EXHIBIT 99(B)
ANNUAL REPORT
-------------------------
GE INSTITUTIONAL FUNDS
INTERNATIONAL EQUITY FUND
------------------------------------------------------------------------------
Like all mutual funds, the Fund's shares have not been approved or disapproved
by the Securities and Exchange Commission, nor has the Securities and Exchange
Commission passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
[GE LOGO OMITTED]
WE BRING GOOD THINGS TO LIFE.
<PAGE>
GE INSTITUTIONAL INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
UNDERSTANDING YOUR REPORT
--------------------------------------------------------------------------------
REVIEW OF PERFORMANCE AND SCHEDULE OF INVESTMENTS
Portfolio Managers' Q&A and Schedule
of Investments ...................................1
NOTES TO PERFORMANCE AND NOTES TO
SCHEDULES OF INVESTMENTS .........................6
FINANCIAL STATEMENTS
Financial Highlights..............................7
Statement of Assets and Liabilities,
Operations, and Changes in Net Assets ..........9
NOTES
Notes to Financial Statements....................11
REPORT OF INDEPENDENT ACCOUNTANTS.....................15
INVESTMENT TEAM........................INSIDE BACK COVER
This report has been prepared for shareholders and may be distributed to others
only if preceded or accompanied by a current prospectus.
<PAGE>
INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
Q&A
RALPH LAYMAN MANAGES THE INTERNATIONAL EQUITY INVESTMENT PROCESS AT GE
INVESTMENTS. TOTAL ASSETS UNDER HIS MANAGEMENT EXCEED $12 BILLION. HE LEADS A
TEAM OF PORTFOLIO MANAGERS FOR THE INTERNATIONAL EQUITY FUND. PRIOR TO JOINING
GE INVESTMENTS IN 1991, RALPH WAS EXECUTIVE VICE PRESIDENT, PARTNER AND
PORTFOLIO MANAGER OF INTERNATIONAL EQUITY OPERATIONS AT NORTHERN CAPITAL
MANAGEMENT. PREVIOUSLY, HE WAS A VICE PRESIDENT AND PORTFOLIO MANAGER AT
TEMPLETON INVESTMENT COUNSEL, INC. HE WAS INSTRUMENTAL IN FORMING TEMPLETON'S
EMERGING MARKETS FUND, THE FIRST LISTED EMERGING MARKETS EQUITY FUND IN THE U.S.
RALPH IS A TRUSTEE OF THE GE PENSION TRUST, AND GE'S EMPLOYEE SAVINGS PROGRAM,
AND SERVES ON THE GE INVESTMENTS' ASSET ALLOCATION COMMITTEE. HE IS A CHARTERED
FINANCIAL ANALYST, A CHARTER MEMBER OF THE INTERNATIONAL SOCIETY OF SECURITY
ANALYSTS AND A MEMBER OF THE NEW YORK SOCIETY OF SECURITY ANALYSTS. RALPH IS A
GRADUATE OF THE UNIVERSITY OF WISCONSIN WITH A B.S. IN ECONOMICS AND A M.S. IN
FINANCE.
Q. HOW DID THE INTERNATIONAL EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK FOR
THE ONE-YEAR PERIOD ENDED SEPTEMBER 30, 1999?
A. The International Equity Fund posted a return of 29.50% for the one-year
period ended September 30, 1999. For the same period the MSCI EAFE Index
rose 30.95%.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. At the start of the period in October 1998, the fund had a significantly
underweight position in Japan of 5.0% compared with the 20.4% weight in the
MSCI EAFE Index. With the Japanese index surging 77.4% during this period,
the underweighting has severely hindered performance. This was compensated
by good stock selection around the world, primarily in Europe. By September
our Japanese weighting had increased to 12.1% as we found more companies
restructuring as the year progressed, meeting our investment criteria of
cash earnings growth exceeding the price to cash earnings.
Top performance contributors were telecoms equipment manufacturer, Nokia of
Finland, cellular telecoms operator, Mannesmann of Germany, the Taiwanese
semiconductor manufacturer Taiwan Semiconductor, and the British
engineering company Invensys.
Q. WHAT CHANGES HAVE YOU MADE IN THE FUND RECENTLY BASED ON CURRENT MARKET
EVENTS?
