[GRAPHIC OMITTED]
GE LOGO
GE
Investments
Funds, Inc.
Annual Report
December 31, 1997
<PAGE>
GE Investments Funds, Inc.
- --------------------------------------------------------------
Understanding Your Report
- --------------------------------------------------------------
A Letter from the Chairman 2
GE Investments Funds portfolio manager Q&A and
Schedules of Investments
International Equity Fund 3
Real Estate Securities Fund 7
Premier Growth Equity Fund 10
Value Equity Fund 13
U.S. Equity Fund 16
S&P 500 Index Fund 21
Total Return Fund 28
Global Income Fund 35
Income Fund 38
Money Market Fund 44
Notes to Performance and Notes to Schedules of
Investments 47
Financial Statements 48
Financial Highlights and Statements of Assets and
Liabilities, Operations, and Changes in Net Assets
Notes to the Financial Statements 60
Independent Auditors' Report 66
GE Investments Funds Investment Team inside back cover
1
<PAGE>
A LETTER FROM THE CHAIRMAN
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Dear Shareholder:
We are pleased to provide you with the GE Investments Funds, Inc. 1997 annual
report.
This has been an exciting year for the GE family. Assets in the funds grew
significantly thanks in part to favorable market conditions as well as several
developments that we initiated within our organization. In May, as you may
recall, GE Investment Management Incorporated (GEIM) was named the new
investment manager of the GE Investments Funds, Inc. (formerly known as Life of
Virginia Series Funds, Inc.). At the same time, we broadened the menu of
available investments by adding two new funds to our family: Value Equity and
Global Income. In December, we combined the Variable Investment Trust and the
GNA Variable Series Trust with the GE Investments Funds, Inc., adding the
Premier Growth Equity , U.S. Equity and Income funds to the GE Investments
Funds, Inc. family. All of these developments contributed significantly to our
growth in 1997 and should serve as a strong foundation for further developments
in 1998.
PERFORMANCE HIGHLIGHTS
In an environment marked by periods of market volatility, the GE Investments
Funds, as a group, performed relatively well. A majority of funds with a
one-year track record outperformed their Lipper peers for the year. The U.S.
Equity and Money Market funds finished in the top 20% of their respective peer
groups, and the International Equity Fund placed in the top 25% for the year.
The S&P 500 Index Fund ranked #1 in its S&P 500 Annuity Lipper category for the
five- and ten-year periods, thanks to its current and prior portfolio managers.
For the year, all funds with equity exposure, and at least a one-year
performance record, posted double-digit returns. These include the Total Return,
International Equity, Real Estate Securities, S&P 500 Index and U.S. Equity
funds, with the U.S. Equity and S&P 500 Index funds achieving returns in excess
of 30%.
MARKET OVERVIEW
Thanks to an environment of low inflation, declining interest rates and solid
corporate earnings, the major market averages -- along with many of our funds --
posted superior investment results. Falling interest rates and low inflation
were also largely responsible for double-digit percentage gains by most equity
and fixed-income markets. The move toward a single currency helped stocks in
Europe, while economic and currency problems in Asia hurt stocks in that region.
MARKET OUTLOOK
Given the current level of valuations in the U.S. and the market volatility
introduced by the Asian contagion, stock selection will become increasingly
important in achieving attractive returns in U.S. equities in 1998. The slowdown
in Asia is likely to keep interest rates low, which is good news for bonds. The
outlook for the international markets is attractive. Europe's move to a single
currency will, in our judgment, remain on track. Other fundamental factors on
the Continent, such as low inflation and good corporate earnings, should bode
well for higher stock prices.
Sincerely,
/s/ Michael J. Cosgrove
Michael J. Cosgrove
Chairman, GE Investments Funds, Inc.
Mike Cosgrove is the President of the Investment Services Group of GE Financial
Assurance and of the funds distributor. In this role, he is responsible for the
marketing, product development and sales of the funds, and is also a Trustee of
the GE Pension Trust and GE's employee savings program.
In Mike's previous position as Chief Financial Officer of GE Investments and
Assistant Treasurer-GE Company, he had financial responsibility for all assets
under GE Investments' management. Mike joined GE in 1970. After completing the
GE Financial Management Program he held a number of managerial positions in
finance and sales in the International Operation, including serving as Vice
President and Treasurer and later as Vice President - Countertrade and Barter
for GE Trading Company.
Mike graduated from Fordham University in 1970 with a B.S. degree in Economics
and received his M.B.A. degree from St. John's University in 1973.
