 75,000 82,698
Occidental Petroleum Corp.
7.375% 11/15/08 115,000 115,672
Pepsi Bottling Holdings Inc.
5.375% 02/17/04 200,000 196,008 (b)
5.625% 02/17/09 70,000 67,900 (b)
Philip Morris Cos. Inc.
7.25% 09/15/01 80,000 82,331
Phillips Petroleum Co.
6.375% 03/30/09 100,000 99,816
Pitney Bowes Credit
9.25% 06/15/08 100,000 121,190
Raytheon Co.
6.75% 08/15/07 100,000 102,523
RJR Nabisco Inc.
7.625% 09/15/03 225,000 230,276
Safeway Inc.
5.75% 11/15/00 75,000 75,053
Sprint Capital Corp.
5.70% 11/15/03 70,000 69,083
6.125% 11/15/08 70,000 68,815
6.875% 11/15/28 95,000 93,803
Stop & Shop Cos. Inc.
9.75% 02/01/02 50,000 54,519
Sun Life Canada Capital Trust
8.526% 05/29/49 301,000 308,098 (b)
SunAmerica Inc.
5.60% 07/31/97 390,000 320,034
Suntrust Banks Inc.
6.00% 01/15/28 80,000 78,867
Tele-Communications Inc.
9.80% 02/01/12 80,000 104,866
- -----------
See Notes to Schedule of Investments and Notes to Financial statements.
42
<PAGE>
SCHEDULE OF INVESTMENTS MARCH 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Texas Utilities Co.
5.94% 10/15/01 $ 340,000 $ 342,798
Time Warner Inc.
10.15% 05/01/12 263,000 342,799
Time Warner Pass-Through Asset Trust
6.10% 12/30/01 90,000 90,698 (b)
Times Mirror Co.
6.61% 09/15/27 110,000 113,792
Toledo Edison Co.
7.38% 03/31/00 411,000 415,311
Turner Broadcasting Systems Inc.
8.38% 07/01/13 115,000 133,172
Tyco International Group S.A.
6.25% 06/15/03 140,000 140,916
6.125% 11/01/08 85,000 83,367 (b)
7.00% 06/15/28 95,000 93,914
U.S. West Capital Funding Inc.
6.125% 07/15/02 40,000 40,417
6.875% 07/15/28 60,000 60,044
Union Pacific Corp.
6.79% 11/09/07 140,000 143,283
United Illuminating Co.
6.25% 12/15/02 30,000 29,812
United Parcel Service Inc.
8.375% 04/01/30 147,000 176,393
USA Waste Services Inc.
6.125% 07/15/01 150,000 150,660
USX Marathon Group
9.80% 07/01/01 80,000 86,034
8.125% 07/15/23 80,000 84,654
Viacom Inc.
7.75% 06/01/05 307,000 327,345
Washington Mutual Capital
8.375% 06/01/27 70,000 73,514
Waste Management Inc.
6.65% 05/15/05 105,000 107,245
Westdeutsche Landesbank
6.75% 06/15/05 150,000 151,308
Williams Cos. Inc.
6.125% 02/15/02 155,000 155,358
Yale University
7.375% 04/15/96 461,000 511,927
Zurich Capital Trust
8.376% 06/01/37 100,000 106,006 (b)
TOTAL CORPORATE NOTES
(COST $16,140,960) 15,996,347
NON-AGENCY MORTGAGE BACKED SECURITIES -- 5.6%
Chase Commercial Mortgage Securities Corp.
6.39% 11/18/08 249,000 249,389
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp.
6.49% 05/15/08 $ 138,000 $ 138,905
DLJ Commercial Mortgage Corp.
6.24% 11/12/31 276,000 273,240
GMAC Commercial Mortgage Security Inc.
6.42% 08/15/08 138,000 139,013
9.88% 08/15/23 2,256,862 93,801 (d)
GS Mortgage Securities Corp.
6.86% 07/13/30 250,000 258,203
Merrill Lynch Mortgage Investors Inc.
6.39% 02/15/30 114,000 114,196
Morgan Stanley Capital Inc.
6.86% 05/15/06 271,035 278,447 (b)
6.52% 01/15/08 133,000 134,268
6.21% 09/15/08 410,000 405,900
9.81% 04/15/23 1,111,064 47,567 (d)
6.01% 11/15/30 161,170 160,767
6.48% 11/15/30 275,000 276,977
9.96% 11/15/31 1,733,990 88,054 (b,d)
Nationslink Funding Corp.
6.001% 11/20/07 92,026 91,796
6.476% 07/20/08 275,000 276,934
Sawgrass Finance REMIC Trust
6.45% 01/20/06 334,000 335,931
Vornado Finance Corp.
6.36% 12/01/00 640,000 645,500 (b)
TOTAL NON-AGENCY MORTGAGE BACKED SECURITIES
(COST $4,028,929) 4,008,888
NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 1.9%
Blackrock Capital Finance
6.266% 11/25/28 122,874 120,263
7.22% 11/25/28 350,000 349,344
7.25% 11/25/28 207,651 178,840
Salomon Brothers Mortgage Securities Inc.
7.00% 07/25/24 748,217 701,513
TOTAL NON-AGENCY COLLATERALIZED
MORTGAGE OBLIGATIONS
(COST $1,403,776) 1,349,960
TOTAL BONDS AND NOTES
(COST $69,661,286) 69,163,410
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
PREFERRED STOCK -- 0.3%
- --------------------------------------------------------------------------------
CORPORATE PREFERRED
Centaur Funding Corp. (Series B),
9.08% 125 138,871 (b)
LaSalle National , 6.46% 35 37,713
TCI Communications Inc., 10.00% 3,200 86,600
TOTAL PREFERRED STOCK
(COST $249,625) 263,184
- -------------
See Notes to Schedule of Investments and Notes to Financial statements.
43
<PAGE>
SCHEDULE OF INVESTMENTS MARCH 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(COST $69,910,911) $69,426,594
SHORT-TERM INVESTMENTS -- 8.7%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund 6,348 6,348
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES
Federal Home Loan Bank
4.80% 04/01/99 $6,210,000 6,210,000
TOTAL SHORT-TERM INVESTMENTS
(COST $6,216,348) 6,216,348
NUMBER
EXPIRATION DATE/ OF
STRIKE PRICE CONTRACTS VALUE
- --------------------------------------------------------------------------------
CALL OPTIONS -- 0.0%
- --------------------------------------------------------------------------------
U.S. Treasury Notes Apr 99/98.56 (604) (47)
U.S. Treasury Notes Apr 99/99.56 (595) (191)
U.S. Treasury Notes Apr 99/98.72 (600) (609)
(WRITTEN OPTION PREMIUM $(4,922)) (847)
- --------------------------------------------------------------------------------
PUT OPTIONS -- 0.0%
- --------------------------------------------------------------------------------
U.S. Treasury Notes Apr 99/92.56 (604) (660)
U.S. Treasury Notes Apr 99/93.56 (595) (3,665)
U.S. Treasury Notes Apr 99/92.72 (600) (3,047)
(WRITTEN OPTION PREMIUM $(5,439)) (7,372)
OTHER ASSETS AND LIABILITIES,
NET (6.0)% (4,312,767)
------------
NET ASSETS-- 100% $71,321,956
============
- ------------
See Notes to Schedule of Investments and Notes to Financial statements.