A. During the last several months, a number of Japanese companies announced
restructuring plans. After extensive research and analysis, we found a few
companies where the increase in cash flows is accompanied by reasonable
valuations. As a result, we increased our exposure to the Japanese market
by starting new positions in Asahi Bank, Fuji Bank, Fujitsu and Asahi
Chemical. Other new investments include the French utility company Vivendi
and the German engineering company Metallgesellschaft.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
A. The economic environment in Europe has slowed somewhat since the beginning
of the year, with Gross Domestic Product growth forecasts for 1999 being in
the 1.5% to 2.0% range, compared with 2.5% to 3.0% range earlier this year.
Economies are expected to improve in 2000, as the benefits of the
introduction of the Euro, lower interest rates and the recent deregulatory
changes take effect. In addition, there has been a very high level of
corporate merger activity which will lead to improvements in efficiencies
and higher margins. So far, the merger and acquisition activity has been
mainly within countries, we expect there will be more cross border activity
in the future.
Europe is not the only region of the world to experience a high level of
corporate merger and acquisition activity. Japan is also experiencing
mergers, the high profile ones have been between banks and other financial
companies, within the chemical sector and also in the car manufacturing
sector with the link between Renault of France and Nissan. With
profitability within corporate Japan being so poor, we anticipate that
there will be further corporate link-ups in the future, especially as the
Japanese government introduces legislation which will break down some of
the barriers which have previously deterred such restructuring. This should
lead to corporate managements' becoming more profit oriented and
shareholder friendly. However, corporate Japan is at the start of a
restructuring period. When assessing restructuring progress, heavy
skepticism needs to be applied to wean out the winners from the losers.
1
<PAGE>
INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT
--------------------------------------------------------------------------------
[LINE GRAPH OMITTED]
International Equity Fund MSCI EAFE
------------------------- ---------
11/25/97 $ 10,000.00 $ 10,000.00
12/97 10,266.29 10,207.24
3/98 12,027.37 11,708.71
6/98 12,237.50 11,833.11
9/98 10,066.17 10,151.26
12/98 12,044.22 12,248.56
3/99 12,472.13 12,419.00
6/99 12,847.86 12,734.62
9/99 13,035.72 13,293.48
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED SEPTEMBER 30, 1999
--------------------------------------------------------------------------------
ONE SINCE
YEAR INCEPTION COMMENCEMENT
--------------------------------------------------------------------------------
International Equity Fund 29.50% 15.41% 11/25/97
--------------------------------------------------------------------------------
MSCI EAFE 30.95% 16.64%
--------------------------------------------------------------------------------
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, 1999
[PIE GRAPH OMITTED]
EUROPE 70.8%
JAPAN 12.1%
OTHER REGIONS 8.0%
PACIFIC RIM 7.9%
CASH & OTHER 1.2%
--------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS
AT SEPTEMBER 30, 1999
--------------------------------------------------------------------------------
Mannesmann AG 3.09%
--------------------------------------------------------------------------------
AXA-UAP 2.44%
--------------------------------------------------------------------------------
Taiwan Semiconductor
Manufacturing Co 2.36%
--------------------------------------------------------------------------------
ING Groep N.V. 2.32%
--------------------------------------------------------------------------------
Total S.A. 2.28%
--------------------------------------------------------------------------------
Preussag AG 2.01%
--------------------------------------------------------------------------------
Autoliv Inc. SDR 1.83%
--------------------------------------------------------------------------------
Invensys PLC 1.70%
--------------------------------------------------------------------------------
Schneider S.A. 1.63%
--------------------------------------------------------------------------------
Telefonica S.A. 1.62%
--------------------------------------------------------------------------------
SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
2
<PAGE>
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 1999
--------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
NUMBER
OF SHARES VALUE
-------------------------------------------------------------
COMMON STOCK -- 98.5%
-------------------------------------------------------------
AUSTRALIA -- 2.1%
Brambles Industries Ltd........... 110,608 $ 3,203,486
Cable & Wireless Optus Ltd........ 432,189 930,968(a)
4,134,454
AUSTRIA -- 0.4%
VA Technologie AG................. 9,162 735,451
BRAZIL -- 0.4%
Uniao de Bancos Brasilieros
S.A. GDR ...................... 40,839 722,340
CANADA -- 2.1%
Celestica Inc..................... 19,453 958,266(a)
CGI Group Inc. (Class A).......... 55,051 1,086,558(a)
Clarica Life Insurance Co......... 28,012 421,333(a)
Nortel Networks Corp.............. 32,871 1,676,421
4,142,578
DENMARK -- 1.2%
Novo-Nordisk AS (Series B)........ 20,441 2,428,958
FINLAND -- 3.1%
Helsingin Puhelin Oyj............. 2,168 91,813
Merita PLC (Series A)............. 269,405 1,513,566
Nokia Oyj (Series A).............. 22,323 1,997,608
Pohjola Group Insurance Corp.