2
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INTERNATIONAL EQUITY FUND
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Q&A
Ralph Layman manages the international equity operation of GE Investments with
total assets of over $10 billion. Prior to joining GE Investments in 1991, Ralph
was Executive Vice President and Director 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 GE Investments' Asset Allocation Committee. He is a
Chartered Financial Analyst (CFA), 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 AND
LIPPER PEER GROUP FOR THE PERIOD DECEMBER 30, 1996 THROUGH DECEMBER 31, 1997?
A. The International Equity Fund posted a total return of 10.17%. This compares
with a 2.34% return for the Morgan Stanley Capital International EAFE Index
for the same period. Our Lipper peer group of 81 International annuity funds
posted an average return of 5.17% for the one-year ended December 31, 1997.
GE Investment Management Incorporated ("GEIM") assumed portfolio management
responsibility for the fund on May 1, 1997.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. The fund's exposure to Europe contributed favorably to performance. Low
inflation, corporate restruc-turings and good corporate earnings were mainly
responsible for the advance. The fund also benefited from superior stock
selection in Japan. While the Japanese stock market declined by more than 24%
in 1997, the fund's Japanese stock holdings gained over 9%. Finally, the fund
had limited exposure to companies significantly affected by the economic and
currency problems that swept through Asia during the second half of the year.
Q. WHICH STOCKS PERFORMED WELL?
A. Novartis, the world's second largest pharmaceutical company, posted
above-average investment results. Novartis was created as a result of the
merger between Ciba-Geigy and Santos one year ago. Last year, investors bid
up the price of Novartis' stock in response to the economies of scale -- and
subsequent improved earnings -- that have resulted from this corporate
marriage. NTT Data, a leading networking, integration systems and consulting
company in Japan, turned in solid performance due to better-than-expected
earnings. Telecom Italia Mobile recorded strong gains largely because of a
double-digit increase in the company's subscriber base. Total, a French-based
oil company, also contributed favorably to the fund's investment results.
During the year, investors focused on the fact that energy demand has been
rising, but the supply of available drilling equipment has not, enabling
energy companies, including Total, to command higher prices. Finally,
Airtours saw its stock rise significantly, as investors rewarded the UK-based
travel company for its ability to improve profit margins and reduce costs.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
A. While global markets may experience increased market volatility due to the
turmoil in Asia, the underlying fundamentals of our key markets remain solid.
In Europe, for example, low inflation, good earnings and corporate
restructurings should continue to serve as a favorable backdrop for stocks on
the Continent. Japan's economic problems may continue to be problematic for
its stock market over the near-term, but good companies with solid
fundamentals can still be found.
3
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INTERNATIONAL EQUITY FUND
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COMPARISON OF CHANGES IN
VALUE OF A $10,000 INVESTMENT
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[GRAPHIC OMITTED]
INTERATIONAL EQUITY FUND EAFE
5/4/95 10000 10000
6-95 10010 9707.41
9-95 10350 10112.38
12-95 10670.38 10522.01
3-96 11322.63 10826
6-96 11628.37 10997.05
9-96 11455.12 10983.95
12-96 11728.25 11095.26
3-97 12345.53 10983.4
6-97 13785.84 12408.42
9-97 13926.62 12321.12
12-97 12921.38 11354.57
..... International Equity Fund (ending value $12,921)
- ----- MSCI EAFE (ending value $11,355)
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AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 1997
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ONE SINCE
YEAR INCEPTION
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International Equity Fund 10.17%* 10.07%
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MSCI EAFE 2.34%* 4.87%
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Lipper peer group average** 5.17%
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Inception date 5/1/95
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INVESTMENT PROFILE
A mutual fund designed for investors who seek long-term capital growth by
investing primarily in foreign equity and equity-related securities.
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TOP TEN LARGEST HOLDINGS
AT DECEMBER 31, 1997
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AXA-UAP 2.9%
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Siebe PLC 2.8%
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Novartis AG (Regd.) 2.8%
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Total S.A. (Class B) 2.7%
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Sony Corp. 2.5%
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Railtrack Group PLC 2.3%
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Airtours PLC 2.2%
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Repsol S.A. 2.2%
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Canon Inc. 2.0%
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Granada Group PLC 1.9%
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<PAGE>
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COUNTRY ALLOCATION
AS OF DECEMBER 31, 1997
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[GRAPHIC OMITTED]
United Kingdom 16.4%
France 15.6%
Japan 9.8%
Switzerland 8.9%
Germany 7.4%
Italy 5.1%
Short-Term Investments 4.6%
Other 32.2%+
* For the period December 30, 1996 through December 31, 1997.