44
<PAGE>
MONEY MARKET FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[LINE GRAPH OMITTED]
Money Market Fund 90 Day T-bill
12/2/97 $10000.00 $10000.00
10045.17 10043.00
Jan-98 10091.62 10085.36
10132.93 10128.29
Mar-98 10178.79 10170.85
10223.34 10212.93
May-98 10269.49 10254.78
10313.99 10297.38
Jul-98 10360.68 10340.15
10407.71 10382.12
Sep-98 10453.23 10419.19
10498.50 10456.19
Nov-98 10541.31 10495.20
10585.27 10533.60
Jan-99 10628.80 10572.57
10667.30 10612.34
Mar-99 10709.49 10651.26
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED MARCH 31, 1999
- --------------------------------------------------------------------------------
SIX ONE SINCE
MONTHS YEAR INCEPTION COMMENCEMENT
- --------------------------------------------------------------------------------
Money Market Fund 2.45% 5.21% 5.29% 12/2/97
- --------------------------------------------------------------------------------
90 day T-Bill 2.23% 4.72% 4.85%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECTOR ALLOCATION AS OF MARCH 31, 1999
- --------------------------------------------------------------------------------
[PIE GRAPH OMITTED]
U.S. GOVERNMENTS 34.6%
CERTIFICATES OF DEPOSITS 15.3%
COMMERICAL PAPER 50.0%
CASH & OTHER 0.1%
- --------------------------------------------------------------------------------
FUND YIELD AT MARCH 31, 1999
- --------------------------------------------------------------------------------
FUND IBC MONEY FUND
- --------------------------------------------------------------------------------
7 day current 4.63%+ 4.35%
- --------------------------------------------------------------------------------
7 day effective 4.74% 4.44%
- --------------------------------------------------------------------------------
CURRENT YIELD REPRESENTS INCOME EARNED ON AN INVESTMENT IN THE MONEY MARKET FUND
FOR A SEVEN DAY PERIOD AND THEN ANNUALIZED.
EFFECTIVE YIELD IS CALCULATED SIMILARLY BUT IS SLIGHTLY HIGHER BECAUSE IT
REFLECTS THE COMPOUNDING EFFECT OF EARNINGS ON REINVESTED DIVIDENDS.
INVESTMENT PROFILE
A mutual fund designed for investors who seek a high
level of current income consistent with the preservation of
capital and maintenance of liquidity by investing in U.S. dollar
denominated, short-term money market instruments.
AN INVESTMENT IN THE MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH
THE FUND SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT
IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND.
+ The seven day current yield, rather than the total return, more closely
reflects the current earnings of the Money Market Fund at March 31, 1999.
SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
45
<PAGE>
SCHEDULE OF INVESTMENTS MARCH 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
MONEY MARKET FUND
PRINCIPAL AMORTIZED
AMOUNT COST
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 99.9%
- --------------------------------------------------------------------------------
U.S. GOVERNMENTS (d) -- 34.6%
Federal Agricultural Mortgage
Corp.
4.82% 4/14/99 $240,000 $ 239,589
Federal Home Loan Bank
4.74% 07/07/99 310,000 306,133
Federal Home Loan Mortgage Corp.
4.71% 04/14/99 530,000 529,091
4.71% 04/15/99 300,000 299,447
4.75% 04/19/99 150,000 149,647
4.96% 04/23/99 280,000 279,172
4.87% 06/15/99 220,000 217,823
Federal National Mortgage Assoc.
4.99% 04/01/99 390,000 390,000
4.95% 04/08/99 110,000 109,898
TOTAL U.S. GOVERNMENTS
(COST $2,520,800) 2,520,800
COMMERCIAL PAPER -- 50.0%
Abbey National PLC
4.81% 05/17/99 290,000 288,218
Bank of Montreal
4.87% 04/23/99 300,000 300,000
Bank of Nova Scotia
4.828% 05/28/99 280,000 277,860
BankAmerica Corp.
4.80% 04/21/99 290,000 289,227
Citicorp
4.86% 04/06/99 290,000 289,804
Credit Suisse
4.88% 04/14/99 300,000 299,471
First Union Corp.
4.79% 04/20/99 290,000 289,267
Halifax Building Society
4.73% 05/05/99 290,000 288,705
Morgan (J.P.) & Co. Inc.
4.81% 07/02/99 290,000 286,435
Morgan Stanley Group Inc.
4.85% 06/02/99 290,000 287,578
Societe General North America Inc.
4.78% 04/26/99 290,000 289,037
UBS Finance Delaware Inc.
4.81% 05/03/99 220,000 219,059
Wells Fargo Company
4.81% 04/12/99 230,000 229,662
TOTAL COMMERCIAL PAPER
(COST $3,634,323) 3,634,323
PRINCIPAL AMORTIZED
AMOUNT COST
- --------------------------------------------------------------------------------
YANKEE CERTIFICATES OF DEPOSIT -- 15.3%
Bayerische Hypotheken Bank
4.87% 05/19/99 $230,000 $ 230,000
Canadian Imperial Bank of
Commerce
4.84% 04/28/99 300,000 300,000
Deutsche Bank AG
4.87% 04/22/99 300,000 300,000
Toronto-Dominion Bank
4.92% 04/14/99 280,000 280,000
TOTAL YANKEE CERTIFICATES OF DEPOSIT
(COST $1,110,000) 1,110,000
TOTAL SHORT-TERM INVESTMENTS
(COST $7,265,123) 7,265,123
OTHER ASSETS AND LIABILITIES,
NET 0.1% 8,778
-----------
NET ASSETS-- 100% $7,273,901
===========
- --------------
See Notes to Schedule of Investments and Notes to Financial statements.
46
<PAGE>
NOTES TO PERFORMANCE MARCH 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
Total returns take into account changes in share price and assume reinvestment
of dividends and capital gains, if any. Investment returns and net asset value
on an investment will fluctuate and you may have a gain or loss when you sell
your shares.
The Standard & Poor's ("S&P") 500 Composite Price Index of stocks (S&P 500), the
S&P 400 MidCap Composite Price Index of stocks (S&P MidCap 400), the Russell
2000 Index (Russell 2000), the Morgan Stanley Capital International Europe,
Australasia, Far East Index (MSCI EAFE), the Morgan Stanley Capital
International Europe Index, (MSCI Europe), the Morgan Stanley Capital
International Emerging Markets Free Index (MSCI EMF), and the Lehman Brothers
Aggregate Bond Index (LB Aggregate) are unmanaged indices and do not reflect the
actual cost of investing in the instruments that comprise each index.
The S&P 500 is a capitalization-weighted index of 500 widely held stocks
recognized by investors to be representative of the stock market in general. The
S&P MidCap 400 is a capitalization-weighted index of 400 U.S. stocks with a
median market capitalization. The Russell 2000 measures the performance of the
smallest companies in the Russell 3000 Index, which represents approximately 10%
of the total market capitalization of the Russell 3000 Index, which measures the
performance of the 3000 largest U.S. companies based on total market
capitalization, which represents approximately 98% of the investable U.S. equity
market. MSCI EAFE is a composite of foreign securities traded in 22 developed
markets representing Europe, Australasia and Far East. MSCI Europe is a
composite of securities traded in 15 developed markets in Europe. MSCI EMF is a
composite of securities available to non-domestic investors traded in 25
emerging markets. LB Aggregate is a composite of short-, medium-, and long-term
bond performance and is widely recognized as a barometer of the bond market in
general.
The results shown for the foregoing indices assume the reinvestment of net
dividends or interest.
The 90-Day T-Bill is the average return on three month U.S. Treasury Bills. The
IBC Money Fund Report yields represent the average yields of 912 taxable money
market funds.
A number of the broad market returns are not available from the funds'
commencement of investment operations through March 31, 1999 and therefore are
calculated from the month end nearest to the funds' commencement of operation
date.
The peer universe of funds used in our peer ranking calculation is based on the
blend of Lipper peer categories, as shown. This blend is the same as the
category blend used by the Wall Street Journal (the Money Market Fund, which is
not in the Wall Street Journal). The actual number of funds and numerical
rankings in the Lipper and Wall Street Journal universes could differ since the
Wall Street Journal excludes certain funds which do not meet their net asset or
number of shareholder publication thresholds. Lipper is an independent mutual
fund rating service.
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
Standard & Poor's, S&P, and S&P 500 are trademarks of The McGraw-Hill Companies,
Inc. and have been licensed for use. The S&P 500 Index Fund is not sponsored,
endorsed, sold or promoted by Standard &Poor's, and and Standard & Poor's makes
no representation or warranty, express or implied, to the investors of the fund
or any member of the public regarding the advisability of investing in the
securities generally or in this fund particularly or the ability of the S&P 500
Index Fund to track general stock market performance.
NOTES TO SCHEDULES OF INVESTMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Pursuant to Rule 144A of Securities Act of 1933, these securities may be
resold in transactions exempt from registration, normally to qualified
institutional buyers. At March 31, 1999, these securities amounted to
$56,895, $313,243, $710,497 and $2,839,414 or 0.6%, 4.4%, 0.5%, and 4.0% of
net assets for the Europe Equity, Emerging Markets Fund, International
Equity Fund, and Income Fund, respectively. These securities have been
determined to be liquid using guidelines established by the Board of
Trustees.
