GE INSTITUTIONAL FUNDS
ANNUAL REPORT
[GE LOGO OMITTED]
September 30, 2000
[GE LOGO OMITTED]
WE BRING GOOD THINGS TO LIFE.
<PAGE>
A LETTER FROM THE PRESIDENT
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DEAR SHAREHOLDER:
I am pleased to provide you with the Annual Report for the GE Institutional
Funds, for the twelve-month period ended September 30, 2000. In this letter I
would like to give you an overview of some of the new products and ideas we have
introduced since our last report, fund highlights, an overview of the market and
what we expect will happen in the market over the course of the next few months.
If you would like detailed information about a particular fund's performance,
please read the portfolio manager commentary and fund specific data included in
this report.
MARKET OVERVIEW
The U.S. economy continued its strength into the third quarter of the year, as
unemployment figures reached a new low of 3.9% and worker productivity levels
continued to rise. The Federal Reserve Board's interest rate increases over the
past 18 months began to take effect as signs of inflation diminished and the
U.S. economy appeared to be heading for a soft landing. U.S. stock markets were
hard hit during the second quarter of the year, as the NASDAQ composite index
fell 355 points, or over 30% in one day. The NASDAQ did regain much of its
losses in June and into the third quarter, however it still finished down 9.74%
for the one-year period that ended September 30th. The Dow Jones Industrial
Average and the S&P 500 Index also closed the year down, finishing at -1.39% and
-6.31% respectively. The positive news from the major indexes was that the
market had regained some breadth after having been narrowly focused on
technology stocks for so long. Utility stocks, financials, capital goods and
energy stocks all performed well during the third quarter.
The Federal Reserve Board declined to increase interest rates at its last
meeting, meeting market expectations. The bond market reacted favorably, as
interest rates lowered across the maturity spectrum, producing a positive total
return for the U.S. Treasury sector.
MARKET OUTLOOK
As we enter the fourth quarter of the year, we believe there are four areas of
concern for the economy and the markets. The first is the November presidential
elections, with concern about future spending by the U.S. Government being
raised since both candidates have made promises that will impact the surplus,
and could cause the country to go back to a deficit position. The second concern
is the ability of the Federal Reserve Board to hold interest rates steady. The
Board's bias thus far has been toward tightening rates, and looks to continue
that way, given the tight labor market and potential inflation effect of higher
energy costs. The third concern came into play during September as a number of
large companies, roughly 30% of the DJIA, reported earnings misses - meaning
that they would not meet their earnings estimates for the year. The fourth area
is rising energy costs. The price of oil reached a ten-year high of $37 a
barrel, as the third quarter ended. If weather forecasters are correct in
predicting a very cold winter, then oil and gas consumption will be heavy and
could result in higher prices. Higher energy prices would also affect corporate
earnings, since the cost of doing business for many companies would be
negatively impacted.
With all of these uncertainties in the market, we continue to believe that our
investment strategy of stock picking, and not indexing, is the key determinant
of who will be successful going forward and who will not. We will continue to
look for investment opportunities with high-quality companies that have
strategic vision and strong earnings potential. We plan to position our
portfolios in a neutral posture going forward in order to take advantage of
investment opportunities as they arise. We would suggest that our investors look
to balance their portfolios, based upon their tolerance levels and risk profiles
in order to make the most of the earning power in their portfolios.
1
<PAGE>
A LETTER FROM THE PRESIDENT
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Thank you for your continued investment with GE Institutional Funds. We look
forward to continuing to serve your financial needs.
Sincerely,
/s/MICHAEL J. COSGROVE
Michael J. Cosgrove
CHAIRMAN, GE INSTITUTIONAL FUNDS
OCTOBER 16, 2000
MIKE COSGROVE IS THE PRESIDENT OF THE ASSET MANAGEMENT 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 ASSET
MANAGEMENT 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
<PAGE>
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 ASSET MANAGEMENT, WITH TOTAL U.S. EQUITY ASSETS OF
APPROX-IMATELY $34 BILLION, AS OF SEPTEMBER 30, 2000. 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 ASSET MANAGEMENT
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 ASSET MANAGEMENT. 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
ONE-YEAR PERIOD ENDED SEPTEMBER 30, 2000?
A. The U.S. Equity Fund posted a return of 12.70% for the one-year period ended
September 30, 2000 while the Standard & Poor's 500 Composite Price Index
returned 13.24% for the same period.
Q. WHY DID THE FUND UNDERPERFORM ITS BENCHMARK FOR THE ONE-YEAR PERIOD ENDED
SEPTEMBER 30, 2000?
A. The Fund underperformed the benchmark because of an underweighting in
technology and due to the continued decline in consumer cyclical stocks amid
a moderation in economic growth. Financial, consumer stable, energy, and
capital goods were strong sectors for the Fund and helped contribute
positively to performance.
Q. WHICH STOCKS/SECTORS HAVE PERFORMED WELL? WHICH HAVE NOT PERFORMED WELL?
A. Several sectors have helped performance including financial, consumer
stable, energy, and capital goods. The financial sector has just recently
rebounded to post very strong returns in the third quarter of 2000, helping
to offset lackluster results early on in the year. The consumer stable
sector has done well primarily due to the strong performance of healthcare
stocks. Energy has also been a strong sector, due to positive demand/ supply
characteristics around oil and the production and refining of this
commodity. Another positive sector over the annual period was capital goods.
Recently, capital goods stocks have pulled back, because of several
disappointing earnings pre-announcements and moderation in economic growth
both in the United States and abroad.
The technology sector delivered strong double-digit returns over the period.
However, our concerns over valuations resulted in an underweighting of the
sector. In addition, the consumer cyclical sector has been hit hard amid
concerns of an economic slowdown, with retailers, restaurants, broadcasting,
and entertainment stocks all under pressure.
Q. WHAT HAS BEEN GOING ON IN THE U.S. EQUITY MARKETS?
A. Volatility has been the one constant in the U.S. equity markets over the
past year. After stellar gains in the fourth quarter of 1999, the first
three quarters of 2000 were very volatile. The first quarter of 2000
performed quite well, with a very strong January and February, however,
March proved to be the beginning of a re-valuation in the U.S. equity
markets. A number of technology stocks were priced to perfection and the
March through May period corrected some of the excesses.
The U.S. Equity markets certainly did not earn a gold medal in the third
quarter of 2000. In fact, the S&P 500 finished down 1.0% in the quarter,
placing the index seventh out of 33 FT/S&P All-World Indices measured in
U.S. dollars. The silver lining is that the U.S. position improved from 18th
place in 1999, perhaps indicating that the U.S. markets provide a relative
"safe" haven in times of slowing global economic conditions.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
A. With the Fund broadly diversified in high-quality, reasonably valued stocks,
we believe it is well positioned for the volatility that we expect for the
remainder of the year. We are committed to investing in high quality
managements that have the experience and resources to manage their
businesses in times of moderating economic conditions.
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]
PLOT POINTS FOLLOWS:
U.S. EQUITY FUND S&P 500
11/25/97 10,000.00 10,000.00
12/97 10,298.16 10,168.40
3/98 11,529.14 11,588.04
6/98 11,819.37 11,972.16
9/98 10,628.43 10,787.78
12/98 12,743.71 13,086.53
3/99 13,467.20 13,735.95
6/99 14,562.76 14,691.87
9/99 13,632.57 13,787.60
12/99 15,264.48 15,843.46
3/00 15,585.02 16,238.69
6/00 15,330.79 15,772.18
9/00 15,363.95 15,619.77
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AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED SEPTEMBER 30, 2000
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ONE SINCE
YEAR INCEPTION** COMMENCEMENT
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U.S. Equity Fund 12.70% 16.26% 11/25/97
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S&P 500 13.24% 16.93%
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**INDEX RETURNS ARE NOT AVAILABLE FROM THE FUND'S INCEPTION DATE AND THEREFORE
ARE CALCULATED FROM THE MONTH END NEAREST THE FUND'S INCEPTION DATE.
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 SEPTEMBER 30, 2000
(AS A % OF NET ASSETS)
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[PIE CHART OMITTED]
PLOT POINTS FOLLOWS:
TECHNOLOGY 20.8%
FINANCIAL 18.6%
CONSUMER STABLE 18.0%
CONSUMER CYCLICAL 11.1%
CAPITAL GOODS 8.7%
ENERGY 8.1%
UTILITIES 7.8%
CASH & OTHER 3.3%*
BASIC MATERIALS 2.2%
TRANSPORTATION 1.4%
*INCLUDES CASH EQUALIZED BY FUTURES OF 0.8%.
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TOP TEN LARGEST HOLDINGS
AT SEPTEMBER 30, 2000
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Citigroup Inc. 4.26%
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Merck & Co. Inc. 2.72%
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Exxon Mobil Corp. 2.61%
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Microsoft Corp. 2.59%
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Intel Corp. 2.51%
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Cardinal Health Inc. 2.06%
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Cisco Systems Inc. 1.92%
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SBC Communications Inc. 1.91%
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Fannie Mae 1.79%
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First Data Corp. 1.78%
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SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
4
<PAGE>
U.S. EQUITY FUND
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2000
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U.S. EQUITY FUND
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
COMMON STOCK -- 96.7%
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BASIC MATERIALS -- 2.2%
Airgas Inc. ....................... 7,148 $ 48,696(a)
Barrick Gold Corp. ................ 43,681 666,135
Bowater Inc. ...................... 13,502 626,999
Du Pont de Nemours (E.I.) & Co. ... 15,884 658,193
International Paper Co. ........... 11,913 341,754
Newmont Mining Corp. .............. 53,609 911,353
PPG Industries Inc. ............... 9,928 394,018
Rayonier Inc. ..................... 13,303 478,077
The Dow Chemical Co. .............. 11,913 297,080
Weyerhaeuser Co. .................. 39,710 1,603,291
6,025,596
CAPITAL GOODS -- 8.7%
Boeing Co. ........................ 21,443 1,350,909
Deere & Co. ....................... 15,090 501,742
Dover Corp. ....................... 88,672 4,162,042
Eaton Corp. ....................... 11,318 697,472
Emerson Electric Co. .............. 41,179 2,758,993
General Dynamics Corp. ............ 10,722 673,476
Honeywell International Inc. ...... 23,032 820,515(h)
Hubbell Inc. (Class B) ............ 31,172 781,248
Ingersoll-Rand Co. ................ 15,090 511,174
Martin Marietta Materials Inc. .... 16,678 638,434
Molex Inc. (Class A) .............. 62,742 2,599,872
Parker-Hannifin Corp. ............. 14,693 495,889
Textron Inc. ...................... 52,059 2,401,221
United Technologies Corp. ......... 64,866 4,491,970
Waste Management Inc. ............. 39,710 692,443
23,577,400
CONSUMER - CYCLICAL -- 11.1%
Adelphia Communications Corp.
(Class A) ...................... 2,780 76,624(a)
AT&T Corp. - Liberty Media
Group (Class A) ................ 132,233 2,380,194(a)
Carnival Corp. .................... 17,473 430,273
Catalina Marketing Corp. .......... 43,482 1,636,010(a)
Comcast Corp. (Class A) ........... 65,919 2,698,559(a)
Costco Wholesale Corp. ............ 8,339 291,344(a)
CVS Corp. ......................... 38,915 1,802,251
Gannett Co. Inc. .................. 32,959 1,746,827
Home Depot Inc. ................... 40,901 2,170,309
Interpublic Group Cos. Inc. ....... 64,728 2,204,797
Knight-Ridder Inc. ................ 13,105 665,898
Lowes Cos. Inc. ................... 41,298 1,853,248
McDonald's Corp. .................. 69,691 2,103,797
NTL Inc. .......................... 37,030 1,714,952(a)
Target Corp. ...................... 91,532 2,345,507
The Walt Disney Co. ............... 87,203 3,335,515
Wal-Mart Stores Inc. .............. 48,843 2,350,569
29,806,674
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NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
COMMON STOCK -- 96.7%
--------------------------------------------------------------------------------
CONSUMER - STABLE -- 18.0%
Abbott Laboratories ............... 48,248 $ 2,294,795
American Home Products Corp. ...... 13,104 741,195
Amgen Inc. ........................ 21,046 1,469,603(a)
Anheuser Busch Cos. Inc. .......... 17,076 722,528
Avon Products Inc. ................ 9,530 389,539
Bestfoods ......................... 9,133 664,426
Bristol-Myers Squibb Co. .......... 53,159 3,036,708
Cardinal Health Inc. .............. 62,940 5,550,521
Colgate-Palmolive Co. ............. 5,083 239,918
Dentsply International Inc. ....... 11,119 388,470
Eli Lilly & Co. ................... 26,607 2,158,493
Energizer Holdings Inc. ........... 31,371 768,589(a)
General Mills Inc. ................ 16,678 592,069
Gillette Co. ...................... 35,739 1,103,442
Heinz (H.J.) Co. .................. 9,928 367,957
Henry Schein Inc. ................. 18,068 360,231(a)
Johnson & Johnson ................. 37,764 3,547,456
Lincare Holdings Inc. ............. 24,223 694,897(a)
Medtronic Inc. .................... 4,964 257,197
Merck & Co. Inc. .................. 98,481 7,330,679
PE Corp. - PE Biosystems Group .... 4,335 505,028
Pepsico Inc. ...................... 80,611 3,708,106
Pfizer Inc. ....................... 99,473 4,470,068
Pharmacia Corp. ................... 16,678 1,003,807
Philip Morris Cos. Inc. ........... 15,963 469,911
Procter & Gamble Co. .............. 24,620 1,649,540
Ralston-Ralston Purina Group ...... 45,666 1,081,713
Schering Plough Corp. ............. 32,165 1,495,672
Sybron International Corp. ........ 32,165 771,960(a)
The Quaker Oats Co. ............... 7,148 565,585
Watson Pharmaceuticals Inc. ....... 4,369 283,439(a)
48,683,542
ENERGY -- 8.1%
Anadarko Petroleum Corp. .......... 15,090 1,002,881
Baker Hughes Inc. ................. 20,252 751,856
BP Amoco PLC ADR .................. 9,531 505,143
Burlington Resources Inc. ......... 26,344 969,789
Calpine Corp. ..................... 5,163 538,888(a)
Chevron Corp. ..................... 9,530 812,433
Conoco Inc. (Class B) ............. 41,695 1,123,159
Exxon Mobil Corp. ................. 78,852 7,027,684
Halliburton Co. ................... 21,026 1,028,960
Nabors Industries Inc. ............ 32,164 1,685,394(a)
Royal Dutch Petroleum Co. ADR ..... 31,768 1,904,094
Schlumberger Ltd. ................. 35,401 2,913,945
Texaco Inc. ....................... 3,574 187,635
Unocal Corp. ...................... 23,827 844,369
USX-Marathon Group ................ 17,075 484,503
21,780,733
FINANCIAL -- 18.6%
AFLAC Inc. ........................ 4,765 305,258
American Express Co. .............. 34,746 2,110,819
American International Group
Inc. ........................... 41,269 3,948,927(h)
Associates First Capital Corp.
(Class A) ...................... 45,865 1,742,870
Bank of America Corp. ............. 52,020 2,724,547
----------------
See Notes to Schedule of Investments and Notes to Financial statements.
5
<PAGE>
U.S. EQUITY FUND
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2000
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--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
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Bank One Corp. .................... 12,707 $ 490,808
Berkshire Hathaway Inc. (Class B) . 313 647,910(a)
Chase Manhattan Corp. ............. 38,122 1,760,760
Chubb Corp. ....................... 19,855 1,571,027
Citigroup Inc. .................... 212,382 11,481,902(h)
Countrywide Credit
Industries Inc. ................ 6,949 262,325
Fannie Mae ........................ 67,626 4,835,259
Fidelity National Financial Inc. .. 15,090 373,478
FleetBoston Financial Corp. ....... 46,064 1,796,496
Goldman Sachs Group Inc. .......... 7,942 904,892
Hartford Financial Services
Group Inc. ..................... 23,826 1,737,809
J.P. Morgan & Co. Inc. ............ 2,979 486,694
Lehman Brothers Holdings Inc. ..... 16,638 2,458,264
Loews Corp. ....................... 6,155 513,173
Marsh & McLennan Cos. Inc. ........ 10,642 1,412,726
MetLife Inc. ...................... 16,418 429,946(a)
Morgan Stanley, Dean Witter & Co. . 39,611 3,621,931
PNC Financial Services Group ...... 30,973 2,013,245
St. Paul Cos. Inc. ................ 15,487 763,703
State Street Corp. ................ 9,729 1,264,770(e)
U.S. Bancorp. ..................... 18,664 424,606
50,084,145
TECHNOLOGY -- 20.8%
Analog Devices Inc. ............... 33,295 2,748,919(a)
Applied Materials Inc. ............ 35,262 2,091,477(a)
Automatic Data Processing Inc. .... 42,966 2,873,351
Cisco Systems Inc. ................ 93,517 5,166,814(a)
Compaq Computer Corp. ............. 13,501 372,358
Dell Computer Corp. ............... 100,069 3,083,376(a)
EMC Corp. ......................... 40,226 3,987,402(a)
Equifax Inc. ...................... 119,914 3,230,183
First Data Corp. .................. 122,705 4,793,164
Intel Corp. ....................... 162,811 6,766,832
International Business
Machines Corp. ................. 13,501 1,518,863
Micron Technology Inc. ............ 28,811 1,325,306(a)
Microsoft Corp. ................... 115,827 6,985,816(a)
Motorola Inc. ..................... 78,229 2,209,969
Nortel Networks Corp. ............. 43,680 2,601,690
PerkinElmer Inc. .................. 4,646 484,926
Pitney Bowes Inc. ................. 33,158 1,307,669
Sun Microsystems Inc. ............. 13,899 1,622,708(a)
Tellabs Inc. ...................... 29,385 1,403,134(a)
Texas Instruments Inc. ............ 27,797 1,311,671
Unisys Corp. ...................... 11,688 131,490(a)
56,017,118
TRANSPORTATION -- 1.4%
AMR Corp. ......................... 22,277 728,180(a)
Burlington Northern Santa
Fe Corp. ....................... 46,262 997,524
Canadian Pacific Ltd. ............. 37,327 970,502
Continental Airlines Inc.
(Class B) ...................... 10,722 487,181(a)
Delta Air Lines Inc. .............. 15,885 704,897
3,888,284
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NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
UTILITIES -- 7.8%
AT&T Corp. ........................ 29,783 $ 874,876
AT&T Wireless Group ............... 7,942 165,789(a)
Dominion Resources Inc. ........... 5,559 322,769
Duke Energy Corp. ................. 20,848 1,787,716
Dynegy Inc. (Class A) ............. 8,736 497,952
El Paso Energy Corp. .............. 25,018 1,541,734
Enron Corp. ....................... 7,148 626,344
Global Crossing Ltd. .............. 25,017 775,527(a)
NEXTLINK Communications Inc.
(Class A) ...................... 17,075 600,827(a)
Qwest Communications
International Inc. ............. 48,248 2,318,919(a)
SBC Communications Inc. ........... 103,048 5,152,400
Southern Energy Inc. .............. 4,764 149,471(a)
Sprint Corp. (FON Group) .......... 37,328 1,094,177
Verizon Communications ............ 47,652 2,308,144
Vodafone Group PLC ADR ............ 35,939 1,329,743
WorldCom Inc. ..................... 21,046 639,272(a)
Xcel Energy Inc. .................. 28,989 797,197
20,982,857
TOTAL INVESTMENTS IN SECURITIES
(COST $237,413,920) 260,846,349
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SHORT-TERM INVESTMENTS -- 3.4%
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GEI Short-Term Investment Fund
(COST $9,226,776) ..............9,226,776 9,226,776
OTHER ASSETS AND LIABILITIES,
NET (0.1)% ..................... (344,809)
------------
NET ASSETS-- 100% ................. $269,728,316
============
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OTHER INFORMATION
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The U.S. Equity Fund had the following long futures contracts open at September
30, 2000:
NUMBER
EXPIRATION OF UNDERLYING UNREALIZED
DESCRIPTION DATE CONTRACTS FACE VALUE DEPRECIATION
--------------------------------------------------------------------------------
S&P 500 Dec. 2000 6 $2,180,550 $(111,609)
----------------
See Notes to Schedule of Investments and Notes to Financial statements.
6
<PAGE>
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 $738 BILLION AS OF SEPTEMBER 30, 2000. 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 AND LIPPER
PEER GROUP FOR THE ONE-YEAR PERIOD ENDED SEPTEMBER 30, 2000?
A. The S&P 500 Index Fund had a return of 13.83% for the one-year period ended
September 30, 2000, while the S&P 500 Index returned 13.24% for the same
period.
Q. WHY DID THE FUND OUTPERFORM ITS BENCHMARK?
A. The Fund outperformed its benchmark primarily due to the investment of Fund
cash flows and our Index change trading strategy.
Q. WHAT HAS YOUR INVESTMENT STRATEGY BEEN?
A. We continue to utilize a full replication strategy to manage the S&P 500
Index Fund. With this strategy, all 500 constituents of the S&P 500 Index
are owned by the Fund in the approximate capitalization weight of the Index.
This methodology has provided consistent tracking to the Index.
Q. WHICH INVESTMENTS STAND OUT?
A. As the technology sector continued to suffer, the financial sector emerged
as the Index sector leader during the third quarter. Firms such as
Associates First Capital, Capital One, and Lehman Brothers posted strong
third quarter returns of 70.60%, 57.06% and 56.36%, respectively, helping to
lead the financial sector. Over the course of the year, technology increased
to 35% of the capitalization weight of the S&P 500 Index through strong
returns and Index additions. However, as the sector stumbled, the overall
weight in the Index has dropped to 29% at September 30, 2000.
The U.S. equity market is broadening. Earlier in the year the largest cap
stocks such as Cisco Systems, Intel and GE dominated the S&P 500 Index.
Their strong returns, coupled with their large weightings in the universe,
powered the Index return. As other smaller stocks in the Index have
performed well, the impact has not been as great, due to their smaller
weightings. Reflecting the broadening market, in the year 2000, 260 stocks
in the S&P 500 have posted positive returns through September 30, 2000.
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
invested to the S&P 500 Index to provide as close tracking as possible to
the Index.
7
<PAGE>
S&P 500 INDEX FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT
--------------------------------------------------------------------------------
[LINE CHART OMITTED]
PLOT POINTS FOLLOWS:
S&P 500 INDEX FUND S&P 500
11/25/97 10,000.00 10,000.00
12/97 10,212.03 10,168.40
3/98 11,643.72 11,588.04
6/98 12,044.19 11,972.16
9/98 10,862.80 10,787.78
12/98 13,198.03 13,086.53
3/99 13,888.39 13,735.95
6/99 14,873.17 14,691.87
9/99 13,949.31 13,787.60
12/99 15,993.98 15,843.46
3/00 16,475.47 16,238.69
6/00 16,035.85 15,772.18
9/00 15,878.84 15,619.77
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AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
ONE SINCE
YEAR INCEPTION** COMMENCEMENT
--------------------------------------------------------------------------------
S&P 500 Index Fund 13.83% 17.62% 11/25/97
--------------------------------------------------------------------------------
S&P 500 13.24% 16.95%
--------------------------------------------------------------------------------
**INDEX RETURNS ARE NOT AVAILABLE FROM THE FUND'S INCEPTION DATE AND THEREFORE
ARE CALCULATED FROM THE MONTH END NEAREST THE FUND'S INCEPTION DATE.
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 primarily in equity securities of companies contained in that Index.
--------------------------------------------------------------------------------
SECTOR ALLOCATION
AS OF SEPTEMBER 30, 20000
(AS A % OF NET ASSETS)
--------------------------------------------------------------------------------
[PIE CHART OMITTED]
PLOT POINTS FOLLOWS:
TECHNOLOGY 29.1%
CONSUMER STABLE 17.2%
FINANCIAL 15.2%
CONSUMER CYCLICAL 11.0%
UTILITIES 9.4%
CAPITAL GOODS 8.1%
ENERGY 5.7%
CASH & OTHER 2.0%*
BASIC MATERIALS 1.8%
TRANSPORTATION 0.5%
*INCLUDES CASH EQUALIZED BY FUTURES OF 1.9%.
--------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS
AT SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
General Electric Co. 4.44%
--------------------------------------------------------------------------------
Cisco Systems Inc. 3.04%
--------------------------------------------------------------------------------
Microsoft Corp. 2.46%
--------------------------------------------------------------------------------
Exxon Mobil Corp. 2.41%
--------------------------------------------------------------------------------
Pfizer Inc. 2.20%
--------------------------------------------------------------------------------
Intel Corp. 2.17%
--------------------------------------------------------------------------------
Citigroup Inc. 1.89%
--------------------------------------------------------------------------------
American International Group Inc. 1.72%
--------------------------------------------------------------------------------
Oracle Systems Corp. 1.72%
--------------------------------------------------------------------------------
EMC Corp. 1.67%
--------------------------------------------------------------------------------
SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
8
<PAGE>
S&P 500 INDEX FUND
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
S&P 500 INDEX FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
COMMON STOCK -- 98.0%
--------------------------------------------------------------------------------
BASIC MATERIALS -- 1.8%
Air Products & Chemicals Inc. ..... 2,300 $ 82,800
Alcan Aluminum Ltd. ............... 2,200 63,662
Alcoa Inc. ........................ 8,884 224,876
Allegheny Technologies Inc. ....... 900 16,312
Avery Dennison Corp. .............. 1,200 55,650
Barrick Gold Corp. ................ 4,100 62,525
Bethlehem Steel Corp. ............. 1,700 5,100(a)
Boise Cascade Corp. ............... 700 18,594
Du Pont de Nemours (E.I.) & Co. ... 10,603 439,362
Eastman Chemical Co. .............. 700 25,856
Ecolab Inc. ....................... 1,300 46,881
Engelhard Corp. ................... 1,200 19,500
FMC Corp. ......................... 300 20,119(a)
Fort James Corp. .................. 2,100 64,181
Freeport McMoran Copper
& Gold Inc. (Class B) .......... 1,400 12,338(a)
Georgia Pacific Corp. ............. 1,600 37,600
Goodrich (B.F.) Co. ............... 1,100 43,106
Great Lakes Chemical Corp. ........ 500 14,656
Hercules Inc. ..................... 1,000 14,125
Homestake Mining Co. .............. 2,500 12,969
Inco Ltd. ......................... 1,700 27,412(a)
International Paper Co. ........... 4,875 139,852
Louisiana-Pacific Corp. ........... 1,400 12,863
Mead Corp. ........................ 1,100 25,712
Millipore Corp. ................... 500 24,219
Newmont Mining Corp. .............. 1,900 32,300
Nucor Corp. ....................... 800 24,100
Pall Corp. ........................ 1,300 25,919
Phelps Dodge Corp. ................ 800 33,400
Placer Dome Inc. .................. 3,500 33,031
Potlatch Corp. .................... 400 12,650
PPG Industries Inc. ............... 1,700 67,469
Praxair Inc. ...................... 1,600 59,800
Rohm & Haas Co. ................... 2,200 63,937
Sealed Air Corp. .................. 900 40,725(a)
Sigma-Aldrich Corp. ............... 1,000 33,000
The Dow Chemical Co. .............. 6,900 172,069
Union Carbide Corp. ............... 1,300 49,075
USX-U.S. Steel Group .............. 1,000 15,188
W.R. Grace & Co. .................. 900 6,188(a)
Westvaco Corp. .................... 900 24,019
Weyerhaeuser Co. .................. 2,200 88,825
Willamette Industries Inc. ........ 1,200 33,600
Worthington Industries Inc. ....... 1,200 11,250
2,336,815
CAPITAL GOODS -- 8.1%
Allied Waste Industries Inc. ...... 1,700 15,619(a)
American Power
Conversion Corp. ............... 1,900 36,456(a)
Armstrong Holdings Inc. ........... 500 5,969
Boeing Co. ........................ 9,200 579,600
Briggs & Stratton Corp. ........... 300 11,344
Caterpillar Inc. .................. 3,600 121,500
Centex Corp. ...................... 500 16,063
Cooper Industries Inc. ............ 1,000 35,250
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
Crane Co. ......................... 700 $ 16,013
Cummins Engine Co. Inc. ........... 500 14,969
Danaher Corp. ..................... 1,400 69,650
Deere & Co. ....................... 2,400 79,800
Dover Corp. ....................... 2,100 98,569
Eaton Corp. ....................... 700 43,137
Emerson Electric Co. .............. 4,300 288,100
Fluor Corp. ....................... 800 24,000
General Dynamics Corp. ............ 2,100 131,906
General Electric Co. .............. 101,100 5,832,206(h)
Grainger (W.W.) Inc. .............. 900 23,681
Honeywell International Inc. ...... 8,150 290,344
Illinois Tool Works Inc. .......... 3,100 173,212
Ingersoll-Rand Co. ................ 1,600 54,200
ITT Industries Inc. ............... 900 29,194
Kaufman & Broad Home Corp. ........ 600 16,163
Lockheed Martin Corp. ............. 4,400 145,024
Masco Corp. ....................... 4,600 85,675
McDermott International Inc. ...... 800 8,800
Minnesota Mining &
Manufacturing Co. .............. 4,100 373,612
Molex Inc. ........................ 2,050 111,597
National Service Industries Inc. .. 500 9,781
Navistar International Corp. Inc. . 600 17,963(a)
Northrop Grumman Corp. ............ 700 63,612
PACCAR Inc. ....................... 800 29,650
Parker-Hannifin Corp. ............. 1,200 40,500
Pulte Corp. ....................... 300 9,900
Raytheon Co. (Class B) ............ 3,500 99,531
Rockwell International Corp. ...... 2,000 60,500
Sherwin-Williams Co. .............. 1,600 34,200
Textron Inc. ...................... 1,500 69,187
The Timken Co. .................... 800 10,950
Thermo Electron Corp. ............. 1,800 46,800(a)
Thomas & Betts Corp. .............. 500 8,719
Tyco International Ltd. ........... 17,198 892,146
United Technologies Corp. ......... 4,800 332,400
Vulcan Materials Co. .............. 1,100 44,206
Waste Management Inc. ............. 6,470 112,821
10,614,519
CONSUMER - CYCLICAL -- 11.0%
Albertsons Inc. ................... 4,241 89,061
American Greetings Corp.
(Class A) ...................... 800 14,000
Autozone Inc. ..................... 1,300 29,494(a)
Bed Bath & Beyond Inc. ............ 2,800 68,294(a)
Best Buy Co. Inc. ................. 2,100 133,612(a)
Black & Decker Corp. .............. 900 30,769
Block (H&R) Inc. .................. 1,100 40,769
Brunswick Corp. ................... 900 16,425
Carnival Corp. .................... 6,000 147,750
Cendant Corp. ..................... 7,638 83,063(a)
Circuit City Stores Inc. .......... 2,200 50,600
Clear Channel
Communications Inc. ............ 5,900 333,350(a)
Comcast Corp. (Class A) ........... 9,200 376,625(a)
Consolidated Stores Corp. ......... 1,400 18,900(a)
Cooper Tire & Rubber Co. .......... 1,000 10,063
Costco Wholesale Corp. ............ 4,500 157,219(a)
CVS Corp. ......................... 3,900 180,619
Dana Corp. ........................ 1,500 32,250
Darden Restaurants Inc. ........... 1,300 27,056
Delphi Automotive Systems Corp. ... 5,818 87,997
Deluxe Corp. ...................... 800 16,250
Dillards Inc. (Class A) ........... 1,000 10,625
----------------
See Notes to Schedule of Investments and Notes to Financial statements.
9
<PAGE>
S&P 500 INDEX FUND
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
Dollar General Corp. .............. 3,341 $ 55,962
Donnelley (R.R.) & Sons Co. ....... 1,300 31,931
Dow Jones & Co. Inc. .............. 900 54,450
Dun & Bradstreet Corp. ............ 1,600 55,100
Eastman Kodak Co. ................. 3,200 130,800
Federated Department Stores
Inc. ........................... 2,200 57,475(a)
Ford Motor Co. .................... 19,077 482,887
Fortune Brands Inc. ............... 1,500 39,750
Gannett Co. Inc. .................. 2,700 143,100
Gap Inc. .......................... 8,762 176,335
General Motors Corp. .............. 5,412 351,780
Genuine Parts Co. ................. 1,700 32,406
Goodyear Tire & Rubber Co. ........ 1,500 27,000
Harcourt General Inc. ............. 700 41,300
Harley-Davidson Inc. .............. 3,200 153,200
Harrah's Entertainment Inc. ....... 1,200 33,000(a)
Hasbro Inc. ....................... 1,750 20,016
Hilton Hotels Corp. ............... 3,500 40,469
Home Depot Inc. ................... 23,600 1,252,275
Interpublic Group Cos. Inc. ....... 3,100 105,594
J.C. Penney Co. Inc. .............. 2,600 30,713
Johnson Controls Inc. ............. 900 47,869
KMart Corp. ....................... 4,600 27,600(a)
Knight-Ridder Inc. ................ 800 40,650
Kohl's Corp. ...................... 3,300 190,369(a)
Kroger Co. ........................ 8,400 189,525(a)
Leggett & Platt Inc. .............. 1,900 30,044
Limited Inc. ...................... 4,516 99,634
Liz Claiborne Inc. ................ 500 19,250
Longs Drug Stores Corp. ........... 500 9,563
Lowes Cos. Inc. ................... 3,900 175,012
Marriott International Inc.
(Class A) ...................... 2,500 91,094
Mattel Inc. ....................... 4,400 49,225
May Department Stores Co. ......... 3,300 67,650
Maytag Corp. ...................... 900 27,956
McDonald's Corp. .................. 13,600 410,550
McGraw Hill Cos. Inc. ............. 2,000 127,125
Meredith Corp. .................... 500 14,750
New York Times Co. (Class A) ...... 1,800 70,762
Newell Rubbermaid Inc. ............ 2,615 59,655
Nike Inc. (Class B) ............... 2,800 112,175
Nordstrom Inc. .................... 1,500 23,344
Office Depot Inc. ................. 2,900 22,656(a)
Omnicom Group Inc. ................ 1,800 131,287
Polaroid Corp. .................... 600 8,063
RadioShack Corp. .................. 1,900 122,787
Reebok International Ltd. ......... 700 13,169(a)
Russell Corp. ..................... 400 6,350
Safeway Inc. ...................... 5,000 233,437(a)
Seagram Co. Ltd. .................. 4,500 258,469
Sears Roebuck & Co. ............... 3,600 116,712
Snap-on Inc. ...................... 500 11,781
Springs Industries Inc. ........... 200 5,638
Staples Inc. ...................... 4,800 68,100(a)
Starbucks Corp. ................... 1,800 72,112(a)
Target Corp. ...................... 9,300 238,312
The Stanley Works ................. 1,000 23,063
The Walt Disney Co. ............... 21,400 818,550
Tiffany & Co. ..................... 1,400 53,987
Time Warner Inc. .................. 13,500 1,056,375
TJX Cos. Inc. ..................... 3,000 67,500
Toys `R Us Inc. ................... 2,100 34,125(a)
Tribune Co. ....................... 3,182 138,815
Tricon Global Restaurants Inc. .... 1,500 45,937(a)
TRW Inc. .......................... 1,200 48,750
Tupperware Corp. .................. 500 9,000
VF Corp. .......................... 1,200 29,625
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
Viacom Inc. (Class B) ............. 15,431 $ 902,713(a)
Visteon Corp. ..................... 1,189 17,984
Wal-Mart Stores Inc. .............. 45,500 2,189,687
Walgreen Co. ...................... 10,300 390,756
Wendy's International Inc. ........ 1,200 24,075
Whirlpool Corp. ................... 800 31,100
Winn Dixie Stores Inc. ............ 1,500 21,563
Young & Rubicam Inc. .............. 800 39,600
14,406,214
CONSUMER - STABLE -- 17.2%
Abbott Laboratories ............... 15,800 751,487(h)
Adolph Coors Co. (Class B) ........ 400 25,275
Aetna Inc. ........................ 1,500 87,094
Alberto-Culver Co. (Class B) ...... 500 14,406
Allergan Inc. ..................... 1,300 109,769
Alza Corp. ........................ 1,200 103,800(a)
American Home Products Corp. ...... 13,300 752,281(h)
Amgen Inc. ........................ 10,500 733,195(a)
Anheuser Busch Cos. Inc. .......... 9,200 389,275
Archer-Daniels Midland Co. ........ 6,361 54,863
Avon Products Inc. ................ 2,500 102,187
Ball Corp. ........................ 400 12,675
Bard (C.R.) Inc. .................. 500 21,125
Bausch & Lomb Inc. ................ 600 23,363
Baxter International Inc. ......... 3,000 239,437
Becton Dickinson & Co. ............ 2,600 68,738
Bemis Co. Inc. .................... 500 16,063
Bestfoods ......................... 2,800 203,700
Biogen Inc. ....................... 1,500 91,500(a)
Biomet Inc. ....................... 1,750 61,250
Boston Scientific Corp. ........... 4,200 69,038(a)
Bristol-Myers Squibb Co. .......... 20,100 1,148,212
Brown-Forman Corp. (Class B) ...... 700 38,325
Campbell Soup Co. ................. 4,400 113,850
Cardinal Health Inc. .............. 2,850 251,334
CIGNA Corp. ....................... 1,600 167,040
Clorox Co. ........................ 2,300 90,994
Coca-Cola Co. ..................... 25,300 1,394,662(h)
Coca-Cola Enterprises Inc. ........ 4,300 68,531
Colgate-Palmolive Co. ............. 5,900 278,480
Conagra Inc. ...................... 5,700 114,356
Crown Cork & Seal Inc. ............ 1,300 13,894
Eli Lilly & Co. ................... 11,500 932,937(h)
General Mills Inc. ................ 3,000 106,500
Gillette Co. ...................... 10,700 330,362
Guidant Corp. ..................... 3,100 219,131(a)
HCA-The Healthcare Corp. .......... 5,700 211,612
Healthsouth Corp. ................. 4,100 33,313(a)
Heinz (H.J.) Co. .................. 3,500 129,719
Hershey Foods Corp. ............... 1,300 70,363
Humana Inc. ....................... 2,200 23,650(a)
IMS Health Inc. ................... 3,000 62,250
International Flavors
& Fragrances ................... 1,000 18,250
Johnson & Johnson ................. 14,200 1,333,912(h)
Kellogg Co. ....................... 4,100 99,169
Kimberly Clark Corp. .............. 5,500 306,969
Mallinckrodt Inc. ................. 700 31,938
Manor Care Inc. ................... 1,300 20,394(a)
McKesson HBOC Inc. ................ 2,744 83,864
MedImmune Inc. .................... 2,100 162,225(a)
Medtronic Inc. .................... 12,300 637,294
Merck & Co. Inc. .................. 23,500 1,749,281
Nabisco Group Holdings Corp. ...... 3,400 96,900
Owens-Illinois Inc. ............... 1,700 15,725(a)
Pactiv Corp. ...................... 1,500 16,781(a)
----------------
See Notes to Schedule of Investments and Notes to Financial statements.