** Lipper performance comparisons are based on average annual total returns
for the periods indicated in the International peer group consisting of 81
underlying annuity funds.
+ Percentage of individual countries are less than 5.5% of the fund's net
assets.
See page 47 for Notes to Performance. Past performance
is no guarantee of future results.
4
<PAGE>
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
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INTERNATIONAL EQUITY FUND
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NUMBER
OF SHARES VALUE
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Common Stock -- 95.0%
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Australia -- 2.5%
Brambles Industries Ltd. 26,676 $ 529,406
Coca Cola Amatil Ltd. 35,393 264,491
793,897
Austria -- 1.7%
OMV AG 1,355 187,725
VA Technologie AG 2,369 359,715
547,440
Brazil -- 3.1%
Telecomunicacoes Brasileiras
S.A. ADR 2,887 336,155
Telecomunicacoes de Sao Paulo
S.A. (Pfd. receipts) 38,884 10,347(a)
Telecomunicacoes de Sao Paulo
S.A.- Telesp (Pfd. shares) 1,290,485 343,409
Uniao de Banco Brasiliero
S.A. GDR 9,046 291,168(a)
981,079
Denmark -- 1.7%
Den Danske Bank 3,978 530,059
Finland -- 1.9%
Merita Ltd. (Series A) 75,858 414,711
Pohjola Insurance Group
(Series B) 1,620 60,033
Sampo Insurance Co. Ltd. 3,725 120,956
595,700
France -- 15.6%
Alcatel Alsthom 1,014 128,888
AXA-UAP 11,920 922,347
Cap Gemini S.A. 5,574 457,052
Carrefour S.A. 866 451,814
Coflexip S.A. ADR 7,616 422,688
Lyonnaise Des Eaux S.A. 4,085 452,041
Michelin CGDE (Regd.) (Class B) 5,519 277,853
Renault S.A. 10,155 285,659(a)
Schneider S.A. 9,533 517,635
Total S.A. (Class B) 7,895 859,221
Usinor Sacilor 14,773 213,305
4,988,503
Germany -- 7.4%
BASF AG 2,375 84,164
Bayerische Vereinsbank AG 6,263 409,770
Daimler-Benz AG 5,791 406,250
Fresenius Medical Care AG 2,707 179,820(a)
Fresenius Medical Care AG
(Pfd. shares) 1,841 99,267(a)
<PAGE>
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NUMBER
OF SHARES VALUE
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Mannesmann AG 1,038 $ 524,496
SGL Carbon AG 3,602 464,529
Siemens AG 2,356 139,478
Veba AG 739 50,322
2,358,096
Greece -- 0.3%
Alpha Credit Bank (Regd.) 1,818 106,081
Hong Kong -- 1.8%
Cheung Kong (Holdings) Ltd. 10,500 68,767
Giordano International Ltd. 226,000 78,016
HSBC Holdings PLC (Regd.) 11,736 289,273
Johnson Electric Holdings 45,800 131,803
567,859
India -- 0.1%
BSES Ltd. GDR 2,316 39,372
Indonesia -- 0.2%
PT Astra International Inc. 103,000 26,686
PT Mulia Industrindo 193,500 21,989
48,675
Israel -- 2.6%
Comverse Technology Inc. 3,766 146,874(a)
ECI Telecommunications Ltd. 16,540 421,770
Teva Pharmaceutical
Industries Ltd. ADR 5,563 263,199
831,843
Italy -- 5.1%
Credito Italiano 121,841 375,717
ENI S.p.A. (Regd.) 9,779 55,446
Industrie Natuzzi S.p.A. ADR 2,906 59,936
Istituto Bancario San Paolo di Torino 21,733 207,624
Montedison S.p.A. 375,467 337,262
Telecom Italia Mobile S.p.A. 131,093 605,073
1,641,058
Japan -- 9.8%
Canon Inc. 28,000 651,911
Credit Saison Co. Ltd. 16,965 418,376
Honda Motor Co. 15,000 550,280
NTT Data Corp. 10 538,408
Sony Corp. 8,900 790,687
Sumitomo Realty & Development 21,000 120,625
Sumitomo Sitix Corp. 7,000 74,519
3,144,806
Mexico -- 1.4%
Gruma S.A. de C.V. (Series B) 24,921 98,813(a)
Grupo Carso S.A. de C.V. ADR 13,559 162,708
Grupo Financiero Bancomer
S.A. ADR (Series C) 13,414 172,706(a,b)
434,227
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See Notes to Schedule of Investments and Financial Statements
5
<PAGE>
INTERNATIONAL EQUITY FUND
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- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
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Netherlands -- 3.1%
IHC Caland N.V. 7,331 $ 380,352
ING Groep N.V. 14,569 613,613
993,965
Panama -- 0.9%
Panamerican Beverages Inc.