(Series B) .................... 11,222 531,364
Sampo Insurance Co. Ltd. (Series A) 61,001 2,025,132
6,159,483
[ICON OMITTED] FRANCE -- 19.9%
Aerospatiale Matra (Regd.)........ 50,855 1,078,998(a)
Alstom............................ 93,742 3,130,033(a)
AXA-UAP........................... 38,176 4,825,793
Cap Gemini S.A.................... 20,319 3,199,822
Carrefour S.A..................... 18,078 2,891,153
Coflexip S.A. ADR................. 29,722 1,419,225
Elf Aquitaine S.A. ADR............ 5,628 982,109
Lagardere S.C.A................... 64,010 2,655,601
Lyonnaise Des Eaux S.A............ 10,406 1,683,020
Michelin CGDE (Regd.) (Class B)... 58,332 2,750,859
Rhone-Poulenc S.A. (Class A)...... 53,339 2,752,634
Schneider S.A..................... 44,252 3,234,830
Societe Generale.................. 8,912 1,834,923
STMicroelectronics N.V............ 21,459 1,671,408
Total S.A. (Class B).............. 35,997 4,519,705
Vivendi........................... 10,758 754,933
39,385,046
NUMBER
OF SHARES VALUE
-------------------------------------------------------------
[ICON OMITTED] GERMANY -- 12.3%
Bayerische Vereinsbank AG......... 17,873 $ 1,042,173
DaimlerChrysler AG................ 22,390 1,541,417
Deutsche Bank AG ................. 35,522 2,375,552
Fresenius Medical Care AG ........ 39,810 2,634,780
Mannesmann AG .................... 38,322 6,116,475
Metallgesellschaft AG ............ 87,458 1,768,133
Muenchener Rueckversicherungs-
Gesellschaft AG (Regd.) ....... 11,223 2,265,364(a)
Preussag AG ...................... 78,904 3,971,202
Veba AG .......................... 46,402 2,540,293
24,255,389
GREECE -- 1.0%
Alpha Credit Bank (Regd.) ........ 2,773 222,224
Hellenic Telecommunication
Organization S.A. ADR ......... 54,500 609,719
Hellenic Telecommunication
Organization S.A. GDR ......... 45,510 1,060,977
1,892,920
HONG KONG -- 1.3%
Giordano International Ltd. ...... 896,000 709,381
Johnson Electric Holdings Ltd. ... 394,400 1,903,989
2,613,370
IRELAND -- 1.5%
Bank of Ireland .................. 182,550 1,485,953
CRH PLC 82,461 1,568,837
3,054,790
ISRAEL -- 3.4%
Comverse Technology Inc. ......... 32,195 3,036,391(a)
ECI Telecommunications Ltd. ...... 79,629 1,965,841
Teva Pharmaceutical Industries
Ltd. ADR ...................... 33,900 1,705,594
6,707,826
ITALY -- 2.4%
Banca Intesa S.p.A. ................ 351,748 1,470,910
Montedison S.p.A. .................. 112,311 219,888
Saipem ............................. 372,433 1,604,963
Telecom Italia Mobile S.p.A. ....... 63,324 393,498
Telecom Italia S.p.A ............... 128,381 1,114,686
Unicredito Italiano S.p.A. ......... 3,224 15,746
4,819,691
[ICON OMITTED] JAPAN -- 12.1%
Asahi Bank Ltd. 58,000 415,527
Asahi Chemical Industry Co. Ltd... 241,000 1,338,388
Canon Inc......................... 86,000 2,496,722
Fujitsu Ltd....................... 78,000 2,425,173
Mazda Motor Corp.................. 362,000 1,810,339
Minebea Co. Ltd................... 206,000 2,614,066
Mitsukoshi Ltd.................... 138,000 825,829(a)
NAMCO Ltd......................... 5,900 232,066
Promise Co. Ltd................... 9,000 722,326
- ------
See Notes to Schedule of Investments and Notes to Financial Statements.