10
<PAGE>
S&P 500 INDEX FUND
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
PE Corp. - PE Biosystems Group .... 2,100 $ 244,650
Pepsico Inc. ...................... 14,700 676,200
Pfizer Inc. ....................... 64,300 2,889,481
Pharmacia Corp. ................... 13,221 795,739
Philip Morris Cos. Inc. ........... 23,000 677,062(h)
Procter & Gamble Co. .............. 13,300 891,100
Quintiles Transnational Corp. ..... 1,100 17,531(a)
Ralston-Ralston Purina Group ...... 3,000 71,063
Sara Lee Corp. .................... 8,800 178,750
Schering Plough Corp. ............. 14,900 692,850
St. Jude Medical Inc. ............. 800 40,800(a)
Supervalu Inc. .................... 1,400 21,088
Sysco Corp. ....................... 3,500 162,094
Temple-Inland Inc. ................ 600 22,725
Tenet Healthcare Corp. ............ 3,200 116,400(a)
The Quaker Oats Co. ............... 1,300 102,862
Unilever N.V. ..................... 5,839 281,732
UnitedHealth Group Inc. ........... 1,600 158,000
UST Inc. .......................... 1,500 34,313
Watson Pharmaceuticals Inc. ....... 1,000 64,875(a)
Wellpoint Health Networks Inc.
(Class A) ...................... 600 57,600(a)
Wrigley (W.M.) Junior Co. ......... 1,200 89,850
22,589,503
ENERGY -- 5.7%
Amerada Hess Corp. ................ 900 60,244
Anadarko Petroleum Corp. .......... 2,437 161,963
Apache Corp. ...................... 1,200 70,950
Ashland Oil Inc. .................. 700 23,581
Baker Hughes Inc. ................. 3,270 121,399
Burlington Resources Inc. ......... 2,200 80,987
Chevron Corp. ..................... 6,700 571,175
Conoco Inc. (Class B) ............. 6,242 168,144
Devon Energy Corp. ................ 1,264 76,030
Exxon Mobil Corp. ................. 35,608 3,173,563(h)
Halliburton Co. ................... 4,500 220,219
Kerr-McGee Corp. .................. 1,000 66,250
Occidental Petroleum Corp. ........ 3,800 82,887
Phillips Petroleum Co. ............ 2,600 163,150
Rowan Cos. Inc. ................... 900 26,100(a)
Royal Dutch Petroleum Co. ADR ..... 21,900 1,312,631
Schlumberger Ltd. ................. 5,800 477,412
Sunoco Inc. ....................... 1,000 26,938
Texaco Inc. ....................... 5,600 294,000
Tosco Corp. ....................... 1,600 49,900
Transocean Sedco Forex Inc. ....... 2,151 126,102
Unocal Corp. ...................... 2,500 88,594
USX-Marathon Group ................ 3,200 90,800
7,533,019
FINANCIAL -- 15.2%
AFLAC Inc. ........................ 2,700 172,969
Allstate Corp. .................... 7,500 260,625
American Express Co. .............. 13,600 826,200(h)
American General Corp. ............ 2,500 195,000
American International
Group Inc. ..................... 23,649 2,262,914(h)
AmSouth Bancorp. .................. 4,100 51,250
Aon Corp. ......................... 2,600 102,050
Associates First Capital Corp.
(Class A) ...................... 7,314 277,932
Bank of America Corp. ............. 16,803 880,057(h)
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
Bank of New York Inc. ............. 7,600 $ 426,075
Bank One Corp. .................... 11,864 458,247
BB&T Corp. ........................ 4,200 126,525
Bear Stearns Cos. Inc. ............ 1,120 70,560
Capital One Financial Corp. ....... 2,000 140,125
Charles Schwab Corp. .............. 14,100 500,550
Charter One Financial Inc. ........ 2,115 51,553
Chase Manhattan Corp. ............. 13,400 618,912
Chubb Corp. ....................... 1,800 142,425
Cincinnati Financial Corp. ........ 1,700 60,350
CIT Group Inc. (Class A) .......... 2,800 49,000
Citigroup Inc. .................... 45,949 2,484,118
Comerica Inc. ..................... 1,550 90,578
Conseco Inc. ...................... 3,674 28,014
Countrywide Credit
Industries Inc. ................ 1,100 41,525
Freddie Mac. ...................... 7,100 383,844
Fannie Mae ........................ 10,300 736,450
Fifth Third Bancorp ............... 4,750 255,906
First Union Corp. ................. 10,010 322,197
Firstar Corp. ..................... 9,845 220,282
FleetBoston Financial Corp. ....... 9,247 360,633
Franklin Resources Inc. ........... 2,500 111,075
Golden West Financial Corp. ....... 1,600 85,800
Hartford Financial Services
Group Inc. ..................... 2,200 160,462
Household International Inc. ...... 4,806 272,140
Huntington Bancshares Inc. ........ 2,378 34,927
J.P. Morgan & Co. Inc. ............ 1,600 261,400
Jefferson-Pilot Corp. ............. 1,000 67,875
KeyCorp. .......................... 4,500 113,906
Lehman Brothers Holdings Inc. ..... 1,200 177,300
Lincoln National Corp. ............ 2,000 96,250
Loews Corp. ....................... 1,000 83,375
Marsh & McLennan Cos. Inc. ........ 2,800 371,700
MBIA Inc. ......................... 1,000 71,125
MBNA Corp. ........................ 8,650 333,025
Mellon Financial Corp. ............ 5,000 231,875
Merrill Lynch & Co. Inc. .......... 9,700 640,200
MGIC Investment Corp. ............. 1,100 67,237
Morgan Stanley, Dean Witter & Co. . 11,500 1,051,531
National City Corp. ............... 6,100 134,962
Northern Trust Corp. .............. 2,300 204,412
Old Kent Financial Corp. .......... 1,375 39,789
PNC Financial Services Group ...... 3,000 195,000
Progressive Corp. ................. 700 57,313
Providian Financial Corp. ......... 1,500 190,500
Regions Financial Corp. ........... 2,200 49,913
Safeco Corp. ...................... 1,400 38,150
SouthTrust Corp. .................. 1,600 50,300
St. Paul Cos. Inc. ................ 2,200 108,487
State Street Corp. ................ 1,600 208,000(e)
Stilwell Financial Inc. ........... 2,200 95,700(a)
Summit Bancorp. ................... 1,900 65,550
Suntrust Banks Inc. ............... 3,100 154,419
Synovus Financial Corp. ........... 2,900 61,444
T. Rowe Price Associates Inc. ..... 1,300 61,019
Torchmark Corp. ................... 1,400 38,938
Union Planters Corp. .............. 1,300 42,981
U.S. Bancorp. ..................... 7,600 172,900
UnumProvident Corp. ............... 2,446 66,654
USA Education Inc. ................ 1,600 77,100
Wachovia Corp. .................... 2,000 113,375
Washington Mutual Inc. ............ 5,522 219,845
Wells Fargo & Co. ................. 16,800 771,750
20,046,570
----------------
See Notes to Schedule of Investments and Notes to Financial statements.
11
<PAGE>
S&P 500 INDEX FUND
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
TECHNOLOGY -- 29.1%
Adaptec Inc. ...................... 1,200 $ 24,000(a)
ADC Telecommunications Inc. ....... 7,200 193,612(a)
Adobe Systems Inc. ................ 1,200 186,300
Advanced Micro Devices Inc. ....... 3,200 75,600(a)
Agilent Technologies Inc. ......... 4,595 224,868(a)
Altera Corp. ...................... 4,000 191,000(a)
America Online Inc. ............... 23,600 1,268,500(a,h)
Analog Devices Inc. ............... 3,600 297,225(a)
Andrew Corp. ...................... 900 23,569(a)
Apple Computer .................... 3,300 84,975(a)
Applied Materials Inc. ............ 8,200 486,362(a)
Autodesk Inc. ..................... 700 17,763(h)
Automatic Data Processing Inc. .... 6,400 428,000
BMC Software Inc. ................. 2,700 51,638(a)
Broadcom Corp. (Class A) .......... 2,300 560,625(a)
Cabletron Systems Inc. ............ 1,800 52,875(a)
Ceridian Corp. .................... 1,600 44,900(a)
Cisco Systems Inc. ................ 72,400 4,000,100(a)
Citrix Systems Inc. ............... 2,000 40,125(a)
Compaq Computer Corp. ............. 17,472 481,878
Computer Associates
International Inc. ............. 6,150 154,903
Computer Sciences Corp. ........... 1,700 126,225(a)
Compuware Corp. ................... 4,000 33,500(a)
Comverse Technology Inc. .......... 1,600 172,800(a)
Conexant Systems Inc. ............. 2,200 92,125(a)
Convergys Corp. ................... 1,600 62,200(a)
Corning Inc. ...................... 3,000 891,000
Dell Computer Corp. ............... 26,500 816,531(a)
Electronic Data Systems Corp. ..... 4,700 195,050
EMC Corp. ......................... 22,162 2,196,808(a)
Equifax Inc. ...................... 1,500 40,406
First Data Corp. .................. 4,200 164,063
Gateway Inc. ...................... 3,300 154,275(a)
Hewlett Packard Co. ............... 10,200 989,400
Intel Corp. ....................... 68,500 2,847,031(h)
International Business
Machines Corp. ................. 18,000 2,025,000
JDS Uniphase Corp. ................ 9,500 899,531(a)
KLA-Tencor Corp. .................. 1,900 78,256(a)
Lexmark International Inc.
(Class A) ...................... 1,300 48,750(a)
Linear Technology Corp. 3,200 207,200
LSI Logic Corp. ................... 3,100 90,675(a)
Lucent Technologies Inc. .......... 34,090 1,041,876(h)
Maxim Integrated Products Inc. .... 2,900 233,269(a)
Mercury Interactive Corp. ......... 800 125,400(a)
Micron Technology Inc. ............ 5,700 262,200(a)
Microsoft Corp. ................... 53,700 3,238,781(a,h)
Motorola Inc. ..................... 22,161 626,048
National Semiconductor Corp. ...... 1,900 76,475(a)
NCR Corp. ......................... 900 34,031(a)
Network Appliance Inc. ............ 3,200 407,600(a)
Nortel Networks Corp. ............. 30,480 1,815,465
Novell Inc. ....................... 3,100 30,806(a)
Novellus Systems Inc. ............. 1,300 60,531(a)
Oracle Systems Corp. .............. 28,700 2,260,125(a)
Palm Inc. ......................... 5,739 303,808(a)
Parametric Technology Corp. ....... 3,000 32,813(a)
Paychex Inc. ...................... 3,700 194,250
PeopleSoft Inc. ................... 2,700 75,431(a)
PerkinElmer Inc. .................. 500 52,188
Pitney Bowes Inc. ................. 2,600 102,538
QUALCOMM Inc. ..................... 7,500 534,375(a)
Sabre Holdings Corp. .............. 1,228 35,535
Sanmina Corp. ..................... 1,500 140,438(a)
Sapient Corp. ..................... 1,200 48,825(a)
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
Scientific-Atlanta Inc. ........... 1,600 $ 101,800
Seagate Technology ................ 2,300 158,700(a)
Siebel Systems Inc. ............... 4,300 478,644(a)
Solectron Corp. ................... 6,200 285,975(a)
Sun Microsystems Inc. ............. 16,200 1,891,350(a)
Tektronix Inc. .................... 500 38,406
Tellabs Inc. ...................... 4,200 200,550(a)
Teradyne Inc. ..................... 1,800 63,000(a)
Texas Instruments Inc. ............ 17,700 835,219
Unisys Corp. ...................... 3,500 39,375(a)
VERITAS Software Corp. ............ 4,100 582,200(a)
Xerox Corp. ....................... 6,900 103,931
Xilinx Inc. ....................... 3,300 282,562(a)
Yahoo! Inc. ....................... 5,600 509,600(a)
38,323,764
TRANSPORTATION -- 0.5%
AMR Corp. ......................... 1,400 45,763(a)
Burlington Northern
Santa Fe Corp. ................. 4,100 88,406
CSX Corp. ......................... 2,200 47,987
Delta Air Lines Inc. .............. 1,200 53,250
FedEx Corp. ....................... 3,000 133,020(a)
Norfolk Southern Corp. ............ 3,800 55,575
Ryder System Inc. ................. 500 9,219
Southwest Airlines Co. ............ 5,100 123,675
U.S. Airways Group Inc. ........... 700 21,306(a)
Union Pacific Corp. ............... 2,600 101,075
679,276
UTILITIES -- 9.4%
AES Corp. ......................... 4,600 315,100(a)
Alltel Corp. ...................... 3,200 167,000
Ameren Corp. ...................... 1,400 58,625
American Electric Power Inc. ...... 3,340 130,677
AT&T Corp. ........................ 38,361 1,126,854(h)
Bellsouth Corp. ................... 19,100 768,775
CenturyTel Inc. ................... 1,400 38,150
CINergy Corp. ..................... 1,500 49,594
CMS Energy Corp. .................. 1,200 32,325
Coastal Corp. ..................... 2,200 163,075
Columbia Energy Corp. ............. 800 56,800
Consolidated Edison Inc. .......... 2,200 75,075
Constellation Energy Group ........ 1,500 74,625
CP&L Inc. ......................... 1,600 66,700
Dominion Resources Inc. ........... 2,384 138,421
DTE Energy Co. .................... 1,400 53,550
Duke Energy Corp. ................. 3,800 325,850
Eastern Enterprises ............... 300 19,144
Edison International .............. 3,400 65,663
El Paso Energy Corp. .............. 2,400 147,900
Enron Corp. ....................... 7,500 657,187
Entergy Corp. ..................... 2,300 85,675
FirstEnergy Corp. ................. 2,300 61,956
Florida Progress Corp. ............ 1,000 52,938
FPL Group Inc. .................... 1,800 118,350
Global Crossing Ltd. .............. 9,025 279,775(a)
GPU Inc. .......................... 1,100 35,681
KeySpan Corp. ..................... 1,300 52,163
Nextel Communications Inc.
(Class A) ...................... 7,700 359,975(a)
Niagara Mohawk Holdings Inc. ...... 1,900 29,925(a)
Nicor Inc. ........................ 400 14,475
ONEOK Inc. ........................ 400 15,900
PECO Energy Co. ................... 1,800 109,012
Peoples Energy Corp. .............. 300 10,013
----------------
See Notes to Schedule of Investments and Notes to Financial statements.
12
<PAGE>
S&P 500 INDEX FUND
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
PG&E Corp. ........................ 4,000 $ 96,750
Pinnacle West Capital Corp. ....... 900 45,788
PPL Corp. ......................... 1,500 62,625
Public Service Enterprise Group ... 2,200 98,312
Qwest Communications
International Inc. ............. 16,917 813,073(a)
Reliant Energy Inc. ............... 3,000 139,500
SBC Communications Inc. ........... 34,553 1,727,650
Sempra Energy ..................... 1,950 40,584
Southern Co. ...................... 6,500 210,844
Sprint Corp. (FON Group) ......... 9,000 263,812
Sprint Corp. (PCS Group) .......... 9,500 333,094(a)
TXU Corp. ......................... 2,600 103,025
Unicom Corp. ...................... 1,800 101,137
Verizon Communications ............ 27,766 1,344,916
Williams Cos. Inc. ................ 4,600 194,350
WorldCom Inc. ..................... 29,421 893,663(a)
Xcel Energy, Inc. ................. 3,315 91,163
12,317,214
TOTAL INVESTMENTS IN SECURITIES
(COST $124,244,893) 128,846,894
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 2.0%
--------------------------------------------------------------------------------
GEI Short-Term Investment Fund .... 679,954 679,954
Money Market Obligations Trust ....1,679,473 1,679,473
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
U.S. GOVERNMENT -- 0.2%
United States Treasury Bill
5.99% 12/14/00 ..............$ 195,000 192,630(d)
TOTAL SHORT-TERM INVESTMENTS
(COST $2,552,057) .............. 2,552,057
OTHER ASSETS AND LIABILITIES,
NET 0.0% ....................... 58,937
------------
NET ASSETS-- 100% ................. $131,457,888
============
--------------------------------------------------------------------------------
OTHER INFORMATION
--------------------------------------------------------------------------------
The S&P 500 Index Fund had the following long futures contracts open at
September 30, 2000:
NUMBER
EXPIRATION OF UNDERLYING UNREALIZED
DESCRIPTION DATE CONTRACTS FACE VALUE DEPRECIATION
--------------------------------------------------------------------------------
S&P 500 Dec. 2000 7 $2,543,975 $(122,413)
----------------
See Notes to Schedule of Investments and Notes to Financial Statements.
13
<PAGE>
VALUE EQUITY FUND
--------------------------------------------------------------------------------
Q&A
PETER J. HATHAWAY IS THE PORTFOLIO MANAGER FOR THE VALUE EQUITY FUND. HE IS
CURRENTLY A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT AND MANAGES EQUITY
ASSETS OF APPROXIMATELY $9 BILLION, AS OF SEPTEMBER 30, 2000. PETE HAS MORE THAN
37 YEARS OF INVESTMENT EXPERIENCE AND HAS HELD POSITIONS WITH GE ASSET
MANAGEMENT SINCE 1985. PETE WAS SENIOR VICE PRESIDENT AND PORTFOLIO MANAGER AT
AMERITRUST FROM 1975 TO 1985, AND PREVIOUSLY HELD INVESTMENT POSITIONS AT
MERRILL LYNCH, EQUITABLE LIFE AND US TRUST. HE HOLDS AN M.B.A. FROM THE WHARTON
SCHOOL AT THE UNIVERSITY OF PENNSYLVANIA AND A BS IN FINANCE FROM ARIZONA STATE
UNIVERSITY.
Q. HOW DID THE VALUE EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK FOR THE
PERIOD FEBRUARY 2, 2000 (COMMENCEMENT OF OPERATIONS) THROUGH SEPTEMBER 30,
2000?
A. The Value Equity Fund posted a return of 3.90% for the period ended
September 30, 2000 while the Standard & Poor's 500/Barra Value Composite
Price Index returned 7.82% for the same period.
Q. WHY DID THE FUND UNDERPERFORM ITS BENCHMARK FOR THE PERIOD ENDED SEPTEMBER
30, 2000?
A. The Fund's inception date was in February of 2000, which was the beginning
of the first technology correction in the market, after several very strong
quarters. Our underperformance was due to an overweighting in technology and
an underweighting in the financials sector, despite solid stock selection.
Q. WHICH STOCKS HAVE PERFORMED WELL? WHICH HAVE NOT PERFORMED WELL?
A. Six of nine sectors in the S&P 500/Barra Value Index earned positive
returns. On a stock selection basis, we performed well in the financial,
utilities, transportation, energy, and basic materials sectors. We did well
in financials, due to holdings such as Lehman Brothers, Hartford Financial
Services Group and Morgan Stanley Dean Witter. An overweight position in
Qwest, an underweight position in AT&T, and not owning Worldcomm, helped our
returns within the utilities sector. Our transportation stocks outperformed
because we were overweight Continental Airlines, and did not own CSX or
Union Pacific. Areas that detracted from performance included technology,
where many stocks pulled back significantly, such as Micron Technology,
Unisys, and Motorola. Again, though our performance in the financial sector
was favorable, the Fund's underweighting had a negative impact on
performance for the period.
Q. HOW HAS THE VOLATILITY IN THE MARKET IMPACTED THE FUND?
A. Volatility over the past twelve months has been a consistent theme in the
U.S. equity markets. In particular, the market certainly did not earn a gold
medal in the most recent third quarter of 2000. In fact, the S&P 500 Index
finished down 1.0% in the quarter, placing the Index seventh out of 33
FT/S&P All-World Indices measured in U.S. dollars. In September, the broader
averages, including the S&P 500 Index and the Dow Jones Industrials, both
posted declines in excess of 5.0%, while the NASDAQ gave back an 11% gain in
August with a more than 13% decline. These market indices have posted mixed
results on a year-to-date basis in 2000 with the S&P 500 Index now down
1.5%, the Dow Jones Industrials down 6.55%, and the NASDAQ down 9.7%.
Interestingly, this is the first negative nine-month performance for the S&P
500 Index since 1994.
The continuation of the roller coaster volatility in performance for the
broader averages is really the confluence of several factors including
energy prices, the Euro currency, U.S. corporate earnings, and the U.S.
Presidential election -- the "4 E's" as some equity strategists have
remarked. In addition, the Federal Reserve's monetary policy of raising
interest rates six times or 175 basis points over the past 18 months has
provided the backdrop for a global economic slowdown following a blistering
pace of GDP growth in the U.S. during 1999.
In terms of the Fund, we continue to own those companies that are
underappreciated relative to their earnings growth and their peers. We are
buying stocks that have a catalyst to unlock the intrinsic value over the
next three to four years. We look at volatility or swings in the market as
opportunities to scale buy or scale sell those stocks that become,
respectively, undervalued or overvalued relative to the market and to their
peers. We are committed to finding those companies with excellent management
in order to execute their business strategy in difficult market conditions.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
A. We continue to expect the stock market to be volatile amid a moderate
economic slowdown. We maintain our focus on fundamental research and stock
selection and plan to maintain the valuation discipline that has rewarded us
over the years. We remain focused on finding under-appreciated stocks with a
catalyst for investment over the next three to four years. We believe the
portfolio is positioned for solid relative performance in this environment.
14
<PAGE>
VALUE EQUITY FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT
--------------------------------------------------------------------------------
[LINE GRAPH OMITTED]
PLOT POIINTS FOLLOWS:
VALUE EQUITY FUND S&P 500/BARRA VALUE
1/31/2000 10,000.00 10,000.00
2/00 9,570.00 9,375.20
3/00 10,550.00 10,352.75
4/00 10,380.00 10,258.44
5/00 10,410.00 10,290.44
6/00 10,360.00 9,883.97
7/00 10,280.00 10,081.75
8/00 10,850.00 10,755.21
9/00 10,390.00 10,756.08
--------------------------------------------------------------------------------
AVERAGE TOTAL RETURN
FOR THE PERIOD ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
SINCE
INCEPTION** COMMENCEMENT
--------------------------------------------------------------------------------
Value Equity Fund 3.90% 2/2/00
--------------------------------------------------------------------------------
S&P 500/BARRA Value 7.82%
--------------------------------------------------------------------------------
**INDEX RETURNS ARE NOT AVAILABLE FROM THE FUND'S INCEPTION DATE AND THEREFORE
ARE CALCULATED FROM THE MONTH END NEAREST THE FUND'S INCEPTION DATE.
INVESTMENT PROFILE
A mutual fund designed for investors who seek long-term growth
of capital and future income by investing primarily in equity
securities of large U.S. companies that the portfolio manager believes
are undervalued by the market but have solid growth prospects.
--------------------------------------------------------------------------------
SECTOR ALLOCATION
AS OF SEPTEMBER 30, 2000
(AS A % OF NET ASSETS)
--------------------------------------------------------------------------------
[PIE CHART OMITTED]
PLOT POINTS FOLLOWS:
TECHNOLOGY 19.2%
FINANCIAL 19.0%
CONSUMER STABLE 16.5%
UTILITIES 9.7%
CONSUMER CYCLICAL 9.2%
CAPITAL GOODS 8.9%
ENERGY 8.0%
CASH & OTHER 4.0%*
BASIC MATERIALS 3.4%
TRANSPORTATION 2.1%
--------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS
AT SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
Citigroup Inc. 3.29%
--------------------------------------------------------------------------------
Exxon Mobil Corp. 2.92%
--------------------------------------------------------------------------------
Merck & Co. Inc. 2.51%
--------------------------------------------------------------------------------
Microsoft Corp. 2.50%
--------------------------------------------------------------------------------
Intel Corp. 2.33%
--------------------------------------------------------------------------------
SBC Communications Inc. 2.28%
--------------------------------------------------------------------------------
Morgan Stanley, Dean Witter & Co. 2.05%
--------------------------------------------------------------------------------
United Technologies Corp. 1.87%
--------------------------------------------------------------------------------
Cisco Systems Inc. 1.42%
--------------------------------------------------------------------------------
Fannie Mae 1.41%
--------------------------------------------------------------------------------
SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
15
<PAGE>
VALUE EQUITY FUND
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
VALUE EQUITY FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
COMMON STOCK -- 96.0%
--------------------------------------------------------------------------------
BASIC MATERIALS -- 3.4%
Avery Dennison Corp. .............. 2,373 $ 110,048
Barrick Gold Corp. ................ 26,108 398,147
Bowater Inc. ...................... 8,071 374,797
Du Pont de Nemours (E.I.) & Co. ... 9,544 395,480
International Paper Co. ........... 7,120 204,255
Newmont Mining Corp. .............. 20,174 342,958
PPG Industries Inc. ............... 5,891 233,799
Praxair Inc. ...................... 1,187 44,364
Rayonier Inc. ..................... 7,951 285,739
The Dow Chemical Co. .............. 7,116 177,455
Westvaco Corp. .................... 6,055 161,593
Weyerhaeuser Co. .................. 19,700 795,387
Willamette Industries Inc. ........ 1,321 36,988
3,561,010
CAPITAL GOODS -- 8.9%
Boeing Co. ........................ 12,882 811,566
Cooper Industries Inc. ............ 3,798 133,879
Deere & Co. ....................... 9,019 299,882
Dover Corp. ....................... 18,798 882,331
Eaton Corp. ....................... 6,758 416,462
Emerson Electric Co. .............. 19,756 1,323,652
General Dynamics Corp. ............ 6,443 404,701
Honeywell International Inc. ...... 7,596 270,607
Hubbell Inc. (Class B) ............ 10,681 267,693
Illinois Tool Works Inc. .......... 1,379 77,052
Ingersoll-Rand Co. ................ 9,019 305,519
Martin Marietta Materials Inc. .... 9,969 381,613
Molex Inc. (Class A) .............. 9,494 393,408
Parker-Hannifin Corp. ............. 8,830 298,012
Sherwin-Williams Co. .............. 4,057 86,718
Textron Inc. ...................... 22,790 1,051,189
United Technologies Corp. ......... 28,551 1,977,157
9,381,441
CONSUMER - CYCLICAL -- 9.2%
AT&T Corp. - Liberty Media
Group (Class A) ................ 8,727 157,086(a,h)
Catalina Marketing Corp. .......... 4,984 187,523(a)
Comcast Corp. (Class A) ........... 15,190 621,841(a)
Costco Wholesale Corp. ............ 4,984 174,129(a)
CVS Corp. ......................... 8,545 395,740
Delphi Automotive Systems Corp. ... 8,782 132,828
Eastman Kodak Co. ................. 1,424 58,206
Gannett Co. Inc. .................. 12,347 654,391
Home Depot Inc. ................... 11,392 604,488
Interpublic Group Cos. Inc. ....... 15,428 525,516
Knight-Ridder Inc. ................ 7,827 397,709
Lowes Cos. Inc. ................... 16,139 724,238
McDonald's Corp. .................. 28,719 866,955
McGraw Hill Cos. Inc. ............. 2,386 151,660
Omnicom Group Inc. ................ 1,187 86,577
Target Corp. ...................... 40,780 1,044,987
The Walt Disney Co. ............... 34,697 1,327,160
Tricon Global Restaurants Inc. .... 1,424 43,610(a)
TRW Inc. .......................... 857 34,816
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
Viacom Inc. (Class B) ............. 2,136 $ 124,956(a)
Wal-Mart Stores Inc. .............. 29,193 1,404,913(h)
9,719,329
CONSUMER - STABLE -- 16.5%
Abbott Laboratories ............... 9,544 453,936
Amgen Inc. ........................ 7,831 546,824(a)
Anheuser Busch Cos. Inc. .......... 10,206 431,841
Avon Products Inc. ................ 3,818 156,061
Baxter International Inc. ......... 3,560 284,133
Bestfoods ......................... 5,459 397,142
Bristol-Myers Squibb Co. .......... 19,523 1,115,251
Cardinal Health Inc. .............. 14,716 1,297,767(h)
Colgate-Palmolive Co. ............. 3,323 156,846
Eli Lilly & Co. ................... 13,055 1,059,087
Energizer Holdings Inc. ........... 14,952 366,324(a)
General Mills Inc. ................ 9,969 353,899
Gillette Co. ...................... 5,934 183,212
Heinz (H.J.) Co. .................. 5,965 221,078
Johnson & Johnson ................. 12,817 1,203,997
Keebler Foods Co. ................. 2,136 89,712
Kimberly Clark Corp. .............. 4,509 251,659
Medtronic Inc. .................... 2,926 151,603
Merck & Co. Inc. .................. 35,602 2,650,124
PE Corp. - PE Biosystems Group .... 2,591 301,852
Pepsico Inc. ...................... 28,244 1,299,224
Pfizer Inc. ....................... 24,450 1,098,722
Pharmacia Corp. ................... 9,969 600,009
Procter & Gamble Co. .............. 11,156 747,452
Ralston-Ralston Purina Group ...... 27,281 646,219
Schering Plough Corp. ............. 19,225 893,962
Sysco Corp. ....................... 6,409 296,817
The Quaker Oats Co. ............... 2,136 169,011
17,423,764
ENERGY -- 8.0%
BP Amoco PLC ADR .................. 5,700 302,100
Burlington Resources Inc. ......... 10,737 395,256
Chevron Corp. ..................... 5,726 488,142
Conoco Inc. (Class B) ............. 24,730 666,164
Exxon Mobil Corp. ................. 34,700 3,092,637
Halliburton Co. ................... 12,689 620,968
Nabors Industries Inc. ............ 10,945 573,518(a)
Royal Dutch Petroleum Co. ADR ..... 11,867 711,278
Schlumberger Ltd. ................. 5,222 429,836
Texaco Inc. ....................... 2,133 111,983
Tosco Corp. ....................... 6,171 192,458
Transocean Sedco Forex Inc. ....... 2,068 121,237
Unocal Corp. ...................... 14,375 509,414
USX-Marathon Group ................ 10,206 289,595
8,504,586
FINANCIAL -- 19.0%
AFLAC Inc. ........................ 1,898 121,591
Allstate Corp. .................... 4,747 164,958
American Express Co. .............. 14,716 893,997
American International
Group Inc. ..................... 12,383 1,184,898
Associates First Capital
Corp. (Class A) ................ 18,750 712,500
AXA ADR ........................... 1,774 114,756
AXA-UAP ........................... 545 71,283
Bank of America Corp. ............. 23,735 1,243,121(h)
Bank of New York Inc. ............. 2,845 159,498
----------------
See Notes to Schedule of Investments and Notes to Financial Statements.
16
<PAGE>
VALUE EQUITY FUND
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
-------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
Bank One Corp. .................... 1,187 $ 45,848
BlackRock Inc. .................... 6,695 214,240(a)
Chase Manhattan Corp. ............. 14,794 683,298
Chubb Corp. ....................... 7,832 619,707
Citigroup Inc. .................... 64,437 3,483,625(h)
Comerica Inc. ..................... 3,563 208,213
Edwards A.G. Inc. ................. 4,035 211,081
Fannie Mae ........................ 20,886 1,493,349
Fidelity National Financial Inc. .. 15,665 387,709
FleetBoston Financial Corp. ....... 17,417 679,263
Franklin Resources Inc. ........... 3,560 158,171
Goldman Sachs Group Inc. .......... 4,747 540,861
Hartford Financial Services
Group Inc. ..................... 14,241 1,038,703
J.P. Morgan & Co. Inc. ............ 1,772 289,500
Lehman Brothers Holdings Inc. ..... 7,559 1,116,842
Merrill Lynch & Co. Inc. .......... 949 62,634
MetLife Inc. ...................... 3,089 80,893(a)
Morgan Stanley, Dean Witter & Co. . 23,660 2,163,411
PNC Financial Services Group ...... 15,472 1,005,680
St. Paul Cos. Inc. ................ 9,391 463,094
Torchmark Corp. ................... 1,424 39,605
U.S. Bancorp. ..................... 11,215 255,141
Waddell & Reed Financial Inc.
(Class A) ...................... 6,171 191,301
20,098,771
TECHNOLOGY -- 19.2%
Analog Devices Inc. ............... 13,040 1,076,615(a,h)
Applied Materials Inc. ............ 11,701 694,016(a)
Automatic Data Processing Inc. .... 9,254 618,861
Axcelis Technologies Inc. ......... 5,222 62,011(a)
BMC Software Inc. ................. 2,849 54,487(a)
Cisco Systems Inc. ................ 27,177 1,501,529(a,h)
Compaq Computer Corp. ............. 1,668 46,003
Computer Sciences Corp. ........... 1,201 89,174(a)
Dell Computer Corp. ............... 37,958 1,169,581(a)
EarthLink Inc. .................... 2,373 21,654(a)
EMC Corp. ......................... 8,542 846,726(a)
Equifax Inc. ...................... 24,215 652,292
First Data Corp. .................. 29,668 1,158,906(h)
Intel Corp. ....................... 59,309 2,465,030
International Business
Machines Corp. ................. 8,070 907,875
Micron Technology Inc. ............ 12,579 578,634(a)
Microsoft Corp. ................... 43,787 2,640,903(a)
Motorola Inc. ..................... 39,162 1,106,327
Nokia Oyj ADR ..................... 1,305 51,955
Nortel Networks Corp. ............. 18,944 1,128,352
PerkinElmer Inc. .................. 4,035 421,153
Pitney Bowes Inc. ................. 16,134 636,285
SCI Systems Inc. .................. 2,373 97,293(a)
Sun Microsystems Inc. ............. 8,307 969,842(a)
Synopsys Inc. ..................... 2,849 107,906(a)
Tellabs Inc. ...................... 12,342 589,331(a)
Texas Instruments Inc. ............ 14,003 660,767
20,353,508
TRANSPORTATION -- 2.1%
AMR Corp. ......................... 10,380 339,296(a)
Burlington Northern Santa
Fe Corp. ....................... 25,053 540,205
Canadian Pacific Ltd. ............. 22,310 580,060
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
Continental Airlines Inc.
(Class B) ...................... 6,414 $ 291,436(a)
Delta Air Lines Inc. .............. 9,508 421,918
2,172,915
UTILITIES -- 9.7%
AT&T Corp. ........................ 17,801 522,904
Constellation Energy Group ........ 6,649 330,788
Dominion Resources Inc. ........... 3,323 192,942
Duke Energy Corp. ................. 12,461 1,068,531
Dynegy Inc. (Class A) ............. 5,222 297,654
El Paso Energy Corp. .............. 14,957 921,725
FPL Group Inc. .................... 720 47,340
Global Crossing Ltd. .............. 14,952 463,512(a)
Montana Power Co. ................. 2,346 78,298
NEXTLINK Communications Inc.
(Class A) ...................... 2,292 80,650(a)
PECO Energy Co. ................... 2,865 173,511
Qwest Communications
International Inc. ............. 22,046 1,059,586(a)
SBC Communications Inc. ........... 48,182 2,409,100
Southern Co. ...................... 720 23,355
Southern Energy Inc. .............. 2,881 90,391(a)
Sprint Corp. (FON Group) .......... 18,985 556,498
Verizon Communications ............ 28,482 1,379,597
Williams Cos. Inc. ................ 2,625 110,906
Xcel Energy Inc. .................. 17,310 476,024
10,283,312
TOTAL INVESTMENTS IN SECURITIES
(COST $101,025,185) ............ 101,498,636
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 4.0%
--------------------------------------------------------------------------------
GEI SHORT-TERM INVESTMENT FUND
(COST $4,276,361) 4,276,361 4,276,361
OTHER ASSETS AND LIABILITIES,
NET 0.0% (20,913)
------------
NET ASSETS-- 100% $105,754,084
============
--------------------------------------------------------------------------------
OTHER INFORMATION
--------------------------------------------------------------------------------
The Value Equity Fund had the following long futures contracts open at September
30, 2000:
NUMBER
EXPIRATION OF UNDERLYING UNREALIZED
DESCRIPTION DATE CONTRACTS FACE VALUE DEPRECIATION
--------------------------------------------------------------------------------
S&P 500 Dec. 2000 4 $1,453,700 $(46,400)
----------------------------------------------------------------
See Notes to Schedule of Investments and Notes to Financial Statements.
17
<PAGE>
MID-CAP GROWTH FUND
--------------------------------------------------------------------------------
Q&A
RALPH (CHIP) E. WHITMAN HAS BEEN THE PORTFOLIO MANAGER OF THE MID-CAP GROWTH
FUND SINCE DECEMBER 1998. HE IS CURRENTLY A SENIOR VICE PRESIDENT OF GE ASSET
MANAGEMENT. CHIP HAS MORE THAN 12 YEARS OF INVESTMENT EXPERIENCE AND HAS HELD
POSITIONS WITH GE ASSET MANAGEMENT SINCE 1987. CHIP IS A HOLDER OF A CHARTERED
FINANCIAL ANALYST DESIGNATION. HE HOLDS A B.A. IN MATHEMATICS FROM HAMILTON
COLLEGE AND A M.S. IN MANAGEMENT FROM THE SLOAN SCHOOL AT MIT.