(c) Settlement is on a delayed delivery or when-issued basis with final maturity
to be announced (TBA) in the future.
(d) Coupon amount represents effective yield.
(e) At March 31, 1999, all or a portion of this security was pledged to cover
collateral requirements for futures, options and TBA's.
(f) Rights - Sociedad Quimica y Minera de Chile S.A. rights expires 4/7/99.
(g) State Street Corp. is the parent company of State Street Bank & Trust Co.,
the fund's custodian.
(h) At March 31, 1999, this security was being re-registered by the Indian
exchange. As a function of this process, shares are illiquid during the
period of re-registration.
(i) Securities with limited voting rights.
(j) Non-convertible savings shares with no voting rights.
ABBREVIATIONS:
ADR -- American Depositary Receipt
GDR -- Global Depository Receipt
Regd. -- Registered
REMIC -- Real Estate Mortgage Investment Conduit
SDR -- Special Drawing Rights
STRIPS -- Separate Trading of Registered Interest
and Principal of Security
47
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA BASED ON A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
(MARCH 31, 1999 DATA IS UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MID-CAP
U.S. S&P 500 MID-CAP VALUE
EQUITY INDEX GROWTH EQUITY
FUND FUND FUND FUND
3/31/99 9/30/98 3/31/99 9/30/98 3/31/99 9/30/98 3/31/99
- -----------------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE -- 11/25/97 -- 11/25/97 -- 11/25/97 12/31/98
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .......... $10.62 $ 10.00 $10.85 $ 10.00 $8.87 $ 10.00 $10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ...................... 0.05 0.11 0.09 0.14 0.03 0.04 0.03
Net realized and unrealized gains (losses)
on investments .......................... 2.74 0.52 2.91 0.72 1.68 (1.16) 0.09
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS 2.79 0.63 3.00 0.86 1.71 (1.12) 0.12
- -----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ...................... 0.13 0.01 0.17 0.01 0.05 0.01 0.00
Net realized gains ......................... 0.25 0.00 0.00 0.00 0.00 0.00 0.00
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ........................... 0.38 0.01 0.17 0.01 0.05 0.01 0.00
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ................ $13.03 $ 10.62 $13.68 $ 10.85 $10.53 $ 8.87 $10.12
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (A) .............................. 26.71% 6.28% 27.85% 8.63% 19.39% (11.25%) 1.20%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ... $161,062 $114,553 $25,803 $20,186 $15,774 $13,208 $10,117
Ratios to average net assets:
Net investment income* .................. 0.97% 1.21% 1.38% 1.57% 0.64% 0.53% 1.30%
Net Expenses* ........................... 0.43% 0.42% 0.15% 0.15% 0.55% 0.55% 0.65%
Portfolio turnover rate .................... 28% 29% 2% 1% 44% 14% 7%
</TABLE>
<TABLE>
<CAPTION>
SMALL-CAP INTERNATIONAL EUROPE EMERGING
VALUE EQUITY EQUITY EQUITY MARKETS
FUND FUND FUND FUND
3/31/99 9/30/98 3/31/99 9/30/98 3/31/99 3/31/99 9/30/98
- -----------------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE -- 8/3/98 -- 11/25/97 1/29/99 -- 11/25/97
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .......... $ 8.91 $10.00 $10.06 $ 10.00 $10.00 $6.78 $10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ...................... 0.01 0.02 0.02 0.14(b) 0.02 0.02 0.07
Net realized and unrealized gains (losses)
on investments .......................... (0.24) (1.11) 2.34 (0.07)(b) (0.40) 2.63 (3.26)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS (0.23) (1.09) 2.36 0.07 (0.38) 2.65 (3.19)
- -----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ...................... 0.03 0.00 0.12 0.01 0.00 0.02 0.03
Net realized gains ......................... 0.00 0.00 0.35 0.00 0.00 0.00 0.00
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ........................... 0.03 0.00 0.47 0.01 0.00 0.02 0.03
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ................ $8.65 $8.91 $11.95 $ 10.06 $9.62 $9.41 $ 6.78
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (A) .............................. (2.57%) (10.90%) 23.90% 0.66% (3.80%) 39.15% (31.96%)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ... $8,806 $9,056 $136,761 $114,414 $9,619 $7,049 $5,063
Ratios to average net assets:
Net investment income* .................. 0.23% 1.68% 0.29% 1.72% 1.33% 0.56% 0.82%
Net Expenses* ........................... 0.70% 0.70% 0.63% 0.64% 0.75% 1.05% 1.05%
Portfolio turnover rate .................... 117% 19% 27% 53% 19% 53% 77%
</TABLE>
<TABLE>
<CAPTION>
MONEY
INCOME MARKET
FUND FUND
3/31/99 9/30/98 3/31/99 9/30/98
- -----------------------------------------------------------------------------------------------
INCEPTION DATE -- 11/21/97 -- 12/2/97
<S> <C> <C> <C> <C>
Net asset value, beginning of period .......... $10.39 $ 10.00 $1.00 $ 1.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ...................... 0.28 0.51 0.02 0.04
Net realized and unrealized gains (losses)
on investments .......................... (0.29) 0.39 0.00 0.00
- -----------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS (0.01) 0.90 0.02 0.04
- -----------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ...................... 0.29 0.51 0.02 0.04
Net realized gains ......................... 0.18 0.00 0.00 0.00
- -----------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ........................... 0.47 0.51 0.02 0.04
- -----------------------------------------------------------------------------------------------
Net asset value, end of period ................ $9.91 $ 10.39 $1.00 $ 1.00
- -----------------------------------------------------------------------------------------------
TOTAL RETURN (A) .............................. (.15%) 9.21% 2.45% 4.53%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ... $71,322 $71,444 $7,274 $7,012
Ratios to average net assets:
Net investment income* .................. 5.69% 5.81% 4.86% 5.33%
Net Expenses* ........................... 0.31% 0.31% 0.25% 0.25%
Portfolio turnover rate .................... 120% 323% N/A N/A
<FN>
- -----------------
NOTES TO FINANCIAL HIGHLIGHTS
(a) Total returns are historical and assume changes in share price, reinvestment
of dividends and capital gains, and assume no sales charge. Periods less
than one year are not annualized.
(b) As a result of the timing of purchases and sales of Fund shares, per share
amounts do not accord with aggregate amounts appearing in Statement of
Changes.
* Annualized for periods less than one year.
</FN>
</TABLE>
- ----------
See Notes to Financial Highlights and Notes to Financial Statements.