3
<PAGE>
INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
-------------------------------------------------------------
Shin-Etsu Chemical Co............. 52,000 $ 2,162,203
Sony Corp......................... 20,100 2,994,859
Sumitomo Electric Industries...... 175,000 2,392,770
The Fuji Bank Ltd................. 57,000 690,747
Toshiba Corp...................... 395,000 2,933,462
24,054,477
MEXICO -- 2.0%
Desc S.A. de C.V. (Series B)...... 216,200 184,984
Desc S.A. de C.V. ADR (Class C)... 32,634 546,620
Grupo Carso S.A. de C.V. ADR...... 131,709 1,078,367
Grupo Financiero Banamex
Accival S.A. de C.V. (Class B) 567,912 1,021,634(a)
Grupo Televisa S.A. GDR........... 30,264 1,208,669(a)
4,040,274
[ICON OMITTED] NETHERLANDS -- 6.8%
CSM N.V........................... 2,218 106,557
IHC Caland N.V.................... 40,566 2,011,453
ING Groep N.V..................... 84,517 4,586,443
Ispat International N.V.
(Regd.) (Class A) ............. 40,986 427,791
Koninklijke Ahold N.V............. 67,017 2,203,460
Philips Electronics N.V........... 31,099 3,127,088
Vendex KBB N.V.................... 37,009 1,063,244
13,526,036
PANAMA -- 0.1%
Panamerican Beverages
Inc. (Class A) ................. 6,475 107,242
PHILIPPINES -- 0.2%
San Miguel Corp. S.A.............. 244,790 371,075
POLAND -- 0.4%
Telekomunikacja Polska S.A.
GDR (Series A) ................ 184,784 886,963(b)
PORTUGAL -- 0.7%
Banco Comercial Portugues (Regd.) 33,120 891,605
Jeronimo Martins, SGPS, S.A....... 15,539 439,812
Portugal Telecom S.A.............. 1,103 45,866
1,377,283
SOUTH KOREA -- 1.7%
Kookmin Bank GDR.................. 42,900 537,793
Korea Telecom Corp. ADR........... 16,281 602,397(a)
Korea Telecom Corp................ 7,640 471,652
Pohang Iron & Steel Co. Ltd....... 10,916 1,224,853
Pohang Iron & Steel Co. Ltd. ADR.. 14,947 468,028
3,304,723
NUMBER
OF SHARES VALUE
-------------------------------------------------------------
SPAIN -- 2.5%
Argentaria, Caja Postal y Banco
Hipotecario de Espana, S.A. ... 51,231 $ 1,126,224
Repsol S.A........................ 28,580 559,250
Telefonica S.A.................... 200,883 3,212,654(a)
4,898,128
SWEDEN -- 4.3%
Autoliv Inc. SDR.................. 96,036 3,622,009
Ericsson LM Telephone (Series B).. 75,658 2,345,555
Investor AB (Series B)............ 23,756 281,256
Invik & Co. AB.................... 5,122 328,213
Kinnevik AB (Series B)............ 9,950 176,703
NetCom Systems AB (Series B)...... 21,542 799,313(a)
Pharmacia & Upjohn Inc............ 18,002 893,349
8,446,398
SWITZERLAND -- 2.7%
ABB AG ........................... 760 1,249,384
ABB Ltd .......................... 1,738 179,295(a)
Credit Suisse AG ................. 8,401 1,537,621
Novartis AG (Regd.) .............. 1,122 1,662,277
Zurich Allied AG ................. 1,421 791,599
5,420,176
TAIWAN -- 2.6%
Synnex Technology International
Corp. GDR.. ................... 22,841 419,703(b)
Taiwan Semiconductor
Manufacturing Co............... 1,110,413 4,668,98(a)
5,088,684
[ICON OMITTED] UNITED KINGDOM -- 11.3%
Airtours PLC ........................475,582 3,031,975
British Energy PLC ...................25,358 172,206
British Steel PLC ...................474,999 1,204,265
Cable & Wireless Communication PLC...215,034 2,198,404(a)
Cable & Wireless PLC .................10,715 116,513
Commercial Union PLC .................53,930 829,251
FKI PLC .............................434,416 1,365,991
Granada Group PLC ...................332,170 2,860,032
Invensys PLC ........................691,121 3,356,486
Nycomed Amersham PLC ................230,032 1,427,705
Railtrack Group PLC ..................38,633 815,371
Reed International PLC ..............154,459 928,143
Royal & Sun Alliance
Insurance Group PLC... ...........253,347 2,014,521
Saatchi & Saatchi PLC ................70,630 243,486
SEMA Group PLC .......................34,160 417,283
Somerfield PLC ......................497,180 1,072,244
Williams PLC .........................59,509 317,422
22,371,298
TOTAL COMMON STOCK
(COST $183,334,426) .............. 194,945,053
- -------
See Notes to Schedule of Investments and Notes to Financial Statements.