(Class A) 8,656 282,402
Peru -- 1.3%
Telefonica del Peru S.A.
ADR (Class B) 17,999 419,602
Philippines -- 0.6%
Metro Bank & Trust Co. 17,710 119,160
San Miguel Corp. 46,080 56,320
175,480
Portugal -- 1.5%
Banco Comercial Portugues (Regd.) 16,946 346,562
Banco Comercial Portugues ADR 4,976 100,764
Banco Commercial Portugues
International Ltd. (Pfd shares) 442 32,335
479,661
South Africa -- 1.3%
Barlow Ltd. 14,030 119,067
Dimension Data Holdings Ltd. 62,749 270,775
Iscor Ltd. 89,459 26,471
416,313
Spain -- 3.2%
Banco Santander S.A. (Regd.) 10,256 342,652
Repsol S.A. 16,137 688,484
1,031,136
Sweden -- 2.6%
Autoliv Inc. SDR 15,509 504,928
Electrolux AB (Series B) 1,101 76,405
Investor AB (Series B) 1,265 61,658
Kinnevik AB (Series B) 2,116 35,045
NetCom Systems AB (Series B) 7,360 158,047
836,083
Switzerland -- 8.9%
ABB AG 442 555,071
Holderbank Financiere Glarus AG 249 203,126
Nestle S.A. (Regd.) 69 103,368
Novartis AG (Regd.) 557 903,429
Roche Holdings AG 25 248,169
Schw Rueckversicher (Regd.) 170 317,849
Zurich Versicherungsgesellschaft
(Regd.) 1,094 521,095
2,852,107
<PAGE>
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NUMBER
OF SHARES VALUE
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United Kingdom -- 16.4%
Airtours PLC 34,596 $ 704,617
Bank of Scotland PLC 25,239 229,247
Billiton PLC 70,543 180,752(a)
Commercial Union PLC 16,510 230,229
Cordiant PLC 29,761 53,770(a)
Granada Group PLC 40,348 616,326
Johnson Matthey PLC 2,789 24,966
LucasVarity PLC 121,207 428,027
Medeva PLC 35,228 93,736
National Westminster PLC 11,363 188,877
Railtrack Group PLC 46,717 742,005
Reed International PLC 41,656 396,836
Royal & Sun Alliance Insurance
Group PLC 31,729 319,464
Saatchi & Saatchi PLC 29,761 53,281(a)
SEMA Group PLC 2,859 69,500
Siebe PLC 46,043 903,726
5,235,359
Total Investments in Securities
(Cost $28,986,509) 30,330,803
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Short-Term Investments -- 4.6%
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GEI Short Term Investment Fund
(Cost $1,461,929) 1,461,929 1,461,929
Other Assets and Liabilities,
net 0.4% 137,866
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NET ASSETS -- 100% $31,930,598
================================================================================
- ----------
See Notes to Schedule of Investments and Financial Statements
6
<PAGE>
REAL ESTATE SECURITIES FUND
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Q&A
David A. Shapiro, portfolio manager of the Real Estate Securities Fund, joined
Seneca Capital Management, LLC as a portfolio manager in 1995. In 1992 David
became a principal of Asset Holdings Group (he has remained a principal of Asset
Holdings Group). From 1982 to 1992, he was a Managing Director of The Adco
Group, a real estate development and finance company. David received a B.A.
from Columbia University and a J.D. from the University of Arizona.
Q. HOW DID THE REAL ESTATE SECURITIES FUND PERFORM COMPARED TO ITS BENCHMARK AND
LIPPER PEER GROUP FOR THE PERIOD DECEMBER 30, 1996 THROUGH DECEMBER 31, 1997?