BETWEEN NOVEMBER 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
ONE-YEAR PERIOD ENDED SEPTEMBER 30, 2000?
A. The Mid-Cap Growth Fund returned 33.97% for the one-year period ended
September 30, 2000, while the Standard & Poor's MidCap 400 Index returned
43.23% for the same period.
Q. WHY DID THE FUND UNDERPERFORM ITS BENCHMARK FOR THE ONE-YEAR PERIOD ENDED
SEPTEMBER 30, 2000?
A. The Fund underperformed its benchmark due to its underweight positions in
the technology and selected healthcare areas. Valuation concerns in
technology and biotechnology related stocks caused us to de-emphasize these
groups. The market remained quite narrow over this time, period as investors
deployed most of their funds in the technology, biotechnology and energy
sectors. The Fund was underweight in technology by 4.5%, but was able to
invest in some solid companies that did quite well over this period.
Holdings such as Analog Devices, ADC Telecom and Nortel Networks performed
very well for the Fund. The financial sector provided the portfolio with
positive performance, due to an overweight of the sector and strong
performance from holdings such as Waddell & Reed, Bank of New York, and AXA
Financial. Another sector providing a positive boost to performance was
utilities, where the Fund was underweight but where stock selection was
solid. The Fund's focus in this sector was primarily in the
telecommunications industry. The capital goods, consumer cyclical, and
consumer stable sectors, as well as an underweight in energy, all detracted
from the Fund's performance. The Fund continues to seek out those companies
with above average growth and reasonable valuations.
Q. WHAT HAS YOUR INVESTMENT STRATEGY BEEN FOR THE FUND?
A. The focus of the Fund continues to be on investing in companies with solid
earnings growth prospects, strong visibility, and superior fundamentals for
the long term. New companies being added to the Fund must be priced
reasonably, based on earnings growth in comparison to the market as well as
in comparison to its respective peer group. We believe companies with high
quality management teams and a focus on enhancing shareholder value will
produce sustainable gains over the long term. We do not invest or speculate
on companies with operating losses and no material track record in managing
their business.
Q. WHICH INVESTMENTS STAND OUT?
A. Energy, technology and healthcare-related stocks (mainly biotechnology) were
without a doubt the main focus with investors over the past year. The Fund's
performance certainly benefited from this trend. Holdings such as Analog
Devices (semiconductors), up 223%, ADC Telecommunications (telecom
equipment), up 157% and Genentech (biotechnology), up 154%, certainly all
stand out. Other issues in the Fund, such as Watson Pharmaceuticals, Waddell
& Reed Financial and Nabors Industries, were up 112%, 110%, and 110%,
respectively, as strength in the financial, energy and healthcare-related
sectors accelerated. While the Fund continues to embrace the "new economy"
paradigm, we are focused on business models with sustainable advantages and
remain disciplined about valuation levels.
Q. WHAT CHANGES HAVE YOU MADE IN THE FUND?
A. Over the course of the past year, we have rebalanced the Fund in
several areas, including the technology, financial, capital goods, consumer
cyclical, and consumer stable sectors. Technology has been an underweight
sector in the Fund and is an area where we selectively add stocks with
strong long-term fundamentals. The financial and capital goods sectors are
overweight, and we have been selectively taking profits here. The consumer
stable sector has been underweight largely due to our reluctance to chase
biotechnology. We have selectively been adding to healthcare and foods.
These shifts should benefit the Fund going forward. The cash position is
higher than our historical average and we are looking to deploy this cash as
good opportunities materialize.
Q. HOW IS THE FUND POSITIONED AMID MODERATING ECONOMIC GROWTH?
A. While we believe the Fund is well positioned to survive an economic
slowdown, we acknowledge that no one security or strategy would be immune to
a broad-based slowdown. Our strategy has been to select securities with
strong, consistent earnings track records and shareholder-friendly
management teams that have a sustainable business model for the long-term.
With respect to valuations, our discipline limits our exposure to
high-flying stocks with stretched valuations as these stocks tend to carry
the most amount of downside risk. We remain focused on bottom-up,
fundamental stock picking to achieve our results.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
A. We believe the Fund is well positioned to take advantage of a rotation into
stocks other than technology-related names. Stocks in these areas have
produced stellar returns over the past few years and are now trading at
extreme valuation levels, even despite the recent correction in many of
them. As we stay focused on quality companies, we believe the Fund can
generate solid results.
18
<PAGE>
MID-CAP GROWTH FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT
--------------------------------------------------------------------------------
[LINE GRAPH OMITTED]
PLOT POINTS FOLLOWS:
MID-CAP GROWTH FUND S&P MID CAP 400
11/25/97 10,000.00 10,000.00
12/97 10,136.02 10,389.50
3/98 11,276.71 11,536.79
6/98 10,856.45 11,289.11
9/98 8,875.28 9,662.50
12/98 10,605.93 12,349.35
3/99 10,595.87 11,567.04
6/99 11,531.69 13,201.97
9/99 10,223.56 12,093.80
12/99 12,553.42 14,173.20
3/00 13,686.36 15,973.13
6/00 13,049.08 15,449.28
9/00 13,706.59 17,322.33
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
ONE SINCE
YEAR INCEPTION* COMMENCEMENT
--------------------------------------------------------------------------------
Mid-Cap Growth Fund 33.97% 11.70% 11/25/97
--------------------------------------------------------------------------------
S&P MidCap 400 43.23% 21.27%
--------------------------------------------------------------------------------
*INDEX RETURNS ARE NOT AVAILABLE FROM THE FUND'S INCEPTION DATE AND THEREFORE
ARE CALCULATED FROM THE MONTH END NEAREST THE FUND'S INCEPTION DATE.
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 portfolio manager believes have above-average growth potential.
--------------------------------------------------------------------------------
SECTOR ALLOCATION
AS OF SEPTEMBER 30, 2000
(AS A % OF NET ASSETS)
--------------------------------------------------------------------------------
[PIE CHART OMITTED]
PLOT POINTS FOLLOWS:
TECHNOLOGY 20.7%
FINANCIAL 14.2%
CONSUMER CYCLICAL 12.6%
CAPITAL GOODS 11.6%
CONSUMER STABLE 11.2%
UTILITIES 10.4%
CASH & OTHER 8.6%
ENERGY 7.8%
BASIC MATERIALS 2.9%
--------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS
AT SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
Analog Devices Inc. 3.49%
--------------------------------------------------------------------------------
SCI Systems Inc. 2.91%
--------------------------------------------------------------------------------
Bank of New York Inc. 2.70%
--------------------------------------------------------------------------------
Molex Inc. (Class A) 2.48%
--------------------------------------------------------------------------------
Viad Corp. 2.39%
--------------------------------------------------------------------------------
El Paso Energy Corp. 2.31%
--------------------------------------------------------------------------------
Devon Energy Corp. 2.25%
--------------------------------------------------------------------------------
Tosco Corp. 2.24%
--------------------------------------------------------------------------------
American International Group Inc. 2.15%
--------------------------------------------------------------------------------
Tyco International Ltd. 2.08%
--------------------------------------------------------------------------------
SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
19
<PAGE>
MID-CAP GROWTH FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
MID-CAP GROWTH FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
COMMON STOCK -- 91.4%
--------------------------------------------------------------------------------
BASIC MATERIALS -- 2.9%
Bowater Inc. ...................... 3,208 $ 148,972
Crompton Corp. .................... 5 39
Praxair Inc. ...................... 6,414 239,723
Rohm & Haas Co. ................... 1,821 52,923
Sealed Air Corp. .................. 3,849 174,167(a)
615,824
CAPITAL GOODS -- 11.6%
Dover Corp. ....................... 5,260 246,891
Honeywell International Inc. ...... 4,170 148,556
Hubbell Inc. (Class B) ............ 3,656 91,629
Martin Marietta Materials Inc. .... 4,811 184,165
Mettler-Toledo International Inc. . 8,596 378,224(a)
Molex Inc. (Class A) .............. 12,830 531,643
Textron Inc. ...................... 6,415 295,892
Thermo Electron Corp. ............. 6,415 166,790(a)
Tyco International Ltd. ........... 8,596 445,918
2,489,708
CONSUMER - CYCLICAL -- 12.6%
Costco Wholesale Corp. ............ 5,237 182,968(a)
Federated Department Stores Inc. .. 12,829 335,158(a)
Hispanic Broadcasting Corp. ....... 4,811 134,107(a)
Interpublic Group Cos. Inc. ....... 8,665 295,151
ITT Industries Inc. ............... 12,829 416,141
Jones Apparel Group Inc. .......... 6,607 175,085(a)
Kroger Co. ........................ 10,392 234,469(a)
Office Depot Inc. ................. 16,037 125,289(a)
Viad Corp. ........................ 19,245 511,195
Young & Rubicam Inc. .............. 1,924 95,238
Zale Corp. ........................ 6,287 203,935(a)
2,708,736
CONSUMER - STABLE -- 11.2%
Cardinal Health Inc. .............. 3,721 328,146
Energizer Holdings Inc. ........... 6,415 157,168(a)
Genentech Inc. .................... 1,384 256,991(a)
Henry Schein Inc. ................. 9,622 191,839(a,h)
Keebler Foods Co. ................. 8,018 336,756
Manor Care Inc. ................... 11,226 176,108(a)
Sybron International Corp. ........ 9,622 230,928(a,h)
Tenet Healthcare Corp. ............ 8,596 312,679(a,h)
Watson Pharmaceuticals Inc. ....... 6,415 416,173(a)
2,406,788
ENERGY -- 7.8%
Devon Energy Corp. ................ 8,019 482,343
Nabors Industries Inc. ............ 4,426 231,922(a)
Schlumberger Ltd. ................. 2,117 174,256
Tosco Corp. ....................... 15,396 480,163
Transocean Sedco Forex Inc. ....... 409 23,978
USX-Marathon Group ................ 9,622 273,024
1,665,686
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
FINANCIAL -- 14.2%
American International Group
Inc. ........................... 4,810 $ 460,257(h)
AXA Financial Inc. ................ 8,339 424,768
Bank of New York Inc. ............. 10,328 579,013
Comdisco Inc. ..................... 16,037 305,705
Firstar Corp. ..................... 3,236 72,406
GATX Corp. ........................ 5,389 225,664
Hartford Financial Services Group
Inc. ........................... 3,977 290,072
Nationwide Financial Services Inc.
(Class A) ...................... 9,621 359,585
UnumProvident Corp. ............... 4,683 127,612
Waddell & Reed Financial Inc.
(Class A) ...................... 6,415 198,865
3,043,947
TECHNOLOGY -- 20.7%
ADC Telecommunications Inc. ....... 11,991 322,445(a)
Analog Devices Inc. ............... 9,059 747,934(a,h)
ANTEC Corp. ....................... 6,415 189,243(a)
Atmel Corp. ....................... 16,024 243,365(a)
Axcelis Technologies Inc. ......... 12,830 152,356(a)
C-Cube Microsystems Inc. .......... 11,758 241,039(a)
Cadence Design Systems Inc. ....... 6,479 166,429(a)
Convergys Corp. ................... 6,414 251,488(a)
Cypress Semiconductor Corp. ....... 4,649 193,224(a)
Intuit Inc. ....................... 4,308 245,556(a)
Nokia Oyj ADR ..................... 8,791 349,992
Nortel Networks Corp. ............. 6,927 412,589
SCI Systems Inc. .................. 15,203 623,323(a)
SunGard Data Systems Inc. ......... 6,800 291,125(a)
4,430,108
UTILITIES -- 10.4%
Dynegy Inc. (Class A) ............. 6,415 365,655
Eastern Enterprises ............... 4,811 307,002
El Paso Energy Corp. .............. 8,019 494,171
Montana Power Co. ................. 12,830 428,201
Qwest Communications
International Inc. ............. 8,339 400,793(a)
Southern Energy Inc. .............. 633 19,860(a)
Telephone & Data Systems Inc. ..... 1,924 212,987
2,228,669
TOTAL INVESTMENTS IN SECURITIES
(COST $16,263,664) ............. 19,589,466
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 12.1%
--------------------------------------------------------------------------------
GEI Short-Term Investment Fund
(COST $2,587,657) ..............2,587,657 2,587,657
OTHER ASSETS AND LIABILITIES,
NET (3.5)% ..................... (757,349)
-----------
NET ASSETS-- 100% $21,419,774
===========
----------------
See Notes to Schedule of Investments and Notes to Financial statements.
20
<PAGE>
MID-CAP VALUE EQUITY FUND
--------------------------------------------------------------------------------
Q&A
JON D. BOSSE OF NWQ INVESTMENT MANAGEMENT COMPANY (NWQ) IS THE PORTFOLIO MANAGER
OF THE MID-CAP VALUE EQUITY FUND. NWQ IS THE FUND'S SUB-ADVISER, AND HAS TOTAL
ASSETS UNDER MANAGEMENT EXCEEDING $5.2 BILLION AS OF SEPTEMBER 30, 2000. 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 HOLDER OF A CHARTERED FINANCIAL ANALYST DESIGNATION
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 AND
LIPPER PEER GROUP FOR THE ONE-YEAR PERIOD ENDED SEPTEMBER 30, 2000?
A. The Mid-Cap Value Equity Fund posted a return of 10.36% for the one-year
period ended September 30, 2000. This compares with a 43.23% return for the
S&P MidCap 400 Index.
Q. WHY DID THE FUND UNDERPERFORM ITS BENCHMARK?
A. The Fund's underperformance relative to its benchmark can be attributed to
several factors, most importantly is the Fund's limited exposure to
technology stocks. These stocks, which comprise over twenty percent of the
S&P MidCap 400 Index, performed exceptionally well due to strong investor
demand for growth stocks. Our investment philosophy, in which we seek
attractive risk/reward opportunities with value-oriented characteristics,
limited our investment in that group. Also negatively impacting performance
was market weakness in the telecommunication sector. This weakness was
related to concerns on profitability and the industry's ability to tap the
financial markets for the slated expansion of their networks. Fund holdings
in this sector include Alltel, AT&T Corp., CoreComm Limited, NTL Inc., and
Telephone & Data Systems. We actively reduced the Fund's exposure to the
telecommunication sector earlier this year following the group's spectacular
returns the past several years. Unfortunately, we were not as aggressive as
we would have liked to be, due to the group's severe sell-off during the
market's rapid decline in March 2000 and our belief we could sell at better
prices.
Q. WHICH INVESTMENTS STAND OUT?
A. Fund holdings that positively contributed to performance the past
twelve-months include Alberto- Culver, Carnival Corp., Mandalay Resort
Group, and Quantum Hard Disk Drive Group. Improving fundamental trends in
the healthcare segment provided the catalyst for our Aetna, Pharmacia Corp.,
and Tenet Healthcare holdings to perform well. These trends include growing
unit volumes, upward pricing momentum, and closure of government fraud
investigations. Some of the best performing stocks were Nabisco Group
Holdings, which received a $30/share cash takeout offer from RJ Reynolds
Tobacco Holdings, and APW Limited, an undervalued technology company.
Financial service was the best performing sector. These stocks rallied due
to moderating inflation concerns, extremely attractive valuations, and a
flurry of consolidation activity. Some of our favorites in the group include
Bear Stearns Companies, Countrywide Credit Industries, and Hartford
Financial Services Group. On the downside, CoreComm Limited and NTL Inc.
underperformed due to the very weak market environment for telecommunication
and media stocks.
Q. HOW DO YOU PICK STOCKS?
A. Our investment philosophy is to identify undervalued companies with
catalysts present to improve profitability and unlock value. Catalysts may
include new management, industry consolidation, restructuring, and a
positive turn in the fundamentals. We are value-oriented and invest in
attractive risk/reward opportunities.
Q. WHAT ARE THE FIVE BEST AND WORST PERFORMING STOCKS HELD DURING THE
TWELVE-MONTH PERIOD?
BEST
Hartford Financial Services Group +78.4%
Bear Stearns Companies +63.9%
Quantum Corp.-
Hard Disk Drive Group +45.9%
Waddell & Reed Financial +39.7%
IndyMac Mortgage Holdings +37.1%
WORST
Alltel Corp. -25.8%
Chase Manhattan Corp. -38.7%
Lear Corp. -41.6%
Hasbro Inc. -46.8%
CoreComm Ltd. -63.8%
Effective October 1, 2000, GEAM, as Investment Adviser to the Fund, will
assume day-to-day portfolio management responsibility from NWQ, the current
Sub-Adviser to the Fund.
21
<PAGE>
MID-CAP VALUE EQUITY FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT
--------------------------------------------------------------------------------
[LINE CHART OMITTED]
PLOT POINTS FOLLOWS:
MID-CAP VALUE EQUITY FUND S&P MIDCAP 400
12/98 10,000.00 10,000.00
3/99 10,120.00 9,366.52
6/99 11,550.00 10,690.42
9/99 9,910.00 9,793.06
12/99 10,956.87 11,476.89
3/00 10,906.33 12,934.39
6/00 10,208.89 12,510.20
9/00 10,936.65 14,026.92
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
ONE SINCE
YEAR INCEPTION COMMENCEMENT
--------------------------------------------------------------------------------
Mid-Cap Value Equity Fund 10.36% 5.25% 12/31/98
--------------------------------------------------------------------------------
S&P MidCap 400 43.23% 21.32%
--------------------------------------------------------------------------------
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 believes are undervalued by the market and
have above-average growth potential.
--------------------------------------------------------------------------------
SECTOR ALLOCATION
AS OF SEPTEMBER 30, 2000
(AS A % OF NET ASSETS)
--------------------------------------------------------------------------------
[PIE CHART OMITTED]
PLOT POINTS OMITTED]
CASH & OTHER 18.8%
FINANCIAL 13.9%
CONSUMER DISCRETIONARY 12.6%
TELECOMMUNICATIONS 9.1%
HEALTHCARE 7.6%
INSURANCE 7.1%
CONSUMER STABLE 6.5%
MATERIALS & PROCESSING 6.2%
TECHNOLOGY - ELECTRONICS & EQUIPMENT 6.1%
ENERGY 5.7%
CAPITAL GOODS 5.1%
TRANSPORTATION 1.3%
--------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS
AT SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
Telephone & Data Systems Inc. 3.93%
--------------------------------------------------------------------------------
Tenet Healthcare Corp. 3.74%
--------------------------------------------------------------------------------
Hartford Financial Services Group Inc. 2.98%
--------------------------------------------------------------------------------
Heller Financial Inc. 2.78%
--------------------------------------------------------------------------------
IndyMac Mortgage Holdings Inc. 2.52%
--------------------------------------------------------------------------------
The E.W. Scripps Co. Inc. (Class A) 2.37%
--------------------------------------------------------------------------------
MGIC Investment Corp. 2.31%
--------------------------------------------------------------------------------
Pharmacia Corp. 2.22%
--------------------------------------------------------------------------------
Praxair Inc. 2.20%
--------------------------------------------------------------------------------
AT&T Corp. - Liberty
Media Group (Class A) 2.18%
--------------------------------------------------------------------------------
SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
22
<PAGE>
MID-CAP VALUE EQUITY FUND
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
MID-CAP VALUE EQUITY FUND
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
COMMON STOCK -- 81.2%
--------------------------------------------------------------------------------
CAPITAL GOODS -- 5.1%
CNH Global N.V. ................... 14,000 $ 140,000
Ingersoll-Rand Co. ................ 2,800 94,850
Parker-Hannifin Corp. ............. 4,000 135,000
Snap-on Inc. ...................... 6,000 141,375
York International Corp. .......... 6,300 156,713
667,938
CONSUMER - DISCRETIONARY -- 12.6%
AT&T Corp. - Liberty Media Group
(Class A) ...................... 16,000 288,000(a)
Carnival Corp. .................... 5,700 140,362
Delphi Automotive Systems Corp. ... 13,400 202,675
Dillards Inc. (Class A) ........... 8,700 92,438
Ford Motor Co. .................... 8,740 221,231
Hasbro Inc. ....................... 17,000 194,437
Lear Corp. ........................ 4,500 92,531(a)
Mandalay Resort Group ............. 4,100 105,063(a)
The E.W. Scripps Co. Inc.
(Class A) ...................... 5,800 313,200
Visteon Corp. ..................... 654 9,892
1,659,829
CONSUMER - STABLE -- 6.5%
Alberto-Culver Co. (Class A) ...... 7,200 180,450
Loews Corp. ....................... 3,400 283,475
Philip Morris Cos. Inc. ........... 8,000 235,500
Sara Lee Corp. .................... 7,600 154,375
853,800
ENERGY -- 5.7%
Conoco Inc. (Class B) ............. 9,200 247,825
Noble Affiliates Inc. ............. 7,000 259,875
Tosco Corp. ....................... 8,000 249,500
757,200
FINANCIAL -- 13.9%
Bank of America Corp. ............. 4,100 214,738
Bear Stearns Cos. Inc. ............ 1,843 116,109
Chase Manhattan Corp. ............. 4,950 228,628
Countrywide Credit Industries
Inc. ........................... 6,500 245,375
First Union Corp. ................. 5,300 170,594
Heller Financial Inc. ............. 12,900 368,456
IndyMac Mortgage Holdings Inc. .... 16,200 333,112
Waddell & Reed Financial Inc.
(Class A) ...................... 5,300 164,300
1,841,312
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
HEALTHCARE -- 7.6%
Aetna Inc. ........................ 3,800 $ 220,637
Pharmacia Corp. ................... 4,879 293,655
Tenet Healthcare Corp. ............ 13,600 494,700(a)
1,008,992
INSURANCE -- 7.1%
Hartford Financial Services
Group Inc. ..................... 5,400 393,863
MGIC Investment Corp. ............. 5,000 305,625
Torchmark Corp. ................... 8,800 244,750
944,238
MATERIALS & PROCESSING -- 6.2%
Bowater Inc. ...................... 3,000 139,313
Packaging Corp. of America ........ 14,500 160,406(a)
Praxair Inc. ...................... 7,800 291,525
Rohm & Haas Co. ................... 7,900 229,594
820,838
TECHNOLOGY - ELECTRONICS & EQUIPMENT -- 6.1%
Agilent Technologies Inc. ......... 3,800 185,963(a)
APW Ltd. .......................... 5,000 243,750(a)
Quantum Corp. - DLT & Storage
Systems ........................ 12,500 188,281(a)
Quantum Corp. - Hard Disk Drive ... 19,400 192,787(a)
810,781
TELECOMMUNICATIONS -- 9.1%
Alltel Corp. ...................... 4,000 208,750
AT&T Corp. ........................ 4,387 128,868
CoreComm Ltd. ..................... 12,650 100,409(a)
NTL Inc. .......................... 5,312 246,012(a)
Telephone & Data Systems Inc. ..... 4,700 520,290
1,204,329
TRANSPORTATION -- 1.3%
Delta Air Lines Inc. .............. 4,000 177,500
TOTAL INVESTMENTS IN SECURITIES
(COST $10,282,554) ............. 10,746,757
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 18.7%
--------------------------------------------------------------------------------
GEI Short-Term Investment Fund
(COST $2,471,250) .............2,471,250 2,471,250
OTHER ASSETS AND LIABILITIES,
NET 0.1% ....................... 16,954
-----------
NET ASSETS-- 100% ................. $13,234,961
===========
----------------
See Notes to Schedule of Investments and Notes to Financial statements.
23
<PAGE>
SMALL-CAP VALUE EQUITY FUND
--------------------------------------------------------------------------------
Q&A
PALISADE CAPITAL MANAGEMENT, L.L.C. ("PALISADE"), WITH TOTAL ASSETS UNDER
MANAGEMENT EXCEEDING $2.4 BILLION AS OF SEPTEMBER 30, 2000, IS THE FUND'S
SUB-ADVISER. THE FUND IS MANAGED BY PALISADE'S SENIOR INVESTMENT 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 GE SMALL-CAP VALUE EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK
AND LIPPER PEER GROUP FOR THE ONE-YEAR PERIOD ENDED SEPTEMBER 30, 2000?
A. The Small-Cap Value Equity Fund posted a return of 28.51% for the one-year
period ended September 30, 2000, while the Russell 2000 Index returned
23.22% for the same period.
Q. WHY DID THE FUND OUTPERFORM ITS BENCHMARK?
A. Strong performance in the healthcare and financial services sectors helped
bolster results over the past twelve months. Among our top performers were
companies with strong management and robust growth potential: AmeriCredit
Corp, Barr Labs, Emmis Communications, Triad Hospitals and Universal Health
Services.
Q. HOW DO YOU PICK STOCKS?
A. Our focus is on quality of management, valuation, visibility of earnings and
growth-rate sustainability. We believe sagacious stock selection begins with
thorough fundamental research. We attempt to maintain a balance between an
investment candidate's projected growth and its valuation.
Q. WHY DID THE WEIGHTING OF THE FUND CHANGE?
A. There is no limit to the amount we will be under- or over-weighted in a
sector or industry group compared to the Russell 2000. First and foremost,
we consider ourselves stock pickers. We view sector allocation as a tool to
help manage risk but rely upon our stock selection as the primary component
of portfolio construction. Our allocation to the financial services,
healthcare and energy sectors has increased over the last few months as we
have found greater potential for future return within these sectors.
Q. WHAT IS THE OUTLOOK FOR THE FUND AND HOW HAVE YOU POSITIONED THE FUND GOING
FORWARD?
A. We remain committed to finding companies with strong product lines, robust
projected growth, reasonable valuations and forward-thinking management.
24
<PAGE>
SMALL-CAP VALUE EQUITY FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT
--------------------------------------------------------------------------------
[LINE CHART OMITTED]
PLOT POINTS FOLLOWS:
SMALL-CAP VALUE EQUITY FUND RUSSELL 2000
8/3/98 10,000.00 10,000.00
9/98 8,910.00 8,688.62
12/98 10,316.52 10,105.88
3/99 8,680.73 9,557.63
6/99 10,647.69 11,043.63
9/99 10,155.95 10,345.68
12/99 12,038.55 12,254.41
3/00 13,319.91 13,121.99
6/00 12,699.90 12,625.75
9/00 13,051.24 12,725.27
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
ONE SINCE
YEAR INCEPTION* COMMENCEMENT
--------------------------------------------------------------------------------
Small-Cap Value Equity Fund 28.51% 13.11% 8/3/98
--------------------------------------------------------------------------------
Russell 2000 23.22% 11.89%
--------------------------------------------------------------------------------
*INDEX RETURNS ARE NOT AVAILABLE FROM THE FUND'S INCEPTION DATE AND THEREFORE
ARE CALCULATED FROM THE MONTH END NEAREST THE FUND'S INCEPTION DATE.
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 but have
solid growth prospects.
--------------------------------------------------------------------------------
SECTOR ALLOCATION
AS OF SEPTEMBER 30, 2000
(AS A % OF NET ASSETS)
--------------------------------------------------------------------------------
[PIE CHART OMITTED]
PLOT POINTS FOLLOWS:
FINANCIAL SERVICES 18.7%
HEALTHCARE 17.9%
CONSUMER DISCRETIONARY 13.1%
TECHNOLOGY 12.4%
REAL ESTATE INVESTMENT TRUST 7.6%
CONSUMER STABLE 6.7%
CASH & OTHER 4.8%
PRODUCER DURABLES 3.7%
MATERIALS & PROCESSING 3.7%
AUTO & TRANSPORTATION 3.7%
UTILITIES 3.5%
ENERGY 3.2%
TELECOMMUNICATIONS 1.0%
--------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS
AT SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
InterTAN Inc. 3.67%
--------------------------------------------------------------------------------
Golden State Bancorp Inc. 3.54%
--------------------------------------------------------------------------------
Iron Mountain Inc. 3.53%
--------------------------------------------------------------------------------
Triad Hospitals Inc. 3.04%
--------------------------------------------------------------------------------
Everest Re Group Ltd. 2.98%
--------------------------------------------------------------------------------
The Earthgrains Co. 2.91%
--------------------------------------------------------------------------------
Beckman Coulter Inc. 2.79%
--------------------------------------------------------------------------------
Caremark Rx Inc. 2.69%
--------------------------------------------------------------------------------
Oshkosh Truck Corp. 2.45%
--------------------------------------------------------------------------------
IndyMac Mortgage Holdings Inc. 2.43%
--------------------------------------------------------------------------------
SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
25
<PAGE>
SMALL-CAP VALUE EQUITY FUND
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SMALL-CAP VALUE EQUITY FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
COMMON STOCK -- 95.2%
--------------------------------------------------------------------------------
AUTO & TRANSPORTATION -- 3.7%
Kirby Corp. ....................... 11,800 $ 231,575(a)
Oshkosh Truck Corp. ............... 12,100 468,875
700,450
CONSUMER - DISCRETIONARY -- 13.1%
AnnTaylor Stores Corp. ............ 4,500 172,969(a)
F.Y.I. Inc. ....................... 2,400 89,700(a)
Handleman Co. ..................... 27,800 344,025(a)
InterTAN Inc. ..................... 48,550 700,941(a)
Iron Mountain Inc. ................ 18,200 673,400(a)
Reader's Digest Assoc. Inc.
(Class A) ...................... 4,000 141,250
School Specialty Inc. ............. 18,100 385,756(a)
2,508,041
CONSUMER - STABLE -- 6.7%
Smithfield Foods Inc. ............. 13,100 343,875(a)
Suiza Foods Corp. ................. 5,400 273,712(a)
The Earthgrains Co. ............... 30,100 554,969
The J.M. Smucker Co. .............. 4,300 104,544(a)
1,277,100
ENERGY -- 3.2%
Louis Dreyfus Natural Gas Corp. ... 7,800 309,075(a)
Noble Affiliates Inc. ............. 8,300 308,138
617,213
FINANCIAL SERVICES -- 18.7%
Affiliated Computer Services Inc.
(Class A) ...................... 6,400 319,200(a)
AmeriCredit Corp. ................. 7,200 207,450(a)
Commerce Bancorp Inc. ............. 3,500 203,656
Everest Re Group Ltd. ............. 11,500 569,250
Golden State Bancorp Inc. ......... 28,600 675,675
IndyMac Mortgage Holdings Inc. .... 22,600 464,712
Investment Technology
Group Inc. ..................... 6,500 259,594(a)
NOVA Corp. ........................ 8,900 152,413(a)
PartnerRe Ltd. .................... 1,600 75,654
The BISYS Group Inc. .............. 5,800 448,412(a)
Trenwick Group Ltd. ............... 10,200 192,347
3,568,363
HEALTHCARE -- 17.9%
Beckman Coulter Inc. .............. 6,900 532,162
Caremark Rx Inc. .................. 45,600 513,000(a)
Digene Corp. ...................... 5,500 198,000(a)
Henry Schein Inc. ................. 14,600 291,088(a)
Oxford Health Plans Inc. .......... 5,300 162,892(a)
The Cooper Cos. Inc. .............. 11,700 413,887
Triad Hospitals Inc. .............. 19,800 581,625(a)
Universal Health Services Inc.
(Class B) ...................... 4,100 351,063(a)
Varian Medical Systems Inc. ....... 8,400 379,575
3,423,292
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
MATERIALS & PROCESSING -- 3.7%
Ball Corp. ........................ 9,900 $ 313,706
Grant Prideco Inc. ................ 17,600 386,100(a)
699,806
PRODUCER DURABLES -- 3.7%
Advanced Energy Industries Inc. ... 3,100 102,300(a)
Baldor Electric Co. ............... 7,500 152,344
L-3 Communications
Holdings Inc. .................. 2,000 113,000(a)
LTX Corp. ......................... 13,400 253,762(a)
MKS Instruments Inc. .............. 3,200 87,600(a)
709,006
REAL ESTATE INVESTMENT TRUST -- 7.6%
Colonial Properties Trust ......... 10,800 277,425
First Industrial Realty Trust Inc. 11,700 359,775
Gables Residential Trust .......... 6,700 182,156
Great Lakes REIT Inc. ............. 14,000 243,250
Mid-Atlantic Realty Trust ......... 18,200 214,988
Parkway Properties Inc. ........... 6,000 183,000
1,460,594
TECHNOLOGY -- 12.4%
About.com Inc. .................... 5,500 178,062(a)
Aeroflex Inc. ..................... 7,650 371,981(a)
Comdisco Inc. ..................... 17,100 325,969
DRS Technologies Inc. ............. 13,000 211,250(a)
General Semiconductor Inc. ........ 31,400 382,687(a)
Glenayre Technologies Inc. ........ 15,400 167,475(a)
Herley Industries Inc. ............ 13,200 299,475(a)
Pennstar Inc. ..................... 13,600 267,750(a)
Teledyne Technologies Inc. ........ 5,500 160,188(a)
2,364,837
TELECOMMUNICATIONS -- 1.0%
Microcell Telecommunications
Inc. (Class B) ................. 6,400 186,000(a)
UTILITIES -- 3.5%
American Water Works Co. Inc. ..... 14,500 399,656
IDA CORP Inc. ..................... 5,800 268,250
667,906
TOTAL INVESTMENTS IN SECURITIES
(COST $16,273,812) ............. 18,182,608
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 10.4%
--------------------------------------------------------------------------------
GEI Short-Term Investment Fund
(COST $1,983,167) ..............1,983,167 1,983,167
OTHER ASSETS AND LIABILITIES,
NET (5.6)% ..................... (1,063,217)
------------
NET ASSETS-- 100% ................. $19,102,558
===========
EXPIRATION DATE/ NUMBER OF
STRIKE PRICE CONTRACTS VALUE
--------------------------------------------------------------------------------
Call Options
--------------------------------------------------------------------------------
AmeriCredit Corp.
Oct. 00/30.00
(Written Option
Premium $6,272) (36) $(5,400)
===========
----------------
See Notes to Schedule of Investments and Notes to Financial statements.
26
<PAGE>
INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
Q&A
RALPH LAYMAN MANAGES THE INTERNATIONAL EQUITY INVESTMENT PROCESS AT GE ASSET
MANAGEMENT. TOTAL ASSETS UNDER HIS MANAGEMENT EXCEED $15 BILLION AS OF SEPTEMBER
30, 2000. HE LEADS A TEAM OF PORTFOLIO MANAGERS FOR THE INTERNATIONAL EQUITY
FUND. PRIOR TO JOINING GE ASSET MANAGEMENT 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 ASSET MANAGEMENT'S ASSET ALLOCATION
COMMITTEE. HE IS A HOLDER OF A CHARTERED FINANCIAL ANALYST DESIGNATION, 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 ONE-YEAR PERIOD ENDED SEPTEMBER 30, 2000?
A. The International Equity Fund posted a return of 11.62% for the one-year
period ended September 30, 2000 while the MSCI EAFE Index returned 3.18% for
the same period.
Q. WHAT EVENTS HAD AN IMPACT ON THE FINANCIAL MARKETS DURING THE ONE-YEAR
PERIOD ENDED SEPTEMBER 30, 2000 AND HOW DID THEY IMPACT THE FUND?
A. The twelve-month period was one of two parts, the first half when the
markets were very strong, led by the technology, media and
telecommunications ("TMT") sectors and the second half during which many
stocks in these sectors lost most if not all of the gains they made earlier.
Thus, for the twelve-month period, the MSCI EAFE Index rose just 3.18%, but
this hides the fact that the index rose 17% in the first three months but
declined in the following three three-month periods.
Despite good fundamentals in the non-TMT sectors, many stocks were ignored
during the first six months of this period and they have only recently
started to reflect their good underlying growth rates. It is interesting to
note that the only sector that consistently performed during the
twelve-month period was Healthcare although the energy sector, boosted
strong crude oil prices, also performed well.
Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARK FOR THE ONE-YEAR PERIOD
ENDED SEPTEMBER 30, 2000?
A. The Fund outperformed the MSCI EAFE Index during the twelve-month period
ended September 30, 2000. With the exception of the United Kingdom, where a
small number of large holdings underperformed, market and stock attribution
was positive across all regions, with that for Continental Europe being
particularly strong. In addition, the contribution from the Emerging Markets
stocks and the Canadian holdings was particularly noteworthy. The holdings
that had the greatest impact on performance were Ericsson (Sweden), Vodafone
(UK), Philips (Netherlands), Lagardere (France) and Nortel Networks (Canada)
all of which are TMT companies.
Q. WHAT CHANGES HAVE YOU MADE IN THE FUND RECENTLY BASED ON CURRENT MARKET
EVENTS?
A. The main activity during the period was in the first quarter when many of
the TMT stocks became very over-valued on our "price to cash earnings
relative to growth" measure which defines our buy and sell discipline. Many
of the TMT stocks became over valued and their share prices rose to levels
that we considered unsustainable, given their expected future growth. Thus,
we sold some of our largest holdings into this momentum driven market,
including Nortel Networks (Canada), Comverse Technology (Israel), Nokia
(Finland) and Telecom Italia Mobile (Italy). Stocks bought during the period
included RAS, the Italian Insurance Company, Aventis, the French Life
Sciences company, Nordic Baltic, the Swedish Banking group and BMW of
Germany.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
A. At the current time, relationships between Israel and the Palestinians have
deteriorated significantly, which has caused further nervousness in the oil
market. This has exacerbated the situation in the oil industry, where stocks
in developed countries are low as we enter the Northern Hemisphere's winter
period. This has come about because of a lack of investment over the last
few years, when the price of a barrel of crude oil was at levels that made
capital investment unprofitable. Inflation expectations are rising, leading
to concerns that the U.S. Federal Reserve Board will at best keep rates at
current levels, causing the U.S.- and hence global- growth to slow. The
effect on overseas markets, especially those emerging markets that are
dependent on U.S. growth, will be significant, unless European growth, which
is improving, can compensate for a slower U.S. growth outlook.