4
<PAGE>
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 1999
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
-------------------------------------------------------------
PREFERRED STOCK -- 0.3%
Henkel KGaA
(COST $ 730,606)........... 9,663 $ 606,632
-------------------------------------------------------------
WARRANTS -- 0.0%
-------------------------------------------------------------
GERMANY -- 0.0%
Muenchener Rueckversicherungs-
Gesellschaft AG (Regd.), 06/03/02
(Cost $ 0) ................. 181 6,202(a)
TOTAL INVESTMENTS IN SECURITIES
(COST $184,065,032) ........ 195,557,887
-------------------------------------------------------------
SHORT-TERM INVESTMENT -- 0.0%
-------------------------------------------------------------
GEI Short Term Investment Fund
(Cost $1,000).............. 1,000 1,000
OTHER ASSETS AND LIABILITIES,
NET 1.2% .................. 2,415,292
NET ASSETS-- 100% ................ $197,974,179
============
-----------------------------------------------------------
OTHER INFORMATION (UNAUDITED)
-----------------------------------------------------------
The International Equity Fund invested in the following
sectors at September 30, 1999:
PERCENTAGE (BASED ON
SECTOR TOTAL NET ASSETS)
-----------------------------------------------------------
Capital Equipment 28.59%
Services 23.67%
Finance 18.31%
Consumer Goods 13.73%
Multi Industry 5.50%
Materials 4.55%
Energy 4.43%
Cash and Other 1.22%
---------
100.00%
=========
[ICON OMITTED] ICONS REPRESENT THE TOP FIVE COUNTRY WEIGHTINGS IN THE
INTERNATIONAL EQUITY FUND AT SEPTEMBER 30, 1999.
- ------------------
See Notes to Schedule of Investments and Notes to Financial Statements.
5
<PAGE>
NOTES TO PERFORMANCE SEPTEMBER 30, 1999 (UNAUDITED)
--------------------------------------------------------------------------------
Information on the preceding performance page related to the Fund's one-year
total return and top ten largest holdings is audited, all other information on
the performance page is unaudited.
Total returns take into account changes in share price and assume reinvestment
of dividends and capital gains, if any. Investment returns and net asset value
on an investment will fluctuate and you may have a gain or loss when you sell
your shares.
The Morgan Stanley Capital International Europe, Australasia, Far East Index
(MSCI EAFE) is an unmanaged index and does not reflect the actual cost of
investing in the instruments that comprise such index.
MSCI EAFE is a composite of foreign securities traded in 20 developed markets
representing Europe, Australasia and Far East.
The results shown for the foregoing index assume the reinvestment of net
dividends or interest.
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.
NOTES TO SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Pursuant to Rule 144A of the Securities Act of 1933, these securities may
be resold in transactions exempt from registration, normally to qualified
institutional buyers. At September 30, 1999, these securities amounted to
$1,306,666 or 0.7% of net assets of the Fund. These securities have been
determined to be liquid using guidelines established by the Board of
Trustees.
ABBREVIATIONS:
ADR -- American Depositary Receipt
GDR -- Global Depositary Receipt
Regd. -- Registered
6
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA BASED ON A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
INTERNATIONAL
EQUITY
FUND
9/30/99 9/30/98
---------------------------------------------------------------------------------------------
INCEPTION DATE -- 11/25/97
<S> <C> <C>
Net asset value, beginning of period................................ $10.06 $ 10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ........................................... 0.09 0.14 (b)
Net realized and unrealized gains (losses) on investments........ 2.81 (0.07)(b)
---------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS ..................... 2.90 0.07
---------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ........................................... 0.12 0.01
Net realized gains .............................................. 0.35 --
---------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS........ ........................................ 0.47 0.01
---------------------------------------------------------------------------------------------
Net asset value, end of period...................................... $12.49 $ 10.06
---------------------------------------------------------------------------------------------
TOTAL RETURN (A).................................................... 29.50% 0.66%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ........................ $197,974 $114,414
Ratios to average net assets:
Net investment income*........................................ 0.99% 1.72%
Net Expenses* ................................................ 0.62% 0.64%
Portfolio turnover rate.......................................... 50% 53%
</TABLE>
- --------------
NOTES TO FINANCIAL HIGHLIGHTS
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains. Periods less than one year are
not annualized.