48 & 49
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
MID-CAP
U.S. S&P 500 MID-CAP VALUE SMALL-CAP
EQUITY INDEX GROWTH EQUITY VALUE EQUITY
FUND FUND FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at market
(cost $131,519,351; $18,116,559;
$13,345,772; $9,719,407; $8,648,424;
$122,793,338; $9,806,295; $5,911,700;
$69,910,911 and $0 respectively) ........... $ 158,341,640 $ 24,469,409 $ 14,763,118 $ 9,920,548 $ 8,629,831
Short-term investments (at amortized cost) .... 2,673,873 1,331,506 1,355,765 184,745 183,060
Cash .......................................... -- -- -- -- --
Foreign currency (cost $0; $0; $0; $0; $0
$44,051; $35,337; $216,817; $0 and $0,
respectively) .............................. -- -- -- -- --
Receivable for investments sold ............... 160,731 -- -- -- 72,410
Income receivables ............................ 147,813 27,924 21,668 10,584 5,972
Receivable for fund shares sold ............... 20,847,899 -- -- -- --
Receivable from GEIM .......................... -- -- -- 1,067 --
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS ............................... 182,171,956 25,828,839 16,140,551 10,116,944 8,891,273
- --------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Options written, at market* ................... -- -- -- -- --
Distributions payable to shareholders ......... -- -- -- -- --
Payable for investments purchased ............. 20,325,286 -- 359,368 -- 80,382
Payable for fund shares redeemed .............. 730,000 -- -- -- --
Payable to GEIM ............................... 48,605 3,359 7,270 -- 5,289
Variation margin on futures ................... 5,700 22,400 -- -- --
Payable to Custodian .......................... -- 100 -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES .......................... 21,109,591 25,859 366,638 -- 85,671
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ....................................... $161,062,365 $25,802,980 $15,773,913 $10,116,944 $8,805,602
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital paid in ............................... $130,035,824 $19,151,408 $15,240,325 $10,000,010 $10,014,220
Undistributed (overdistributed)
net investment income ...................... 319,540 89,339 23,703 30,111 434
Accumulated net realized gain (loss) .......... 3,890,703 232,883 (906,861) (114,318) (1,190,459)
Net unrealized appreciation/ (depreciation) on:
Investments ................................ 26,822,289 6,352,850 1,417,346 201,141 (18,593)
Futures .................................... (5,963) (23,500) (600) -- --
Written options ............................ -- -- -- -- --
Foreign currency related transactions ...... (28) -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ....................................... $161,062,365 $25,802,980 $15,773,913 $10,116,944 $ 8,805,602
- --------------------------------------------------------------------------------------------------------------------------------
Shares outstanding ($.001 par value) ............. 12,363,070 1,885,795 1,497,911 1,000,001 1,017,654
Net asset value, offering and redemption
price per share ............................... $ 13.03 $ 13.68 $ 10.53 $ 10.12 $ 8.65
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EUROPE EMERGING MONEY
EQUITY EQUITY MARKETS INCOME MARKET
FUND FUND FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at market
(cost $131,519,351; $18,116,559;
$13,345,772; $9,719,407; $8,648,424;
$122,793,338; $9,806,295; $5,911,700;
$69,910,911 and $0 respectively) ........... $ 132,333,813 $ 9,470,506 $ 6,798,855 $ 69,426,594 $ --
Short-term investments (at amortized cost) .... 3,173,136 -- 26,485 6,216,349 7,265,123
Cash .......................................... -- -- -- -- 2,409
Foreign currency (cost $0; $0; $0; $0; $0
$44,051; $35,337; $216,817; $0 and $0,
respectively) .............................. 43,832 35,343 216,948 -- --
Receivable for investments sold ............... 2,750,375 299,551 116,166 1,216,849 --
Income receivables ............................ 483,127 16,516 26,360 767,475 13,467
Receivable for fund shares sold ............... -- -- -- -- --
Receivable from GEIM .......................... -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS ............................... 138,784,283 9,821,916 7,184,814 77,627,267 7,280,999
- --------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Options written, at market* ................... -- -- -- 8,220 --
Distributions payable to shareholders ......... -- -- -- 67,107 5,533
Payable for investments purchased ............. 1,951,824 143,263 130,127 6,211,472 --
Payable for fund shares redeemed .............. -- -- -- -- --
Payable to GEIM ............................... 71,619 5,280 5,951 18,512 1,565
Variation margin on futures ................... -- -- -- -- --
Payable to Custodian .......................... -- 54,455 -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES .......................... 2,023,443 202,998 136,078 6,305,311 7,098
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ....................................... $136,760,840 $9,618,918 $7,048,736 $71,321,956 $7,273,901
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital paid in ............................... $124,469,689 $10,000,000 $7,601,442 $72,099,811 $7,273,862
Undistributed (overdistributed)
net investment income ...................... 249,448 20,499 13,606 354,409 --
Accumulated net realized gain (loss) .......... 2,511,847 (66,659) (1,450,439) (650,088) 39
Net unrealized appreciation/ (depreciation) on:
Investments ................................ 9,540,475 (335,789) 887,155 (484,317) --
Futures .................................... -- -- -- -- --
Written options ............................ -- -- -- 2,141 --
Foreign currency related transactions ...... (10,619) 867 (3,028) -- --
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ....................................... $136,760,840 $ 9,618,918 $7,048,736 $71,321,956 $7,273,901
- --------------------------------------------------------------------------------------------------------------------------------
Shares outstanding ($.001 par value) ............. 11,442,623 1,000,000 749,004 7,195,989 7,273,863
Net asset value, offering and redemption
price per share ............................... $ 11.95 $ 9.62 $ 9.41 $ 9.91 $ 1.00
<FN>
* Premium received for the Income Fund was $10,361.
</FN>
</TABLE>
- -------------
See Notes to Financial Statements.
50 & 51
<PAGE>
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED MARCH 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
MID-CAP
U.S. S&P 500 MID-CAP VALUE SMALL-CAP
EQUITY INDEX GROWTH EQUITY VALUE EQUITY
FUND FUND FUND FUND* FUND
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
<S> <C> <C> <C> <C> <C>
Dividends ................................ $ 817,843 $ 152,661 $ 50,169 $ 32,879 $ 36,265
Interest ................................. 57,601 29,082 38,117 12,377 7,293
Less: Foreign taxes withheld ............. (2,023) (242) (632) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ............................. 873,421 181,501 87,654 45,256 43,558
- ---------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administration fees ...... 266,305 17,718 40,427 15,044 32,691
Trustees' fees ........................ 2,887 517 332 101 216
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES ........................... 269,192 18,235 40,759 15,145 32,907
- ---------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME .................... 604,229 163,266 46,895 30,111 10,651
- ---------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ..................... 3,925,419 58,047 (314,505) (114,318) (983,227)
Futures ......................... 229,794 255,400 26,825 -- --
Written Options ................. -- -- -- -- --
Foreign currency related
transactions ................. (1,201) -- (5) -- --
INCREASE (DECREASE) IN UNREALIZED
APPRECIATION/DEPRECIATION ON:
Investments ..................... 25,565,024 5,153,036 2,808,303 201,141 741,276
Futures ......................... (39,432) (13,200) (2,100) -- --
Written options ................. -- -- -- -- --
Foreign currency related
transactions ................. (297) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments ........................ 29,679,307 5,453,283 2,518,518 86,823 (241,951)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............. $30,283,536 $5,616,549 $ 2,565,413 $116,934 $(231,300)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EUROPE EMERGING MONEY
EQUITY EQUITY MARKETS INCOME MARKET
FUND FUND** FUND FUND FUND
- -----------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
<S> <C> <C> <C> <C> <C>
Dividends ................................ $ 568,891 $ 20,188 $ 43,947 $ 21,688 $ --
Interest ................................. 79,376 13,395 8,073 2,095,822 183,233
Less: Foreign taxes withheld ............. (47,688) (1,510) (4,004) -- --
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ............................. 600,579 32,073 48,016 2,117,510 183,233
- -----------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administration fees ...... 408,820 11,506 31,243 107,404 8,948
Trustees' fees ........................ 2,896 68 127 1,652 165
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES ........................... 411,716 11,574 31,370 109,056 9,113
- -----------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME .................... 188,863 20,499 16,646 2,008,454 174,120
- -----------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ..................... 2,783,062 (27,178) (1,196,129) (27,672) --
Futures ......................... -- -- -- -- --
Written Options ................. -- -- -- 59,056 --
Foreign currency related
transactions ................. (127,972) (39,481) (21,972) -- --
INCREASE (DECREASE) IN UNREALIZED
APPRECIATION/DEPRECIATION ON:
Investments ..................... 24,450,196 (335,789) 3,189,218 (2,129,326) --
Futures ......................... -- -- -- -- --
Written options ................. -- -- -- 910 --
Foreign currency related
transactions ................. (19,486) 867 (2,362) -- --
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments ........................ 27,085,800 (401,581) 1,968,755 (2,097,032) --
- -----------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............. $27,274,663 $(381,082) $1,985,401 $ (88,578) $174,120
- -----------------------------------------------------------------------------------------------------------------------------
<FN>
* For the period December 31, 1998 (inception) through March 31, 1999.
** For the period January 29, 1999 (inception) through March 31, 1999.
</FN>
</TABLE>
- ------------
See Notes to Financial Statements.