27
<PAGE>
INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT
--------------------------------------------------------------------------------
[LINE GRAPH OMITTED]
PLOT POINTS FOLLOWS:
INTERNATIONAL EQUITY FUND MSCI EAFE
11/25/97 10,000.00 10,000.00
12/97 10,266.29 10,087.20
3/98 12,027.37 11,571.01
6/98 12,237.50 11,693.95
9/98 10,066.17 10,031.88
12/98 12,044.22 12,104.51
3/99 12,472.13 12,272.95
6/99 12,847.86 12,584.86
9/99 13,035.72 13,137.15
12/99 15,880.83 15,368.47
3/00 16,497.04 15,352.99
6/00 16,324.07 14,744.75
9/00 14,551.12 13,555.46
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
ONE SINCE
YEAR INCEPTION* COMMENCEMENT
--------------------------------------------------------------------------------
International Equity Fund 11.62% 14.07% 11/25/97
--------------------------------------------------------------------------------
MSCI EAFE 3.18% 11.27%
--------------------------------------------------------------------------------
*INDEX RETURNS ARE NOT AVAILABLE FROM THE FUND'S INCEPTION DATE AND THEREFORE
ARE CALCULATED FROM THE MONTH END NEAREST THE FUND'S INCEPTION DATE.
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 SEPTEMBER 30, 2000
(AS A % OF NET ASSETS)
--------------------------------------------------------------------------------
[PIE CHART OMITTED]
PLOT POINTS FOLLOWS:
EUROPE 61.2%
JAPAN 15.4%
PACIFIC RIM 9.4%
OTHER REGIONS 9.3%
CASH & OTHER 4.7%
--------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS
AT SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
ING Groep N.V. 2.59%
--------------------------------------------------------------------------------
BAE Systems PLC 2.58%
--------------------------------------------------------------------------------
Canon Inc. 2.38%
--------------------------------------------------------------------------------
Taiwan Semiconductor
Manufacturing Co. Ltd. 2.05%
--------------------------------------------------------------------------------
AXA-UAP 2.03%
--------------------------------------------------------------------------------
Fujitsu Ltd. 2.01%
--------------------------------------------------------------------------------
Vodafone AirTouch PLC 1.99%
--------------------------------------------------------------------------------
Koninklijke (Royal) Philips
Electronics N.V. 1.97%
--------------------------------------------------------------------------------
CGNUPLC 1.97%
--------------------------------------------------------------------------------
Total S.A. (Class B) 1.94%
SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
28
<PAGE>
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
COMMON STOCK -- 93.9%
--------------------------------------------------------------------------------
AUSTRALIA -- 2.1%
Brambles Industries Ltd. .......... 247,494 $ 6,470,560
Cable & Wireless Optus Ltd. ....... 787,140 1,708,291(a)
8,178,851
BRAZIL -- 2.1%
Embraer - Empresa Brasileirade
Aeronautica S.A. ADR ........... 65,651 2,035,181(a)
Petroleo Brasileiro S.A. -
Petrobras ADR .................. 105,438 3,169,730(a)
Telecomunicacoes Brasileiras
S.A. ADR ....................... 10,442 826,223
Uniao de Bancos Brasileiros
S.A. GDR ....................... 70,249 2,318,217
8,349,351
CANADA -- 2.1%
ATI Technologies Inc. ............. 217,464 1,767,355(a)
Celestica Inc. .................... 63,183 4,375,423(a)
CGI Group Inc. (Class A) .......... 269,722 2,093,642(a)
8,236,420
DENMARK -- 0.1%
GN Store Nord A/S ................. 2,987 424,400
FINLAND -- 1.7%
Sampo Insurance Co. Ltd.
(Series A) ..................... 102,316 5,009,365
Stora Enso Oyj .................... 189,068 1,585,673
Tietoenator Oyj ................... 6,455 182,547
6,777,585
FRANCE -- 14.1%
Alcatel ........................... 31,973 2,048,570
Alstom ............................ 289,136 6,681,949
Aventis S.A. ...................... 89,450 6,719,370
AXA-UAP ........................... 61,401 8,030,942
Banque Nationale de Paris ......... 54,464 4,808,442
Coflexip S.A. ADR ................. 19,618 1,221,220
Lagardere S.C.A. .................. 106,409 6,455,773
Lyonnaise Des Eaux S.A. ........... 18,591 2,886,714
Michelin CGDE (Regd.) (Class B) ... 71,090 1,979,012
Publicis Groupe ................... 23,679 724,061(a)
Rhodia S.A. ....................... 116,490 1,267,290
Schneider S.A. .................... 26,532 1,674,162
Total S.A. (Class B) .............. 52,180 7,645,712
Vivendi S.A. ...................... 47,541 3,537,608
55,680,825
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
GERMANY -- 8.1%
Bayer AG .......................... 53,505 $ 1,993,064
Bayerische Hypo- und
Vereinsbank AG ................. 32,169 1,784,226
Bayerische Motoren Werke
(BMW) AG ....................... 118,455 4,056,528
Deutsche Bank AG .................. 50,955 4,219,449
Dresdner Bank AG .................. 125,109 5,503,928
Fresenius Medical Care AG ......... 42,427 3,843,222
Metallgesellschaft AG ............. 325,590 3,467,268
Muenchener Rueckversicherungs-
Gesellschaft AG (Regd.) ........ 15,722 4,696,278
Preussag AG ....................... 16,309 502,728
Veba AG ........................... 35,142 1,810,608
31,877,299
GREECE -- 0.5%
Hellenic Telecommunication
Organization S.A. ADR .......... 71,360 660,080
Hellenic Telecommunication
Organization S.A. GDR .......... 72,020 1,380,060
2,040,140
HONG KONG -- 2.4%
Cheung Kong (Holdings) Ltd. ....... 251,495 3,032,198
Giordano International Ltd. .......3,196,000 1,854,922
Hutchison Whampoa Ltd. ............ 28,300 375,688
Johnson Electric Holdings Ltd. ....1,937,600 4,162,739
9,425,547
IRELAND -- 2.7%
Bank of Ireland ................... 739,722 5,916,246
CRH PLC ........................... 221,426 3,516,463
Jefferson Smurfit Group PLC ....... 709,153 1,227,057
10,659,766
ISRAEL -- 2.5%
ECI Telecommunications Ltd. ....... 187,000 5,726,875
Teva Pharmaceutical Industries
Ltd. ADR ....................... 59,123 4,327,065
10,053,940
ITALY -- 3.0%
Banca Intesa S.p.A. ...............1,091,250 4,214,393
Riunione Adriatica di Sicurta
S.p.A .......................... 289,142 3,807,385
Saipem ............................ 458,376 2,552,065
Telecom Italia S.p.A .............. 113,773 1,210,584
11,784,427
JAPAN -- 15.4%
Asahi Bank Ltd. ................... 94,882 391,511
Canon Inc. ........................ 212,000 9,416,106
Fujitsu Ltd. ...................... 341,000 7,936,483
ITOCHU Corp. ...................... 455,262 2,114,945(a)
Kao Corp. ......................... 151,621 4,147,452
Mazda Motor Corp. .................1,037,000 2,019,287
----------------
See Notes to Schedule of Investments and Notes to Financial statements.
29
<PAGE>
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
Minebea Co. Ltd. .................. 507,000 $ 5,947,007
Mitsukoshi Ltd. ................... 304 1,088(a)
Mizuho Holdings Inc. .............. 221 1,823,821(a)
Murata Manufacturing Co. Ltd. ..... 24,000 3,315,870
NAMCO Ltd. ........................ 1,200 33,381
Nippon Telegraph and Telephone
Corp. (NTT) .................... 331 3,253,373
Shin-Etsu Chemical Co. ............ 104,000 4,387,779
Sony Corp. ........................ 62,500 6,351,709
The Tokyo Electric Power Co. Inc. . 98,400 2,322,110
Toshiba Corp. ..................... 889,000 7,179,925
60,641,847
MEXICO -- 2.6%
Desc S.A. de C.V. (Series B) ...... 425,549 238,870
Desc S.A. de C.V. ADR ............. 78,477 809,294
Grupo Carso S.A. de C.V. ADR ...... 104,269 626,657(a)
Grupo Financiero Banamex
Accival S.A. de C.V. (Class B) . 834,213 3,825,612(a)
Grupo Televisa S.A. GDR ........... 42,430 2,447,680(a)
Telefonos de Mexico S.A. de
C.V. ADR ....................... 43,820 2,330,676
10,278,789
NETHERLANDS -- 7.9%
ASM Lithography Holding N.V. ...... 104,850 3,484,060(a)
European Aeronautic Defence
& Space Co. .................... 110,790 1,943,526(a)
Getronics N.V. .................... 103,665 1,042,567(a)
IHC Caland N.V. ................... 66,249 3,337,210
ING Groep N.V. .................... 153,181 10,218,005
Ispat International N.V.
(Regd.) (Class A) .............. 92,003 460,015
Koninklijke (Royal) KPN N.V. ...... 27,908 608,700
Koninklijke (Royal) Philips
Electronics N.V. ............... 180,551 7,781,834
Koninklijke Ahold N.V. ............ 79,622 2,260,857
31,136,774
POLAND -- 0.3%
Telekomunikacja Polska S.A.
GDR (Series A) ................. 241,706 1,220,615(b)
PORTUGAL -- 0.2%
Banco Comercial Portugues
(Regd.) ........................ 168,891 888,082
SINGAPORE -- 0.5%
Datacraft Asia Ltd. ............... 262,120 2,175,596
SOUTH KOREA -- 2.3%
Kookmin Bank ...................... 16,600 197,983
Korea Electric Power
(KEPCO) Corp. .................. 34,571 902,135
Korea Telecom Corp. ADR ........... 38,831 1,305,692
Korea Telecom Corp. ............... 19,247 1,152,939
Pohang Iron & Steel Co. Ltd. ...... 17,182 1,278,847
Pohang Iron & Steel Co. Ltd.
ADR ............................ 39,133 728,852
Samsung Electronics ............... 19,840 3,593,848
9,160,296
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
SPAIN -- 2.4%
Acciona S.A. ...................... 16,005 $ 529,850
Repsol S.A. ....................... 71,430 1,316,182
Telefonica S.A. ................... 378,774 7,514,945(a)
Telefonica S.A. ADR ............... 5,313 315,792(a)
9,676,769
SWEDEN -- 2.5%
Autoliv Inc. SDR .................. 172,077 3,391,429
Investor AB (Series B) ............ 38,554 547,334
Invik & Co. AB .................... 8,365 777,775
Kinnevik AB (Series B) ............ 15,368 350,036
NetCom AB (Series B) .............. 13,745 706,191(a)
Nordic Baltic Holding AB FDR ...... 348,901 2,472,896
Svenska Handelsbanken AB
(Series A) ..................... 37,196 599,624
Telefonaktiebolaget LM
Ericsson AB (Series B) ......... 74,615 1,136,880
9,982,165
SWITZERLAND -- 0.9%
ABB Ltd. .......................... 2,671 260,034
Credit Suisse AG .................. 16,958 3,174,128
3,434,162
TAIWAN -- 2.1%
Taiwan Semiconductor
Manufacturing Co. Ltd. .........2,440,928 8,104,994(a)
UNITED KINGDOM -- 15.4%
BAE Systems PLC ...................1,885,495 10,177,877
Bank of Scotland .................. 162,681 1,431,505
Billiton PLC ...................... 285,880 1,022,090
Cable & Wireless PLC .............. 439,680 6,274,845
CGNU PLC .......................... 547,969 7,779,760
Corus Group PLC ................... 728,970 552,513
Dimension Data Holdings PLC ....... 39,496 366,235(a)
Granada Compass PLC ............... 261,746 2,450,319(a)
Invensys PLC ......................3,164,822 6,915,375
Nycomed Amersham PLC .............. 459,107 4,504,990
Prudential PLC .................... 115,151 1,571,840
Railtrack Group PLC ............... 72,677 1,191,976
Reed International PLC ............ 316,697 2,515,111
Royal & Sun Alliance Insurance
Group PLC ...................... 770,119 5,147,961
Somerfield PLC .................... 775,350 905,866
Vodafone AirTouch PLC .............2,104,619 7,859,118
60,667,381
TOTAL COMMON STOCK
(COST $387,468,216) ............ 370,856,021
--------------------------------------------------------------------------------
PREFERRED STOCK -- 1.4%
--------------------------------------------------------------------------------
GERMANY -- 1.4%
Fresenius Medical Care AG ......... 28,679 1,419,324
Henkel KGAA ....................... 63,478 3,832,100
TOTAL PREFERRED STOCK
(COST $4,953,412) .............. 5,251,424
----------------
See Notes to Schedule of Investments and Notes to Financial statements.
30
<PAGE>
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
WARRANTS -- 0.0%
--------------------------------------------------------------------------------
Muenchener Rueckversicherungs-
Gesellschaft AG (Regd.),
06/03/02 ....................... 181 $ 13,756(a)
Publicis SA-CVG, 03/07/02 ......... 20,704 39,888(a)
TOTAL WARRANTS
(COST $0) ...................... 53,644
TOTAL INVESTMENTS IN SECURITIES
(COST $392,421,628) ............ 376,161,089
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 4.1%
--------------------------------------------------------------------------------
GEI SHORT-TERM INVESTMENT FUND
(COST $16,213,862) ..............16,213,862 16,213,862
OTHER ASSETS AND LIABILITIES,
NET 0.6% ....................... 2,477,031
------------
NET ASSETS-- 100% ................. $394,851,982
============
--------------------------------------------------------------------------------
OTHER INFORMATION (UNAUDITED)
--------------------------------------------------------------------------------
The International Equity Fund invested in the following sectors
at September 30, 2000:
PERCENTAGE (BASED ON
SECTOR TOTAL NET ASSETS)
--------------------------------------------------------------------------------
Finance 23.95%
Information Technology 16.20%
Industrials 14.09%
Consumer Discretionary 10.66%
Telecommunication Services 9.81%
Materials 6.50%
Health Care 5.27%
Cash and Other 4.74%
Energy 4.03%
Utilities 2.90%
Consumer Staples 1.85%
---------
100.00%
=========
----------------
See Notes to Schedule of Investments and Notes to Financial statements.
31
<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 10 YEARS OF INVESTMENT EXPERIENCE AND
JOINED GEASSET MANAGEMENT IN 1990. HE IS CURRENTLY A VICE PRESIDENT OF GE ASSET
MANAGEMENT. MIKE IS A HOLDER OF A CHARTERED FINANCIAL ANALYST DESIGNATION AND A
MEMBER OF THE NEW YORK SOCIETY OF SECURITY ANALYSTS. HE HOLDS A B.S. IN FINANCE
FROM WESTERN NEW ENGLAND COLLEGE AND AN M.B.A. FROM FORDHAM UNIVERSITY.
Q. HOW DID THE EUROPE EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK FOR THE
ONE-YEAR PERIOD ENDED SEPTEMBER 30, 2000?
A. The Europe Equity Fund posted a return of 29.76% for the one-year period e
nded September 30, 2000 while the MSCI Europe Index returned 5.45% for the
same period.
Q. WHAT EVENTS HAD AN IMPACT ON THE FINANCIAL MARKETS DURING THE ONE-YEAR
PERIOD ENDED SEPTEMBER 30, 2000 AND HOW DID THEY IMPACT THE FUND?
A. European markets have recently been weak following a strong performance in
early 2000 and late 1999. Market sentiment has been significantly impacted
by the high price of the UMTS cellular licenses which European telephone
companies have been paying, and by the rising price of oil. The political
implications of the rising oil price during the year were significant, given
the already high prices, because of the substantial petroleum taxes imposed
by European governments. Public demonstrations led to distribution problems
in France, the United Kingdom and Germany, causing a loss of popularity for
their governments and leading to promises to ease taxes. Sentiment was
further dampened by the weakening Euro, which fell to a low of 0.84 against
the US dollar in mid September before rallying slightly to end the quarter
at 0.88 . Since its launch in January 1999, the Euro has fallen 26%.
Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARK FOR THE ONE-YEAR PERIOD
ENDED SEPTEMBER 30, 2000?
A. The Fund outperformed the MSCI Europe Index during the twelve-month period
ended September 30, 2000. Over the last twelve months, the consumer
discretionary, information technology and telecommunication services sectors
were the three major performance drivers for the Fund. The holdings that had
the greatest impact on performance were Thomson Multimedia, Ericsson, Epcos
and Mannesmann.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
A. Restructuring at the corporate and fiscal level continues. Of note is the
discussion of tax reform, which will lead to lower corporate and personal
tax rates in France and Germany and the removal of a tax liability on the
sale of cross shareholdings in Germany. Corporate activity continues to be
high, boosted by some significant acquisitions, including Seagrams by
Vivendi, Payne Webber by UBS, Snapple by Cadbury and Voicestream by Deutsche
Telecom - interestingly many of the transactions involve European companies
buying US assets despite the weak Euro.
32
<PAGE>
EUROPE EQUITY FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT
--------------------------------------------------------------------------------
[LINE CHART OMITTED]
PLOT POINTS FOLLOWS:
EUROPE EQUITY FUND MSCI EUROPE
1/29/99 10,000.00 10,000.00
3/99 9,620.00 9,852.43
6/99 9,700.00 9,821.76
9/99 9,970.00 9,936.52
12/99 12,907.30 11,664.48
3/00 14,671.97 11,674.24
6/00 14,208.12 11,305.62
9/00 12,937.55 10,479.17
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
ONE SINCE
YEAR INCEPTION COMMENCEMENT
--------------------------------------------------------------------------------
Europe Equity Fund 29.76% 16.65% 1/29/99
--------------------------------------------------------------------------------
MSCI Europe 5.45% 2.84%
--------------------------------------------------------------------------------
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 SEPTEMBER 30, 2000
(AS A % OF NET ASSETS)
--------------------------------------------------------------------------------
[PIE CHART OMITTED]
PLOT POINTS FOLLOWS:
DEVELOPED 94.5%
EMERGING 3.2%
CASH & OTHER 2.1%
OTHER (U.S.) 0.2%
--------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS
AT SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
Aventis S.A. 3.11%
--------------------------------------------------------------------------------
BAE Systems PLC 2.86%
--------------------------------------------------------------------------------
Koninklijke (Royal) Philips
Electronics N.V. 2.81%
--------------------------------------------------------------------------------
Invensys PLC 2.78%
--------------------------------------------------------------------------------
Royal & Sun Alliance
Insurance Group PLC 2.65%
--------------------------------------------------------------------------------
Bank of Ireland 2.58%
--------------------------------------------------------------------------------
ING Groep N.V. 2.58%
--------------------------------------------------------------------------------
Koninklijke Ahold N.V. 2.39%
--------------------------------------------------------------------------------
Vivendi S.A. 2.36%
--------------------------------------------------------------------------------
Unaxis Holding AG (Regd.) 2.35%
--------------------------------------------------------------------------------
SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
33
<PAGE>
EUROPE EQUITY FUND
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EUROPE EQUITY FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
COMMON STOCK -- 97.9%
--------------------------------------------------------------------------------
DENMARK -- 0.4%
GN Store Nord A/S ................. 197 $ 27,990
Novo-Nordisk A/S (Series B) ....... 138 30,637
58,627
FINLAND -- 1.6%
Sampo Insurance Co. Ltd.
(Series A) ..................... 3,688 180,564
Sonera Oyj ........................ 657 16,722
Stora Enso Oyj .................... 2,258 18,937
216,223
FRANCE -- 21.2%
Alcatel ........................... 2,072 132,757
Alstom ............................ 12,325 284,831
Aventis S.A. ...................... 5,520 414,655
AXA-UAP ........................... 1,970 257,666
Banque Nationale de Paris ......... 1,467 129,516
Imerys ............................ 886 90,672
Lagardere S.C.A. .................. 4,816 292,184
Michelin CGDE (Regd.) (Class B) ... 2,134 59,407
Schneider S.A. .................... 980 61,838
Studio Canal ...................... 7,659 78,516(a)
Thomson Multimedia ................ 4,951 249,400(a)
Total S.A. (Class B) .............. 2,029 297,301
Transiciel S.A. ................... 2,455 133,431(a)
Unilog S.A. ....................... 204 22,716
Vivendi S.A. ...................... 4,232 314,910
2,819,800
GERMANY -- 13.1%
AMB Aachener & Muenchener
Beteiligungs AG ................ 55 4,827
Bayer AG .......................... 703 26,187
Bayerische Motoren Werke (BMW)
AG ............................. 2,626 89,928
Dresdner Bank AG .................. 6,008 264,310
Epcos AG .......................... 3,072 250,583(a)
Ergo Versicherungs Gruppe AG ...... 1,045 156,906
Fresenius Medical Care AG ......... 2,439 220,935
Metallgesellschaft AG ............. 15,393 163,923
Muenchener Rueckversicherungs-
Gesellschaft AG (Regd.) ........ 631 188,485
Suess MicroTec AG ................. 2,357 76,654(a)
Techem AG ......................... 7,828 193,704(a)
Veba AG ........................... 2,120 109,228
1,745,670
GREECE -- 2.8%
Antenna TV S.A. ADR ............... 11,093 244,046(a)
Hellenic Telecommunication
Organization S.A. ADR .......... 6,782 62,733
Hellenic Telecommunication
Organization S.A. GDR .......... 3,340 64,002
370,781
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
IRELAND -- 4.3%
Bank of Ireland ................... 42,948 $ 343,499
CRH PLC ........................... 9,042 143,596
Irish Life & Permanent PLC ........ 2,980 29,522
Jefferson SmurFit Group PLC ....... 33,378 57,755
574,372
ITALY -- 4.6%
Banca Intesa S.p.A. ............... 59,648 230,360
Banca Popolare di Lodi ............ 7,747 86,949
Banca Popolare di Verona .......... 2,473 29,177
Riunione Adriatica di Sicurta
S.p.A .......................... 5,326 70,132
Saipem ............................ 6,795 37,832
Telecom Italia S.p.A .............. 14,317 152,338
606,788
NETHERLANDS -- 15.9%
ASM Lithography Holding N.V. ...... 5,673 188,508(a)
European Aeronautic Defence
& Space Co. .................... 5,714 100,237(a)
Fox Kids Europe N.V. .............. 15,766 264,731(a)
Getronics N.V. .................... 17,800 179,016
IHC Caland N.V. ................... 4,185 210,814
ING Groep N.V. .................... 5,147 343,333
Ispat International N.V. (Regd.)
(Class A) ...................... 2,689 13,445
Koninklijke (Royal) KPN N.V. ...... 5,646 123,144
Koninklijke (Royal) Philips
Electronics N.V. ............... 8,700 374,974
Koninklijke Ahold N.V. ............ 11,228 318,818
2,117,020
NORWAY -- 0.2%
Sparebanken NOR ................... 1,249 30,358
POLAND -- 0.4%
Telekomunikacja Polska S.A.
GDR (Series A) ................. 10,735 54,212(b)
PORTUGAL -- 1.8%
PT MULTIMEDIA - Servicos de
Telecomunicacoes e Multimedia
SGPS S.A. ...................... 2,484 91,102(a)
Telecel-Comunicacoes Pessoais
S.A. ........................... 12,018 150,923(a)
242,025
SPAIN -- 2.1%
Corporacion Mapfre, Compania
Internacional de
Reaseguros S.A. ................ 848 13,302
Sol Melia S.A. .................... 9,408 92,040
Telefonica S.A. ................... 8,758 173,760(a)
279,102
----------------
See Notes to Schedule of Investments and Notes to Financial statements.
34
<PAGE>
EUROPE EQUITY FUND
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
SWEDEN -- 1.9%
Autoliv Inc. SDR .................. 5,098 $ 100,476
LGP Telecom Holding AB ............ 4,196 102,554
Telefonaktiebolaget LM
Ericsson AB (Series B) ......... 1,840 28,035
Telelogic AB ...................... 2,722 21,799(a)
252,864
SWITZERLAND -- 6.2%
ABB Ltd. .......................... 256 24,923
Credit Suisse AG .................. 416 77,865
Leica Geosystems AG ............... 550 172,428(a)
Sulzer AG (Regd.) ................. 408 236,905(a)
Unaxis Holding AG (Regd.) ......... 1,120 312,833(a)
824,954
UNITED KINGDOM -- 21.2%
BAE Systems PLC ................... 70,541 380,779
Bank of Scotland .................. 11,470 100,930
Cable & Wireless PLC .............. 19,033 271,627
CGNU PLC .......................... 15,814 224,518
Cobham PLC ........................ 1,923 30,203
Corus Group PLC ................... 97,921 74,218
Dialog Semiconductor PLC .......... 602 21,015(a)
Granada Compass PLC ............... 15,679 146,778(a)
Horizon Technology Group PLC ...... 1,647 13,828(a)
Invensys PLC ...................... 169,602 370,593
Nycomed Amersham PLC .............. 10,438 102,423
Prudential PLC .................... 5,244 71,582
Railtrack Group PLC ............... 896 14,695
Reed International PLC ............ 28,732 228,181
Royal & Sun Alliance Insurance
Group PLC ...................... 52,789 352,875
Somerfield PLC .................... 43,705 51,062
Standard Chartered PLC ............ 2,709 39,462
Tesco PLC ......................... 5,062 18,603
Vodafone AirTouch PLC ............. 83,684 312,495
2,825,867
UNITED STATES -- 0.2%
Global TeleSystems Group Inc. ..... 4,601 20,992(a)
Infonet Services Corp. (Class B) .. 873 9,221(a)
30,213
TOTAL INVESTMENTS IN SECURITIES
(COST $13,294,011) ............. 13,048,876
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 2.8%
--------------------------------------------------------------------------------
Gei Short-Term Investment Fund
(COST $370,729) ................ 370,729 370,729
OTHER ASSETS AND LIABILITIES,
NET (0.7)% ..................... (95,800)
-----------
NET ASSETS-- 100% ................. $13,323,805
===========
--------------------------------------------------------------------------------
OTHER INFORMATION (UNAUDITED)
--------------------------------------------------------------------------------
The Europe Equity Fund invested in the following sectors at September 30, 2000:
PERCENTAGE (BASED ON
SECTOR TOTAL NET ASSETS)
--------------------------------------------------------------------------------
Financial 24.21%
Consumer Discretionary 16.67%
Industrials 16.21%
Information Technology 11.30%
Telecommunication Services 10.74%
Health Care 5.77%
Cash and Other 4.58%
Materials 4.42%
Utilities 3.18%
Consumer Staples 2.92%
---------
100.00%
=========
----------------
See Notes to Schedule of Investments and Notes to Financial statements.
35
<PAGE>
EMERGING MARKETS FUND
--------------------------------------------------------------------------------
Q&A
RALPH LAYMAN LEADS A TEAM OF PORTFOLIO MANAGERS FOR THE EMERGING MARKETS FUND.
REFER TO PAGE 27 FOR HIS BIOGRAPHICAL DETAILS.
Q. HOW DID THE EMERGING MARKETS FUND PERFORM COMPARED TO ITS BENCHMARK FOR THE
ONE-YEAR PERIOD ENDED SEPTEMBER 30, 2000?
A. The Emerging Markets Fund posted a return of 16.56% for the one-year period
ended September 30, 2000, while the MSCI EMF Index returned 0.42% for the
same period.
Q. WHY DID THE FUND OUTPERFORM ITS BENCHMARK FOR THE ONE-YEAR PERIOD ENDED
SEPTEMBER 30, 2000?
A. The Fund outperformed due to its superior stock selection. Our gains in
Latin America were led by our holdings in the Mexican banks. Mexico's
financial system has required nearly five years to repair itself following
the nation's currency devaluation in 1994. Institutions such as Bannaci and
Bancomer are now relatively healthy, and we expect stronger loan growth and
better profitability from these groups going forward. In Asia, we continue
to make money on several of our Indian software names. Also, the Chinese
market has performed well. Among our Chinese stocks, Huaneng Power, an
electric utility, and China Mobile, a cellular telephony provider, added the
most value.
Q. WHAT HAS YOUR INVESTMENT STRATEGY BEEN?
A. Our strategy remains to invest in the best companies in our asset class. It
is our view that there is a new generation of firms emerging in our
universe. These newer companies are run by entrepreneurs, they can compete
globally, and they are in some of world's best growth industries. Some
examples would include Embraer, a Brazilian regional jet maker, or Datacraft
Asia, a telecom systems integrator. We expect to find other companies like
these in the future, and believe that our efforts will ultimately prove
rewarding to our shareholders.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND AND HOW HAVE YOU POSITIONED THE FUND GOING
FORWARD?
A. Going forward, we expect investors to wait for a clearer indication of
global economic growth before returning to the asset class. At these levels,
however, emerging stocks look compelling. We have recently been reducing our
cash holdings, as we are finding several attractive bottoms-up ideas.
36
<PAGE>
EMERGING MARKETS FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT
--------------------------------------------------------------------------------
[LINE CHART OMITTED]
PLOT POINTS FOLLOWS:
EMERGING MARKETS FUND MSCI EMF
11/25/97 10,000.00 10,000.00
12/97 10,215.36 10,241.00
3/98 11,068.31 10,875.27
6/98 9,392.51 8,308.96
9/98 6,803.55 6,480.34
12/98 8,159.95 7,646.02
3/99 9,467.96 8,596.95
6/99 11,258.92 10,694.33
9/99 11,540.64 10,143.17
12/99 16,996.08 12,723.52
3/00 18,546.67 13,032.24
6/00 15,395.14 11,707.31
9/00 13,451.87 10,185.38
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
ONE SINCE
YEAR INCEPTION* COMMENCEMENT
--------------------------------------------------------------------------------
Emerging Markets Fund 16.56% 10.97% 11/25/97
--------------------------------------------------------------------------------
MSCI EMF 0.42% 0.65%
--------------------------------------------------------------------------------
*INDEX RETURNS ARE NOT AVAILABLE FROM THE FUND'S INCEPTION DATE AND THEREFORE
ARE CALCULATED FROM THE MONTH END NEAREST THE FUND'S INCEPTION DATE.
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 SEPTEMBER 30, 2000
(AS A % OF NET ASSETS)
--------------------------------------------------------------------------------
[PIE CHART OMITTED]
PLOT POINTS FOLLOWS:
ASIA 41.8%
LATIN AMERICA 23.0%
MIDDLE EAST AND AFRICA 17.1%
EUROPE 11.3%
CASH & OTHER 6.8%
--------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS
AT SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
Satyam Computer Services Ltd. 3.02%
--------------------------------------------------------------------------------
Telefonos de Mexico S.A. de C.V. ADR 2.82%
--------------------------------------------------------------------------------
Taiwan Semiconductor
Manufacturing Co. Ltd. 2.36%
--------------------------------------------------------------------------------
Mastek Ltd. 2.12%
--------------------------------------------------------------------------------
Korea Electric Power (KEPCO) Corp. 1.95%
--------------------------------------------------------------------------------
Kookmin Bank 1.89%
--------------------------------------------------------------------------------
Samsung Electronics 1.86%
--------------------------------------------------------------------------------
Pohang Iron & Steel Co. Ltd. ADR 1.63%
--------------------------------------------------------------------------------
Fundtech Ltd. 1.59%
--------------------------------------------------------------------------------
Grupo Financiero Banamex
Accival S.A. de C.V. (Class B) 1.58%
--------------------------------------------------------------------------------
SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
37
<PAGE>
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EMERGING MARKETS FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
COMMON STOCK -- 89.8%
--------------------------------------------------------------------------------
ARGENTINA -- 0.3%
Impsat Fiber Networks Inc. ........ 1,438 $ 15,818(a)
Telecom Argentina S.A. ADR ........ 677 14,640
30,458
BRAZIL -- 4.9%
Aracruz Celulose S.A. ADR ......... 1,153 19,097
Brasil Telecom Participacoes
S.A. ADR ....................... 937 54,580
Embraer - Empresa Brasileira
de Aeronautica S.A. ............ 12,204 93,367
Embraer - Empresa Brasileira
de Aeronautica S.A. ADR ........ 1,518 47,058(a)
Petroleo Brasileiro S.A. ADR ...... 343 9,733
Petroleo Brasileiro S.A. -
Petrobras ADR .................. 2,655 79,816(a)
Telecomunicacoes Brasileiras
S.A. ADR ....................... 1,852 146,539
Ultrapar Participacoes S.A.
ADR ............................ 2,656 30,544
Uniao de Bancos Brasileiros
S.A. GDR ....................... 3,094 102,102
582,836
CANADA -- 0.5%
Global Light
Telecommunications Inc. ........ 11,300 58,195(a)
CHILE -- 0.1%
Companhia de
Telecomunicaciones de Chile
S.A. ADR ....................... 826 14,352
CHINA -- 4.6%
Brilliance China Automotive
Holdings Ltd. ADR .............. 4,099 125,020
China Mobile (Hong Kong) Ltd.
ADR ............................ 2,554 82,845(a)
China Unicom Ltd. ................. 46,000 102,957
Denway Motors Ltd. ................ 192,000 30,044(a)
Huaneng Power International
Inc. ADR ....................... 4,812 76,992
Huaneng Power International
Inc. (Class H) ................. 306,000 128,538
546,396
CROATIA -- 1.2%
Pliva D D GDR (Regd.) ............. 6,401 68,171
Zagrebacka Banka GDR .............. 5,098 79,019(b)
147,190
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
CZECH REPUBLIC -- 0.3%
Ceske Radiokomunikace GDR ......... 933 $ 34,708(a,b)
DOMINICAN REPUBLIC -- 0.8%
TRICOM S.A. ADR ................... 6,056 92,354(a)
EGYPT -- 2.1%
Al-Ahram Beverage Co. S.A.E.
GDR ............................ 3,603 50,802(a)
Commercial International Bank
GDR ............................ 2,000 15,700
EFG-Hermes Holding S.A.E. GDR ..... 4,651 11,162(b)
Egyptian Company for Mobile
Services ....................... 4,060 90,019(a)
Olympic Group Financial
Investment Co. ................. 8,753 10,097
Orascom Telecommunication GDR ..... 11,064 70,810(a,b)
248,590
ESTONIA -- 0.5%
AS Eesti Telekom GDR .............. 3,844 59,774
GHANA -- 0.0%
Home Finance Co. .................. 18,516 2,691
GREECE -- 1.0%
A.G. Petzetakis S.A. .............. 6,348 52,061
Hellenic Telecommunication
Organization S.A. ADR .......... 7,247 67,035
119,096
HUNGARY -- 0.5%
Magyar Tavkozlesi RT ADR .......... 1,295 30,513
OTP Bank RT ....................... 509 26,262
56,775
India -- 10.4%
Aptech Ltd. ....................... 10,120 93,951
Cipla Ltd. ........................ 1,950 27,164
Dr. Reddy's Laboratories Ltd. ..... 1,200 30,569
Global Tele-Systems Ltd. ADR ...... 1,490 37,561
Himachal Futuristic
Communications Ltd. ............ 2,000 55,367
Mastek Ltd. ....................... 5,000 254,021(a)
NIIT Ltd. ......................... 3,870 111,885(k)
Pentamedia Graphics Ltd. .......... 11,300 104,447
Satyam Computer Services Ltd. ..... 36,640 362,448(a)
Sriven Multi-Tech Ltd. ............ 7,498 6,996(a)
Sun Pharmaceutical
Industries Ltd. ................ 6,267 55,925
UTI India IT Fund ................. 3,683 108,354
1,248,688
----------------
See Notes to Schedule of Investments and Notes to Financial statements.
38
<PAGE>
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
INDONESIA -- 0.5%
PT Gudang Garam ................... 53,500 $ 64,072
ISRAEL -- 11.2%
Camtek Ltd. ....................... 8,348 70,436(a)
Commtouch Software Ltd. ........... 1,149 21,759(a)
Comverse Technology Inc. .......... 1,372 148,176(a)
DSP Group Inc. .................... 1,879 70,228(a)
e-SIM Ltd. ........................ 3,345 23,624(a)
ECI Telecommunications Ltd. ....... 4,626 141,671
ECtel Ltd. ........................ 974 19,419(a)
Fundtech Ltd. ..................... 7,965 190,040(a)
Galileo Technology Ltd. ........... 4,303 136,620(a)
Magic Software Enterprises Ltd. ... 6,722 51,255(a)
MIND C.T.I. Ltd. .................. 3,608 42,845(a)
NICE Systems Ltd. ADR ............. 637 45,864(a)
Orbotech Ltd. ..................... 1,679 91,793(a)
Radview Software Ltd. ............. 5,528 36,623(a)
RADVision Ltd. .................... 1,308 36,869(a)
RADWARE Ltd. ...................... 1,781 53,430(a)
Sapiens International Corp. N.V. .. 15,114 58,567(a)
Teva Pharmaceutical Industries
Ltd. ADR ....................... 590 43,181
TTI Team Telecom
International Ltd. ............. 3,232 65,852(a)
1,348,252
KAZAKHSTAN -- 0.1%
Kazkommertsbank GDR ............... 1,185 8,483(a)
MEXICO -- 12.7%
Alfa S.A. (Series A) .............. 13,766 28,897
Coca-Cola Femsa S.A. de C.V.
ADR ............................ 2,554 51,080
Consorcio Ara S.A. de C.V. ........ 16,067 26,035(a)
Corporacion GEO S.A. de C.V.
(Series B) ..................... 46,124 79,625(a)
Corporacion Interamericana de
Entretenimiento S.A. de C.V.