(b) As a result of the timing of purchases and sales of fund shares, per share
amounts do not accord with aggregate amounts appearing in Statement of
Changes.
* Annualized for periods less than one year.
- --------
See Notes to Financial Statements and Notes to Financial Statements.
7
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1999
--------------------------------------------------------------------------------
INTERNATIONAL
EQUITY
FUND
--------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $184,065,032)..... $195,557,887
Short-term investments (at amortized cost)................... 1,000
Cash......................................................... --
Foreign currency (cost $639,311)............................. 638,975
Receivable for investments sold.............................. 705,350
Income receivables........................................... 458,949
Receivable for fund shares sold.............................. 795,576
Variation margin receivable.................................. --
--------------------------------------------------------------------------------
TOTAL ASSETS.............................................. 198,157,737
--------------------------------------------------------------------------------
LIABILITIES
Distributions payable to shareholders........................ --
Payable for investments purchased............................ --
Payable for fund shares redeemed............................. --
Payable to GEIM.............................................. 99,210
Payable to Custodian......................................... 84,348
--------------------------------------------------------------------------------
TOTAL LIABILITIES......................................... 183,558
--------------------------------------------------------------------------------
NET ASSETS...................................................... $197,974,179
--------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital paid in.............................................. $179,506,961
Undistributed net investment income.......................... 1,094,353
Accumulated net realized gain................................ 5,873,769
Net unrealized appreciation on:
Investments .............................................. 11,492,855
Futures .................................................. --
Foreign currency related transactions..................... 6,241
--------------------------------------------------------------------------------
NET ASSETS...................................................... $197,974,179
--------------------------------------------------------------------------------
Shares outstanding ($.001 par value)............................ 15,854,773
Net asset value, offering and redemption price per share........ $12.49
- -------
See Notes to Financial Statements.
8
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1999
--------------------------------------------------------------------------------
INTERNATIONAL
EQUITY
FUND
--------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividends.....................................................$ 2,481,577
Interest...................................................... 207,827
Less: Foreign taxes withheld.................................. (298,957)
--------------------------------------------------------------------------------
TOTAL INCOME..................................................... 2,390,447
--------------------------------------------------------------------------------
EXPENSES:
Advisory and administration fees 915,623
Trustees' fees................................................ 5,825
--------------------------------------------------------------------------------
TOTAL EXPENSES................................................... 921,448
--------------------------------------------------------------------------------
NET INVESTMENT INCOME............................................ 1,468,999
--------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ............................................ 6,017,035
Futures ................................................ --
Written options ........................................ --
Foreign currency related transactions .................. (435,254)
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/DEPRECIATION ON:
Investments ............................................ 26,402,576
Futures ................................................ --
Written options ........................................ --
Foreign currency related transactions................... (2,626)
--------------------------------------------------------------------------------
Net realized and unrealized gain on investments.................. 31,981,731
--------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............$33,450,730
--------------------------------------------------------------------------------
- --------
See Notes to Financial Statements.
9
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INTERNATIONAL
EQUITY
FUND
-------------------------------------------------------------------------------------------
YEAR PERIOD
ENDED ENDED
9/30/99 9/30/98(a)
-------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSET
OPERATIONS:
<S> <C> <C>
Net investment income ..................................$ 1,468,999 $ 1,503,970
Net realized gain (loss) on investments, futures,
written options, and foreign currency
related transactions ................................. 5,581,781 3,833,256
Net increase (decrease) in unrealized appreciation/
depreciation ......................................... 26,399,950 (14,900,854)
-------------------------------------------------------------------------------------------
Net increase (decrease) from operations ................. 33,450,730 (9,563,628)
-------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income .................................. (1,386,768) (21,580)
Net realized gains......... ............................. (4,011,536) --
-------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ......................................... (5,398,304) (21,580)
-------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations
and distributions ......................................... 28,052,426 (9,585,208)
-------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares............................... 63,250,137 126,319,228
Value of distributions reinvested.......................... 5,398,304 21,580
Cost of shares redeemed.................................... (13,140,485) (2,341,803)
-------------------------------------------------------------------------------------------
Net increase(decrease)from share transactions.............. 55,507,956 123,999,005
-------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ........................ 83,560,382 114,413,797
NET ASSETS
Beginning of period ......................................... 114,413,797 --
-------------------------------------------------------------------------------------------
End of period ...............................................$197,974,179 $114,413,797
-------------------------------------------------------------------------------------------
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME,
END OF PERIOD.. .............................................$ 1,094,353 $ 1,447,353
-------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES:
Shares sold by subscription................................ 5,068,474 11,565,378
Issued for distributions reinvested........................ 489,869 2,109
Shares redeemed .................................. (1,081,713) (189,344)
-------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares ......................... 4,476,630 11,378,143
-------------------------------------------------------------------------------------------
<FN>
(a) For the period November 25, 1997 (inception) through September 30, 1998.