52 & 53
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
U.S. S&P 500 MID-CAP
EQUITY INDEX GROWTH
FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED PERIOD ENDED PERIOD ENDED PERIOD
3/31/99 ENDED 3/31/99 ENDED 3/31/99 ENDED
(UNAUDITED) 9/30/98(a) (UNAUDITED) 9/30/98(a) (UNAUDITED) 9/30/98(a)
- ---------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income ................. $ 604,229 $ 1,181,640 $ 163,266 $ 266,931 $ 46,895 $ 64,857
Net realized gain (loss) on investments,
futures, and foreign currency related
transactions ........................ 4,154,012 2,418,734 313,447 (80,564) (287,685) (619,195)
Net increase (decrease) in unrealized
appreciation/depreciation ........... 25,525,295 1,291,003 5,139,836 1,189,514 2,806,203 (1,389,457)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
from operations ..................... 30,283,536 4,891,377 5,616,549 1,375,881 2,565,413 (1,943,795)
- ---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ................. (1,388,813) (80,261) (320,568) (20,501) (80,475) (7,583)
Net realized gains .................... (2,679,706) -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ..................... (4,068,519) (80,261) (320,568) (20,501) (80,475) (7,583)
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
operations and distributions .......... 26,215,017 4,811,116 5,295,981 1,355,380 2,484,938 (1,951,378)
- ---------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares .......... 20,847,899 112,863,469 -- 18,862,804 -- 15,291,488
Value of distributions reinvested ..... 4,068,514 80,261 320,574 20,501 80,477 7,583
Cost of shares redeemed ............... (4,621,578) (3,202,333) -- (52,260) -- (139,195)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase from share transactions .. 20,294,835 109,741,397 320,574 18,831,045 80,477 15,159,876
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS . 46,509,852 114,552,513 5,616,555 20,186,425 2,565,415 13,208,498
NET ASSETS
Beginning of period ..................... 114,552,513 -- 20,186,425 -- 13,208,498 --
- ---------------------------------------------------------------------------------------------------------------------------
End of period ...........................$161,062,365 $114,552,513 $25,802,980 $20,186,425 $15,773,913 $13,208,498
- ---------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED (OVERDISTRIBUTED) NET
INVESTMENT INCOME, END OF PERIOD ........ $319,540 $1,104,124 $ 89,339 $246,641 $ 23,703 $ 57,283
- ---------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES:
Shares sold by subscription ........... 1,599,992 11,070,334 -- 1,862,744 -- 1,502,376
Issued for distributions reinvested ... 349,529 7,974 26,105 2,045 8,427 773
Shares redeemed ....................... (373,581) (291,178) -- (5,099) -- (13,665)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase in fund shares ................ 1,575,940 10,787,130 26,105 1,859,690 8,427 1,489,484
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
MID-CAP
VALUE SMALL-CAP INTERNATIONAL EUROPE
EQUITY VALUE EQUITY EQUITY EQUITY
FUND FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------------------------
PERIOD SIX MONTHS SIX MONTHS PERIOD
ENDED ENDED PERIOD ENDED PERIOD ENDED
3/31/99 3/31/99 ENDED 3/31/99 ENDED 3/31/99
(UNAUDITED)(b) (UNAUDITED) 9/30/98(c) (UNAUDITED) 9/30/98(a) (UNAUDITED)(d)
- --------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income ................. $30,111 $ 10,651 $ 23,457 $ 188,863 $ 1,503,970 $ 20,499
Net realized gain (loss) on investments,
futures, and foreign currency related
transactions ........................ (114,318) (983,227) (207,232) 2,655,090 3,833,256 (66,659)
Net increase (decrease) in unrealized
appreciation/depreciation ........... 201,141 741,276 (759,869) 24,430,710 (14,900,854) (334,922)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
from operations ..................... 116,934 (231,300) (943,644) 27,274,663 (9,563,628) (381,082)
- --------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ................. -- (33,674) -- (1,386,768) (21,580) --
Net realized gains .................... -- -- -- (4,011,536) -- --
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ..................... -- (33,674) -- (5,398,304) (21,580) --
- --------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
operations and distributions .......... 116,934 (264,974) (943,644) 21,876,359 (9,585,208) (381,082)
- --------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares .......... 10,000,010 10,100,000 10,000,110 -- 126,319,228 10,000,000
Value of distributions reinvested ..... -- 33,670 -- 5,398,360 21,580 --
Cost of shares redeemed ............... -- (10,119,560) -- (4,927,676) (2,341,803) --
- --------------------------------------------------------------------------------------------------------------------------------
Net increase from share transactions .. 10,000,010 14,110 10,000,110 470,684 123,999,005 10,000,000
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS . 10,116,944 (250,864) 9,056,466 22,347,043 114,413,797 9,618,918
NET ASSETS
Beginning of period ..................... -- 9,056,466 -- 114,413,797 -- --
- -------------------------------------------------------------------------------------------------------------------------------
End of period ........................... $10,116,944 $8,805,602 $9,056,466 $136,760,840 $114,413,797 $9,618,918
- -------------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED (OVERDISTRIBUTED) NET
INVESTMENT INCOME, END OF PERIOD ........ $30,111 $ 434 $23,457 $ 249,448 $ 1,447,353 $ 20,499$
- -------------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES:
Shares sold by subscription ........... 1,000,001 1,013,039 1,016,007 -- 11,565,378 1,000,000
Issued for distributions reinvested ... -- 3,609 -- 489,869 2,109 --
Shares redeemed ....................... -- (1,015,001) -- (425,389) (189,344) --
- -------------------------------------------------------------------------------------------------------------------------------
Net increase in fund shares ................ 1,000,001 1,647 1,016,007 64,480 11,378,143 1,000,000
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
EMERGING MONEY
MARKETS INCOME MARKET
FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED PERIOD ENDED PERIOD ENDED PERIOD
3/31/99 ENDED 3/31/99 ENDED 3/31/99 ENDED
(UNAUDITED)9/30/98(a) (UNAUDITED) 9/30/98(e) (UNAUDITED) 9/30/98(f)
- ------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income ................. $ 16,646 $ 47,014 $ 2,008,454 $ 3,197,364 $ 174,120 $ 492,085
Net realized gain (loss) on investments,
futures, and foreign currency related
transactions ........................ (1,218,101) (244,962) 31,384 916,815 -- 39
Net increase (decrease) in unrealized
appreciation/depreciation ........... 3,186,856 (2,302,729) (2,128,416) 1,646,240 -- --
- ------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
from operations ..................... 1,985,401 (2,500,677) (88,578) 5,760,419 174,120 492,124
- ------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ................. (15,069) (22,361) (2,020,084) (3,199,802) (174,120) (492,085)
Net realized gains .................... -- -- (1,229,810) -- -- --
- ------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ..................... (15,069) (22,361) (3,249,894) (3,199,802) (174,120) (492,085)
- ------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
operations and distributions .......... 1,970,332 (2,523,038) (3,338,472) 2,560,617 -- 39
- ------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares .......... -- 7,584,622 -- 67,027,457 -- 32,721,555
Value of distributions reinvested ..... 15,068 22,361 3,216,292 3,182,314 171,675 488,997
Cost of shares redeemed ............... -- (20,609) -- (1,326,252) -- (26,108,365)
- ------------------------------------------------------------------------------------------------------------------------
Net increase from share transactions .. 15,068 7,586,374 3,216,292 68,883,519 171,675 7,102,187
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS . 1,985,400 5,063,336 (122,180) 71,444,136 171,675 7,102,226
NET ASSETS
Beginning of period ..................... 5,063,336 -- 71,444,136 -- 7,102,226 --
- ------------------------------------------------------------------------------------------------------------------------
End of period ........................... $7,048,736 $ 5,063,336 $71,321,956 $71,444,136 $7,273,901 $7,102,226
- ------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED (OVERDISTRIBUTED) NET
INVESTMENT INCOME, END OF PERIOD ........ 13,606 $ 12,029 $ 354,409 $ 366,039$ -- $ --
- ------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES:
Shares sold by subscription ........... -- 746,750 -- 6,692,568 -- 32,721,555
Issued for distributions reinvested ... 1,957 2,224 318,773 313,760 171,676 488,997
Shares redeemed ....................... -- (1,927) -- (129,112) -- (26,108,365)
- ------------------------------------------------------------------------------------------------------------------------
Net increase in fund shares ................ 1,957 747,047 318,773 6,877,216 171,676 7,102,187
- ------------------------------------------------------------------------------------------------------------------------
<FN>
(a) For the period November 25, 1997 (inception) through September 30, 1998.
(b) For the period December 31, 1998 (inception) through March 31, 1999.