(CIE) (Series B) ............... 6,769 32,798(a)
Desc S.A. de C.V. (Series B) ...... 22,524 12,643
Desc S.A. de C.V. ADR ............. 2,130 21,966
Fomento Economico Mexicano
S.A. de C.V. ADR ............... 991 38,649
Grupo Carso S.A. de C.V. ADR ...... 5,635 33,866(a)
Grupo Elektra S.A. de C.V. GDR .... 4,810 45,695
Grupo Financiero Banamex
Accival S.A. de C.V. (Class B) . 41,415 189,925(a)
Grupo Financiero Bancomer
S.A. ADR (Series C) ............ 13,672 158,937(a,b)
Grupo Financiero Banorte
S.A. de C.V. ................... 59,103 77,118(a)
Grupo Financiero Inbursa
S.A. de C.V. ................... 4,245 18,523(a)
Grupo Iusacell S.A. de C.V. ADR ... 2,704 32,110(a)
Grupo Televisa S.A. GDR ........... 2,201 126,970(a)
Telefonos de Mexico S.A. de
C.V. ADR ....................... 6,349 337,688
Tubos de Acero de Mexico
S.A. ADR ....................... 3,447 57,737
TV Azteca S.A. de C.V. ADR ........ 4,840 62,315
Wal-Mart de Mexico
S.A. de C.V. ................... 40,323 83,704(a)
1,516,281
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
NETHERLANDS -- 0.6%
Indigo N.V. ....................... 11,485 $ 76,806(a)
PHILIPPINES -- 1.9%
Benpres Holdings Corp. ............ 288,700 23,746(a)
Metropolitan Bank & Trust Co. ..... 9,080 33,018
Philippine Long Distance
Telephone Co. .................. 9,716 170,346
227,110
POLAND -- 1.8%
Elektrim Spolka Akcyjna S.A. ...... 6,692 60,427(a)
Europejki Fundusz Leasingowy
GDR ............................ 1,125 16,594(a,b)
Prokom Software S.A. GDR .......... 3,553 78,166(b)
Telekomunikacja Polska S.A. GDR
(Series A) ..................... 12,484 63,044(b)
218,231
RUSSIA -- 1.7%
Mobile Telesystems ADR ............ 4,718 119,719(a)
OAO Lukoil Holding ADR ............ 1,385 77,560
Premier Telesports Ltd. ........... 1,156 1,482(a)
Sun Interbrew Ltd. GDR
(Class A) ...................... 1,185 2,050(a)
200,811
SINGAPORE -- 1.3%
Datacraft Asia Ltd. ............... 19,436 161,319
SOUTH AFRICA -- 3.8%
Dimension Data Holdings PLC ....... 12,698 117,564(a)
Johnnic Holdings Ltd. ............. 10,406 135,141
M-Cell Ltd. ....................... 12,650 50,845
Sappi Ltd. ........................ 13,049 96,760
Softline Ltd. ..................... 92,872 57,796(a)
458,106
SOUTH KOREA -- 12.3%
Dae Duck Electronics Co. .......... 10,176 91,252
Kookmin Bank ...................... 19,000 226,606
Korea Electric Power (KEPCO)
Corp. .......................... 8,982 234,387
Korea Telecom Corp. ADR ........... 390 13,114
Korea Telecom Corp. ............... 2,928 175,394
Medison Co. Ltd. .................. 7,940 44,287
Mirae Co. ADR ..................... 718 3,410
Pohang Iron & Steel Co. Ltd. ...... 1,850 137,695
Pohang Iron & Steel Co. Ltd.
ADR ............................ 10,506 195,674
S1 Corp. .......................... 5,502 57,480
Samsung Electronics ............... 1,229 222,623
Youngone Corp. .................... 65,050 77,291
1,479,213
TAIWAN -- 10.3%
Chroma Ate Inc. ................... 24,240 45,661
Compal Electronics Inc. ........... 77,771 121,668
----------------
See Notes to Schedule of Investments and Notes to Financial statements.
39
<PAGE>
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
Compeq Manufacturing Co. Ltd. ..... 18,440 $ 101,264
D-Link Corp. ...................... 27,000 43,964
Far Eastern Textile Ltd. .......... 162,985 174,324
Hon Hai Precision Industry ........ 17,340 114,046
Nien Hsing Textile Corp. Ltd. ..... 63,200 76,677
Premier Camera Taiwan Ltd. ........ 37,520 91,042
Procomp Informatics Co. Ltd. ...... 14,100 67,076
Ritek Corp. ....................... 8,963 29,618
Ritek Corp. GDR ................... 419 2,682(b)
Taiwan Semiconductor
Manufacturing Co. Ltd. ......... 85,100 282,571(a)
Yageo Corp. ....................... 102,345 81,364
1,231,957
THAILAND -- 0.4%
Hana Microelectronics Public
Co. Ltd. (foreign) ............. 19,200 50,580(a)
TURKEY -- 3.7%
Aksigorta A.S. ....................2,550,000 41,230
Dogan Yayin Holding A.S. ..........8,112,274 92,729
Enka Holding Yatirim A.S. ......... 288,555 45,570
Migros Turk T.A.S. ................ 375,941 44,669
Tansas A.S. ....................... 542,433 62,004
Turkcell Iletisim Hizmetleri
A.S. ADR ....................... 7,137 78,507(a)
Turkiye Garanti Bankasi A.S. ......5,958,296 51,081
Yapi ve Kredi Bankasi A.S. ........3,481,785 25,136
440,926
VENEZUELA -- 0.3%
Compania Anonima Nacional
Telefonos de Venezuela ADR ..... 1,676 40,957
TOTAL COMMON STOCK
(COST $9,773,681) .............. 10,765,207
--------------------------------------------------------------------------------
PREFERRED STOCK -- 3.9%
--------------------------------------------------------------------------------
BRAZIL -- 3.9%
Celular CRT Participaceos S.A ..... 108,091 37,536(a)
Companhia de Bebidas das
Americas (Ambev) ADR ........... 3,565 78,876
Companhia Paranaense de
Energia-Copel ADR .............. 3,127 27,752
Companhia Vale do Rio Doce ........ 1,815 45,596
Embratel Participacoes
S.A. ADR ....................... 1,632 30,192
Petroleo Brasileiro S.A. .......... 3,449 98,623
Tele Norte Leste Participacoes
S.A. ADR ....................... 3,647 83,425
Telecomunicacoes do Rio de
Janeiro S.A. ................... 984,439 30,334
Telesp Celular Participacoes
S.A. ...........................2,809,972 37,065
TOTAL PREFERRED STOCK
(COST $365,448) ................ 469,399
TOTAL INVESTMENTS IN SECURITIES
(COST $10,139,129) ............. 11,234,606
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 5.3%
--------------------------------------------------------------------------------
GEI Short-Term Investment Fund
(COST $638,222) ................ 638,222 $ 638,222
OTHER ASSETS AND LIABILITIES,
NET 1.0% ....................... 116,434
-----------
NET ASSETS-- 100% ................. $11,989,262
===========
--------------------------------------------------------------------------------
OTHER INFORMATION (UNAUDITED)
--------------------------------------------------------------------------------
The Emerging Markets Fund invested in the following sectors at September 30,
2000:
PERCENTAGE (BASED ON
SECTOR TOTAL NET ASSETS)
--------------------------------------------------------------------------------
Information Technology 33.30%
Telecommunication Services 18.65%
Financial 12.03%
Consumer Discretionary 9.21%
Cash and Other 8.39%
Materials 4.56%
Utilities 4.16%
Industrials 4.03%
Health Care 2.90%
Consumer Staples 2.77%
--------
100.00%
=======
----------------
See Notes to Schedule of Investments and Notes to Financial statements.
40
<PAGE>
PREMIER GROWTH EQUITY FUND
--------------------------------------------------------------------------------
Q&A
DAVID CARLSON MANAGES PENSION AND MUTUAL FUND PORTFOLIOS WITH TOTAL ASSETS OF
APPROXIMATELY $7 BILLION AS OF SEPTEMBER 30, 2000. DAVE JOINED GE IN 1980 WITH
THE GE FINANCIAL MANAGEMENT PROGRAM. IN 1982, HE JOINED GE ASSET MANAGEMENT AS A
SECURITY ANALYST RESPONSIBLE FOR SEVERAL CONSUMER INDUSTRIES. IN 1988, DAVE
ASSUMED RESPONSIBILITY FOR MANAGING ELFUN TRUSTS. HE IS A TRUSTEE FOR THE GE
CANADA PENSION TRUST, A HOLDER OF A CHARTERED FINANCIAL ANALYST DESIGNATION AND
A MEMBER OF THE NEW YORK SOCIETY OF SECURITY ANALYSTS. DAVE IS A GRADUATE OF
INDIANA UNIVERSITY WITH A B.S. IN BUSINESS.
Q. HOW DID THE PREMIER GROWTH EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK FOR
THE PERIOD OCTOBER 29, 1999 (COMMENCEMENT OF OPERATIONS) THROUGH SEPTEMBER
30, 2000?
A. The Premier Growth Equity Fund posted a return of 14.62%, compared to 6.47%
for the Standard & Poor's 500 Composite Price Index for the period ended
September 30, 2000. The Fund outperformed the benchmark by more than 8% for
this period.
Q. WHY DID THE FUND OUTPERFORM ITS BENCHMARK FOR THE PERIOD ENDED SEPTEMBER 30,
2000?
A. The Fund outperformed the S&P 500 Index primarily due to stock selection.
Technology is the largest sector in the portfolio, with about a 30% weight
as of the end of the quarter. The S&P 500 Index also has a technology weight
of approximately 30% now, after being as high as 34%. Our technology
holdings were up more than 26% in the period versus a 19% return for the S&P
500 Index technology sector. Other strong groups for the Fund were financial
(+45%), energy (+43%), consumer stable (+27%), and capital goods (+32%).
Lagging groups in the Fund were in the consumer cyclical sector (-6%), and
communications services (-30%).
Q. DO ANY PARTICULAR STOCKS STAND OUT IN TERMS OF PERFORMANCE FOR THE PERIOD?
A. Among our technology holdings, EMC Corp. posted a gain of 160%, Applied
Materials Inc. a gain of 30%, and Automatic Data Processing Inc. a gain of
42%. On the downside, consumer cyclical names such as NTL Inc. (-27%), and
Interpublic Group Cos. Inc. (-13%) detracted from performance over the
period.
Q. WHAT IS THE OUTLOOK FOR THE FUND GIVEN A SLOWDOWN IN THE ECONOMY AND SLOWER
GROWTH IN CORPORATE PROFITS?
A. We continue to focus on companies with strong secular earnings growth, and
not overly dependent on the economy. For example, Catalina Marketing Corp.,
a leading company in supermarket promotional incentives, should continue to
grow at a double-digit rate in spite of projected slowing economic
conditions. Similarly, our positions in drugs and healthcare, such as
Cardinal Health Inc., Pfizer Inc., Dentsply International Inc. and Lincare
Holdings Inc. should continue to grow nicely and be less sensitive to a
slowing economy.
For the Fund as a whole, we believe we have less economic sensitivity in our
earnings growth than the S&P 500 Index. Our focus on high quality, market
share leaders should allow us to successfully weather rough market
conditions.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
A. The Fund remains concentrated in thirty-three holdings. We have reduced the
overweighting in technology stocks over the past quarter to match the level
of the S&P 500 Index as mentioned above. The rationale was based on
valuations. The fundamentals of the technology sector remain excellent, but
the valuation levels remain stretched in our opinion. We are finding more
compelling investment opportunities in other sectors, where growth rates are
high and valuation levels more reasonable. We continue to focus on industry
leaders with strong fundamentals. We estimate the earnings growth of our
holdings to be in the 15-20% range, and we expect that the above-average
growth will drive above average stock price performance over the long term.
41
<PAGE>
PREMIER GROWTH EQUITY FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT
--------------------------------------------------------------------------------
[LINE CHART OMITTED]
PLOT POINTS FOLLOWS:
PREMIER GROWTH EQUITY FUND S&P 500
10/31/99 10,000.00 10,000.00
11/99 10,470.00 10,203.00
12/99 11,672.59 10,803.96
1/00 11,202.08 10,259.55
2/00 11,031.90 10,073.85
3/00 12,103.05 11,073.48
4/00 11,892.82 10,721.89
5/00 11,552.46 10,498.56
6/00 11,612.52 10,755.35
7/00 11,342.23 10,587.67
8/00 11,952.89 11,245.17
9/00 11,462.36 10,651.42
--------------------------------------------------------------------------------
AVERAGE TOTAL RETURN
FOR THE PERIOD ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
SINCE
INCEPTION COMMENCEMENT
--------------------------------------------------------------------------------
Premier Growth Equity Fund 14.62% 10/29/99
--------------------------------------------------------------------------------
S&P 500 6.47%
--------------------------------------------------------------------------------
SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
42
<PAGE>
PREMIER GROWTH EQUITY FUND
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PREMIER GROWTH EQUITY FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
COMMON STOCK -- 95.1%
--------------------------------------------------------------------------------
CAPITAL GOODS -- 7.7%
Dover Corp. ....................... 31,108 $ 1,460,132
Molex Inc. (Class A) .............. 53,937 2,235,014
3,695,146
CONSUMER - CYCLICAL -- 23.7%
AT&T Corp. - Liberty Media
Group (Class A) ................ 82,253 1,480,554(a)
Carnival Corp. .................... 35,121 864,855
Catalina Marketing Corp. .......... 49,672 1,868,909(a)
Comcast Corp. (Class A) ........... 41,142 1,684,251(a)
CVS Corp. ......................... 28,097 1,301,242
Home Depot Inc. ................... 30,104 1,597,393
Interpublic Group Cos. Inc. ....... 34,118 1,162,144
NTL Inc. .......................... 30,056 1,391,969(a)
11,351,317
CONSUMER - STABLE -- 17.8%
Cardinal Health Inc. .............. 21,105 1,861,197(h)
Dentsply International Inc. ....... 15,052 525,879
Gillette Co. ...................... 19,066 588,663
Henry Schein Inc. ................. 14 279(a)
Lincare Holdings Inc. ............. 50,174 1,439,367(a)
Merck & Co. Inc. .................. 19,066 1,419,225
Pfizer Inc. ....................... 30,104 1,352,799
Sybron International Corp. ........ 55,191 1,324,584(a)
8,511,993
ENERGY -- 6.3%
Baker Hughes Inc. ................. 41,142 1,527,397
Schlumberger Ltd. ................. 18,062 1,486,728
3,014,125
FINANCIAL -- 8.1%
AFLAC Inc. ........................ 28,097 1,799,964
Citigroup Inc. .................... 38,800 2,097,625
3,897,589
TECHNOLOGY -- 26.8%
Applied Materials Inc. ............ 15,052 892,772(a)
Automatic Data Processing Inc. .... 27,094 1,811,911
Cisco Systems Inc. ................ 30,104 1,663,246(a)
Dell Computer Corp. ............... 33,115 1,020,356(a)
EMC Corp. ......................... 20,069 1,989,340(a)
Equifax Inc. ...................... 50,174 1,351,562
First Data Corp. .................. 42,145 1,646,289
Intel Corp. ....................... 30,104 1,251,197
Microsoft Corp. ................... 20,069 1,210,412(a)
12,837,085
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
UTILITIES -- 4.7%
Vodafone Group PLC ADR ............ 35,121 $ 1,299,477
WorldCom Inc. ..................... 32,111 975,371(a)
2,274,848
TOTAL INVESTMENTS IN SECURITIES
(COST $45,926,912) ............. 45,582,103
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 4.9%
--------------------------------------------------------------------------------
GEI SHORT-TERM INVESTMENT FUND
(COST $2,338,988) ..............2,338,988 2,338,988
OTHER ASSETS AND LIABILITIES,
NET 0.0% ....................... 4,748
-----------
NET ASSETS-- 100% ................. $47,925,839
===========
--------------------------------------------------------------------------------
OTHER INFORMATION
--------------------------------------------------------------------------------
The Premier Growth Equity Fund had the following long futures contracts open at
September 30, 2000:
NUMBER
EXPIRATION OF UNDERLYING UNREALIZED
DESCRIPTION DATE CONTRACTS FACE VALUE DEPRECIATION
--------------------------------------------------------------------------------
S&P 500 Dec. 2000 1 $363,425 $(14,075)
----------------
See Notes to Schedule of Investments and Notes to Financial statements.
43
<PAGE>
PREMIER RESEARCH EQUITY FUND
--------------------------------------------------------------------------------
Q&A
CHRIS BROWN IS A SENIOR VICE PRESIDENT WITH GE ASSET MANAGEMENT AND IS
CO-PORTFOLIO MANAGER OF THE GE PREMIER RESEARCH EQUITY FUND. CHRIS BEGAN HIS
CAREER AT GE IN 1981, SPENDING TWO YEARS IN THE FINANCIAL MANAGEMENT PROGRAM. HE
THEN SPENT THE NEXT TWO YEARS AS AN INTERNATIONAL SECTOR FINANCIAL ANALYST WITH
SADELMI NEW YORK, INC., A GE SUBSIDIARY, AND JOINED GEAM IN 1985. CHRIS IS CUM
LAUDE GRADUATE IN ECONOMICS FROM BUCKNELL UNIVERSITY AND IS THE HOLDER OF A
CHARTERED FINANCIAL ANALYST DESIGNATION.
DICK SANDERSON IS A SENIOR VICE PRESIDENT WITH GE ASSET MANAGEMENT AND IS
CO-PORTFOLIO MANAGER OF THE GE PREMIER RESEARCH EQUITY FUND. HE HAS
TWENTY-NINE YEARS OF INVESTMENT EXPERIENCE, SIX WITH GEAM. PRIOR TO JOINING
GEAM, DICK HELD POSITIONS WITH ALLIANCE CAPITAL, NEUBERGER AND BERMAN,
INVESTORS DIVERSIFIED SERVICES, FIRST NATIONAL BANK OF DENVER, AND NORTHERN
TRUST COMPANY. DURING HIS CAREER, HE WAS VOTED "BEST OF BUY SIDE" THREE
TIMES BY INSTITUTIONAL INVESTOR MAGAZINE. HE RECEIVED BOTH A BA
(ANTHROPOLOGY) AND MBA (FINANCE) FROM THE UNIVERSITY OF MICHIGAN AND IS THE
HOLDER OF A CHARTERED FINANCIAL ANALYST DESIGNATION.
Q. HOW DID THE PREMIER RESEARCH EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK
FOR THE PERIOD APRIL 28, 2000 (COMMENCEMENT OF OPERATIONS) THROUGH SEPTEMBER
30, 2000?
A. The Premier Research Equity Fund returned negative 0.80% compared to the S&P
500 Index which returned negative 0.66% for the period ended September 30,
2000. The Fund slightly underperformed the benchmark over the period.
Q. PLEASE DISCUSS THE FUND'S PERFORMANCE VERSUS THE BENCHMARK.
A. As a reminder, the Fund is sector neutral versus the S&P 500 Index
benchmark. Therefore, performance is driven by stock selection. In this
regard, the stocks the Fund owned in the technology and consumer cyclical
sectors underperformed their respective benchmarks. This was partially
offset by positive stock performance in electric utilities, natural gas,
regional Bell operating companies and the financial and consumer stable
sectors.
Q. DOES ANY PARTICULAR STOCK PERFORMANCE STAND OUT IN THE PERIOD?
A. As mentioned, the utilities sector did very well over the period. Our
holdings in Calpine (+127%), Enron (+25%), and SBC Communications (+15%)
contributed to the strong performance. Despite declines in technology,
several holdings did well including PerkinElmer and EMC. Financial holdings
such as Lehman Brothers, AXA Financial, and Associated First Capital were
standouts in this area.
Q. WHAT IS THE OUTLOOK FOR THE FUND GIVEN A SLOWDOWN IN THE ECONOMY AND SLOWER
GROWTH IN CORPORATE PROFITS?
A. We continue to focus on companies with solid earnings prospects, and those
with managements that can execute in a variety of market conditions.
Delivering earnings in a slowing economic environment may be challenging,
however, superior management teams can weather the storm. We may see
continued strength in the energy, utilities, and consumer stable areas as
investors look for safer havens away from technology. We believe the
companies we are invested with in these areas are positioned well, given the
economic backdrop.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
A. The Fund is positioned to be sector neutral versus the S&P 500 Index
benchmark, so the Fund will follow the general trend of the overall market.
We believe we will add value over time, through the ownership of stocks
comprised of the best large capitalization ideas generated by our research
team. We remain focused on the best ideas generated by our research team and
believe this Fund will continue to reflect investments with solid earnings
prospects going forward.
44
<PAGE>
PREMIER RESEARCH EQUITY FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT
--------------------------------------------------------------------------------
[LINE CHART OMITTED]
PLOT POINTS FOLLOWS:
PREMIER RESEARCH EQUITY FUND S&P 500
4/28/2000 10,000.00 10,000.00
5/00 9,995.01 9,791.70
6/00 10,110.00 10,031.20
7/00 9,930.00 9,874.82
8/00 10,590.00 10,488.04
9/00 9,920.00 9,934.28
--------------------------------------------------------------------------------
AVERAGE TOTAL RETURN
FOR THE PERIOD ENDED SEPTEMBER 30, 200
--------------------------------------------------------------------------------
SINCE
INCEPTION COMMENCEMENT
--------------------------------------------------------------------------------
Premier Research Equity Fund -0.80% 4/28/00
--------------------------------------------------------------------------------
S&P 500 -0.66%
--------------------------------------------------------------------------------
INVESTMENT PROFILE
A mutual fund designed for investors who seek long-term growth
of capital and future income by investing primarily in a limited
number of equity securities of large- and medium-sized
companies located in the United States.
--------------------------------------------------------------------------------
SECTOR ALLOCATION
AS OF SEPTEMBER 30, 2000
(AS A % OF NET ASSETS)
--------------------------------------------------------------------------------
[PIE CHART OMITTED]
PLOT POINTS FOLLOWS:
TECHNOLOGY 29.8%
CONSUMER STABLE 18.0%
FINANCIAL 15.2%
CONSUMER CYCLICAL 11.6%
UTILITIES 7.9%
ENERGY 7.5%
CAPITAL GOODS 3.6%
CASH & OTHER 1.9%*
MISCELLANEOUS 1.9%
BASIC MATERIALS 1.8%
TRANSPORTATION 0.8%
--------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS
AT SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
Pfizer Inc. 4.45%
--------------------------------------------------------------------------------
Microsoft Corp. 4.13%
--------------------------------------------------------------------------------
Exxon Mobil Corp. 3.54%
--------------------------------------------------------------------------------
Cisco Systems Inc. 3.17%
--------------------------------------------------------------------------------
Intel Corp. 2.92%
--------------------------------------------------------------------------------
SBC Communications Inc. 2.90%
--------------------------------------------------------------------------------
Merck & Co. Inc. 2.88%
--------------------------------------------------------------------------------
EMC Corp. 2.71%
--------------------------------------------------------------------------------
Dell Computer Corp. 2.38%
--------------------------------------------------------------------------------
Citigroup Inc. 2.31%
--------------------------------------------------------------------------------
SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
45
<PAGE>
PREMIER RESEARCH EQUITY FUND
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PREMIER RESEARCH EQUITY FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
COMMON STOCK -- 98.1%
--------------------------------------------------------------------------------
BASIC MATERIALS -- 1.8%
Newmont Mining Corp. .............. 5,815 $ 98,855
Weyerhaeuser Co. .................. 1,977 79,821
178,676
CAPITAL GOODS -- 3.6%
Dover Corp. ....................... 2,384 111,899
Textron Inc. ...................... 1,862 85,885
United Technologies Corp. ......... 2,268 157,059
354,843
CONSUMER - CYCLICAL -- 11.6%
CVS Corp. ......................... 4,536 210,073
Gannett Co. Inc. .................. 2,850 151,050
Interpublic Group Cos. Inc. ....... 5,001 170,347
Lowes Cos. Inc. ................... 4,187 187,892
McDonald's Corp. .................. 6,338 191,328
NTL Inc. .......................... 1,425 65,995(a)
Target Corp. ...................... 7,036 180,298
1,156,983
CONSUMER - STABLE -- 18.0%
Amgen Inc. ........................ 2,326 162,420(a)
Cardinal Health Inc. .............. 1,337 117,907
Eli Lilly & Co. ................... 1,396 113,250
Gillette Co. ...................... 5,233 161,569
Merck & Co. Inc. .................. 3,838 285,691
Pepsico Inc. ...................... 3,140 144,440
Pfizer Inc. ....................... 9,827 441,601
Procter & Gamble Co. .............. 1,745 116,915
The Quaker Oats Co. ............... 2,093 165,609
Watson Pharmaceuticals Inc. ....... 1,279 82,975(a)
1,792,377
ENERGY -- 7.5%
Burlington Resources Inc. ......... 2,482 91,369
Calpine Corp. ..................... 1,512 157,815(a)
Exxon Mobil Corp. ................. 3,939 351,063
Schlumberger Ltd. ................. 1,768 145,528
745,775
FINANCIAL -- 15.2%
Associates First Capital Corp.
(Class A) ...................... 4,245 161,310
Bank of America Corp. ............. 3,606 188,864
Chase Manhattan Corp. ............. 3,954 182,626
Chubb Corp. ....................... 1,977 156,430
Citigroup Inc. .................... 4,244 229,441
FleetBoston Financial Corp. ....... 5,000 195,000
Lehman Brothers Holdings Inc. ..... 1,152 170,208
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
MetLife Inc. ...................... 4,810 $ 125,962(a)
PNC Financial Services Group ...... 1,512 98,280
1,508,121
MISCELLANEOUS -- 1.9%
SPDR Trust ........................ 1,296 186,138
TECHNOLOGY -- 29.8%
Analog Devices Inc. ............... 2,431 200,709(a)
Applied Materials Inc. ............ 1,453 86,181(a)
Cisco Systems Inc. ................ 5,699 314,870(a)
Compaq Computer Corp. ............. 3,954 109,051
Dell Computer Corp. ............... 7,675 236,486(a)
EMC Corp. ......................... 2,710 268,629(a)
Equifax Inc. ...................... 5,347 144,035
First Data Corp. .................. 2,908 113,594
Intel Corp. ....................... 6,978 290,023
Micron Technology Inc. ............ 2,268 104,328(a)
Microsoft Corp. ................... 6,804 410,366(a)
Motorola Inc. ..................... 3,720 105,090
Nortel Networks Corp. ............. 3,489 207,814
PerkinElmer Inc. .................. 1,361 142,054
Tellabs Inc. ...................... 2,558 122,145(a)
Texas Instruments Inc. ............ 1,279 60,353
Unisys Corp. ...................... 3,489 39,251(a)
2,954,979
TRANSPORTATION -- 0.8%
AMR Corp. ......................... 1,407 45,991(a)
Burlington Northern Santa
Fe Corp. ....................... 1,337 28,829
74,820
UTILITIES -- 7.9%
AT&T Wireless Group ............... 2,326 48,556(a)
Enron Corp. ....................... 2,093 183,399
NEXTLINK Communications Inc.
(Class A) ...................... 3,024 106,407(a)
Qwest Communications
International Inc. ............. 3,315 159,327(a)
SBC Communications Inc. ........... 5,756 287,800
785,489
TOTAL INVESTMENTS IN SECURITIES
(COST $9,932,202) .............. 9,738,201
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.6%
--------------------------------------------------------------------------------
Gei Short-Term Investment Fund
(COST $160,910) ................ 160,910 160,910
OTHER ASSETS AND LIABILITIES,
NET 0.3% ....................... 31,529
----------
NET ASSETS-- 100% ................. $9,930,640
==========
----------------
See Notes to Schedule of Investments and Notes to Financial statements.
46
<PAGE>
PREMIER INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
Q&A
BRIAN HOPKINSON IS A SENIOR VICE PRESIDENT WITH GE ASSET MANAGEMENT AND IS THE
PORTFOLIO MANAGER FOR THE GE PREMIER INTERNATIONAL EQUITY FUND. BRIAN HAS 21
YEARS OF INVESTMENT EXPERIENCE, INCLUDING ELEVEN YEARS IN LONDON AND HAS BEEN
WITH GEAM SINCE 1996. BEFORE JOINING GEAM HE WAS WITH COLUMBUS CIRCLE INVESTORS
AND FIDUCIARY TRUST COMPANY INTERNATIONAL. HE RECEIVED A BACHELOR OF SCIENCE
(HONOURS) DEGREE IN MATHEMATICS/ STATISTICS FROM THE UNIVERSITY OF LEEDS AND IS
AN ASSOCIATE OF THE INSTITUTE OF ACTUARIES.
Q. HOW DID THE PREMIER INTERNATIONAL EQUITY FUND PERFORM COMPARED TO ITS
BENCHMARK FOR THE PERIOD APRIL 28, 2000 (COMMENCEMENT OF OPERATIONS) THROUGH
SEPTEMBER 30, 2000?
A. The Premier International Equity Fund posted a return of negative 13.10% for
the period ended September 30, 2000 while the MSCI EAFE Index returned
negative 6.80% for the same period.
Q. WHY DID THE FUND PERFORM UNDERPERFORM ITS BENCHMARK FOR THE PERIOD ENDED
SEPTEMBER 30, 2000?
A. The Fund's underperformance can be attributed to various factors. Following
strong performance from the technology stocks in the spring, we bought a
number of "old economy" companies whose valuations appeared much more
reasonable, including Fresenius Medical Systems (Germany), British Aerospace
(UK), Dresdner Bank (Germany) and BNP Paribas (France). These stocks
performed well initially, although they have been weak in the recent
sell-off in the equity markets.
Q. WHAT EVENTS HAD AN IMPACT ON THE FINANCIAL MARKETS DURING THE PERIOD ENDED
SEPTEMBER 30, 2000 AND HOW DID THEY IMPACT THE FUND?
A. The European markets were generally weak during the period. Market sentiment
was hit by the high cost of the cellular telecommunications licenses, which
the operators were paying throughout Europe, and by the rising price of oil,
with its implicit political implications. Sentiment was further negatively
affected by the weakening Euro, which fell to a low of 0.84 against the US
dollar in mid-September before rallying slightly to end the quarter at 0.88.
Since its launch in January 1999, the Euro has underperformed the U.S.
dollar by 25%. On a positive note, planned tax reform will lead to lower
corporate and personal tax rates in France and Germany, and the elimination
of a tax liability on the sale of cross shareholdings in Germany.
The Japanese market fell 4.7% in U.S. dollars during the period. Most
sectors were weak, with the exception of healthcare, and the market was led
down by the technology and telecommunications sectors. The Bank of Japan
ended its zero interest rate policy after much external pressure, and the
concern is that this will lead to an increase in the failure of companies,
especially within the construction and retail sectors.
There were, however, signs that parts of the Japanese economy may be
improving, primarily the capital expenditure sectors, which experienced
strong order growth from the electronics and the auto sectors throughout the
past quarter. Elsewhere, consumer spending is still depressed and current
government policy includes the introduction of yet another supplementary
budget, which will cause a further increase in government debt, which
already stands around 130% of GDP.
As Asian economies are still very dependent on the strength of the global
economy, the expectation of slower global growth has had a big effect on the
Asian stock markets. Most of the Asian countries are oil importers and so
slower demand from Europe and the U.S., and higher import prices for oil,
have resulted in weak stock markets. The Latin American markets performed
less well in the third quarter, as investors wait to see the degree of soft
landing in the U.S., as this will affect the main driver of exports for
these markets, especially in Brazil and Mexico.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
A. At the current time, relationships between Israel and the Palestinians have
deteriorated significantly which has caused further nervousness in the oil
market. Inflation expectations are rising, leading to concerns that the U.S.
Federal Reserve Board will, at best, keep rates at current levels, causing
the U.S. -- and hence global -- growth to slow. The effect on overseas
markets, especially those emerging markets that are dependent on U.S.
growth, will be significant, unless European growth, which is improving, can
compensate for a slower U.S. growth outlook.
47
<PAGE>
PREMIER INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT
--------------------------------------------------------------------------------
[LINE CHART OMITTED]
PLOT POINTS FOLLOWS:
PREMIER INTERNATIONAL EQUITY FUND MSCI EAFE
4/28/2000 10,000.00 10,000.00
5/00 9,640.00 9,755.80
6/00 10,300.00 10,137.25
7/00 9,700.00 9,712.20
8/00 9,690.00 9,796.69
9/00 8,690.00 9,319.59
--------------------------------------------------------------------------------
AVERAGE TOTAL RETURN
FOR THE PERIOD ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
SINCE
INCEPTION COMMENCEMENT
--------------------------------------------------------------------------------
Premier International Equity Fund-13.10%4/28/00
--------------------------------------------------------------------------------
MSCI EAFE -6.80%
--------------------------------------------------------------------------------
INVESTMENT PROFILE
A mutual fund designed for investors who seek long-term growth
of capital by investing primarily in a limited number of
equity securities of companies located in developed
and developing countries other than the United States.
--------------------------------------------------------------------------------
SECTOR ALLOCATION
AS OF SEPTEMBER 30, 2000
(AS A % OF NET ASSETS)
--------------------------------------------------------------------------------
[PIE CHART OMITTED]
PLOT POINTS FOLLOWS:
EUROPE 62.7%
JAPAN 20.9%
PACIFIC RIM 9.2%
OTHER REGIONS 5.6%
CASH & OTHER 1.6%
--------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS
AT SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
ING Groep N.V. 5.16%
--------------------------------------------------------------------------------
BAE Systems PLC 4.63%
--------------------------------------------------------------------------------
Canon Inc. 4.59%
--------------------------------------------------------------------------------
Taiwan Semiconductor
Manufacturing Co. Ltd. 4.08%
--------------------------------------------------------------------------------
Koninklijke (Royal) Philips
Electronics N.V. 4.07%
--------------------------------------------------------------------------------
AXA-UAP 4.00%
--------------------------------------------------------------------------------
Toshiba Corp. 3.89%
--------------------------------------------------------------------------------
Total S.A. (Class B) 3.81%
--------------------------------------------------------------------------------
Telefonica S.A. 3.81%
--------------------------------------------------------------------------------
CGNU PLC 3.74%
--------------------------------------------------------------------------------
SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
48
<PAGE>
PREMIER INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PREMIER INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
COMMON STOCK -- 98.4%
--------------------------------------------------------------------------------
AUSTRALIA -- 3.3%
Brambles Industries Ltd. .......... 10,840 $ 283,404
CANADA -- 2.8%
Celestica Inc. .................... 3,557 246,322(a)
FINLAND -- 2.5%
Sampo Insurance Co. Ltd.
(Series A) ..................... 4,418 216,304
FRANCE -- 19.9%
Alstom ............................ 11,388 263,177
Aventis S.A. ...................... 3,718 279,292
AXA-UAP ........................... 2,667 348,830
Banque Nationale de Paris ......... 2,367 208,974
Lagardere S.C.A. .................. 4,940 299,707
Total S.A. (Class B) .............. 2,265 331,881
1,731,861
GERMANY -- 7.4%
Dresdner Bank AG .................. 4,800 211,167
Fresenius Medical Care AG ......... 2,552 231,171
Muenchener Rueckversicherungs-
Gesellschaft AG (Regd.) ........ 674 201,329
643,667
ISRAEL -- 2.8%
ECI Telecommunications Ltd. ....... 8,007 245,214
JAPAN -- 20.9%
Canon Inc. ........................ 9,000 399,740
Fujitsu Ltd. ...................... 12,000 279,290
Minebea Co. Ltd. .................. 19,000 222,866
Nippon Telegraph and Telephone
Corp. (NTT) .................... 15 147,434
Shin-Etsu Chemical Co. ............ 4,000 168,761
Sony Corp. ........................ 2,600 264,231
Toshiba Corp. ..................... 42,000 339,209
1,821,531
NETHERLANDS -- 9.2%
ING Groep N.V. .................... 6,744 449,861
Koninklijke (Royal) Philips
Electronics N.V. ............... 8,218 354,200
804,061
SOUTH KOREA -- 1.8%
Samsung Electronics ............... 860 155,782
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
SPAIN -- 3.8%
Telefonica S.A. ................... 16,712 $ 331,569(a)
TAIWAN -- 4.1%
Taiwan Semiconductor
Manufacturing Co. Ltd. ......... 107,000 355,289(a)
UNITED KINGDOM -- 19.9%
BAE Systems PLC ................... 74,665 403,041
Cable & Wireless PLC .............. 17,618 251,433
CGNU PLC .......................... 22,946 325,775
Invensys PLC ...................... 112,567 245,968
Royal & Sun Alliance Insurance
Group PLC ...................... 33,398 223,253
Vodafone AirTouch PLC ............. 76,943 287,322
1,736,792
TOTAL INVESTMENTS IN SECURITIES
(COST $9,466,588) .............. 8,571,796
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 0.9%
--------------------------------------------------------------------------------
Gei Short-Term Investment Fund
(COST $82,174) ................. 82,174 82,174
OTHER ASSETS AND LIABILITIES,
NET 0.7% ....................... 58,126
----------
NET ASSETS-- 100% ................. $8,712,096
==========
--------------------------------------------------------------------------------
OTHER INFORMATION (UNAUDITED)
--------------------------------------------------------------------------------
The Premier International Equity Fund invested in the following sectors at
September 30, 2000:
PERCENTAGE (BASED ON
SECTOR TOTAL NET ASSETS)
--------------------------------------------------------------------------------
Financial 25.09%
Information Technology 23.20%
Industrials 16.28%
Telecommunication Services 11.68%
Consumer Discretionary 10.54%
Healthcare 5.86%
Energy 3.81%
Materials 1.94%
Cash and Other 1.60%
---------
100.00%
=========
----------------
See Notes to Schedule of Investments and Notes to Financial statements.
49
<PAGE>
INCOME FUNDS
--------------------------------------------------------------------------------
Q&A
ROBERT MACDOUGALL LEADS THE FIXED INCOME TEAM AT GE ASSET MANAGEMENT ("GEAM").
ASSETS UNDER HIS MANAGEMENT EXCEED $31 BILLION AS OF SEPTEMBER 30, 2000. HIS
RESPONSIBILITIES INCLUDE MANAGING THE INCOME AND MONEY MARKET FUNDS. BOB JOINED
GEAM 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. REVIEW WHAT HAPPENED IN THE FIXED INCOME MARKET OVER THE ONE-YEAR PERIOD
ENDED SEPTEMBER 30, 2000.