</FN>
</TABLE>
- -------
See Notes to Financial Statements.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1999
--------------------------------------------------------------------------------
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 fifteen investment funds (collectively the "Funds") only ten of
which have commenced operations. The ten active funds are, as follows: U.S.
Equity Fund, S&P 500 Index Fund, Mid-Cap Growth Fund, Mid-Cap Value Equity Fund,
Small-Cap Value Equity Fund, International Equity Fund, Europe Equity Fund,
Emerging Markets Fund, Income Fund and Money Market Fund. The Funds are
presently authorized to issue two classes of shares --- the Investment Class and
the Service Class. However, as of September 30, 1999, only the Investment Class
has investors. The Trust expects that most of the time each fund will have
relatively few shareholders, (as compared with most mutual funds) but that these
shareholders will invest substantial amounts in a fund (minimum initial
investment requirements are described in the current prospectus of the Funds).
These financial statements only represent the activities of the Investment Class
of the International Equity Fund (the "Fund").
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 Fund:
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. 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.
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
The Fund may enter into repurchase agreements. The Fund's custodian takes
possession of the collateral pledged for investments in repurchase agreements on
behalf of the Fund. The Fund values 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
The Fund may loan securities to brokers, dealers, and financial institutions
determined by GE Investment Management Incorporated ("GEIM") to be creditworthy,
subject to certain limitations. The Fund receives compensation in the form of
fees in addition to the 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 Fund 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 Fund may be exposed to the risk of loss of reacquiring the
loaned securities at prevailing market prices using the proceeds of the sale of
the collateral.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1999
--------------------------------------------------------------------------------
FOREIGN CURRENCY
Accounting records of the Fund are maintained in U.S. dollars. Investment
securities and other assets and liabilities denominated in foreign currency are
translated to U.S. dollars at the prevailing rates of exchange at period end.
Purchases and sales of securities, income receipts and expense payments
denominated in foreign currencies are translated into U.S. dollars at the
prevailing exchange rate on the respective dates of the transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in their market prices. Such fluctuations are included in
net realized 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.
FINANCIAL FUTURES CONTRACTS AND OPTIONS
The Fund, may invest in financial futures contracts and, may purchase and write
options, subject to certain limitations. The Fund may invest in futures and
options contracts to manage their exposure to the stock and bond markets and
fluctuations in currency values. Buying futures, writing puts and buying calls
tend to increase the Fund's exposure to the underlying instrument. Selling
futures, buying puts and writing calls tend to decrease the Fund's exposure to
the underlying instrument, or hedge other Fund investments. The Fund will not
enter into a transaction involving futures and options on 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
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. Options are valued at the last sale price, or if no
sales occurred on that day, at the last quoted bid price.
Upon entering into a financial futures contract, the Fund is required to pledge
to the broker an amount of cash and/or other assets equal to a certain
percentage of the contract amount, know as initial margin deposit. Subsequent
payments, known as variation margins, are made or received by the Fund each day,
depending on the daily fluctuation in the fair value of the underlying security.
The Fund records 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 financial futures contracts and may incur a loss.
The Fund recognizes a realized gain or loss on the expiration or closing of a
futures contract.
When the 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 Fund 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.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
The Fund may purchase or sell securities on a when-issued or forward commitment
basis. These transactions are arrangements in which the Fund purchases and sells
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
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1999
--------------------------------------------------------------------------------
counterparty does not perform under the contract. In connection with such
purchases, the Fund maintains cash or liquid assets in an amount equal to
purchase commitments for such underlying securities until settlement date and
for sales commitments the Fund maintains equivalent deliverable securities as
"cover" for the transaction. Unsettled commitments are valued at current market
value of the underlying security. Daily fluctuations in the value of such
contracts are recorded as unrealized gains or losses. The Fund will not enter
into such agreements for the purpose of investment leverage.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Fund 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. Fluctuations in the value of the
c-oe++(degree)+/-o >&(%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 is segregated so that the value of the account
will equal the amount of the Fund's commitment with respect to the contract.
INVESTMENT 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.