(c) For the period August 3, 1998 (inception) through September 30, 1998.
(d) For the period January 29, 1999 (inception) through March 31, 1999.
(e) For the period November 21, 1997 (inception) through September 30, 1998.
(f) For the period December 2, 1997 (inception) through September 30, 1998.
</FN>
</TABLE>
- -----------
See Notes to Financial Statements.
54 & 55
<PAGE>
NOTES TO FINANCIAL STATEMENTS MARCH 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION OF THE FUNDS
GE Institutional Funds (the "Trust") is registered under the Investment Company
Act of 1940 as amended (the "1940 Act") as an open-end management investment
company. The Trust was organized as a Delaware business trust on May 23, 1997,
and is authorized to issue an unlimited number of shares. It is currently
comprised of thirteen investment funds (each a "Fund" and collectively the
"Funds") only ten of which have commenced operations. The 10 active funds are,
as follows: U.S. Equity Fund, S&P 500 Index Fund, Mid-Cap Growth Fund, Mid-Cap
Value Equity Fund, Small-CapValue Equity Fund, International Equity Fund, Europe
Equity Fund, Emerging Markets Fund, Income Fund and Money Market Fund. The Funds
(except Money Market Fund) are presently authorized to issue two classes of
shares -- the Investment Class and the Service Class. However, as of March 31,
1999, only the Investment Class has investors. The Trust expects that most of
the time each fund will have relatively few shareholders, (as compared with most
mutual funds) but that these shareholders will invest substantial amounts in a
Fund (the minimum initial investment in each fund is generally $35 million).
The commencement dates of the Funds were as follows: U.S. Equity Fund, S&P 500
Index Fund, Mid-Cap Growth Fund, International Equity Fund, Emerging Markets
Fund - November 25, 1997; Mid-Cap Value Equity Fund -December 31, 1998;
Small-Cap Value Equity Fund -August 3, 1998; Europe Equity Fund - January 29,
1999; Income Fund - November 21, 1997; and Money Market Fund - December 2, 1997.
These financial statements only represent the activities of the Investment
Class.
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period. Actual results may differ
from those estimates, but are expected to be immaterial.
The following summarizes the significant accounting policies of the Trust:
SECURITY VALUATION AND TRANSACTIONS
Securities for which exchange quotations are readily available are valued at the
last sale price, or if no sales occurred on that day, at the last quoted bid
price. Certain fixed income securities are valued by a dealer or by a pricing
service based upon a computerized matrix system, which considers market
transactions and dealer supplied valuations. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on which
they are principally traded. Options are valued at the last sale price, or if no
sales occurred on that day, at the last quoted bid price. Forward foreign
currency contracts are valued at the mean between the bid and the offered
forward rates as last quoted by a recognized dealer. Short-term investments
maturing within 60 days are valued at amortized cost or original cost plus
accrued interest, both of which approximate current value. Fund positions which
cannot be valued as set forth above are valued at fair value determined under
procedures approved by the Board of Trustees of the Funds.
In accordance with Rule 2a-7 of the 1940 Act, the Money Market Fund values its
securities initially at cost and, thereafter, securities are assumed to have a
constant amortization to maturity of any discount or premium. Amortized cost
approximates fair value.
Transactions are accounted for as of the trade date. Realized gains and losses
on investments sold are recorded on the basis of specific identification cost
for both financial statement and federal tax purposes.
FOREIGN CURRENCY
Accounting records of the Funds are maintained in U.S. dollars. Investment
securities and other assets and liabilities denominated in a foreign currency
are translated to U.S. dollars at the prevailing rates of exchange at period
end. Purchases and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the respective
dates of transactions.
The Funds do not isolate the portion of the results of operations resulting from
changes in foreign exchange rates on investments from the fluctuations arising
from changes in their market prices. Such fluctuations are included in net
realized and unrealized gain or loss from investments. Reported net realized
exchange gains or losses from foreign currency transactions represent gains or
losses on
56
<PAGE>
NOTES TO FINANCIAL STATEMENTS MARCH 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
sales of foreign currencies, currency gains or losses between the trade date and
the settlement date on securities transactions, net realized gains and losses on
sales and maturities of forward foreign currency contracts, and the difference
between the amounts of foreign investment income and withholding taxes accrued
on the Funds' books and the U.S. dollar equivalent of the amounts actually
received or paid. Net unrealized foreign exchange gains and losses arising from
changes in the value of other assets and liabilities as a result of changes in
foreign exchange rates are included as increases or decreases in unrealized
appreciation/depreciation on foreign currency related transactions.
INCOME TAXES
The Funds intend to comply with all sections of the Internal Revenue Code
applicable to regulated investment companies and to distribute substantially all
of their taxable income and realized gains to their shareholders and, therefore,
no provision for federal income tax has been made. Each Fund is treated as a
separate taxpayer for federal income tax purposes. Any net capital and currency
losses incurred after October 31, within each Fund's tax year, are deemed to
arise on the first day of the Fund's next tax year if the Fund so elects to
defer such losses.
The Funds incurred and elected to defer losses at October 31, 1997 as follows:
CURRENCY CAPITAL
----------- -----------
S&P 500 Index Fund $ -- $ 90,864
Mid-Cap Growth Fund 19 616,491
Small-Cap Value Equity Fund -- 207,232
International Equity Fund 33,974 --
Emerging Markets Fund 10,665 188,237
INVESTMENT INCOME
Corporate actions (including cash dividends) are recorded net of non-reclaimable
tax withholdings on the ex-dividend date, except for certain foreign securities
for which corporate actions are recorded as soon after ex-dividend date as such
information is available. Interest income is recorded on the accrual basis. All
discounts and premiums on taxable bonds are accreted or amortized to call or
maturity date, whichever is shorter, using the effective yield method.
EXPENSES
The Funds pay a "unitary fee" equivalent to the Funds' advisory and
administration fee. This fee includes any normal operating expenses payable by
the Funds, except for fees paid to the Trust's independent Trustees.
DISTRIBUTIONS TO SHAREHOLDERS
The Income Fund and Money Market Fund declare investment income dividends daily
and pay them monthly. All other Funds declare and pay dividends from net
investment income annually. All Funds declare and pay net realized capital gains
distributions annually. The character of income and gains to be distributed is
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences include treatment of
realized and unrealized gains and losses on forward foreign currency contracts,
paydown gains and losses on mortgage-backed securities and losses deferred due
to wash sale transactions. Reclassifications are made to the Funds' capital
accounts to reflect income and gains available for distribution (or available
capital loss carryovers) under income tax regulations. These reclassifications
have no impact on net investment income, realized gains or losses, or net asset
value of the Funds. The calculation of net investment income per share in the
Financial Highlights table excludes these adjustments. During any particular
year, net realized gains from investment transactions in excess of any
applicable capital loss carryforwards would be taxable to the Funds if not
distributed and, therefore, will be declared and paid to their shareholders
annually.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
The Funds may purchase or sell securities on a when-issued or forward commitment
basis. These transactions are arrangements in which the Funds purchase and sell
securities with payment and delivery scheduled for a future time. Settlement
dates may be a month or more after entering into these transactions, and the
purchase of securities on a when-issued or forward commitment basis involves a
risk of loss if the value of the underlying security declines prior to the
settlement date. The price of the underlying securities and the date when these
securities will be delivered and paid for are fixed at the time the transaction
is negotiated. This may increase the risk if the other party involved in the
transaction fails to deliver and causes the Funds to subsequently invest at less
advantageous prices and yields. In connection with such purchases, the Funds
maintain cash or liquid assets in an amount equal to purchase commitments for
such underlying securities until settlement date and for sales commitments the
Funds maintain equivalent deliverable securities as "cover"
57
<PAGE>
NOTES TO FINANCIAL STATEMENTS MARCH 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
for the transaction. Unsettled commitments are valued at current market value of
the underlying security. Daily fluctuations in the value of such contracts are
recorded as unrealized gains or losses. The Funds will not enter into such
agreements for the purpose of investment leverage.
FOREIGN SECURITIES
All Funds may invest in foreign securities, subject to certain limitations.