A. For the twelve months ended September 30, 2000, the U.S. fixed income market
was clearly defined by an "inversion" in the yield curve. Yields on short
maturity notes became greater than the yields of long maturity bonds. The
cause of this atypical reshaping of the yield curve was twofold. Strong
economic growth, driven by explosive demand from consumers confident from
increasing job growth, and stock market gains forced the Federal Reserve to
take action against the risk of higher inflation, typically a byproduct of a
strong economy. By May of 2000, the Federal Reserve had raised the Federal
Funds rate 175 basis points to 6.50%, a nine year high. This caused yields
in the front end of the curve to rise. Conversely, the long lasting economic
expansion created a surplus in the federal budget. This enabled the U.S.
Treasury to announce in January 2000 its intention to reduce the amount of
quarterly debt issuance and to buyback Treasury debt, particularly long
maturity issues. This expected reduction in supply drove yields on long
Treasuries downward. On May 16, 2000, the last time the Fed raised rates,
two-year notes yielded 76 basis points more than 30-year bonds. Since May
2000, the Federal Reserve has held monetary policy steady, as economic
growth appears to be softening, the stock market has stumbled, and
productivity gains hold inflation fears in check. Recently, market
expectations for further Federal Reserve tightening through year end dropped
to zero, easing rates in the short end of the yield curve; however,
inflationary risks posed by higher oil prices have put upward pressure on
long yields. By the end of the period, two-year notes yielded 5.60% and
30-year bonds yielded 5.88%, up 37 basis points and down 17 basis points,
respectively.
For the twelve-month period, the U.S. fixed income market posted a total
return of 6.99%, as measured by the Lehman Brothers Aggregate Bond Index.
Long maturity Treasuries (greater than 20 years) were the star performers,
providing investors with a 10.12% return. Investors were punished for
holding government agency and corporate securities versus U.S. Treasuries.
Agency yield spreads widened, in reaction to a congressional debate over
benefits from government sponsorship enjoyed by these issuers. Inversion of
the yield curve, poor liquidity and credit concerns due to stock buybacks
and LBO's, caused corporate spreads to widen dramatically, particularly on
longer maturity issues. As a result, the corporate sector posted the worst
relative performance (4.99% return) for the period. Although the securitized
asset classes, such as mortgage-backed and asset-backed sectors, suffered
spread widening in the first half of 2000 due to yield curve inversion,
these security types still managed to outperform U.S. Treasuries for the
full twelve months.
INCOME FUND
Q. HOW DID THE INCOME FUND PERFORM RELATIVE TO ITS BENCHMARK FOR THE ONE-YEAR
PERIOD ENDING SEPTEMBER 30, 2000?
A. The Income Fund posted a total return of 6.61% versus a return of 6.99% for
the Lehman Brothers Aggregate Bond Index.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. The overweight position in corporate securities, relative to the benchmark,
was the main drag on total return, as this sector was the worst performer
over the period. Offsetting this was the allocation to asset-backed and
commercial mortgage-backed sectors and yield curve positioning, which
performed well, as the yield curve flattened.
Q. WHAT IS YOUR OUTLOOK FOR THE BOND MARKET?
A. Looking ahead, we expect the Federal Reserve will hold monetary policy
steady through year end, but keep their bias towards raising rates, given
the tight labor market and inflationary effects of higher energy costs. With
the 10-year Treasury yielding 70 basis points less than Fed Funds, bonds
appear fully priced, however, interest rates should remain range bound,
waiting for a clearer view of economic growth and inflation. We believe that
the recent normalization (steepening) of the yield curve will continue over
the near term, which should favor non-Treasury securities. Therefore,
selective positioning in spread sectors, and good security selection, should
provide above market returns through added income and positive relative
price performance.
50
<PAGE>
INCOME FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT
--------------------------------------------------------------------------------
[LINE CHART OMITTED]
PLOT POINTS OMITTED
INCOME FUND LB AGGREGATE
11/21/97 10,000.00 10,000.00
12/97 10,112.09 10,101.00
3/98 10,290.76 10,256.86
6/98 10,544.23 10,496.62
9/98 10,921.11 10,940.26
12/98 10,967.82 10,977.14
3/99 10,904.74 10,921.35
6/99 10,783.19 10,825.13
9/99 1,0842.60 10,899.26
12/99 10,826.21 10,885.99
3/00 11,048.27 11,126.30
6/00 11,226.87 11,319.13
9/00 11,558.98 11,660.76
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
ONE SINCE
YEAR INCEPTION* COMMENCEMENT
--------------------------------------------------------------------------------
Income Fund 6.61% 5.19% 11/21/97
--------------------------------------------------------------------------------
LB Aggregate 6.99% 5.52%
--------------------------------------------------------------------------------
*INDEX RETURNS ARE NOT AVAILABLE FROM THE FUND'S INCEPTION DATE AND THEREFORE
ARE CALCULATED FROM THE MONTH END NEAREST THE FUND'S INCEPTION DATE.
INVESTMENT PROFILE
Amutual fund designed for investors who seek maximum
income consistent with prudent investment management and
the preservation of capital by investing
primarily in a variety of investment grade debt securities.
--------------------------------------------------------------------------------
SECTOR ALLOCATION
AS OF SEPTEMBER 30, 2000
(AS A % OF NET ASSETS)
--------------------------------------------------------------------------------
[PIE CHART OMITTED]
PLOT POINTS FOLLOWS:
MORTGAGE BACKED 40.0%
CORPORATE NOTES 26.6%
TREASURIES 13.3%
FEDERAL AGENCIES 12.3%
CASH & OTHER 7.8%
--------------------------------------------------------------------------------
QUALITY RATINGS AT
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
Moody's/ Percent of
S&P Rating+ Market Value
--------------------------------------------------------------------------------
Aaa/AAA 79.64%
--------------------------------------------------------------------------------
A to AA 15.15%
--------------------------------------------------------------------------------
Below A 5.03%
--------------------------------------------------------------------------------
Other 0.18%
--------------------------------------------------------------------------------
+ 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.
51
<PAGE>
INCOME FUND
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
INCOME FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
BONDS AND NOTES -- 105.5%
--------------------------------------------------------------------------------
U.S. TREASURIES -- 13.3%
U.S. Treasury Bonds
8.125% 08/15/19 ............ $ 9,700,000 $ 11,847,677(h)
6.25% 08/15/23 ............ 1,745,000 1,779,080
6.125% 08/15/29 ............ 755,000 771,165(j)
6.25% 05/15/30 ............ 6,180,000 6,494,809(j)
20,892,731
U.S. Treasury Notes
6.75% 05/15/05 ............ 5,100,000 5,283,294(j)
3.875% 01/15/09 ............ 1,536,548 1,522,627(h,m)
5.75% 08/15/10 ............ 325,000 324,187
7,130,108
TOTAL U.S. TREASURIES
(COST $27,908,821) .......... 28,022,839
FEDERAL AGENCIES -- 11.6%
Federal Home Loan Bank
6.75% 05/01/02 ........... 6,465,000 6,485,171(j)
Federal Home Loan Mortgage Corp.
5.50% 05/15/02 ............ 450,000 442,899
7.375% 05/15/03 ............ 405,000 413,035
6.22% 03/18/08 ............ 490,000 460,982
1,316,916
Federal National Mortgage Assoc.
5.125% 02/13/04 ............ 2,875,000 2,751,001
5.78% 05/05/04 ............ 515,000 497,536
5.625% 05/14/04 ............ 150,000 145,454
7.00% 07/15/05 ............ 11,600,000 11,795,692(j)
6.99% 07/09/07 ............ 300,000 292,734
5.64% 12/10/08 ............ 290,000 272,696
6.04% 02/25/09 ............ 900,000 839,106
16,594,219
TOTAL FEDERAL AGENCIES
(COST $24,356,343) .......... 24,396,306
AGENCY MORTGAGE BACKED -- 30.1%
Federal Home Loan Mortgage Corp.
7.50% 09/01/12 ............ 166,688 168,301
6.00% 02/01/29 - 08/01/29 . 8,048,335 7,522,699
6.50% 02/01/29 - 09/01/29 . 6,683,995 6,429,136
7.50% 01/01/30 ............ 152,539 152,299
8.50% 02/01/30 ............ 908,582 932,714
7.00% 03/01/30 ............ 378,859 371,489
6.50% 06/01/30 - 07/01/30 . 1,694,699 1,629,203
8.00% 06/01/30 - 09/01/30 . 262,056 265,822
6.50% TBA ................. 1,329,000 1,276,677(c)
7.00% TBA ................. 2,800,000 2,743,132(c)
7.50% TBA ................. 8,900,000 8,886,116(c)
30,377,588
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
Federal National Mortgage Assoc.
9.00% 06/01/09 ........... $ 167,475 $ 175,116
7.50% 12/01/09 ........... 190,308 191,999
8.00% 01/01/13 ........... 797,546 811,287
7.00% 08/01/13 ........... 70,429 70,362
6.00% 02/01/14 ........... 210,882 202,906
7.50% 02/01/14 ........... 119,075 120,303
9.00% 04/01/16 ........... 95,982 98,706
9.00% 12/01/17 ........... 125,075 129,412
9.00% 12/01/22 ........... 142,232 147,164
6.446% 10/01/24 ........... 540,610 533,009
6.50% 01/01/29 - 08/01/29 4,251,972 4,083,212
6.00% 10/01/29 ........... 460,750 430,373
7.00% 01/01/30 ........... 863,064 845,434
7.50% 01/01/30 - 02/01/30 2,637,049 2,630,457
8.50% 07/01/30 - 09/01/30 1,338,031 1,369,544
6.00% TBA ................ 1,559,000 1,455,716(c)
6.00% TBA ................ 215,000 206,871(c)
6.50% TBA ................ 731,000 701,533(c)
6.50% TBA ................ 7,769,000 7,616,029(c)
21,819,433
Government National Mortgage Assoc.
7.00% 03/15/12 ........... 510,408 512,322
9.00% 11/15/16 ........... 575,328 604,630
8.50% 10/15/17 ........... 208,872 216,188
9.00% 01/15/17 - 11/15/17 180,891 190,105
9.00% 12/15/21 ........... 26,183 27,295
7.50% 10/15/22 ........... 1,578,606 1,588,961
6.50% 03/15/24 ........... 405,320 392,272
7.00% 10/15/27 ........... 139,118 137,076
6.50% 04/15/28 ........... 536,949 517,147
7.00% 04/15/28 ........... 380,821 375,108
7.00% 03/15/29 - 07/15/29 3,382,048 3,331,318
8.00% 12/15/29 ........... 100,778 102,573
8.00% 01/15/30 - 06/15/30 1,745,862 1,776,956
6.50% TBA ................ 700,000 674,191(c)
8.00% TBA ................ 700,000 712,467(c)
11,158,609
TOTAL AGENCY MORTGAGE BACKED
(COST $62,919,868) .......... 63,355,630
AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 4.2%
Federal Home Loan Mortgage Corp.
6.204% 02/15/22 ........... 201,000 178,004
5.75% 06/15/23 ........... 155,000 148,809
5.46% 10/15/23 ........... 215,579 115,401(d,f)
6.894% 02/15/24 ........... 166,000 149,348
7.50% 07/15/27 ........... 369,203 98,991(g)
7.00% 01/15/28 ........... 123,000 46,854(g)
6.04% 04/01/29 ........... 452,926 293,199(d,f)
7.50% 06/15/29 - 07/15/29 863,812 187,369(g)
2.745% 09/15/29 ........... 364,359 232,051
4.461% 03/15/30 ........... 550,199 396,148
1,846,174
Federal Home Loan Mortgage Corp. STRIPS
8.00% 02/01/23 ........... 150,882 40,455(g)
8.00% 07/01/24 ........... 159,976 44,624(d,g)
5.55% 08/01/27 ........... 360,090 259,488(d,f)
8.00% 01/01/28 ........... 96,747 26,998(g)
5.97% 04/01/28 ........... 573,088 378,238(d,f)
6.34% 06/15/29 ........... 2,688,877 1,701,555(d,f)
2,451,358
----------------
See Notes to Schedule of Investments and Notes to Financial statements.
52
<PAGE>
INCOME FUND
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
Federal National Mortgage Assoc.
6.18% 10/25/29 ........... $ 297,440 $ 190,266(d,f)
7.00% 12/01/29 ........... 511,106 140,235(g)
7.50% 01/19/39 ........... 793,002 795,480
1,125,981
Federal National Mortgage Assoc. REMIC
1,080.912% 03/25/22 ........... 682 23,038(d,g)
1,008.00% 05/25/22 ........... 495 13,677(d,g)
3.561% 12/18/29 ........... 172,057 113,451
150,166
Federal National Mortgage Assoc. STRIPS
8.00% 02/01/23 - 08/01/23 1,812,497 516,169(g)
7.50% 11/01/23 ........... 650,147 189,759(g)
8.00% 07/01/24 ........... 562,258 157,078(g)
8.00% 11/01/26 ........... 369,642 101,247(g)
7.50% 04/01/27 - 07/01/27 3,658,174 1,042,662(g)
5.93% 05/01/28 ........... 1,404,335 925,541(d,f)
8.00% 11/01/29 ........... 682,138 173,242(g)
5.24% 05/01/30 ........... 210,383 156,472(d,f)
3,262,170
TOTAL AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS
(COST $8,854,630) ........... 8,835,849
ASSET BACKED -- 13.3%
Advanta Business Card Master Trust
6.793% 01/20/06 ........... 1,000,000 1,000,000(l)
American Express Credit
Account Master Trust
6.821% 03/15/05 ........... 91,000 91,227
American Express Master Trust
6.771% 08/15/04 ........... 1,059,000 1,060,980
Arran Master Trust
6.80% 03/15/05 ........... 1,250,000 1,250,775(l)
Citibank Credit Card Master Trust I
5.75% 01/15/03 ........... 72,000 71,775
5.30% 01/09/06 ........... 550,000 527,136
Discover Card Master Trust I
6.731% 09/15/04 ........... 1,550,000 1,550,480(i)
6.801% 11/15/07 ........... 1,570,000 1,571,227(l)
First Chicago Master Trust II
6.746% 08/15/04 ........... 1,000,000 999,370
First Deposit Master Trust
Series 1996-1
6.791% 08/15/07 ........... 2,000,000 2,003,740(d,l)
First North American
National Bank
7.021% 02/15/05 ........... 1,000,000 1,001,900
Ford Credit Auto Loan Master Trust
5.50% 02/15/03 ........... 109,000 108,478
Ford Credit Auto Owner Trust
7.03% 11/15/03 ........... 1,565,000 1,573,070
Green Tree Financial Corp.
Series 1993-1
6.90% 04/15/18 ........... 55,418 54,899
6.97% 04/01/31 ........... 116,000 115,130
LB Commercial Conduit
Mortgage Trust
6.78% 04/15/09 ........... 3,950,000 3,864,828
MBNA Master Credit Card Trust
6.746% 06/15/04 ........... 1,000,000 1,001,250
6.851% 04/15/05 ........... 305,000 306,046(i)
6.701% 11/15/05 ........... 1,000,000 1,000,310(l)
6.78% 07/15/07 ........... 3,000,000 3,003,750(l)
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
Metris Master Trust
6.833% 01/22/07 ............ $ 2,000,000 $ 2,000,000(l)
Providian Gateway Master Trust
6.84% 03/15/07 ............ 900,000 900,000
Saks Credit Card Master Trust
6.846% 12/15/05 ............ 1,000,000 1,001,730
Superior Wholesale Inventory
Financing Trust
6.905% 04/15/07 ............ 1,600,000 1,601,872(l)
West Penn Funding LLC
6.81% 09/25/08 ............ 95,000 94,718
Yorkshire Power Pass-Through
Asset Trust
8.25% 02/15/05 ............ 140,000 144,994(b)
TOTAL ASSET BACKED
(COST $27,816,236) .......... 27,899,685
CORPORATE NOTES -- 26.6%
Abbey National Capital Trust I
8.963% 12/29/49 ............ 305,000 305,733(i)
Abbey National PLC
6.70% 06/29/49 ............ 150,000 135,770(i)
7.35% 10/29/49 ............ 200,000 190,326(i)
Abitibi-Consolidated Inc.
8.30% 08/01/05 ............ 135,000 138,285
AES Drax Holdings Ltd.
10.41% 12/31/20 ............ 200,000 209,900(b)
Aetna Services Inc.
6.97% 08/15/36 ............ 95,000 94,338
AFLAC Inc.
6.50% 04/15/09 ............ 245,000 227,558
Ahold Finance USA Inc.
8.25% 07/15/10 ............ 280,000 281,795
AIG SunAmerica GBL Fin II
7.60% 06/15/05 ............ 575,000 590,685(b)
Allstate Corp.
7.20% 12/01/09 ............ 1,425,000 1,402,670
Amerada Hess Corp.
7.875% 10/01/29 ............ 425,000 423,937
American Airlines Inc.
9.71% 01/02/07 ............ 306,388 327,942
6.855% 04/15/09 ............ 280,695 276,841
10.18% 01/02/13 ............ 65,000 72,038
Armstrong World Industries Inc.
7.45% 05/15/29 ............ 65,000 35,294
Arvin Industries Inc.
7.125% 03/15/09 ............ 95,000 84,348
Associates Corp. of North America
6.375% 10/15/02 ............ 400,000 396,812
5.75% 11/01/03 ............ 1,270,000 1,231,341
Bank One Corp.
6.896% 01/07/02 ............ 2,300,000 2,299,770(l)
6.40% 08/01/02 ............ 1,705,000 1,693,559
Barclays Bank PLC
8.55% 09/29/49 ............ 410,000 411,886(b)
BCI US Funding Trust I
8.01% 12/29/49 ............ 150,000 139,626(b,i)
Beckman Instruments Inc.
7.10% 03/04/03 ............ 65,000 63,051
Bell Telephone Co. - Pennsylvania
8.35% 12/15/30 ............ 368,000 389,296
Bellsouth Capital Funding
7.875% 02/15/30 ............ 500,000 515,775
Bellsouth Telecomm Inc.
6.375% 06/01/28 ............ 595,000 510,647
Boeing Capital Corp.
7.10% 09/27/05 ............ 495,000 497,990
----------------
See Notes to Schedule of Investments and Notes to Financial statements.
53
<PAGE>
INCOME FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
Boston University
7.625% 07/15/97 ........... $ 250,000 $ 227,980
Brascan Ltd.
7.375% 10/01/02 ........... 40,000 39,221
Bristol-Myers Squibb Co.
6.875% 08/01/97 ........... 150,000 138,096
CIT Group Inc.
7.125% 10/15/04 ........... 1,035,000 1,030,901
Citigroup Inc.
7.45% 06/06/02 ........... 370,000 374,310
Clear Channel Communications Inc.
7.25% 09/15/03 ........... 310,000 310,569
7.875% 06/15/05 ........... 180,000 183,641
Coastal Corp.
7.75% 06/15/10 ........... 300,000 304,329
ConAgra Foods Inc.
7.50% 09/15/05 ........... 235,000 236,635
Conseco Inc.
8.70% 11/15/26 ........... 23,000 9,890
Corporacion Andina De Fomento
6.75% 03/15/05 ........... 130,000 125,834
CSC Holdings Inc.
8.125% 07/15/09 ........... 160,000 158,334
CSX Corp.
6.25% 10/15/08 ........... 280,000 253,744
DaimlerChrysler AG
7.40% 01/20/05 ........... 335,000 336,786
DaimlerChrysler NA Holding Corp.
6.78% 09/16/02 ........... 2,000,000 2,000,000(l)
Delphi Automotive Systems Corp.
6.125% 05/01/04 ........... 305,000 291,086
Deutsche Telekom AG
7.75% 06/15/05 ........... 605,000 619,333
8.25% 06/15/30 2,110,000 2,167,538
Dominion Resources Inc.
7.60% 07/15/03 ........... 150,000 151,481
Dresdner Funding Trust I
8.151% 06/30/31 ........... 595,000 531,650(b)
Duke Capital Corp.
7.25% 10/01/04 ........... 1,165,000 1,173,015
Duke Energy Corp.
5.375% 01/01/09 ........... 100,000 87,976
Electronic Data Systems Corp.
6.85% 10/15/04 ........... 150,000 148,938
Enron Corp.
8.00% 08/15/05 ........... 355,000 361,037(b)
ERAC USA Finance Co.
8.25% 05/01/05 ........... 615,000 628,075(b)
Federated Department Stores Inc.
8.50% 06/01/10 ........... 185,000 184,478
First Union Corp.
7.55% 08/18/05 ........... 325,000 328,942
Ford Motor Co.
7.375% 10/28/09 ........... 670,000 654,603
7.45% 07/16/31 ........... 300,000 277,422
Ford Motor Credit Co.
7.50% 06/15/03 ........... 325,000 328,221
7.60% 08/01/05 ........... 475,000 479,926
7.875% 06/15/10 ........... 375,000 378,881
FPL Group Capital Inc.
7.375% 06/01/09 ........... 700,000 689,990
General Motors Acceptance Corp.
5.75% 11/10/03 ........... 70,000 67,555
6.125% 01/22/08 ........... 470,000 430,177
Georgia-Pacific Group
9.95% 06/15/02 ........... 60,000 62,264
Hanson PLC
7.875% 09/27/10 ........... 460,000 455,650
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
Heritage Media Corp.
8.75% 02/15/06 ........... $ 130,000$ 129,025
Honeywell International Inc.
6.875% 10/03/05 ........... 490,000 487,344
Household Finance Corp.
6.125% 07/15/12 ........... 50,000 49,275(i)
HSBC Capital Funding LP
9.547% 06/30/10 ........... 95,000 100,592(b)
Hydro-Quebec
8.25% 04/15/26 ........... 105,000 112,999
International Paper Co.
8.00% 07/08/03 ........... 300,000 306,012(b)
8.125% 07/08/05 ........... 225,000 232,407(b)
Israel Electric Corp. Ltd.
7.125% 07/15/05 ........... 60,000 58,868(b)
J.P. Morgan & Co.
6.00% 01/15/09 ........... 875,000 803,486
Koninklijke (Royal) KPN NV
7.50% 10/01/05 ........... 245,000 245,809(b)
Kroger Co.
7.375% 03/01/05 ........... 175,000 172,545
LCI International Inc.
7.25% 06/15/07 ........... 210,000 205,939
Lehman Brothers Holdings Inc.
7.75% 01/15/05 ........... 470,000 479,433
8.25% 06/15/07 ........... 355,000 367,602
7.50% 08/01/26 ........... 145,000 146,650
Lenfest Communications Inc.
8.375% 11/01/05 ........... 140,000 146,653
Liberty Property Ltd. Partnership
7.50% 01/15/18 ........... 90,000 77,659
Lockheed Martin Corp.
7.95% 12/01/05 ........... 250,000 256,097
8.20% 12/01/09 ........... 705,000 734,152
Lumbermens Mutual Casualty
8.30% 12/01/37 ........... 20,000 15,954(b)
Marconi Corp. PLC
8.375% 09/15/30 ........... 950,000 940,490
Merita Bank Ltd.
7.15% 12/29/49 ........... 250,000 246,900(b,i)
MidAmerican Energy Co.
7.375% 08/01/02 ........... 290,000 290,764
Midwest Generation LLC
8.56% 01/02/16 ........... 450,000 441,751(b)
Monumental Global Funding II
6.95% 10/01/03 ........... 400,000 399,812(b)
Morgan Stanley, Dean Witter & Co.
7.125% 01/15/03 ........... 1,165,000 1,170,452
5.625% 01/20/04 ........... 65,000 62,549
8.00% 06/15/10 ........... 455,000 474,565
Nabisco Inc.
6.125% 02/01/33 ........... 95,000 91,095
National Rural Utilities Cooperative
6.046% 04/15/03 ........... 100,000 98,468
NB Capital Trust IV
8.25% 04/15/27 ........... 250,000 235,540
News America Holdings Inc.
7.625% 11/30/28 ........... 110,000 98,704
Noram Energy Corp.
6.375% 11/01/03 ........... 80,000 78,337(i)
Northrop-Grumman Corp.
8.625% 10/15/04 ........... 75,000 78,178
Occidental Petroleum Corp.
7.375% 11/15/08 ........... 115,000 113,639
8.45% 02/15/29 ........... 340,000 355,939
Ontario Province of Canada
7.375% 01/27/03 ........... 2,460,000 2,492,570
Osprey Trust/Osprey I
7.797% 01/15/03 ........... 410,000 410,000(b)
----------------
See Notes to Schedule of Investments and Notes to Financial statements.
54
<PAGE>
INCOME FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
Pactiv Corp.
8.375% 04/15/27 ........... $ 190,000 $ 171,642
Pepsi Bottling Holdings Inc.
5.375% 02/17/04 ........... 200,000 190,644(b)
Petroleos Mexicanos
9.50% 09/15/27 ........... 445,000 459,462
Pharmacia Corp.
5.75% 12/01/05 ........... 80,000 76,210
Phillips Petroleum Co.
8.50% 05/25/05 ........... 175,000 184,985
9.375% 02/15/11 ........... 200,000 226,356
PP&L Capital Funding Inc.
7.75% 04/15/05 ........... 220,000 217,118
Procter & Gamble Co.
9.36% 01/01/21 ........... 165,000 188,123
Quebec Province of Canada
7.50% 09/15/29 ........... 285,000 284,684
Qwest Corp.
7.625% 06/09/03 ........... 1,250,000 1,265,238(b)
5.625% 11/15/08 ........... 125,000 110,579
Raytheon Co.
7.90% 03/01/03 ........... 215,000 216,731(b)
6.75% 08/15/07 ........... 100,000 94,736
Royal & Sun Alliance Insurance
Group PLC
8.95% 10/15/29 ........... 170,000 168,963(b)
Royal Bank of Scotland Group PLC
8.817% 03/31/49 ........... 595,000 620,523
9.118% 03/31/49 ........... 270,000 283,489
Sprint Capital Corp.
5.70% 11/15/03 ........... 520,000 497,302
Stop & Shop Cos. Inc.
9.75% 02/01/02 ........... 50,000 51,607
SunAmerica Inc.
5.60% 07/31/97 ........... 390,000 275,874
Suntrust Bank Inc.
6.00% 01/15/28 ........... 40,000 36,845
Tele-Communications Inc.
9.80% 02/01/12 ........... 80,000 91,216
Telefonica Europe BV
7.35% 09/15/05 ........... 480,000 481,877
Texas Utilities Co.
5.94% 10/15/01 ........... 340,000 336,148(i)
Textron Inc.
6.375% 07/15/04 ........... 85,000 82,670
The Walt Disney Co.
5.62% 12/01/08 ........... 265,000 239,642
Time Warner Inc.
7.57% 02/01/24 ........... 410,000 384,592
Time Warner Pass-Through
Asset Trust
6.10% 12/30/01 ........... 90,000 88,784(b)
Tosco Corp.
7.625% 05/15/06 ........... 55,000 55,826
TRW Inc.
6.625% 06/01/04 ........... 165,000 159,166
Turner Broadcasting Systems Inc.
8.375% 07/01/13 ........... 115,000 119,306
TXU Eastern Funding Co.
6.45% 05/15/05 ........... 170,000 160,822
Tyco International Group S.A.
6.875% 09/05/02 ........... 200,000 199,166
6.25% 06/15/03 ........... 55,000 53,576(i)
7.00% 06/15/28 ........... 95,000 83,465
Union Carbide Corp.
6.79% 06/01/25 ........... 370,000 365,253
Union Oil Co.
7.35% 06/15/09 ........... 310,000 307,387
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
Union Pacific Co. (Series A)
8.02% 07/02/12 ........... $ 490,859 $ 495,041
United Air Lines Inc.
7.73% 07/01/10 ........... 120,000 121,052
9.56% 10/19/18 ........... 150,000 151,772
United Illuminating Co.
6.25% 12/15/02 ........... 30,000 29,264
US Airways Pass-Through Trust
8.36% 07/20/20 ........... 314,440 324,228
USA Networks Inc.
6.75% 11/15/05 ........... 480,000 466,829
Viacom Inc.
7.75% 06/01/05 ........... 307,000 314,706
Visteon Corp.
7.95% 08/01/05 ........... 75,000 75,720
Vodafone AirTouch PLC
7.625% 02/15/05 ........... 565,000 573,000(b)
Wal-Mart Stores Inc.
6.875% 08/10/09 ........... 1,590,000 1,576,755
Williams Cos. Inc.
6.125% 02/15/12 ........... 155,000 152,889
WorldCom Inc.
6.40% 08/15/05 ........... 105,000 102,244
8.875% 01/15/06 ........... 150,000 155,241
Yale University
7.375% 04/15/96 ........... 321,000 307,049
TOTAL CORPORATE NOTES
(COST $56,040,182) .......... 56,059,772
NON-AGENCY MORTGAGE BACKED SECURITIES -- 1.4%
DLJ Commercial Mortgage Corp.
6.24% 11/12/31 ........... 675,000 636,778
GS Mortgage Securities Corp.
(Class A)
6.86% 07/13/30 ........... 250,000 248,171(g)
Nationslink Funding Corp.
6.001% 11/20/07 ........... 83,172 80,522
6.476% 07/20/08 ........... 2,100,000 2,028,657
TOTAL NON-AGENCY MORTGAGE
BACKED SECURITIES
(COST $2,932,267) ........... 2,994,128
NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 5.0%
Bear Stearns Commercial
Mortgage Securities
7.11% 09/15/09 ........... 994,000 996,066
Countrywide Home Loans
8.00% 07/25/30 ........... 421,000 430,256
GMAC Commercial Mortgage
Security Inc.
6.42% 08/15/08 ........... 1,862,000 1,771,581
Headlands Mortgage Securities
Inc. (Class A)
6.65% 02/25/29 ........... 442,705 423,890
Holmes Financing PLC
6.834% 07/15/05 ........... 2,000,000 2,000,938(l)
6.884% 07/15/07 ........... 1,500,000 1,500,000(l)
J.P. Morgan Commercial
Mortgage Finance Corp.
7.108% 08/15/32 ........... 179,000 178,999
LB Commercial Conduit
Mortgage Trust
7.105% 07/15/08 ........... 631,156 635,961
----------------
See Notes to Schedule of Investments and Notes to Financial statements.
55
<PAGE>
INCOME FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
Lehman Large Loan
6.79% 06/12/04 ........... $ 278,820 $ 278,744
Merrill Lynch Mortgage
Investors Inc.
6.50% 05/01/30 ........... 176,000 158,836
Morgan Stanley Capital I
6.86% 05/15/06 ........... 208,149 207,608(b)
6.52% 01/15/08 ........... 21,000 20,307
6.21% 09/15/08 ........... 44,000 41,809
6.76% 11/15/08 ........... 187,386 185,922
7.11% 07/15/09 ........... 114,000 113,893
Norwest Integrated Structured
Assets Inc. (Class A)
7.50% 03/25/30 ........... 289,047 288,504
Residential Accredit Loans Inc.
7.75% 04/25/30 ........... 332,000 330,124
Residential Asset
Securitization Trust
1.078% 08/25/30 ........... 2,131,756 63,740(g)
Residential Funding Mortgage
Securities I (Class A)
6.50% 07/25/14 ........... 352,812 343,332
Salomon Brothers Mortgage
Securities Inc.
7.00% 07/25/24 ........... 728,663 644,911(i)
TOTAL NON-AGENCY COLLATERALIZED
MORTGAGE OBLIGATIONS
(COST $10,588,605) .......... 10,615,421
TOTAL BONDS AND NOTES
(COST $221,416,952) ......... 222,179,630
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
PREFERRED STOCK -- 0.3%
--------------------------------------------------------------------------------
Centaur Funding Corp.
(Series B), 9.08%
(COST $502,300) ............. 475 482,333(b)
TOTAL INVESTMENTS IN SECURITIES
(COST $221,919,252) ......... 222,661,963
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 22.5%
--------------------------------------------------------------------------------
COMMERCIAL PAPER -- 3.9%
National Australia Funding
Inc.
6.68% 10/02/00 ............ $ 6,300,000 $ 6,298,831(l)
San Paolo U.S. Finance Co.
6.70% 10/02/00 ............ 1,900,000 1,899,647(l)
8,198,478
FEDERAL AGENCIES -- 14.3%
Federal Farm Credit Bank
6.25% 10/02/00 ............ 10,170,000 10,168,234(d)
Federal Home Loan Bank
6.25% 10/02/00 ............ 10,000,000 9,998,256(d)
Federal National Mortgage
Assoc.
6.63% 10/02/00 ............ 10,000,000 9,998,244(d)
30,164,734
TIME DEPOSIT-- 4.3%
Bank of Montreal
6.687% 10/02/00 ............ 9,000,000 9,000,000(l)
TOTAL SHORT-TERM INVESTMENTS
(COST $47,363,212) .......... 47,363,212
OTHER ASSETS AND LIABILITIES,
NET (28.3)% ................. (59,485,137)
------------
NET ASSETS-- 100% .............. $210,540,038
============
----------------
See Notes to Schedule of Investments and Notes to Financial statements.
56
<PAGE>
STRATEGIC INVESTMENT FUND
--------------------------------------------------------------------------------
Q&A
THE STRATEGIC INVESTMENT FUND IS MANAGED JOINTLY BY DAVID CARLSON, RALPH LAYMAN
AND BOB MACDOUGALL. THE FUND FOLLOWS AN ASSET ALLOCATION STRATEGY AND EACH
PORTFOLIO MANAGER IS RESPONSIBLE FOR INVESTMENTS WITHIN HIS AREA OF EXPERTISE:
DAVE MANAGES THE DOMESTIC EQUITY INVESTMENTS IN THE PORTFOLIO (PLEASE REFER TO
PAGE 41 FOR DAVE'S BIOGRAPHICAL DETAILS), RALPH MANAGES THE INTERNATIONAL EQUITY
HOLDINGS WITHIN THE PORTFOLIO (PLEASE REFER TO PAGE 27 FOR RALPH'S BIOGRAPHICAL
DETAILS) AND BOB MANAGES THE FIXED INCOME RELATED INVESTMENTS IN THE PORTFOLIO
(PLEASE REFER TO PAGE 50 FOR BOB'S BIOGRAPHICAL DETAILS).
Q. HOW DID THE STRATEGIC INVESTMENT FUND PERFORM COMPARED TO ITS BENCHMARK FOR
THE PERIOD OCTOBER 29, 1999 (COMMENCEMENT OF OPERATIONS) THROUGH SEPTEMBER
30, 2000?
A. The Strategic Investment Fund posted a return of 10.24% for the period ended
September 30, 2000. The Fund allocates investments among several asset
classes and, therefore, the results of the Fund need to be compared to
several bench-marks: the S&P 500 Index which returned 6.47%; the MSCI EAFE
Index which returned negative 0.54%; and the Lehman Brothers Aggregate Bond
Index which returned 6.59%.
Q. WHY DID THE FUND OUTPERFORM ITS BENCHMARK FOR THE PERIOD ENDED SEPTEMBER 30,
2000?
A. The Fund's outperformance was driven by asset allocation and strong
performance within each of the asset classes. The U.S. equity portion of the
Fund returned in excess of 15%, exceeding the S&P 500 Index return of just
6.5%. The fixed income portion of the Fund was very strong during this time
period, posting a gain of more than 5%. The international portion of the
Fund performed strongly as well, with gains in excess of 9%, which more than
beat the MSCI EAFE Index, which posted a decline of 0.54% during the period.
Our allocation in international stocks sets us apart from many other
balanced funds, which only concentrate on the U.S. financial markets. Please
read the commentary on the International Equity Fund and the Income Fund for
a more detailed description of the individual asset classes.
Q. WHAT HAS BEEN GOING ON IN THE U.S. EQUITY MARKETS?
A. Volatility has been the one constant in the U.S. equity markets over the
past year. After stellar gains in the fourth quarter of 1999, the first
three quarters of 2000 were very volatile. The first quarter of 2000
performed quite well, with a very strong January and February, however,
March proved to be the beginning of a re-valuation in the U.S. equity
markets. A number of technology stocks were priced to perfection and the
March through May period corrected some of the excesses.
The U.S. Equity markets certainly did not earn a gold medal in the third
quarter of 2000. In fact, the S&P 500 Index finished down 1.0% in the
quarter. placing the Index seventh out of 33 FT/S&P All-World Indices
measured in U.S. dollars. The silver lining is that the U.S. position
improved from 18th place in 1999. perhaps indicating that the U.S. markets
provide a relative "safe" haven in times of slowing global economic
conditions.
Q. WHAT ARE THE CURRENT WEIGHTINGS OF THE VARIOUS ASSET CLASSES AND HOW HAVE
THEY CHANGED OVER THE PERIOD?
A. Currently, the Fund's asset allocation mix reflects 46% of the assets in
U.S. equities, 15% in international equities, 35% in fixed income, and 4% in
cash and cash equivalents. We continue to directionally model the weights of
this portfolio in conjunction with the policy governing the GE Pension Plan.
Our Asset Allocation Committee meets regularly to discuss any changes to the
policy. The target weightings have shifted marginally toward international
equities as our Committee believes there are compelling values in the
international markets versus the U.S. equity markets. The total equity
allocation is 61% and the fixed income allocation is 35%, directionally in
line with the Committee's policy targets.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
A. The returns for the Fund should continue to reflect demand for equities in
both U.S. and international issues. Despite the Federal Reserve's commitment
to containing any inflationary pressures through rate increases, we believe
companies are executing their business plans and should produce solid
earnings over the next few quarters. The U.S. market, and consequently the
international markets, likely will continue to be volatile, although this
should be beneficial as the speculative excesses are eliminated from the
system. The fixed income market should continue to experience relief if the
market seeks short term security in the bond market, if a soft landing
unfolds.