A. The Real Estate Securities Fund posted a total return of 19.49%. This
compares with a 21.00% return for Wilshire Real Estate Investment Trust Index
for the same period. Our Lipper peer group of seven Real Estate annuity funds
posted an average return of 20.05% for the one-year period ended December 31,
1997.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. Benefiting from strong underlying fundamentals, attractive relative pricing
and an increase in consolidation within the sector, real estate securities
participated in the strong stock market rally in 1997. Four holdings that
performed particularly well for the fund were Apartment Investment, Equity
Residential, Glenborough Realty Trust and Patriot American Hospitality. In
1998, we expect these companies to be among the survivors in the ongoing
consolidation of the real estate investment trust ("REIT") market. Each has
superior, experienced management teams. In fact, executives at Apartment
Investment and Equity Residential have been in the business for more than 30
years. They proved their talent and ability to operate apartments efficiently
long before their respective companies went public.
Q. WHAT WAS YOUR FUND'S ASSET ALLOCATION?
A. At the end of the year, we had roughly 21% of total assets in apartments,
approximately 34% in office and industrial buildings and about 15% in hotels
with the balance invested in regional malls, manufactured housing, mobile
homes and movie theaters.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND AND HOW HAVE YOU POSITIONED IT GOING
FORWARD?
A. We remain generally bullish on real estate securities. The ongoing recovery
of the real estate markets and increasing rents should fuel growth. The
outlook for earnings of companies in this sector still appears to be in
relatively good shape. Additionally, with dividend yields on REITs
approximately 150 basis points higher than that of the 10-year Treasury Bond,
these investments still offer individuals an attractive alternative to
traditional common stock investments. Since many individuals invest their
money in the Real Estate Fund to gain additional stock market
diversification, we intend to manage the fund with an even greater emphasis
on defensive stocks -- companies whose price-earnings ratios are lower than
the market average.
7
<PAGE>
REAL ESTATE SECURITIES FUND
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COMPARISON OF CHANGES IN
VALUE OF A $10,000 INVESTMENT
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[GRAPHIC OMITTED]
REAL ESTATE SECURITIES FUND WILSHIRE REAL ESTATE INDEX
4-95 10000 10000
6-95 10570 10510.76
9-95 11060 11009.19
12-95 11700 11404.02
3-96 12102.35 11885.81
6-96 12515.29 12449.66
9-96 13383.53 13184.84
12-96 15940.59 15452.97
3-97 16607.13 15894.06
6-97 17307.56 16624.64
9-97 19160.33 18725.11
12-97 19048.06 18697.54
.... Real Estate Securities Fund (ending value $19,048)
- ---- Wilshire REIT (ending value $18,698)
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AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
ONE SINCE
YEAR INCEPTION
- --------------------------------------------------------------------------------
Real Estate Securities Fund 19.49%* 27.30%
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Wilshire REIT 21.00%* 26.37%
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Lipper peer group average** 20.05%
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Inception date 5/1/95
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INVESTMENT PROFILE
A mutual fund designed for investors who seek to maximize total returns through
current income and capital appreciation by investing primarily in equity and
debt securities of U.S. issuers that are principally engaged in or related to
the real estate industry.
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TOP TEN LARGEST HOLDINGS
AT DECEMBER 31, 1997
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Equity Residential Properties Trust 5.1%
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Patriot American Hospitality Inc. 4.6%
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Mack-Cali Realty Corp. 4.3%
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Prentiss Properties Trust 4.2%
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First Industrial Realty Trust Inc. 3.5%
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Urban Shopping Centers Inc. 3.2%
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Boston Properties Inc. 3.1%
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Equity Office Properties Trust 3.0%
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Simon DeBartolo Group Inc. 3.0%
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Manufactured Home Communities Inc. 2.8%
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SECTOR ALLOCATION
AS OF DECEMBER 31, 1997
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Office/Industrial 33.8%
Apartments 21.0%
Hotel 14.8%
Short-Term Investments 13.4%
Regional Malls 10.1%
Other 6.9%+
* For the period December 30, 1996 through December 31, 1997.
** Lipper performance comparison are based on average annual total returns for
the periods indicated in the Real Estate peer group consisting of 7
underlying annuity funds.
+ Percentage of individual sectors are less than 5.5% of the fund's net
assets.
See page 47 for Notes to Performance. Past performance
is no guarantee of future results.