There are certain additional risks involved when investing in foreign securities
(including those denominated in foreign currencies) that are not inherent in
domestic securities. These risks may involve foreign currency exchange rate
fluctuations; changes in foreign exchange control regulations; application of
foreign tax laws, including withholding taxes; lack of uniform accounting,
auditing and financial reporting standards; and increase uncertainty about
changes in governmental administration or economic or monetary policy (in the
United States or abroad). The Funds may be subject to restrictions on the
repatriation or foreign currencies and may be limited on the use or removal of
its assets. Additionally, investments in developing or emerging markets involve
increased uncertainty about adverse political and economic developments as
described above. The ability to hedge currency risk in these markets may be
limited, and therefore, investments in these markets may be exposed to currency
devaluation.
FORWARD FOREIGN CURRENCY CONTRACTS
Certain Funds may enter into forward foreign currency contracts to facilitate
transactions in foreign denominated securities and to manage the Fund's currency
exposure. A forward foreign currency contract is an agreement between two
parties to buy or sell currency at a set price on a future date. Contracts to
sell are generally used to hedge the Fund's investments against currency
fluctuations or to offset a previous contract to buy. Contracts to buy are
generally used to hedge exposure to foreign currencies or to offset a previous
contract to sell. Currency exposure exists during the period that a foreign
denominated investment is held or during a period between the trade date and
settlement date of an investment which is purchased or sold. These contracts
involve market risk in excess of the unrealized gain or loss reflected in the
fund's Statement of Assets and Liabilities. This amount represents the aggregate
exposure to each currency the Fund has acquired or hedged through currency
contracts at period end. Losses may arise from changes in the value of foreign
currency or if the counterparties do not perform under the contracts' terms. An
open contract is marked-to-market daily and the change in the market value is
recorded by the Fund as an unrealized gain or loss. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value at the time it was opened and the value at the time it was closed. No
Funds may utilize forward currency contracts for speculative purposes.
REPURCHASE AGREEMENTS
Each of the Funds may enter into repurchase agreements. The Funds' custodian
takes possession of the collateral pledged for investments in repurchase
agreements on behalf of the Funds. The Funds value the underlying collateral
daily on a mark-to-market basis to determine that the value, including accrued
interest, is at least equal to the repurchase price. In the event of default of
the obligation to repurchase, the Funds have the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligation. There is
the risk that the collateral may be insufficient to meet the obligation in the
event of default.
FINANCIAL FUTURES CONTRACTS AND OPTIONS
Each Fund, other than the Money Market Fund, may invest in financial futures
contracts and purchase and write options, subject to certain limitations. The
Funds may invest in futures and options contracts for the following reasons: (1)
for the purpose of hedging against the effects of changes in the value of
portfolio securities or other investments due to anticipated changes in interest
rates, stock market conditions and currency market conditions, (2) to gain
stock, bond, or currency market exposure for accumulating and residual cash
positions, (3) for duration management, (4) when such transactions are an
economically appropriate way to reduce risks inherent in the management of a
Fund, and (5) for non-hedging purposes such as seeking additional income or
otherwise seeking to increase total return. Buying futures, writing puts and
buying calls tend to increase a Fund's exposure to the underlying instrument.
Selling futures, buying puts and writing calls tend to decrease a Fund's
exposure to the underlying instrument, or hedge other Fund investments. A Fund
will not enter into a transaction involving futures and options on futures for
speculative purposes.
These investments involve, to varying degrees, elements of
58
<PAGE>
NOTES TO FINANCIAL STATEMENTS MARCH 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
market risk and risks in excess of the amount recognized in the Statement of
Assets and Liabilities. The face or contract amounts, shown in the Schedule of
Investments under the captions "Other Information", "Call Options" and "Put
Options" reflect the extent of the involvement the Funds have in the particular
classes of these instruments. Losses may be caused by an imperfect correlation
between movements in the price of the instruments and the price of the
underlying securities and interest rates and currency. Losses also may arise if
there is an illiquid secondary market for the instruments, or an inability of
counterparties to perform.
Upon entering into a financial futures contract, the Funds are required to
deposit with the Funds' custodian in a segregated account, either cash or
securities in an amount (initial margin) equal to a certain percentage of the
contract value. Subsequent payments (variation margin) are made or received by
the Funds each day. The variation margin payments are equal to the daily change
in the contract value and are recorded as unrealized gains and losses. The Funds
recognize a realized gain or loss when the futures contract is closed. The Funds
will realize a gain or loss upon the expiration or closing of an option
transaction. When an option is exercised, the proceeds on the sale of a security
as a result of exercising a written option, the purchase cost of a security
acquired from exercising a written put option, or the proceeds on the sale of
the security from exercising a purchased put option or cost of the security
acquired from exercising a purchased call option is adjusted by the amount of
original premium received or paid.
SECURITY LENDING
The Funds may loan securities to brokers, dealers, and financial institutions
determined by GEIM to be creditworthy, up to a maximum of 30% of the total value
of the Fund's assets. The loans of securities will be secured by collateral in
the form of cash or other liquid assets, which will be segregated and maintained
with the custodian in an amount at least equal to the current market value of
the loaned securities. The Funds receive a lender fee in addition to the
interest and dividends on the loaned securities during the term of the loan. The
Funds will receive any gain or loss in the market value of their loaned
securities and of securities in which cash collateral is invested net of any
rebate during the term of the loan. In the event the counterparty (borrower)
does not meet its contracted obligation to return the securities, the Fund may
be exposed to the risk of loss of reacquiring the loaned securities at
prevailing market prices using the proceeds of the sale of the collateral.
3. FEES AND COMPENSATION PAID TO AFFILIATES
ADVISORY AND ADMINISTRATION FEES
GE Investment Management Incorporated ("GEIM"), a registered investment adviser,
was retained by the Trust's Board of Trustees effective September 10, 1997 to
act as investment adviser and administrator of the Funds.
Compensation of GEIM, a wholly-owned subsidiary of General Electric Company, for
investment advisory and administrative services, is paid monthly based on the
average daily net assets of each Fund. The advisory and administrative fee is
stated in the following schedule:
BASED ON AVERAGE DAILY NET ASSETS
AVERAGE DAILY ADVISORY AND
NET ASSETS OF FUND ADMINISTRATION FEES
- --------------------------------------------------------------------------------
U.S. Equity Fund First $25 million .55%
Mid-Cap Next $25 million .45%
Growth Fund Over $50 million .35%
S&P 500
Index Fund All assets .15%
Mid-Cap Value First $25 million .65%
Equity Fund Next $25 million .60%
Over $50 million .55%
Small-Cap Value First $25 million .70%
Equity Fund Next $25 million .65%
Over $50 million .60%
International Equity First $25 million .75%
Fund Next $50 million .65%
Europe Equity Fund Over $75 million .55%
Emerging Markets First $50 million 1.05%
Fund Over $50 million .95%
Income Fund First $25 million .35%
Next $25 million .30%
Next $50 million .25%
Over $100 million .20%
Money Market First $25 million .25%
Fund Next $25 million .20%
Next $50 million .15%
Over $100 million .10%
* FROM TIME TO TIME, GEIM MAY WAIVE OR REIMBURSE ADVISORY OR
ADMINISTRATIVE FEES PAID BY A FUND.
59
<PAGE>
NOTES TO FINANCIAL STATEMENTS MARCH 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
TRUSTEE COMPENSATION
The Funds pay no compensation to their Trustees who are officers or employees of
GEIM or its affiliates. Trustees who are not such officers or employees receive
an annual fee of $5,000 and an additional fee of $500 per Trustees' meeting
attended in person. These fees are allocated proportionally among the Funds
based upon the relative net assets of each fund.
4. SUB-ADVISORY FEES
Pursuant to an investment sub-advisory agreement with GEIM, effective November
25, 1997, State Street Global Advisors, ("SSgA"), a division of State Street
Bank and Trust Company, became the sub-adviser to the S&P 500 Index Fund.
Pursuant to an investment sub-advisory agreement with GEIM, effective June 29,
1998, Palisade Capital Management, LLC ("Palisade") became the sub-adviser to
the Small-Cap Value Equity Fund. The Small-Cap Value Equity Fund is managed by
an investment advisory committee composed of the following members: Jack Feiler,
Martin L. Berman, Steven E. Berman and Richard Meisenberg.