57
<PAGE>
STRATEGIC INVESTMENT FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT
--------------------------------------------------------------------------------
[LINE CHART OMITTED]
PLOT POINTS FOLLOWS:
STRATEGIC INVESTMENT FUND S&P 500 LB AGGREGATE COMPOSITE*
10/99 10,000.00 10,000.00 10,000.00 10,000.00
11/99 10,150.00 10,203.00 9,999.00 10,121.40
12/99 10,651.90 10,803.96 9,951.01 10,459.66
1/00 10,450.92 10,259.55 9,918.17 10,129.61
2/00 10,420.77 10,073.85 10,038.18 10,068.63
3/00 11,013.66 11,073.48 10,170.68 10,721.26
4/00 10,842.83 10,721.89 10,141.19 10,504.58
5/00 10,832.78 10,498.56 10,136.11 10,371.20
6/00 11,013.66 10,755.35 10,346.95 10,609.69
7/00 10,893.07 10,587.67 10,441.10 10,549.07
8/00 11,264.88 11,245.17 10,592.50 11,003.31
9/00 11,023.71 10,651.42 10,659.23 10,682.46
--------------------------------------------------------------------------------
AVERAGE TOTAL RETURN
FOR THE PERIOD ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
SINCE
INCEPTION COMMENCEMENT
--------------------------------------------------------------------------------
Strategic Investment Fund 10.24% 10/29/99
--------------------------------------------------------------------------------
S&P 500 6.47%
--------------------------------------------------------------------------------
LB Aggregate 6.59%
--------------------------------------------------------------------------------
Composite* 6.80%
--------------------------------------------------------------------------------
* THE COMPOSITE INDEX RETURN IS A BLENDED RETURN COMPOSED OF 60% S&P 500 INDEX
AND 40% LB AGGREGATE BOND INDEX.
INVESTMENT PROFILE
A mutual fund designed for investors who seek to maximize
total return by investing primarily in a combination of
equity securities and investment grade debt securities.
--------------------------------------------------------------------------------
REGIONAL ALLOCATION
AS OF SEPTEMBER 30, 2000
(AS A % OF NET ASSETS)
--------------------------------------------------------------------------------
[PIE CHART OMITTED]
PLOT POINTS FOLLOWS:
DOMESTIC EQUITY 45.4%
BONDS AND NOTES 35.7%
FOREIGN EQUITY 15.0%
CASH & OTHER 3.9%
--------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS
AT SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
U.S. Treasury Notes 5.875%, 11/15/04 19.21%
--------------------------------------------------------------------------------
U.S. Treasury Notes 6.00%, 08/15/09 16.43%
--------------------------------------------------------------------------------
Citigroup Inc. 3.09%
--------------------------------------------------------------------------------
Cardinal Health Inc. 1.93%
--------------------------------------------------------------------------------
First Data Corp. 1.60%
--------------------------------------------------------------------------------
Dover Corp. 1.44%
--------------------------------------------------------------------------------
Fannie Mae 1.40%
--------------------------------------------------------------------------------
AT&T Corp. - Liberty
Media Group (Class A) 1.37%
--------------------------------------------------------------------------------
Molex Inc. (Class A) 1.26%
--------------------------------------------------------------------------------
Merck & Co. Inc. 1.25%
--------------------------------------------------------------------------------
SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
58
<PAGE>
STRATEGIC INVESTMENT FUND
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
DOMESTIC EQUITY -- 45.4%
--------------------------------------------------------------------------------
BASIC MATERIALS -- 0.0%
Airgas Inc. ....................... 370 $ 2,521(a)
CAPITAL GOODS -- 4.4%
Dover Corp. ....................... 2,338 109,740
Emerson Electric Co. .............. 326 21,842
Honeywell International Inc. ...... 533 18,988
Hubbell Inc. (Class B) ............ 688 17,243
Molex Inc. (Class A) .............. 2,325 96,342
Textron Inc. ...................... 295 13,607
United Technologies Corp. ......... 357 24,722
Waste Management Inc. ............. 1,970 34,352
336,836
CONSUMER - CYCLICAL -- 7.1%
Adelphia Communications Corp.
(Class A) ...................... 144 3,969(a)
AT&T Corp. - Liberty Media
Group (Class A) ................ 5,830 104,940(a)
Carnival Corp. .................... 901 22,187
Catalina Marketing Corp. .......... 2,157 81,157(a)
Comcast Corp. (Class A) ........... 2,009 82,243(a)
CVS Corp. ......................... 472 21,860
Gannett Co. Inc. .................. 133 7,049
Home Depot Inc. ................... 1,084 57,520
Interpublic Group Cos. Inc. ....... 1,084 36,924
NTL Inc. .......................... 1,597 73,961(a)
The Walt Disney Co. ............... 1,279 48,922
540,732
CONSUMER - STABLE -- 10.4%
Abbott Laboratories ............... 1,606 76,385
American Home Products Corp. ...... 678 38,349
Avon Products Inc. ................ 164 6,704
Bristol-Myers Squibb Co. .......... 1,064 60,781
Cardinal Health Inc. .............. 1,672 147,450
Colgate-Palmolive Co. ............. 263 12,414
Dentsply International Inc. ....... 575 20,089
Energizer Holdings Inc. ........... 329 8,061(a)
Gillette Co. ...................... 924 28,529
Henry Schein Inc. ................. 934 18,622(a)
Johnson & Johnson ................. 810 76,089
Lincare Holdings Inc. ............. 1,253 35,945(a)
Merck & Co. Inc. .................. 1,281 95,354
Pepsico Inc. ...................... 1,123 51,658
Pfizer Inc. ....................... 1,241 55,767
Philip Morris Cos. Inc. ........... 826 24,315
Sybron International Corp. ........ 1,596 38,304(a)
794,816
ENERGY -- 3.6%
Anadarko Petroleum Corp. .......... 748 49,712
Baker Hughes Inc. ................. 1,005 37,311
Exxon Mobil Corp. ................. 380 33,867
Nabors Industries Inc. ............ 690 36,156(a)
Royal Dutch Petroleum Co. ADR ..... 589 35,303
Schlumberger Ltd. ................. 1,024 84,288
276,637
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
FINANCIAL -- 9.6%
AFLAC Inc. ........................ 246 $ 15,759
American Express Co. .............. 524 31,833
American International
Group Inc. ..................... 946 90,520
Bank One Corp. .................... 657 25,377
Berkshire Hathaway Inc.
(Class B) ...................... 16 33,120(a)
Citigroup Inc. .................... 4,367 236,091
Countrywide Credit Industries
Inc. ........................... 360 13,590
Fannie Mae ........................ 1,499 107,179
Fidelity National Financial Inc. .. 780 19,305
Loews Corp. ....................... 318 26,513
Marsh & McLennan Cos. Inc. ........ 528 70,092
State Street Corp. ................ 482 62,660(e)
732,039
MISCELLANEOUS -- 0.8%
SPDR Trust ........................ 409 58,743
TECHNOLOGY -- 8.7%
Analog Devices Inc. ............... 164 13,540(a)
Applied Materials Inc. ............ 532 31,554(a)
Automatic Data Processing Inc. .... 1,363 91,151
Cisco Systems Inc. ................ 1,418 78,345(a)
Dell Computer Corp. ............... 534 16,454(a)
EMC Corp. ......................... 827 81,976(a)
Equifax Inc. ...................... 3,033 81,701
First Data Corp. .................. 3,133 122,383
Intel Corp. ....................... 1,970 81,878
Microsoft Corp. ................... 946 57,056(a)
Pitney Bowes Inc. ................. 318 12,541
668,579
UTILITIES -- 0.8%
NEXTLINK Communications Inc.
(Class A) ...................... 349 12,280(a)
SBC Communications Inc. ........... 142 7,100
Sprint Corp. (FON Group) .......... 287 8,413
WorldCom Inc. ..................... 1,089 33,078(a)
60,871
TOTAL DOMESTIC EQUITY
(COST $3,134,056) .............. 3,471,774
--------------------------------------------------------------------------------
FOREIGN EQUITY -- 15.0%
--------------------------------------------------------------------------------
CONSUMER - DISCRETIONARY -- 1.5%
Koninklijke (Royal) Philips
Electronics N.V. ............... 1,030 44,393
Lagardere S.C.A. .................. 645 39,132
Sony Corp. ........................ 300 30,488
114,013
ENERGY -- 0.5%
Total S.A. (Class B) .............. 283 41,467
----------------
See Notes to Schedule of Investments and Notes to Financial statements.
59
<PAGE>
STRATEGIC INVESTMENT FUND
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
FINANCIAL -- 3.4%
AXA-UAP ........................... 333 $ 43,555
Banque Nationale de Paris ......... 267 23,573
CGNU PLC .......................... 2,994 42,507
Dresdner Bank AG .................. 544 23,932
ING Groep N.V. .................... 838 55,899
Muenchener Rueckversicherungs-
Gesellschaft AG (Regd.) ........ 75 22,403
Royal & Sun Alliance Insurance
Group PLC ...................... 3,772 25,214
Sampo Insurance Co. Ltd.
(Series A) ..................... 501 24,529
261,612
HEALTHCARE -- 0.8%
Aventis S.A. ...................... 435 32,677
Fresenius Medical Care AG ......... 317 28,715
61,392
INDUSTRIALS -- 2.3%
Alstom ............................ 1,477 34,133
BAE Systems PLC ................... 9,746 52,609
Brambles Industries Ltd. .......... 1,415 36,994
Invensys PLC ...................... 13,409 29,300
Minebea Co. Ltd. .................. 2,000 23,460
176,496
INFORMATION TECHNOLOGY -- 3.5%
Canon Inc. ........................ 2,000 88,831
Celestica Inc. .................... 404 27,977(a)
ECI Telecommunications Ltd. ....... 861 26,368
Fujitsu Ltd. ...................... 2,000 46,549
Toshiba Corp. ..................... 5,000 40,382
United Microelectronics Corp.
ADR ............................ 2,862 33,986(a)
264,093
MATERIALS -- 0.6%
Shin-Etsu Chemical Co. ............ 1,000 42,190
TELECOMMUNICATION SERVICES -- 2.4%
Cable & Wireless PLC .............. 1,869 26,673
Nippon Telegraph and Telephone
Corp. (NTT) .................... 2 19,658
Telefonica S.A. ................... 2,181 43,271(a)
Vodafone AirTouch PLC ............. 8,234 30,748
Vodafone AirTouch PLC ADR ......... 1,785 66,045
186,395
TOTAL FOREIGN EQUITY
(COST $1,193,406) .............. 1,147,658
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
BONDS AND NOTES -- 35.7%
--------------------------------------------------------------------------------
U.S. TREASURIES -- 35.7%
U.S. Treasury Notes
5.875% 11/15/04 ...............$ 1,470,000 $ 1,468,398
6.00% 08/15/09 ............... 1,250,000 1,256,250
2,724,648
TOTAL BONDS AND NOTES
(COST $2,684,118) .............. 2,724,648
TOTAL INVESTMENTS IN SECURITIES
(COST $7,011,580) .............. 7,344,080
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 3.1%
--------------------------------------------------------------------------------
GEI Short-Term Investment Fund
(COST $240,920) ................ 240,920 240,920
OTHER ASSETS AND LIABILITIES,
NET 0.8% ....................... 59,054
----------
NET ASSETS-- 100% ................. $7,644,054
==========
----------------
See Notes to Schedule of Investments and Notes to Financial statements.
60
<PAGE>
MONEY MARKET FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT
--------------------------------------------------------------------------------
[LINE CHART OMITTED]
PLOT POINTS FOLLOWS:
MONEY MARKET FUND 90 DAY T-BILL
12/2/97 10,000.00 10,000.00
12/97 10,045.17 10,043.00
3/98 10,178.79 10,170.85
6/98 10,313.99 10,297.38
9/98 10,453.23 10,419.19
12/98 10,585.27 10,533.60
3/99 10,709.49 10,651.26
6/99 10,833.83 10,773.32
9/99 10,967.85 10,902.15
12/99 11,116.86 11,042.51
3/00 11,273.22 11,200.06
6/00 11,444.27 11,361.32
9/00 11,627.85 11,534.77
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
ONE SINCE
YEAR INCEPTION* COMMENCEMENT
--------------------------------------------------------------------------------
Money Market Fund 6.02% 5.47% 12/2/97
--------------------------------------------------------------------------------
90 Day T-Bill 5.77% 5.16%
--------------------------------------------------------------------------------
*INDEX RETURNS ARE NOT AVAILABLE FROM THE FUND'S INCEPTION DATE AND THEREFORE
ARE CALCULATED FROM THE MONTH END NEAREST THE FUND'S INCEPTION DATE.
--------------------------------------------------------------------------------
SECTOR ALLOCATION
AS OF SEPTEMBER 30, 2000
(AS A % OF NET ASSETS)
--------------------------------------------------------------------------------
[PIE CHART OMITTED]
PLOT POINTS FOLLOWS:
COMMERICAL PAPER 48.1%
CERTIFICATES OF DEPOSIT & OTHER 29.6%
U.S. GOVERNMENTS 22.3%
--------------------------------------------------------------------------------
FUND YIELD
AT SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
FUND IBC MONEY FUND
--------------------------------------------------------------------------------
7 day current 6.26%+ 5.99%
--------------------------------------------------------------------------------
7 day effective 6.46% 6.17%
--------------------------------------------------------------------------------
[dagger]The seven day current yield, rather than the total return, more closely
reflects the current earnings of the Money Market Fund at September
30, 2000.
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.
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 $1.00 PER SHARE, IT
IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND.
INVESTMENT PROFILE
A mutual fund designed for investors who seek a high level of
current income consistent with the preservation of capital and
maintenance of liquidity by investing primarily in
short-term U.S. dollar denominated, money market instruments.
ROBERT MACDOUGALL LEADS A TEAM OF MANAGERS FOR THE MONEY MARKET FUND (PLEASE
REFER TO PAGE 50 FOR BOB'S BIOGRAPHICAL DETAILS AND AN ANALYSIS OF THE FIXED
INCOME MARKETS).
Q. HOW DID THE MONEY MARKET FUND PERFORM RELATIVE TO ITS BENCHMARK FOR THE
ONE-YEAR PERIOD ENDED SEPTEMBER 30, 2000?
A. The Money Market Fund posted a total return of 6.02% versus a return of
5.77% for the 90-day U.S. Treasury Bill.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. The Fund outperformed the 90-day U.S. Treasury Bill before and after fees
and expenses. The positive relative performance is attributable to favorable
duration manage-ment at the short end of the yield curve, taking advantage
of movements in rates around Federal Reserve action.
SEE NOTES TO PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
61
<PAGE>
MONEY MARKET FUND
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
MONEY MARKET FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PRINCIPAL AMORTIZED
AMOUNT COST
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 99.7%
--------------------------------------------------------------------------------
U.S. GOVERNMENTS -- 22.3%
U.S. AGENCIES (D)
Federal Home Loan Mortgage Corp.
6.35% 10/12/00 ..............$ 150,000 $ 149,718
6.54% 11/30/00 .............. 250,000 247,321
397,039
Federal National Mortgage Assoc.
6.63% 10/02/00 .............. 340,000 339,939
6.60% 10/26/00 .............. 260,000 258,842
6.69% 12/21/00 .............. 260,000 256,215
6.55% 03/01/01 .............. 270,000 262,809
1,117,805
TOTAL U.S. GOVERNMENTS
(COST $1,514,844) .............. 1,514,844
COMMERCIAL PAPER -- 48.1%
Abbey National PLC
6.51% 10/24/00 .............. 210,000 209,127
Associates Corp. of North America
6.68% 10/02/00 .............. 220,000 219,959
Bank One NA
6.68% 10/05/00 .............. 250,000 250,000
Barclays US Funding Corp.
6.50% 10/30/00 .............. 270,000 268,586
Citibank Capital Markets
6.55% 10/17/00 .............. 250,000 249,272
Credit Suisse
6.48% 11/13/00 .............. 220,000 218,297
Deutsche Bank Financial Inc.
6.475% 11/01/00 .............. 130,000 129,275
Goldman Sachs Group LP
6.47% 10/16/00 .............. 220,000 219,407
Halifax Building Society
6.475% 11/20/00 .............. 220,000 218,021
Morgan (J.P.) & Co. Inc.
6.50% 10/10/00 .............. 250,000 249,594
Royal Bank of Canada
6.478% 11/10/00 .............. 260,000 258,129
UBS Finance Delaware Inc.
6.65% 10/02/00 .............. 220,000 219,959
Wachovia Bank
6.58% 11/16/00 .............. 220,000 220,000
Wells Fargo & Co.
6.47% 10/31/00 .............. 130,000 129,299
6.505% 10/31/00 .............. 210,000 208,862
TOTAL COMMERCIAL PAPER
(COST $3,267,787) .............. 3,267,787
--------------------------------------------------------------------------------
PRINCIPAL AMORTIZED
AMOUNT COST
--------------------------------------------------------------------------------
YANKEE CERTIFICATES OF DEPOSIT -- 29.3%
Bank of America
6.66% 10/23/00 ..............$ 260,000 $ 260,000
Bank of Montreal
6.53% 10/03/00 .............. 250,000 250,000
Bayerische Hypotheken Bank
6.55% 11/22/00 .............. 130,000 130,000
6.56% 11/22/00 .............. 210,000 210,000
Canadian Imperial Bank
of Commerce
6.55% 11/15/00 .............. 280,000 280,000
Deutsche Bank AG
6.625% 11/01/00 .............. 210,000 210,000
Dresdner Bank AG
6.53% 11/07/00 .............. 120,000 120,000
6.59% 11/07/00 .............. 220,000 220,000
Societe Generale
6.51% 10/06/00 .............. 150,000 150,000
6.64% 10/06/00 .............. 160,000 160,000
TOTAL YANKEE CERTIFICATES OF DEPOSIT
(COST $1,990,000) .............. 1,990,000
TOTAL SHORT-TERM INVESTMENTS
(COST $6,772,631) .............. 6,772,631
OTHER ASSETS AND LIABILITIES,.
NET 0.3% ....................... 20,866
----------
NET ASSETS-- 100% ................. $6,793,497
==========
----------------
See Notes to Schedule of Investments and Notes to Financial statements.
62
<PAGE>
NOTES TO PERFORMANCE SEPTEMBER 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
Information of the preceding performance pages related to the Fund's one-year
total return and top ten largest holdings is audited, all other information on
the performance pages is unaudited.
Total returns take into account changes in share price and assume reinvestment
of dividends and capital gains distributions, 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. For periods less than one year, the returns are not
annualized.
The Standard & Poor's ("S&P") 500 Composite Price Index of stocks (S&P 500
Index), the S&P/BARRA Composite Index of 500 value stocks (S&P 500/BARRA Value),
the S&P MidCap 400 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 Index 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 500/BARRA Value is a capitalization-weighted index of all stocks in the S&P
500 that have low price-to-book ratios. 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 2000
companies of the Russell 3000 Index, which represents approximately 10% of the
total market capitalization of the Russell 3000 Index. The Russell 3000 Index
measures the performance of the 3000 largest U.S. companies based on total
market capitalization, representing approximately 98% of the investable U.S.
equity market. MSCI EAFE is a composite of foreign securities traded in 20
developed markets representing Europe, Australasia and the 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 946 taxable money
market funds.
A number of the broad market returns are not available from the Funds'
commencement of investment operations through September 30, 2000 and therefore
are calculated from the month end nearest to the funds' commencement of
operations date.
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 current or future holdings and should not be considered as a
recommendation to purchase or sell a particular security. They were cited solely
for illustrative purposes. See the Prospectus for complete descriptions of
investment objectives, policies, risks and permissible investments.
Standard & Poor's, S&P, S&P 500 and S&P MidCap 400 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
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
--------------------------------------------------------------------------------
(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 September 30, 2000, these securities amounted to
$1,220,615; $54,212; $515,122; and $8,669,259 or 0.3%, 0.4%, 4.3%, and 4.1%
of net assets for the International Equity, Europe Equity, Emerging Markets
and Income Funds, 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) State Street Corp. is the parent company of State Street Bank & Trust Co.,
the Fund's custodian and sub-advisor.
(f) Principal only securities represent the right to receive the monthly
principal payments on an underlying pool of mortgages. No payments of
interest on the pool are passed through to the "principal only" holder.
(g) Interest only securities represent the right to receive the monthly interest
payments on an underlying pool of mortgages. Payments of principal on the
pool reduce the value of the interest only holding.
(h) At September 30, 2000, all or a portion of this security was pledged to
cover collateral requirements for futures, options and/or TBA's.
(i) Variable or floating rate security. The stated rate represents the rate at
September 30, 2000.
(j) All or a portion of security out on loan.
(k) At September 30, 2000, GEAM has determined that the security is illiquid as
it may be difficult to resell within seven days in the ordinary course of
business at approximately the price it is valued.
(l) Security purchased with collateral from securities lending.
(m) Treasury Inflation Protected Security. Principal amount has been adjusted
for inflation.
ABBREVIATIONS:
ADR -- American Depositary Receipt
FDR -- Finnish Depositary Receipt
GDR -- Global Depositary Receipt
Regd. -- Registered
REMIC -- Real Estate Mortgage Investment Conduit
SDR -- Swedish Depositary Receipt
STRIPS -- Separate Trading of Registered Interest
and Principal of Security
63
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
SELECTED DATA BASED ON A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
------------------------------------------------------------------------------------------------------------------------------------
U.S. S&P 500 VALUE
EQUITY INDEX EQUITY
FUND FUND FUND
9/30/00 9/30/99 9/30/98 9/30/00 9/30/99 9/30/98 9/30/00
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCEPTION DATE -- -- 11/25/97 -- -- 11/25/97 2/2/00
Net asset value, beginning of period ............. $ 13.19 $ 10.62 $ 10.00 $ 13.74 $ 10.85 $ 10.00 $ 10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ......................... 0.10 0.11 0.11 0.15 0.18 0.14 0.04
Net realized and unrealized gains (losses)
on investments ............................. 1.53 2.84 0.52 1.73 2.88 0.72 0.35
------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS ... 1.63 2.95 0.63 1.88 3.06 0.86 0.39
------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ......................... 0.09 0.13 0.01 0.18 0.17 0.01 --
Net realized gains ............................ 0.83 0.25 -- 0.27 -- -- --
Return of capital ............................. -- -- -- 0.00(c) -- -- --
------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS .............................. 0.92 0.38 0.01 0.45 0.17 0.01 --
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ................... $ 13.90 $ 13.19 $ 10.62 $ 15.17 $ 13.74 $ 10.85 $ 10.39
------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (A) ................................. 12.70% 28.27% 6.28% 13.83% 28.41% 8.63% 3.90%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ...... $269,728 $160,980 $114,553 $131,458 $26,359 $20,186 $105,754
Ratios to average net assets:
Net investment income* ..................... 0.90% 0.92% 1.21% 1.14% 1.35% 1.57% 1.14%
Expenses* .................................. 0.38% 0.41% 0.42% 0.15% 0.15% 0.15% 0.47%
Portfolio turnover rate .................... 48% 45% 29% 44% 7% 1% 26%
</TABLE>
----------------
See Notes to Financial Highlights and Notes to Financial Statements.
64
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
MID-CAP
MID-CAP VALUE SMALL-CAP INTERNATIONAL
GROWTH EQUITY VALUE EQUITY EQUITY
FUND FUND FUND FUND
9/30/00 9/30/99 9/30/98 9/30/00 9/30/99 9/30/00 9/30/99 9/30/98 9/30/00 9/30/99 9/30/98
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-- -- 11/25/97 -- 12/31/98 -- -- 8/3/98 -- -- 11/25/97
$ 10.16 $ 8.87 $ 10.00 $ 9.91 $ 10.00 $ 10.12 $ 8.91 $10.00 $ 12.49 $ 10.06 $ 10.00
0.10 0.05 0.04 0.10 0.08 0.03 0.01 0.02 0.13 0.09 0.14(b)
3.34 1.29 (1.16) 0.92 (0.17) 2.80 1.23 (1.11) 1.33 2.81 (0.07)(b)
------------------------------------------------------------------------------------------------------------------------------------
3.44 1.34 (1.12) 1.02 (0.09) 2.83 1.24 (1.09) 1.46 2.90 0.07
------------------------------------------------------------------------------------------------------------------------------------
0.06 0.05 0.01 0.11 -- 0.02 0.03 -- 0.08 0.12 0.01
-- -- -- -- -- 0.30 -- -- 0.41 0.35 --
-- -- -- -- -- -- -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
0.06 0.05 0.01 0.11 -- 0.32 0.03 -- 0.49 0.47 0.01
------------------------------------------------------------------------------------------------------------------------------------
$ 13.54 $ 10.16 $ 8.87 $ 10.82 $ 9.91 $ 12.63 $ 10.12 $ 8.91 $ 13.46 $ 12.49 $ 10.06
------------------------------------------------------------------------------------------------------------------------------------
33.97% 15.19% (11.25%) 10.36% (0.90%) 28.51% 13.98% (10.90%) 11.62% 29.50% 0.66%
$21,420 $15,313 $13,208 $13,235 $10,182 $19,103 $10,287 $9,056 $394,852 $197,974 $114,414
0.84% 0.53% 0.53% 1.05% 1.00% 0.30% 0.13% 1.68% 1.16% 0.99% 1.72%
0.55% 0.55% 0.55% 0.65% 0.65% 0.70% 0.70% 0.70% 0.58% 0.62% 0.64%
48% 52% 14% 39% 18% 231% 216% 19% 59% 50% 53%
</TABLE>
----------------
See Notes to Financial Highlights and Notes to Financial Statements.
65
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
SELECTED DATA BASED ON A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
--------------------------------------------------------------------------------------------------------------------------------
PREMIER
EUROPE EMERGING GROWTH
EQUITY MARKETS EQUITY
FUND FUND FUND
9/30/00 9/30/99 9/30/00 9/30/99 9/30/98 9/30/00
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCEPTION DATE ....................................... -- 1/29/99 -- -- 11/25/97 10/29/99
Net asset value, beginning of period ................. $ 9.97 $ 10.00 $ 11.47 $ 6.78 $10.00 $ 10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss) ...................... 0.12 0.11 (0.02) 0.01 0.07 0.03
Net realized and unrealized gains (losses)
on investments ................................. 2.84 (0.14) 1.91 4.70 (3.26) 1.43
--------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS ....... 2.96 (0.03) 1.89 4.71 (3.19) 1.46
--------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ............................. 0.10 -- 0.01 0.01 0.03 0.01
Net realized gains ................................ -- -- -- -- -- --
Return of capital ................................. -- -- -- 0.01 -- --
--------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS .................................. 0.10 -- 0.01 0.02 0.03 0.01
--------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ....................... $ 12.83 $ 9.97 $ 13.35 $11.47 $ 6.78 $ 11.45
--------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (A) ..................................... 29.76% (0.30%) 16.56% 69.62% (31.96%) 14.62%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) .......... $13,324 $10,080 $11,989 $8,592 $5,063 $47,926
Ratios to average net assets:
Net investment income (loss)* .................. 0.88% 1.78% (0.14%) 0.12% 0.82% 0.29%
Expenses* ...................................... 0.75% 0.75% 1.05% 1.05% 1.05% 0.52%
Portfolio turnover rate ........................ 74% 49% 58% 79% 77% 18%
</TABLE>
----------------
See Notes to Financial Highlights and Notes to Financial Statements.
66
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
PREMIER PREMIER
RESEARCH INTERNATIONAL STRATEGIC MONEY
EQUITY EQUITY INCOME INVESTMENT MARKET
FUND FUND FUND FUND FUND
9/30/00 9/30/00 9/30/00 9/30/99 9/30/98 9/30/00 9/30/00 9/30/99 9/30/98
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
4/28/00 4/28/00 -- -- 11/21/97 10/29/99 -- -- 12/2/97
$ 10.00 $10.00 $ 9.57 $ 10.39 $ 10.00 $10.00 $ 1.00 $ 1.00 $ 1.00
0.03 0.07 0.62 0.55 0.51 0.25 0.06 0.05 0.04
(0.11) (1.38) (0.02)(b) (0.62) 0.39 0.77 -- -- --
------------------------------------------------------------------------------------------------------------------------------
(0.08) (1.31) 0.60 (0.07) 0.90 1.02 0.06 0.05 0.04
------------------------------------------------------------------------------------------------------------------------------
-- -- 0.62 0.57 0.51 0.05 0.06 0.05 0.04
-- -- -- 0.18 -- -- -- -- --
-- -- -- -- -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------
-- -- 0.62 0.75 0.51 0.05 0.06 0.05 0.04
------------------------------------------------------------------------------------------------------------------------------
$ .92 $ 8.69 $ 9.55 $ 9.57 $ 10.39 $10.97 $ 1.00 $ 1.00 $ 1.00
------------------------------------------------------------------------------------------------------------------------------
(0.80%) (13.10%) 6.61% (0.72%) 9.21% 10.24% 6.02% 4.92% 4.53%
$9,931 $8,712 $210,540 $95,381 $71,444 $7,644 $6,793 $5,736 $7,012
0.65% 1.74% 6.65% 5.80% 5.81% 2.56% 5.95% 4.81% 5.33%
0.55% 0.75% 0.26% 0.30% 0.31% 0.45% 0.25% 0.25% 0.25%
25% 29% 234% 227% 323% 65% N/A N/A N/A
<FN>
---------------
NOTES TO FINANCIAL HIGHLIGHTS
(a) Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains
distributions. 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.
(c) Less than $0.01 per share.
* Annualized for periods less than one year.
</FN>
</TABLE>
----------------
See Notes to Financial Statements.
67
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
------------------------------------------------------------------------------------------------------------------------------
U.S. S&P 500
EQUITY INDEX
FUND FUND
------------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Investments in securities, at market (cost
$237,413,920; $124,244,893; $101,025,185;
$16,263,664; $10,282,554; $16,273,812; and
$392,421,628, respectively) ......................................... $260,846,349 $128,846,894
Short-term investments (at amortized cost) ............................. 9,226,776 2,552,057
Cash ................................................................... 2,011 --
Foreign currency (cost $0; $0; $695; $0; $0; $0
and $1,483,108, respectively) ....................................... -- --
Receivable for investments sold ........................................ 1,243,339 1,872
Income receivables ..................................................... 219,399 120,666
Receivable for fund shares sold ........................................ 4,363 --
------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS ........................................................ 271,542,237 131,521,489
------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Due to custodian ....................................................... -- --
Options written, at market* ............................................ -- --
Payable for investments purchased ...................................... 1,203,191 --
Payable for fund shares redeemed ....................................... 502,147 --
Payable to GEAM ........................................................ 75,133 24,576
Variation margin payable ............................................... 33,450 39,025
------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ................................................... 1,813,921 63,601
------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ................................................................ $269,728,316 $131,457,888
------------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital paid in ........................................................ $227,060,908 $116,857,246
Undistributed (overdistributed) net investment income .................. 1,792,382 955,115
Accumulated net realized gain (loss) ................................... 17,554,336 9,165,939
Net unrealized appreciation (depreciation) on:
Investments ......................................................... 23,432,429 4,602,001
Futures ............................................................. (111,609) (122,413)
Written options ..................................................... -- --
Foreign currency related transactions ............................... (130) --
------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ................................................................ $269,728,316 $131,457,888
------------------------------------------------------------------------------------------------------------------------------
Shares outstanding ($.001 par value) ...................................... 19,406,749 8,667,889
Net asset value, offering and redemption price per share .................. $13.90 $15.17
<FN>
*Premiums received for the Small-Cap Value Equity Fund were $6,272 (see Note 7).
</FN>
</TABLE>
68
-------------
See Notes to Financial statements.
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
VALUE MID-CAP MID-CAP SMALL-CAP INTERNATIONAL
EQUITY GROWTH VALUE EQUITY VALUE EQUITY EQUITY
FUND FUND FUND FUND FUND
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$101,498,636 $19,589,466 $10,746,757 $18,182,608 $376,161,089
4,276,361 2,587,657 2,471,250 1,983,167 16,213,862
-- -- -- -- 30,738
652 -- -- -- 1,482,996
75,041 398,853 -- 251,196 4,268,820
103,386 32,354 24,020 21,476 935,720
2,041 -- -- -- 2,371,894
-------------------------------------------------------------------------------------------------------------------------
105,956,117 22,608,330 13,242,027 20,438,447 401,465,119
-------------------------------------------------------------------------------------------------------------------------
191 -- -- -- --
-- -- -- 5,400 --
142,033 1,179,773 -- 1,319,610 6,389,333
-- -- -- -- 30,738
37,509 8,783 7,066 10,879 193,066
22,300 -- -- -- --
-------------------------------------------------------------------------------------------------------------------------
202,033 1,188,556 7,066 1,335,889 6,613,137
-------------------------------------------------------------------------------------------------------------------------
$105,754,084 $21,419,774 $13,234,961 $19,102,558 $394,851,982
-------------------------------------------------------------------------------------------------------------------------
$105,176,684 $16,148,519 $12,426,500 $15,734,194 $372,271,785
384,367 136,602 78,836 35,365 2,897,251
(233,947) 1,808,851 265,422 1,423,331 35,984,686
473,451 3,325,802 464,203 1,908,796 (16,260,539)
(46,400) -- -- -- --
-- -- -- 872 --
(71) -- -- -- (41,201)
-------------------------------------------------------------------------------------------------------------------------
$105,754,084 $21,419,774 $13,234,961 $19,102,558 $394,851,982
-------------------------------------------------------------------------------------------------------------------------
10,178,164 1,581,530 1,223,722 1,512,192 29,332,601
$10.39 $13.54 $10.82 $12.63 $13.46
</TABLE>
69
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
-------------------------------------------------------------------------------------------------------------------------------
EUROPE EMERGING
EQUITY MARKETS
FUND FUND
-------------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Investments in securities, at market (cost
$13,294,011; $10,139,129; $45,926,912;
$9,932,202; $9,466,588; $221,919,252;
$7,011,580; and $0, respectively) ................................... $13,048,876 $11,234,606
Short-term investments (at amortized cost) ............................. 370,729 638,222
Cash ................................................................... -- --
Foreign currency (cost $141,361; $94,198;
$0; $0; $43,426; $0; $10,056; and $0, respectively) ................. 141,759 93,548
Receivable for investments sold ........................................ 43,043 100,907
Income receivables ..................................................... 36,383 8,536
-------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS ........................................................ 13,640,790 12,075,819
-------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Distributions payable to shareholders .................................. -- --
Payable on forward foreign currency contracts .......................... -- --
Payable upon return of securities loaned ............................... -- --
Payable for investments purchased ...................................... 308,623 75,576
Payable for fund shares redeemed ....................................... -- --
Payable to GEAM ........................................................ 8,362 10,981
Variation margin payable ............................................... -- --
Payable to Custodian ................................................... -- --
-------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ................................................... 316,985 86,557
-------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ................................................................ $13,323,805 $11,989,262
-------------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital paid in ........................................................ $10,486,254 $9,493,091
Undistributed (overdistributed) net investment income .................. 70,225 4,747
Accumulated net realized gain (loss) ................................... 3,016,287 1,396,616
Net unrealized appreciation (depreciation) on:
Investments ......................................................... (245,135) 1,095,477
Futures ............................................................. -- --
Foreign currency related transactions ............................... (3,826) (669)
-------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ................................................................ $13,323,805 $11,989,262
-------------------------------------------------------------------------------------------------------------------------------
Shares outstanding ($.001 par value) ...................................... 1,038,665 897,788
Net asset value, offering and redemption price per share .................. $12.83 $13.35
</TABLE>
------------
See Notes to Financial statements.
70
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
PREMIER PREMIER PREMIER
GROWTH RESEARCH INTERNATIONAL STRATEGIC MONEY
EQUITY EQUITY EQUITY INCOME INVESTMENT MARKET
FUND FUND FUND FUND FUND FUND
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$45,582,103 $9,738,201 $8,571,796 $222,661,963 $7,344,080 $ --
2,338,988 160,910 82,174 47,363,212 240,920 6,772,631
-- -- -- -- -- 6,118
-- -- 43,131 -- 10,051 --
-- 303,319 -- 7,528,984 4,215 --
29,758 7,337 20,499 2,664,929 49,250 21,567
-------------------------------------------------------------------------------------------------------------------------------
47,950,849 10,209,767 8,717,600 280,219,088 7,648,516 6,800,316
-------------------------------------------------------------------------------------------------------------------------------
-- -- -- 214,000 -- 5,393
-- -- -- -- -- --
-- -- -- 31,826,992 -- --
-- 274,483 -- 30,802,040 1,565 --
-- -- -- 90,000 -- --
19,435 4,644 5,504 38,323 2,897 1,426
5,575 -- -- -- -- --
-- -- -- 6,707,695 -- --
-------------------------------------------------------------------------------------------------------------------------------
25,010 279,127 5,504 69,679,050 4,462 6,819
-------------------------------------------------------------------------------------------------------------------------------
$47,925,839 $9,930,640 $8,712,096 $210,540,038 $7,644,054 $6,793,497
-------------------------------------------------------------------------------------------------------------------------------
47,064,078 $10,010,062 $10,030,173 $212,446,569 $6,922,460 $6,793,529
67,354 27,498 122,160 237,386 142,218 39
1,153,291 87,081 (545,057) (2,886,628) 246,919 (71)
(344,809) (194,001) (894,792) 742,711 332,500 --
(14,075) -- -- -- -- --
-- -- (388) -- (43) --
-------------------------------------------------------------------------------------------------------------------------------
$47,925,839 $9,930,640 $8,712,096 $210,540,038 $7,644,054 $6,793,497
-------------------------------------------------------------------------------------------------------------------------------
4,184,303 1,001,117 1,002,933 22,048,258 696,767 6,793,529
$11.45 $9.92 $8.69 $9.55 $10.97 $1.00
</TABLE>
71
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED SEPTEMBER 30, 2000
------------------------------------------------------------------------------------------------------------------------------
U.S. S&P 500
EQUITY INDEX
FUND FUND
------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
<S> <C> <C>
Dividends ........................................................... $ 2,877,391 $1,024,077
Interest ............................................................ 396,867 162,684
Less: Foreign taxes withheld ........................................ (13,280) (6,484)
------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ........................................................... 3,260,978 1,180,277
------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administration fees .................................... 967,707 137,467
Trustees' fees ...................................................... 6,239 900
------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES ......................................................... 973,946 138,367
------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME .................................................. 2,287,032 1,041,910
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ................................................... 19,950,600 9,057,580
Futures ....................................................... 256,618 119,976
Written options ............................................... -- --
Foreign currency related
transactions ............................................... 298 --
INCREASE (DECREASE) IN UNREALIZED
APPRECIATION/DEPRECIATION ON:
Investments ................................................... 2,391,758 (1,366,846)
Futures ....................................................... (73,046) (94,913)
Written options ............................................... -- --
Foreign currency related transactions ......................... (125) --
------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments ................. 22,526,103 7,715,797
------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ........................................... $24,813,135 $8,757,707
------------------------------------------------------------------------------------------------------------------------------
<FN>
* For the period February 2, 2000 (inception) through September 30, 2000.