INCOME TAXES
The Fund intends 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. The Fund is treated as a separate taxpayer for federal income
tax purposes.
As of September 30, 1999, the Fund had no capital loss carryovers.
Any net capital and currency losses incurred after October 31, within the 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 International Equity Fund incurred and elected to defer losses after October
31, 1998 as follows:
FUND CURRENCY CAPITAL
-------------------------------------------------------------
International Equity Fund $423,145 --
DISTRIBUTIONS TO SHAREHOLDERS
The Fund declares and pays dividends from net investment income annually. The
Fund declares and pays 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
treatment of realized and unrealized gains and losses on forward foreign
currency contracts, paydown gains and losses on mortgage-backed securities, and
losses deferred due to wash sale transactions. Reclassifications are made to the
Fund's 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 Fund. The calculation of net investment income
per share in the Financial Highlights table excludes these adjustments.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1999
--------------------------------------------------------------------------------
INVESTMENT INCOME
Corporate actions (including cash dividends) are recorded, net of
non-reclaimable tax withholdings, on the ex-dividend date, 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.
EXPENSES
The Fund pays a "unitary fee" equivalent to the Fund's advisory and
administration fee. This fee includes any normal operating expenses payable by
the Fund, except for fees paid to the Trust's independent Trustees.
3. FEES AND COMPENSATION PAID TO AFFILIATES
ADVISORY AND ADMINISTRATION FEES
Compensation of GEIM 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*
---------------------------------------------------------------------
International Equity First $25 million .75%
Fund Next $50 million .65%
Over $75 million .55%
* FROM TIME TO TIME, GEIM MAY WAIVE OR REIMBURSE ADVISORY OR
ADMINISTRATIVE FEES PAID BY A FUND.
TRUSTEE COMPENSATION
The Fund pays no compensation to their Trustees who are officers or employees of
GEIM or its affiliates. Trustees who are not such officers or employees receive
an annual fee of $5,000 and an additional fee of $500 per Trustees' meeting
attended in person.
4. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION
Aggregate gross unrealized appreciation/(depreciation) of investments for the
International Equity Fund at September 30, 1999, were as follows:
NET
GROSS GROSS UNREALIZED
UNREALIZED UNREALIZED APPRECIATION/
APPRECIATION DEPRECIATION (DEPRECIATION)
-----------------------------------------------------------------
International
Equity Fund $21,638,720 $10,145,865 $11,492,855
The aggregate cost of the Fund's investments was substantially the same for book
and federal income tax purposes at September 30, 1999.
5. 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, 1999, were
as follows:
PURCHASES SALES
---------------------------------------------------------------
International
Equity Fund $126,052,285 $73,266,898
6. BENEFICIAL INTEREST
The number of shareholders each owning 5% or more of the Fund and the total
percentage of the Fund held by such shareholders at September 30, 1999 are:
5% OR GREATER
SHAREHOLDERS
------------------
% OF % OF FUND HELD
NUMBER FUND HELD BY GE AFFILIATES*
-----------------------------------------------------------------------
International Equity Fund 5 96% 48%
Investment activities of these shareholders could have a material impact on the
Funds.
* INCLUDED IN THE 5% OR GREATER SHAREHOLDERS PERCENTAGE.
14
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------
To the Shareholders and Trustees of GE Institutional International Equity Fund
In our opinion, the accompanying statement of assets and liabilities, including
the schedule 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 the GE~Institutional International
Equity Fund at September 30, 1999, and the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting principles. 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 generally accepted auditing standards which require that we plan and
perform the audit 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 investments owned at
September 30, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 12, 1999
15
<PAGE>
NOTES
--------------------------------------------------------------------------------
16
<PAGE>
GE INSTITUTIONAL FUNDS' INVESTMENT TEAM
--------------------------------------------------------------------------------
PORTFOLIO MANAGER
INTERNATIONAL EQUITY FUND
Team led by Ralph R. Layman
INVESTMENT ADVISER
AND ADMINISTRATOR
GE Investment Management Incorporated
TRUSTEES
Michael J. Cosgrove
John R. Costantino
Alan M. Lewis
William J. Lucas
Robert P. Quinn
SECRETARY
Matthew J. Simpson
TREASURER
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 Investment Management Incorporated
3003 Summer Street
P.O. Box 7900
Stamford, CT 06904
DISTRIBUTOR GE Investment Distributors, Inc.
777 Long Ridge Road, Building B
Stamford, CT 06927
GE INT-PRO-1