8
<PAGE>
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
- --------------------------------------------------------------------------------
REAL ESTATE SECURITIES FUND
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NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Common Stock -- 95.9%
- --------------------------------------------------------------------------------
Apartments -- 21.0%
Apartment Investment &
Management Co. (Class A) 37,600 $ 1,381,800
Avalon Properties Inc. 22,800 705,375
Berkshire Realty Company Inc. 84,500 1,014,000
Equity Residential Properties Trust 48,900 2,472,506
Essex Property Trust Inc. 9,000 315,000
Irvine Apartment
Communities Inc. 27,900 887,569
Merry Land & Investment Co. Inc. 46,000 1,052,250
Security Capital Atlantic Inc. 49,500 1,045,688
Security Capital PacificTrust 57,085 1,384,311
10,258,499
Diversified -- 3.2%
Golf Trust of America Inc. 15,000 435,000
Pacific Gulf Properties Inc. 47,700 1,132,875
1,567,875
Financial Services -- 1.2%
Northstar Capital Investment
Corp. 30,000 600,000(b)
Hotel -- 14.8%
American General Hospitality
Corp. 44,500 1,190,375
Circus Circus Enterprises Inc. 19,400 397,700(a)
FelCor Suite Hotels Inc. 26,200 930,100
Four Seasons Hotels, Inc 6,000 189,750
Host Marriott Corp. 36,000 706,500(a)
Patriot American Hospitality Inc. 78,020 2,247,951
Starwood Lodging Trust 3,000 173,625
Sunstone Hotel Investors Inc. 79,700 1,374,825
7,210,826
Manufactured Home -- 4.5%
Manufactured Home
Communities Inc. 51,500 1,390,500
Sun Communities Inc. 23,000 826,562
2,217,062
Mortgage -- 1.4%
Capital Trust 60,000 675,000(a)
Net Lease -- 2.1%
TriNet Corporation Realty
Trust Inc. 26,000 1,005,875
Office/Industrial -- 33.8%
AMB Property Corp. 45,100 1,133,137
Arden Realty Inc. 15,000 461,250
<PAGE>
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Bedford Property Investors Inc. 50,500 $ 1,104,688
Boston Properties Inc. 46,300 1,530,794
Catellus Development Corp. 61,600 1,232,000(a)
CenterPoint Properties Corp. 17,600 618,200
Cornerstone Properties Inc. 40,000 767,500
Equity Office Properties Trust 46,000 1,451,875
First Industrial Realty Trust Inc. 47,600 1,719,550
Liberty Property Trust 47,000 1,342,437
Mack-Cali Realty Corp. 51,600 2,115,600
Prentiss Properties Trust 74,000 2,067,375
SL Green Reality Corp. 10,500 272,344
Spieker Properties Inc. 17,000 728,875
16,545,625
Regional Malls -- 10.1%
General Growth Properties 23,700 856,163
Macerich Co. 37,000 1,054,500
Simon DeBartolo Group Inc. 44,300 1,448,056
Urban Shopping Centers Inc. 45,100 1,572,862
4,931,581
Self Storage -- 1.6%
Shurgard Storage Centers Inc.
(Class A) 12,600 365,400
Sovran Self Storage Inc. 13,500 437,906
803,306
Shopping Center -- 2.2%
Burnham Pacific Properties Inc. 21,000 321,563
Developers Diversified Realty
Corp. 20,000 765,000
1,086,563
Total Investments in Securities
(Cost $38,259,479) 46,902,212
- --------------------------------------------------------------------------------
Short-Term Investments -- 13.4%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund
(Cost $6,523,933) 6,523,933 6,523,933
Other Assets and Liabilities,
net (9.3%) (4,539,623)
- --------------------------------------------------------------------------------
NET ASSETS -- 100% $48,886,522
================================================================================
- ----------
See Notes to Schedule of Investments and Financial Statements
9
<PAGE>
PREMIER GROWTH EQUITY FUND
- --------------------------------------------------------------------------------
Q&A
David Carlson manages pension and mutual fund portfolios with total assets of
over $5 billion. Dave joined GE in 1980 on the GE Financial Management Program.
In 1982, he joined GE Investments 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 Chartered Financial
Analyst (CFA) 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 DECEMBER 12, 1997 (INCEPTION OF THE FUND) THROUGH DECEMBER 31,
1997?
A. Since the Premier Growth Equity Fund commenced operations on December 12,
1997, we only have data for less than one month. During this period, the fund
posted a total return of 3.46%, while the Standard & Poor's 500 Index
advanced 1.82%.
Q. SINCE THE FUND IS NEW, PLEASE DESCRIBE HOW YOU SELECT STOCKS FOR THE
PORTFOLIO?
A. The Premier Growth Equity Fund is a growth fund that has certain aggressive
characteristics. We focus primarily on a select group of high-quality, well
managed, financially sound companies that are leaders in their respective
industries. We target holdings with a minimum growth rate of 15% in earnings.