</FN>
</TABLE>
-------------
See Notes to Financial statements.
72
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
VALUE MID-CAP MID-CAP SMALL-CAP INTERNATIONAL
EQUITY GROWTH VALUE EQUITY VALUE EQUITY EQUITY
FUND* FUND FUND FUND FUND
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$422,628 $ 107,397 $ 153,901 $ 109,323 $ 5,905,625
121,572 166,089 32,624 44,349 843,539
(2,524) (796) (579) -- (836,611)
-------------------------------------------------------------------------------------------------------------------------------
541,676 272,690 185,946 153,672 5,912,553
-------------------------------------------------------------------------------------------------------------------------------
157,866 107,862 70,917 106,940 1,963,052
106 524 342 346 7,021
-------------------------------------------------------------------------------------------------------------------------------
157,972 108,386 71,259 107,286 1,970,073
-------------------------------------------------------------------------------------------------------------------------------
383,704 164,304 114,687 46,386 3,942,480
(99,322) 2,188,637 370,386 1,643,553 37,656,177
(134,625) 87,870 -- -- --
-- -- -- 103,142 --
663 -- -- -- (752,714)
473,451 2,936,777 568,673 1,617,301 (27,753,394)
(46,400) 14,151 -- -- --
-- -- -- 872 --
(71) -- -- -- (47,442)
-------------------------------------------------------------------------------------------------------------------------------
193,696 5,227,435 939,059 3,364,868 9,102,627
-------------------------------------------------------------------------------------------------------------------------------
$577,400 $5,391,739 $1,053,746 $3,411,254 $13,045,107
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
73
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED SEPTEMBER 30, 2000
------------------------------------------------------------------------------------------------------------------------------
EUROPE EMERGING
EQUITY MARKETS
FUND FUND
------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
<S> <C> <C>
Dividends ........................................................... $233,062 $98,636
Interest*** ......................................................... 23,835 26,461
Less: Foreign taxes withheld ........................................ (35,266) (10,224)
------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ........................................................... 221,631 114,873
------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administration fees .................................... 101,813 132,909
Trustees' fees ...................................................... 343 308
------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES ......................................................... 102,156 133,217
------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) ........................................... 119,475 (18,344)
------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ................................................... 3,079,680 2,047,708
Futures ....................................................... -- --
Written options ............................................... -- 1,404
Foreign currency related
transactions ............................................... (21,152) (16,659)
Swaps ......................................................... -- --
INCREASE (DECREASE) IN UNREALIZED
APPRECIATION/DEPRECIATION ON:
Investments ................................................... (205,235) (695,472)
Futures ....................................................... -- --
Foreign currency related transactions ......................... (4,695) 1,634
------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments ................. 2,848,598 1,338,615
------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ........................................... $2,968,073 $1,320,271
------------------------------------------------------------------------------------------------------------------------------
<FN>
* For the period October 29, 1999 (inception) through September 30, 2000.
** For the period April 28, 2000 (inception) through September 30, 2000.
*** Income attributable to security lending activity, net of rebate expenses, for the GE Institutional Income
Fund was $50,695.
</FN>
</TABLE>
--------------
See Notes to Financial statements.
74
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
PREMIER PREMIER PREMIER
GROWTH RESEARCH INTERNATIONAL STRATEGIC MONEY
EQUITY EQUITY EQUITY INCOME INVESTMENT MARKET
FUND* FUND** FUND** FUND FUND* FUND
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 102,069 $ 39,123 $ 86,751 $ 49,130 $ 41,649 $ --
89,199 11,880 23,799 10,579,483 177,413 267,448
(372) (19) (9,300) -- (2,181) --
-------------------------------------------------------------------------------------------------------------------------------
190,896 50,984 101,250 10,628,613 216,881 267,448
-------------------------------------------------------------------------------------------------------------------------------
122,701 23,414 30,504 395,242 32,446 10,784
293 72 72 3,336 197 173
-------------------------------------------------------------------------------------------------------------------------------
122,994 23,486 30,576 398,578 32,643 10,957
-------------------------------------------------------------------------------------------------------------------------------
67,902 27,498 70,674 10,230,035 184,238 256,491
-------------------------------------------------------------------------------------------------------------------------------
1,238,801 87,081 (545,057) (1,893,218) 246,919 (44)
(75,058) -- -- (49,693) -- --
-- -- -- 1,770 -- --
-- -- 51,486 -- 2,980 --
-- -- -- 105,016 -- --
(344,809) (194,001) (894,792) 3,239,890 332,500 --
(14,075) -- -- -- -- --
-- -- (388) -- (43) --
-------------------------------------------------------------------------------------------------------------------------------
804,859 (106,920) (1,388,751) 1,403,765 582,356 (44)
-------------------------------------------------------------------------------------------------------------------------------
$ 872,761 $ (79,422) $(1,318,077) $11,633,800 $766,594 $256,447
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
75
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
---------------------------------------------------------------------------------------------------------------------------------
U.S. S&P 500 VALUE
EQUITY INDEX EQUITY
FUND FUND FUND
---------------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
9/30/00 9/30/99 9/30/00 9/30/99 9/30/00(A)
---------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
<S> <C> <C> <C> <C> <C>
Net investment income .......................$ 2,287,032 $ 1,339,135 $ 1,041,910 $ 344,103 $ 383,704
Net realized gain (loss) on investments,
futures, written options, swaps and
foreign currency related transactions ..... 20,207,516 11,323,757 9,177,556 603,902 (233,284)
Net increase (decrease) in unrealized
appreciation/ depreciation on investments,
futures, written options, swaps and foreign
currency related transactions ............. 2,318,587 19,711,100 (1,461,759) 4,751,833 426,980
---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations ..... 24,813,135 32,373,992 8,757,707 5,699,838 577,400
---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ....................... (1,547,799) (1,388,813) (357,000) (320,568) --
Net realized gains .......................... (13,714,925) (2,679,706) (534,955) -- --
---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ........................... (15,262,724) (4,068,519) (891,955) (320,568) --
---------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
operations and distributions ................ 9,550,411 28,305,473 7,865,752 5,379,270 577,400
---------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares ................ 117,265,348 22,447,898 114,698,208 500,000 182,932,294
Value of distributions reinvested ........... 15,262,919 4,068,514 891,957 320,568 --
Cost of shares redeemed ..................... (33,330,182) (8,394,578) (18,357,443) (26,849) (77,755,610)
---------------------------------------------------------------------------------------------------------------------------------
Net increase(decrease)from share
transactions ............................. 99,198,085 18,121,834 97,232,722 793,719 105,176,684
---------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ....... 108,748,496 46,427,307 105,098,474 6,172,989 105,754,084
NET ASSETS
Beginning of period ........................... 160,979,820 114,552,513 26,359,414 20,186,425 --
---------------------------------------------------------------------------------------------------------------------------------
End of period .................................$269,728,316 $160,979,820 $131,457,888 $26,359,414 $105,754,084
---------------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED (OVERDISTRIBUTED) NET
INVESTMENT INCOME, END OF PERIOD ..............$ 1,792,084 $ 1,052,851 $ 955,115 $ 270,205 $ 383,704
---------------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES:
Shares sold by subscription ................. 8,542,701 1,718,638 7,875,834 34,868 17,406,398
Issued for distributions reinvested ......... 1,143,290 349,529 60,884 26,105 --
Shares redeemed ............................. (2,483,971) (650,568) (1,187,590) (1,902) (7,228,235)
---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares ........... 7,202,020 1,417,599 6,749,128 59,071 10,178,163
---------------------------------------------------------------------------------------------------------------------------------
<FN>
(a) For the period February 2, 2000 (inception) through September 30, 2000.
(b) For the period December 31, 1998 (inception) through September 30, 1999.
</FN>
</TABLE>
-------------
See Notes to Financial statements.
76
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
MID-CAP
MID-CAP VALUE SMALL-CAP INTERNATIONAL
GROWTH EQUITY VALUE EQUITY EQUITY
FUND FUND FUND FUND
------------------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR PERIOD YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
9/30/00 9/30/99 9/30/00 9/30/99(B) 9/30/00 9/30/99 9/30/00 9/30/99
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 164,304 $ 82,290 $ 114,687 $ 79,149 $ 46,386 $ 12,735 $ 3,942,480 $ 1,468,999
2,276,507 157,720 370,386 (104,964) 1,746,695 196,098 36,903,463 5,581,781
2,950,928 1,764,331 568,673 (104,470) 1,618,173 1,051,365 (27,800,836) 26,399,950
------------------------------------------------------------------------------------------------------------------------------------
5,391,739 2,004,341 1,053,746 (130,285) 3,411,254 1,260,198 13,045,107 33,450,730
(93,000) (80,475) (115,000) -- (22,210) (33,674) (1,398,016) (1,386,768)
-- -- -- -- (303,654) -- (7,534,112) (4,011,536)
------------------------------------------------------------------------------------------------------------------------------------
(93,000) (80,475) (115,000) -- (325,864) (33,674) (8,932,128) (5,398,304)
------------------------------------------------------------------------------------------------------------------------------------
5,298,739 1,923,866 938,746 (130,285) 3,085,390 1,226,524 4,112,979 28,052,426
726,189 100,002 1,999,322 33,107,697 54,823,199 20,948,085 251,912,186 63,250,137
93,000 80,475 115,003 -- 325,869 33,670 8,932,087 5,398,304
(10,995) -- (24) (22,795,498) (49,418,824) (20,977,821) (68,079,449) (13,140,485)
------------------------------------------------------------------------------------------------------------------------------------
808,194 180,477 2,114,301 10,312,199 5,730,244 3,934 192,764,824 55,507,956
6,106,933 2,104,343 3,053,047 10,181,914 8,815,634 1,230,458 196,877,803 83,560,382
15,312,841 13,208,498 10,181,914 -- 10,286,924 9,056,466 197,974,179 114,413,797
------------------------------------------------------------------------------------------------------------------------------------
$21,419,774 $15,312,841 $13,234,961 $10,181,914 $19,102,558 $10,286,924 $394,851,982 $197,974,179
------------------------------------------------------------------------------------------------------------------------------------
$ 130,397 $ 59,093 $ 78,836 $ 79,149 $ 35,641 $ 11,465 $ 3,638,817 $ 1,094,353
------------------------------------------------------------------------------------------------------------------------------------
67,441 8,795 184,995 3,042,924 4,620,024 2,029,729 17,563,538 5,068,474
8,201 8,427 11,079 -- 30,173 3,609 655,807 489,869
(818) -- (2) (2,015,274) (4,154,705) (2,032,645) (4,741,517) (1,081,713)
------------------------------------------------------------------------------------------------------------------------------------
74,824 17,222 196,072 1,027,650 495,492 693 13,477,828 4,476,630
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
77
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
---------------------------------------------------------------------------------------------------------------------------------
EUROPE EMERGING PREMIER
EQUITY MARKETS GROWTH EQUITY
FUND FUND FUND
---------------------------------------------------------------------------------------------------------------------------------
YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
9/30/00 9/30/99(B) 9/30/00 9/30/99 9/30/00(A)
---------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
<S> <C> <C> <C> <C> <C>
Net investment income (loss) ............... $ 119,475 $ 116,193 $ (18,344) $ 8,272 $ 67,902
Net realized gain (loss) on investments,
futures, written options, swaps and
foreign currency related transactions .... 3,058,528 (107,528) 2,032,453 (570,834) 1,163,743
Net increase (decrease) in unrealized
appreciation/depreciation on investments,
futures, written options, swaps and
foreign currency related transactions .... (209,930) (39,031) (693,838) 4,091,375 (358,884)
---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations .... 2,968,073 (30,366) 1,320,271 3,528,813 872,761
---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ...................... (100,156) -- (8,580) (8,870) (11,000)
Return of capital .......................... -- -- -- (6,199) --
Net realized gains ......................... -- -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS .......................... (100,156) -- (8,580) (15,069) (11,000)
---------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
operations and distributions ............... 2,867,917 (30,366) 1,311,691 3,513,744 861,761
---------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares ............... 81,861,663 20,540,050 2,224,602 -- 50,595,324
Value of distributions reinvested .......... 100,156 -- 8,578 15,068 11,119
Cost of shares redeemed (81,585,615) (10,430,000) (147,757) -- (3,542,365)
---------------------------------------------------------------------------------------------------------------------------------
Net increase(decrease) from share
transactions ............................. 376,204 10,110,050 2,085,423 15,068 47,064,078
---------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ...... 3,244,121 10,079,684 3,397,114 3,528,812 47,925,839
NET ASSETS
Beginning of period .......................... 10,079,684 -- 8,592,148 5,063,336 --
---------------------------------------------------------------------------------------------------------------------------------
End of period ................................ $13,323,805 $10,079,684 $11,989,262 $8,592,148 $47,925,839
---------------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED (OVERDISTRIBUTED) NET
INVESTMENT INCOME, END OF PERIOD ............. $ 91,377 $ 72,058 $ (41,080) $ (14,156) $ 56,902
---------------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES:
Shares sold by subscription ................ 6,140,706 2,010,552 156,438 -- 4,491,528
Issued for distributions reinvested ........ 8,466 -- 583 1,957 1,027
Shares redeemed ............................ (6,121,059) (1,000,000) (8,237) -- (308,252)
---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares .......... 28,113 1,010,552 148,784 1,957 4,184,303
---------------------------------------------------------------------------------------------------------------------------------
<FN>
(a) For the period October 29, 1999 (inception) through September 30, 2000.
(b) For the period January 29, 1999 (inception) through September 30, 1999.
(c) For the period April 28, 2000 (inception) through September 30, 2000.
</FN>
</TABLE>
--------------
See Notes to Financial statements.
78
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
PREMIER PREMIER STRATEGIC MONEY
RESEARCH INTERNATIONAL INCOME INVESTMENT MARKET
EQUITY FUND EQUITY FUND FUND FUND FUND
---------------------------------------------------------------------------------------------------------------------------------
PERIOD PERIOD YEAR YEAR PERIOD YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
9/30/00(C) 9/30/00(C) 9/30/00 9/30/99 9/30/00(A) 9/30/00 9/30/99
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 27,498 $ 70,674 $ 10,230,035 $ 4,402,558 $ 184,238 $ 256,491 $ 332,821
87,081 (493,571) (1,836,125) (632,492) 249,899 (44) (27)
(194,001) (895,180) 3,239,890 (4,143,419) 332,457 -- --
---------------------------------------------------------------------------------------------------------------------------------
(79,422) (1,318,077) 11,633,800 (373,353) 766,594 256,447 332,794
-- -- (10,343,294) (4,410,028) (45,000) (256,450) (332,862)
-- -- -- -- -- -- --
-- -- -- (1,229,810) -- -- --
---------------------------------------------------------------------------------------------------------------------------------
-- -- (10,343,294) (5,639,838) (45,000) (256,450) (332,862)
---------------------------------------------------------------------------------------------------------------------------------
(79,422) (1,318,077) 1,290,506 (6,013,191) 721,594 (3) (68)
30,881,763 30,620,452 117,547,050 24,422,296 9,637,176 7,630,362 --
-- -- 10,193,539 5,608,108 44,996 250,362 332,504
(20,871,701) (20,590,279) (13,872,406) (80,000) (2,759,712) (6,823,301) (1,698,585)
---------------------------------------------------------------------------------------------------------------------------------
10,010,062 10,030,173 113,868,183 29,950,404 6,922,460 1,057,423 (1,366,081)
9,930,640 8,712,096 115,158,689 23,937,213 7,644,054 1,057,420 (1,366,149)
-- -- 95,381,349 71,444,136 -- 5,736,077 7,102,226
---------------------------------------------------------------------------------------------------------------------------------
$9,930,640 $ 8,712,096 $210,540,038 $95,381,349 $ 7,644,054 $ 6,793,497 $5,736,077
---------------------------------------------------------------------------------------------------------------------------------
$ 27,498 $ 70,674 $ (19,301) $ (11,058) $ 139,238 $ 39 $ (2)
---------------------------------------------------------------------------------------------------------------------------------
3,001,279 3,002,960 12,470,867 2,536,572 952,075 7,630,362 --
-- -- 1,080,804 565,769 4,373 250,362 332,504
(2,000,162) (2,000,027) (1,474,611) (8,359) (259,681) (6,823,301) (1,698,585)
---------------------------------------------------------------------------------------------------------------------------------
1,001,117 (1,002,933) 12,077,060 3,093,982 696,767 1,057,423 (1,366,081)
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
79
<PAGE>
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
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 seventeen investment funds (each a "Fund" and collectively the
"Funds") although only the following fifteen are currently being offered: U.S.
Equity Fund, S&P 500 Index Fund, Value Equity Fund, Mid-Cap Growth Fund, Mid-Cap
Value Equity Fund, Small-Cap Value Equity Fund, International Equity Fund,
Europe Equity Fund, Emerging Markets Fund, Premier Growth Equity Fund, Premier
Research Equity Fund, Premier International Equity Fund, Income Fund, Strategic
Investment 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 September 30, 2000, 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 (minimum initial
investment requirements are described in the current prospectus of the Funds).
GE Investment Management Incorporated, the Funds' investment advisor and a
wholly owned subsidiary of General Electric Company, changed its name to GE
Asset Management Incorporated ("GEAM") effective January 28, 2000.
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 at
the date of the financial statements. Actual results may differ from those
estimates.
The following summarizes the significant accounting policies of the Trust:
SECURITY VALUATION AND TRANSACTIONS
Securities for which exchange (or NASDAQ) 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 matrix system, which considers market transactions
as well as dealer supplied valuations. 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 that cannot be valued as set
forth above are valued at fair value determined in good faith 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
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.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax 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 102% of the repurchase price. In the event the
seller defaults and the value of the security declines, or if the seller enters
an insolvency proceeding, realization of the collateral by the Funds may be
delayed or limited.
SECURITY LENDING
Each of the Funds may loan securities to brokers, dealers, and financial
institutions determined by GEAM to be creditworthy, subject to certain
limitations. The Funds continue to earn interest and dividends on the loaned
securities during the term of the loan. The loans of securities are secured by
collateral in the form of cash or other liquid assets, which are segregated and
maintained with the custodian in an amount at least equal to 102% of the current
market value of the loaned securities. During the term of the loan, the Funds
will receive any gain or loss in the market value of its loaned securities and
of securities in which cash collateral is invested net of any rebate. In the
event the counterparty (borrower) does not meet its contracted obligation to
return the securities, the Funds 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.
80
<PAGE>
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
FOREIGN CURRENCY
Accounting records of the Funds are maintained in U.S. dollars. Investment
securities and other assets and liabilities denominated in foreign currency are
translated into U.S. dollars at the prevailing rates of exchange at period end.
Purchases and sales of securities, income receipts and expense payments
denominated in foreign currencies are translated into U.S. dollars at the
prevailing exchange rate on the respective dates of the transactions.
The Funds do not isolate the portion of the results of operations resulting from
changes in foreign exchange rates from the fluctuations arising from changes in
market prices of securities during the period. Such fluctuations are included in
net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received and paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. 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.
FUTURES CONTRACTS
Certain Funds may invest in interest rate, financial and stock or bond index
futures contracts subject to certain limitations. The Funds may invest in
futures contracts to manage their exposure to the stock and bond markets and
fluctuations in currency values. Buying futures tends to increase a Fund's
exposure to the underlying instrument while selling futures tends 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 for speculative
purposes. The Fund's risks in using these contracts include changes in the value
of the underlying instruments, non-performance of the counterparties under the
contracts' terms and changes in the liquidity of the secondary market for the
contracts. Futures contracts are valued at the settlement price established each
day by the board of trade or exchange on which they principally trade.
Upon entering into a futures contract, the Funds are required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Funds each day, depending on
the daily fluctuation in the fair value of the underlying security. The Funds
record an unrealized gain or loss equal to the daily variation margin. Should
market conditions move unexpectedly, the Fund may not achieve the anticipated
benefits of the futures contracts and may incur a loss. The Funds recognize a
realized gain or loss on the expiration or closing of a futures contract.
OPTIONS
Certain Funds may purchase and write options, subject to certain limitations.
The Funds may invest in options contracts to manage their exposure to the stock
and bond markets and fluctuations in currency values. Writing puts and buying
calls tend to increase a Fund's exposure to the underlying instrument while
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 options for speculative purposes. The Fund's risks
in using these contracts include changes in the value of the underlying
instruments, non-performance of the counterparties under the contracts' terms
and changes in the liquidity of the secondary market for the contracts. Options
are valued at the last sale price, or if no sales occurred on that day, at the
last quoted bid price.
When a Fund writes an option, the amount of the premium received is recorded as
a liability and is subsequently adjusted to the current fair value of the option
written. Premiums received from writing options that expire unexercised are
treated by the Funds on the expiration date as realized gains from investments.
The difference between the premium and the amount paid on effecting a closing
purchase transaction, including brokerage commissions, is also treated as a
realized gain, or if the premium is less than the amount paid for the closing
purchase, as a realized loss. When an option is exercised, the proceeds from the
sale of the underlying security or the cost basis of the securities purchased is
adjusted by the original premium received or paid.
SWAP CONTRACTS
Certain Funds may invest in swap agreements. A swap agreement is an agreement to
exchange the return generated by one instrument for the return generated by
another instrument. The Funds may enter into total return swaps as part of their
investment strategies. Total return swap agreements involve commitments to pay
interest in exchange for a market linked return based upon a notional principal
amount. To the extent the total return of the security or index underlying the
agreement exceeds or
81
<PAGE>
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
falls short of the offsetting interest rate obligation, the Funds will receive a
payment from or make a payment to the counterparty. Payments received or made
are recorded as realized gain or loss in the Statement of Operations. Entering
into swap agreements involves, to varying degrees, elements of credit and market
risk in excess of the amounts recognized on the Statement of Assets and
Liabilities. Such risks involve the possibility that there will be no liquid
market for these agreements, that the counterparty to the agreements may default
on its obligation to perform and that there may be unfavorable changes in the
value of the index or securities underlying the agreement. Notional principal
amounts are used to express the extent of involvement in these transactions, but
the amounts potentially subject to credit risk are much smaller.
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 a month or more after entering
into the transaction. 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. Losses may arise due to changes in the market value
of the underlying securities or if the counterparty does not perform under the
contract. 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" for the transaction. Unsettled commitments are
valued at the 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.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Certain Funds may enter into forward foreign currency exchange contracts to
facilitate transactions in foreign denominated securities and to manage the
Fund's currency exposure. Forward foreign currency exchange contracts are valued
at the mean between the bid and the offered forward rates as last quoted by a
recognized dealer. The aggregate principal amounts of the contracts are not
recorded in the Fund's financial statements. Such amounts appear under the
caption forward foreign currency exchange contracts in the Schedule of
Investments. Fluctuations in the value of the contracts are recorded in the
Statement of Assets and Liabilities as an asset (or liability) and in the
Statement of Operations as unrealized appreciation (depreciation) until the
contracts are closed, when they are recorded as realized gains or losses on
foreign currency related transactions. The Fund's risks in using these contracts
include changes in the value of foreign currency or the possibility that the
counterparties do not perform under the contracts' terms. When a Fund enters
into a forward foreign currency exchange contract, it is required to segregate
cash or liquid securities with its custodian in an amount equal to the value of
the Fund's total assets committed to the consummation of the forward contract.
If the value of the segregated securities declines, additional cash or
securities are segregated so that the value of the account will equal the amount
of the Fund's commitment with respect to the contract.
INVESTMENTS IN FOREIGN MARKETS
Investing in foreign markets may involve special risks and considerations not
typically associated with investing in the United States. These risks include
revaluation of currencies, high rates of inflation, repatriation on income and
capital, and adverse political and economic developments. Moreover, securities
issued in these markets may be less liquid, subject to government ownership
controls, tariffs and taxes, subject to delays in settlements, and their prices
may be more volatile.
The Funds may be subject to capital gains and repatriation taxes imposed by
certain countries in which they invest. Such taxes are generally based on income
and/or capital gains earned or repatriated. Taxes are accrued based on net
investment income, net realized gains and net unrealized appreciation as income
and/or capital gains are earned. At September 30, 2000, the Emerging Markets
Fund has recorded a deferred tax accrual of $71,727 with respect to unrealized
appreciation on applicable investments in securities. This accrual is included
in net realized and unrealized gain (loss) on investments in the Statements of
Operations.
INCOME TAXES
The Funds intend to comply with all sections of the Internal Revenue Code
applicable to regulated investment companies including the distribution of
substantially all of their taxable net investment income and net realized
capital gains to their shareholders. Therefore, no provision for federal income
tax has been made. Each Fund is treated as a separate taxpayer for federal
income tax purposes.
As of September 30, 2000 the following Funds have capital loss carryovers as
indicated below. The capital loss carryover is available to offset future
realized capital gains to the extent provided in the Internal Revenue Code and
regulations thereunder. To the extent that these carryover losses are used to
offset future capital gains, it is probable that the gains so offset will not be
distributed to shareholders because they would be taxable as ordinary income.
82
<PAGE>
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
FUND AMOUNT EXPIRES
--------------------------------------------------------------------------------
Income Fund $1,120,061 2008
Money Market Fund 27 2008
The Mid-Cap Growth Fund and Emerging Markets Fund utilized $475,601 and
$375,590, respectively, of their capital loss carryover during the current year.
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 elected to defer
losses after October 31, 1999 as follows:
FUND CURRENCY CAPITAL
--------------------------------------------------------------------------------
Emerging Markets Fund $ 16,149 $ --
International Equity Fund 721,810 --
Money Market Fund -- 44
Europe Equity Fund 17,540 --
Value Equity Fund -- 108,615
Income Fund -- 1,727,930
Premier Growth Equity Fund -- 53,480
Premier International
Equity Fund -- 511,446
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
in excess of capital loss carryforwards 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 (but are not limited to) swaps, treatment of realized
and unrealized gains and losses on forward foreign currency exchange 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.
INVESTMENT INCOME
Corporate actions (including cash dividends) are recorded on ex-dividend date,
net of applicable withholding taxes, except for certain foreign corporate
actions which are recorded as soon after ex-dividend date as such information
becomes available. Interest income is recorded on the accrual basis. All
discounts and premiums on taxable bonds are 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, brokerage
fees and fees that are not normal operating expenses of the Funds (such as
extraordinary expenses, interest and taxes).
3. SECURITY LENDING
At September 30, 2000, the Income Fund, which is the only Fund that participated
in securities lending, had loaned securities having a value, including accrued
interest, of approximately $31,256,160 and received $31,826,992 in cash as
collateral for loans.
4. FEES AND COMPENSATION PAID TO AFFILIATES
ADVISORY AND ADMINISTRATION FEES
Compensation of GEAM 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%
Value Equity Fund Next $25 million .45%
Mid-Cap Growth Fund Over $50 million .35%
Premier Growth
Equity Fund
Premier Research
Equity Fund
----------------------------------------------------------------
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%
----------------------------------------------------------------
83
<PAGE>
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
BASED ON AVERAGE DAILY NET ASSETS
AVERAGE DAILY ADVISORY AND
NET ASSETS OF FUND ADMINISTRATION FEES*
---------------------------------------------------------------
International Equity First $25 million .75%
Fund Next $50 million .65%
Europe Equity Fund Over $75 million .55%
Premier International
Equity Fund
---------------------------------------------------------------
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%
---------------------------------------------------------------
Strategic Investment First $25 million .45%
Fund Next $25 million .40%
Over $50 million .35%
---------------------------------------------------------------
Money Market First $25 million .25%
Fund Next $25 million .20%
Next $50 million .15%
Over $100 million .10%
---------------------------------------------------------------
* FROM TIME TO TIME, GEAM MAY WAIVE OR REIMBURSE ADVISORY OR
ADMINISTRATIVE FEES PAID BY A FUND.
TRUSTEE COMPENSATION
The Funds pay no compensation to their Trustees who are officers or employees of
GEAM 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.
5. SUB-ADVISORY FEES
Pursuant to investment sub-advisory agreements with GEAM, State Street Global
Advisors ("SSgA"), a division of State Street Bank and Trust Company, is the
sub-adviser to the S&P 500 Index Fund; Palisade Capital Management, LLC
("Palisade") is the sub-adviser to the Small-Cap Value Equity Fund; NWQ
Investment Management Company ("NWQ") is the sub-adviser to the Mid-Cap Value
Equity Fund.
SSgA, Palisade 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 to buy, sell or hold a particular security, under the general
supervision of GEAM and the Board.
For their services, GEAM 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.
Effective October 1, 2000, GEAM, as Investment Adviser to the Mid-Cap Value
Equity Fund will assume day-to-day portfolio management responsibility from NWQ,
the current Sub-Adviser to the Mid-Cap Value Equity Fund.
6. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION
Aggregate gross unrealized appreciation/(depreciation) of investments for each
Fund at September 30, 2000, were as follows:
NET
GROSS GROSS UNREALIZED
UNREALIZED UNREALIZED APPRECIATION/
APPRECIATION DEPRECIATION (DEPRECIATION)
--------------------------------------------------------------
U.S. Equity Fund $43,178,741 $19,746,312 $23,432,429
S&P 500
Index Fund 19,436,273 14,834,272 4,602,001
Value Equity Fund 8,041,463 7,568,012 473,451
Mid-Cap
Growth Fund 4,733,538 1,407,736 3,325,802
Mid-Cap Value
Equity Fund 1,844,472 1,380,269 464,203
Small-Cap Value
Equity Fund 2,536,198 627,402 1,908,796
International
Equity Fund 28,114,864 44,375,403 (16,260,539)
Europe Equity Fund 1,507,082 1,752,217 (245,135)
Emerging Markets
Fund 2,345,673 1,250,196 1,095,477
Premier Growth
Equity Fund 4,076,702 4,421,511 (344,809)
Premier Research
Equity Fund 898,513 1,092,514 (194,001)
Premier International
Equity Fund 274,550 1,169,342 (894,792)
Income Fund 1,933,999 1,191,288 742,711
Strategic Investment
Fund 671,324 338,824 332,500
The aggregate cost of each Fund's investments was substantially the same for
book and federal income tax purposes at September 30, 2000.
84
<PAGE>
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
7. OPTIONS
During the period ended September 30, 2000, the following option contracts were
written:
SMALL-CAP VALUE EQUITY FUND
--------------------------------------------
NUMBER
OF CONTRACTS PREMIUM
--------------------------------------------------------------------------------
Balance as of September 30, 1999 -- $ --
Written 578 245,706
Closed and Expired (437) (192,503)
Exercised (105) (46,931)
--------------------------------------------------------------------------------
Balance as of September 30, 2000 36 $ 6,272
--------------------------------------------------------------------------------
8. INVESTMENT TRANSACTIONS
The cost of purchases and the proceeds from sales of investments, other than
short-term securities and options, for the period ended September 30, 2000, were
as follows:
PURCHASES SALES
--------------------------------------------------------------------------------
U.S. Equity Fund $199,692,633 $118,174,439
S&P 500 Index Fund 133,369,266 37,697,304
Value Equity Fund 114,756,711 13,632,203
Mid-Cap Growth Fund 9,301,662 8,157,239
Mid-Cap Value Equity Fund 4,040,581 4,200,606
Small-Cap Value
Equity Fund 39,272,253 34,097,257
International Equity Fund 362,348,990 191,400,641
Europe Equity Fund 9,869,976 9,525,257
Emerging Markets Fund 8,464,667 6,978,058
Premier Growth
Equity Fund 49,177,805 4,489,694
Premier Research
Equity Fund 12,310,348 2,465,228
Premier International
Equity Fund 12,743,336 2,731,691
Income Fund 463,069,828 350,720,759
Strategic Investment Fund 11,849,804 5,087,868
Open swap transactions held by the Funds consisted of the following as of
September 30, 2000:
INCOME FUND
NOTIONAL AMOUNT
Total Return Swap with Morgan
Stanley Capital Services Inc. on the
Lehman Brothers Asset Backed
Securities Index. Fund receives/
pays the positive/negative return
on the Index and pays one-month
LIBOR minus 35 basis points monthly,
expires January 31, 2001. $1,550,000
NOTIONAL AMOUNT
Total Return Swap with Morgan
Stanley Capital Services Inc. on the
investment grade portion of the
Lehman Brothers CMBS Index.
Fund receives/pays the positive/
negative return on the Index and
pays one-month LIBOR minus 35
basis points monthly, expires
June 29, 2001. $2,346,000
9. BENEFICIAL INTEREST
The number of shareholders each owning 5% or more of a Fund are listed below.
The total percentage of a Fund held by such shareholders, as well as the
percentage of a Fund held by certain directly and indirectly owned subsidiaries
of General Electric Company and their respective retirement plans ("GE
Affiliates"), at September 30, 2000 are:
5% OR GREATER
SHAREHOLDERS
------------------
% OF % OF FUND HELD
NUMBER FUND HELD BY GE AFFILIATES*
--------------------------------------------------------------------------------
U.S. Equity Fund 5 87% 60%
S&P 500 Index Fund 2 95% 95%
Value Equity Fund 9 93% 26%
Mid-Cap Growth Fund 3 97% 83%
Mid-Cap Value Equity Fund 2 100% 85%
Small-Cap Value Equity Fund 3 100% 89%
International Equity Fund 4 83% 56%
Europe Equity Fund 1 100% 100%
Emerging Markets Fund 4 98% 73%
Premier Growth Equity Fund 4 95% 43%
Premier Research
Equity Fund 1 100% 100%
Premier International
Equity Fund 1 100% 100%
Income Fund 6 89% 26%
Strategic Investment Fund 1 100% 100%
Money Market Fund 5 100% 84%
Investment activities of these shareholders could have a material impact on
these Funds.
* INCLUDED IN THE 5% OR GREATER SHAREHOLDERS PERCENTAGE.
85
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------
To the Shareholders and Trustees of GE Institutional Funds
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of each of the funds constituting GE
Institutional Funds (the "Trust") at September 30, 2000, and the results of
their operations, the changes in their net assets and the financial highlights
for the periods indicated, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at September 30, 2000 by correspondence with the custodian and
brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 17, 2000
86
<PAGE>
TAX INFORMATION, UNAUDITED
--------------------------------------------------------------------------------
For the ordinary income distribution paid during the year ended September 30,
2000, the total amount of qualified passive income received by the Europe Equity
Fund from sources within foreign countries and possessions of the United States
was 0.21275 per share. The total amount of taxes paid by the Fund to such
countries was 0.02494 per share.
During the year end September 30, 2000, the following Funds paid to shareholders
of record on December 6, 1999 the following long-term capital gain dividends:
FUND PER SHARE AMOUNT
--------------------------------------------------------------------------------
International Equity Fund $0.34205
S&P 500 Index Fund 0.21295
U.S. Equity Fund 0.75695
Small-Cap Value Fund 0.00027
Please consult a tax adviser if you have any questions about Federal or State
income tax laws or on how to prepare your tax returns. If you have specific
questions about your Fund account, please consult your investment representative
or call 1-800-242-0134.
87
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88
<PAGE>
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
PREMIER GROWTH EQUITY FUND
David B. Carlson
VALUE EQUITY FUND
Peter J. Hathaway
MID-CAP GROWTH FUND
Ralph E. Whitman, Jr.
MID-CAP VALUE EQUITY FUND
Ralph E. Whitman, Jr.
SMALL-CAP VALUE EQUITY FUND
Senior 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
STRATEGIC INVESTMENT FUND
David B. Carlson
Ralph R. Layman
Robert A. MacDougall
INCOME FUND
MONEY MARKET FUND
Team led by
Robert A. MacDougall
INVESTMENT ADVISER
AND ADMINISTRATOR
GE Asset Management Incorporated
TRUSTEES
Michael J. Cosgrove
John R. Costantino
Alan M. Lewis
William J. Lucas
Robert P. Quinn
SECRETARY
Matthew J. Simpson
TREASURER
Michael J. Tansley
ASSISTANT TREASURER
Michael M. D'Ambrosio
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
John J. Walker, EVP, CHIEF FINANCIAL 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, MARKETING
Don W. Torey, EVP, ALTERNATIVE INVESTMENTS
AND REAL ESTATE
<PAGE>
INVESTMENT ADVISER
GE ASSET MANAGEMENT INCORPORATED
3003 SUMMER STREET
STAMFORD, CT 06905
DISTRIBUTOR
GE INVESTMENT DISTRIBUTORS, INC.
MEMBER NASD AND SIPC
777 LONG RIDGE ROAD
STAMFORD, CT 06927
[GE LOGO OMITTED]
WE BRING GOOD THINGS TO LIFE.