Pursuant to an investment sub-advisory agreement with GEIM, effective December
30, 1998, NWQ Investment Management Company ("NWQ") became the sub-adviser to
the Mid-Cap Value Equity Fund.
SSgA, Mr. Feiler and NWQ are responsible for the day-to-day portfolio management
of the assets of the S&P 500 Index Fund, the Small-Cap Value Equity Fund and the
Mid-Cap Value Equity Fund, respectively, including the responsibility for making
decisions and placing orders to buy, sell or hold a particular security, under
the general supervision of GEIM and the Board.
For their services, GEIM pays SSgA, Palisade and NWQ monthly sub-advisory fees
which are calculated as a percentage of the average daily net assets of the
respective funds. The following annual rates apply for each of the fund's
average daily net assets:
S&P 500 SMALL-CAP MID-CAP
INDEX FUND VALUE EQUITY FUND VALUE EQUITY FUND
- --------------------------------------------------------------------------------
First $25 million .05% .35% .45%
Next $25 million .05% .35% .45%
Next $25 million .05% .35% .375%
Next $25 million .05% .35% .375%
Next $75 million .04% .35% .375%
Next $25 million .04% .35% .375%
Next $100 million .04% .325% .375%
Amounts in excess
of $300 million .03% .30% .375%
- --------------------------------------------------------------------------------
5. AGGREGATE UNREALIZED
APPRECIATION AND DEPRECIATION
Aggregate gross unrealized appreciation/(depreciation) of investments for each
Fund at March 31, 1999, were as follows:
NET
GROSS GROSS UNREALIZED
UNREALIZED UNREALIZED APPRECIATION/
APPRECIATION DEPRECIATION (DEPRECIATION)
- --------------------------------------------------------------------------------
U.S. Equity Fund $30,329,711 $3,507,422 $26,822,289
S&P 500
Index Fund 7,216,206 863,356 6,352,850
Mid-Cap
Growth Fund 2,455,685 1,038,339 1,417,346
Mid-Cap Value
Equity Fund 888,455 687,314 201,141
Small-Cap Value
Equity Fund 406,258 424,851 (18,593)
International
Equity Fund 17,270,468 7,729,993 9,540,475
Europe Equity
Fund 422,765 758,554 (335,789)
Emerging Markets
Fund 1,472,421 585,266 887,155
Income Fund 227,107 711,424 (484,317)
The aggregate cost of each Fund's investments was substantially the same for
book and federal income tax purposes at March 31, 1999.
6. OPTIONS
During the period ended March 31, 1999, the following option contracts were
written:
INCOME FUND
---------------------------------------------
NUMBER
OF CONTRACTS PREMIUM
- --------------------------------------------------------------------------------
Balance as of September 30, 1998 3,965 $15,806
Written 17,538 66,702
Closed and Expired (14,710) (59,056)
Exercised (3,195) (13,091)
- --------------------------------------------------------------------------------
Balance as of March 31, 1999 3,598 $10,361
- --------------------------------------------------------------------------------
60
<PAGE>
NOTES TO FINANCIAL STATEMENTS MARCH 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
7. INVESTMENT TRANSACTIONS
The cost of purchases and the proceeds from sales of investments, other than
U.S. Government securities, short-term securities and options, for the period
ended March 31, 1999, were as follows:
PURCHASES SALES
- --------------------------------------------------------------------------------
U.S. Equity Fund $ 54,351,690 $ 36,982,333
S&P 500 Index Fund 382,729 371,441
Mid-Cap Growth Fund 6,327,072 5,904,808
Mid-Cap Value
Equity Fund 10,300,144 466,419
Small-Cap Value
Equity Fund 10,909,097 10,623,352
International Equity
Fund 34,852,865 40,190,999
Europe Equity Fund 11,058,818 1,198,918
Emerging Markets Fund 3,218,355 2,984,220
Income Fund 15,455,799 6,678,747
The cost of purchases and the proceeds from sales of long-term U.S. Government
securities for the period ended March 31, 1999, were as follows:
PURCHASES SALES
- --------------------------------------------------------------------------------
Income Fund $ 72,250,078 $ 79,943,547
8. BENEFICIAL INTEREST
The number of shareholders each owning 5% or more of a Fund and the total
percentage of the Fund held by such shareholders are at March 31, 1999 are:
5% OR GREATER SHAREHOLDERS
------------------------------
% OF
NUMBER FUND HELD
- --------------------------------------------------------------------------------
U.S. Equity Fund 3 92%*
S&P 500 Index Fund 1 93%*
Mid-Cap Growth Fund 2 94%*
Mid-Cap Value Equity Fund 1 100%
Small-Cap Value Equity Fund 1 100%
International Equity Fund 4 95%*
Europe Equity Fund 1 100%
Emerging Markets Fund 2 94%*
Income Fund 3 94%*
Money Market Fund 4 100%*
At March 31, 1999, indirect wholly-owned subsidiaries of General Electric
Company held the following percentage of shares outstanding of the Funds:
% OF
FUND HELD
- --------------------------------------------------------------------------------
Mid-Cap Value Union Fidelity Life
Equity Fund Insurance Company 100%
Small-Cap Value General Electric Capital
Equity Fund Assurance Company 100%
Europe Equity First Colony Life
Fund Insurance Company 100%
* At March 31, 1999, retirement plans of certain affiliates of General Electric
Company held the indicated percentage of shares outstanding of the Funds
except for the U.S. Equity Fund and the International Equity Fund, where
affiliates held 79% and 28%, respectively.
Investment activities of these shareholders could have a material impact on
these funds.
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GE INSTITUTIONAL FUNDS' INVESTMENT TEAM
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS
U.S. EQUITY FUND
Team led by Eugene K. Bolton
S&P 500 INDEX FUND
James B. May
State Street Global Advisors
MID-CAP GROWTH FUND
Ralph E. Whitman, Jr.
MID-CAP VALUE EQUITY FUND
Jon D. Bosse
NWQ Investment Management Company
SMALL-CAP VALUE FUND
Investment Committee:
Jack Feiler
Martin L. Berman
Steven E. Berman
Richard Meisenberg
Palisade Capital Management, L.L.C.
INTERNATIONAL EQUITY FUND
EMERGING MARKETS FUND
Team led by Ralph R. Layman
EUROPE EQUITY FUND
Michael J. Solecki
INCOME FUND
MONEY MARKET FUND
Team led by
Robert A. MacDougall
INVESTMENT ADVISER
AND ADMINISTRATOR
GE Investment Management Incorporated
TRUSTEES
Michael J. Cosgrove
John R. Costantino
Alan M. Lewis
William J. Lucas
Robert P. Quinn
SECRETARY
Matthew J. Simpson
TREASURER
Jeffrey A. Groh
ASSISTANT TREASURERS
Michael M. D'Ambrosio
Michael J. Tansley
DISTRIBUTOR
GE Investment Distributors, Inc.
Member NASD and SIPC
COUNSEL
Sutherland, Asbill & Brennan, L.L.P
CUSTODIAN
State Street Bank & Trust Company
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
OFFICERS OF THE INVESTMENT ADVISER
JOHN H. MYERS, CHAIRMAN OF THE BOARD AND PRESIDENT
EUGENE K. BOLTON, EVP, DOMESTIC EQUITIES
MICHAEL J. COSGROVE, EVP, MUTUAL FUNDS
JEFFREY A. GROH, EVP, CHIEF INVESTMENT OFFICER
RALPH R. LAYMAN, EVP, INTERNATIONAL EQUITIES
ALAN M. LEWIS, EVP, GENERAL COUNSEL AND SECRETARY
ROBERT A. MACDOUGALL, EVP, FIXED INCOME
GEOFFREY R. NORMAN, EVP, INSTITUTIONAL MARKETING
DON W. TOREY, EVP, ALTERNATIVE INVESTMENTS AND REAL ESTATE
62
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<PAGE>
INVESTMENT ADVISER
GE INVESTMENT MANAGEMENT INCORPORATED
3003 SUMMER STREET
STAMFORD, CT 06905
DISTRIBUTOR
GE INVESTMENT DISTRIBUTORS, INC.
MEMBER NASD AND SIPC
777 LONG RIDGE ROAD
STAMFORD, CT 06927
904179