The majority of the fund holdings will be large capitalization companies.
Q. HOW MANY STOCKS ARE REPRESENTED IN THE FUND?
A. Currently, approximately 35 companies are represented in our fund, and it is
our intention to maintain a tight, focused list. While this is significantly
less than the number of stocks that can be found in many mutual funds, we
believe that focusing on a select group of what we consider to be premier
companies with above-average growth potential compared to the market will
result in superior performance long-term. However, the concentration may
increase short-term volatility when compared with market averages.
Q. WHAT ARE SOME OF THE KEY SECTORS REPRESENTED IN THE FUND?
A. As a rule, this fund will be overweighted in growth industries and
underweighted in mature industries. Presently, the fund's largest weightings
are in the healthcare, technology, and consumer - cyclical industries.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
A. Given the level of valuations in the stock market, the nation's economic
growth rate and the uncertainty created by Asia's economic woes, we don't
expect equities to produce the historically high level of returns that we
have seen over the last three years. However, with interest rates low and
inflation still under control, the economic backdrop for equities remains
favorable. In this environment, we believe that stock-picking rather than
broad sector-related investing will be the key to registering solid
investment results in 1998.
10
<PAGE>
PREMIER GROWTH EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMPARISON OF CHANGES IN
VALUE OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
PREMIER GROWTH EQUITY FUND S&P 500
12-97 10000 10000
12-97 10006.03 10103.9
12-97 10024.1 10151.29
12-97 10042.18 10123.27
12-97 9995.98 10017.68
12-97 9931.71 9929.23
12-97 9961.84 10002.31
12-97 9923.68 9851.17
12-97 9895.56 9785.17
12-97 9941.76 9822.45
12-97 10100.42 10003.09
12-97 10331.39 10181.64
12-97 10345.74 10182.15
.... Premier Growth Equity Fund (ending value $10,346)
- ---- S&P 500(ending value $10,182)
- --------------------------------------------------------------------------------
TOTAL RETURN
FOR THE PERIOD ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
SINCE
INCEPTION
- --------------------------------------------------------------------------------
Premier Growth Equity Fund 3.46%
- --------------------------------------------------------------------------------
S&P 500 1.82%
- --------------------------------------------------------------------------------
Inception date 12/12/97
- --------------------------------------------------------------------------------
INVESTMENT PROFILE
A mutual fund designed for investors who seek long-term growth of capital
as well as future income by investing primarily in growth-oriented equity
securities.
- --------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS
AT DECEMBER 31, 1997
- --------------------------------------------------------------------------------
Cendant Corp. 3.3%
- --------------------------------------------------------------------------------
First Data Corp. 3.2%
- --------------------------------------------------------------------------------
Equifax Inc. 3.2%
- --------------------------------------------------------------------------------
Molex Inc. (Class A) 3.1%
- --------------------------------------------------------------------------------
Dover Corp. 3.1%
- --------------------------------------------------------------------------------
Airtouch Communications Inc. 3.1%
- --------------------------------------------------------------------------------
Carnival Corp. (Class A) 3.1%
- --------------------------------------------------------------------------------
Cardinal Health Inc. 3.1%
- --------------------------------------------------------------------------------
Baker Hughes Inc. 3.1%
- --------------------------------------------------------------------------------
Automatic Data Processing Inc. 3.0%
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
SECTOR ALLOCATION
AS OF DECEMBER 31, 1997
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Consumer - Cyclical 22.4%
Healthcare 20.2%
Technology - Software & Service 14.6%
Financial 8.1%
Short-Term Investments 8.1%
Capital Goods 6.3%
Energy 5.9%
Utilities 5.5%
Other 8.9%+
+ Percentage of individual sectors are less than 5.5% of the fund's net
assets.
See page 47 for Notes to Performance. Past performance
is no guarantee of future results.
11
<PAGE>
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
- --------------------------------------------------------------------------------
PREMIER GROWTH FUND
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Common Stock -- 92.0%
- --------------------------------------------------------------------------------
Capital Goods -- 6.3%
Dover Corp. 14,026 $ 506,689
Molex Inc. (Class A) 17,754 510,428
1,017,117
Consumer - Cyclical -- 22.4%
Carnival Corp. (Class A) 9,035 500,313
Catalina Marketing Corp. 9,351 432,484(a)
Cendant Corp. 15,416 529,925(a)
Circus Circus Enterprises Inc. 9,414 192,987(a)
Comcast UK Cable Partners Ltd.
(Class A) 18,702 176,500(a)
Disney (Walt) Co. 4,675 463,117
Harman International Industries
Inc 9,793 415,590
Interpublic Group Cos. Inc. 9,793 487,814
Tele-Communications Inc. Liberty
Media Group (Series A) 12,131 439,749(a)
3,638,479
Energy -- 5.9%
Baker Hughes Inc. 11,373 496,147
Schlumberger Ltd. 5,813 467,947
964,094
Financial -- 8.1%
Citicorp 3,285 415,347
Travelers Group Inc. 8,403 452,712
Wells Fargo & Co. 1,308 443,984
1,312,043
Healthcare -- 20.2%
Cardinal Health Inc. 6,634 498,379
Dentsply International Inc. 15,858 483,669
Johnson & Johnson 7,013 461,981
Lincare Holdings Inc. 8,403 478,971(a)
Scherer (R.P.) Corp. 7,645 466,345(a)
Sybron International Corp. 8,845 415,162(a)
Tenet Healthcare Corp. 14,468 479,253(a)
3,283,760
Retail Trade -- 4.2%
Arbor Drugs Inc. 14,026 259,481
Home Depot Inc. 7,139 420,309
679,790
Technology - Electronics and Equipment -- 4.8%
Cisco Systems Inc. 7,898 440,286(a)
Intel Corp. 4,865 341,766
782,052
<PAGE>
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Technology - Software & Services -- 14.6%
Automatic Data Processing Inc. 7,961 $ 488,606
Equifax Inc. 14,468 512,710
First Data Corp. 17,943 524,833
Microsoft Corp. 2,906 375,600(a)
Reuters Holdings PLC ADR
(Class B) 7,013 464,611
2,366,360
Utilities -- 5.5%
Airtouch Communications Inc. 12,068 501,576(a)
NTL Inc. 14,026 390,975(a)
892,551
Total Investments in Securities
(Cost $14,394,545) 14,936,246
- --------------------------------------------------------------------------------
Short-Term Investments -- 8.1%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund
(Cost $1,310,700) 1,310,700 1,310,700
Other Assets and Liabilities,
net (0.1%) (10,037)
-----------
NET ASSETS -- 100% $16,236,909
================================================================================
- ----------
See Notes to Schedule of Investments and Financial Statements
12
<PAGE>
VALUE EQUITY FUND
- --------------------------------------------------------------------------------
Q&A
Jon D. Bosse, portfolio manager of the Value Equity Fund, joined NWQ Investment
Management Company in 1996. Prior to joining NWQ, he 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 were he received the John M.
Olin Award for excellence in economics and his M.B.A. from Wharton Business
School, University of Pennsylvania. Jon is also a Chartered Financial Analyst
and a member of the Association for Investment Management and Research and the
Los Angeles Society of Financial Analysts.
Q. HOW DID THE VALUE EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK FROM MAY 1,
1997 (INCEPTION OF THE FUND) THROUGH DECEMBER 31, 1997?
A. The Value Equity Fund posted a total return of 32.56%. This compares very
favorably with the Standard & Poor's 500 Index return of 22.59% for the same
period.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. Superior performance was generated by both individual stock selection and
strong representation in several sectors that posted solid investment
results. The stocks of large, well-established companies, such as those found
in the Value Equity Fund, recorded solid investment results in 1997.
Additionally, many of the sectors that registered good performance were well
represented in our portfolio. Fueling the rise in stock prices was an ideal
economic environment that consisted of falling interest rates, solid
corporate earnings and the lowest inflation rate in eleven years. The fund's
holdings in the oil services and cable industries performed particularly
well. Our stock selection also contributed favorably to the fund's investment
results. Additionally, when the broad-based equity indices declined sharply
in August and October due to concerns over the Asian economic crisis, the
fund held up significantly better than the stock market.
Q. WHICH INVESTMENTS STAND OUT?
A. Cellular Communications recorded solid gains thanks to a substantial increase
in its subscriber base. Cox Communications and Liberty Media were among our
better performing cable stocks. BJ Services and Transocean Offshore, two of
our holdings in the energy sector, benefited from higher drilling rates,
favorable supply and demand industry characteristics and their relatively
attractive valuations. Storage Technology, a leading supplier of information
storage systems, also enjoyed strong performance driven by strong
fundamentals.
Q. WHAT IS YOUR OUTLOOK FOR THE VALUE EQUITY FUND?
A. Notwithstanding the significant appreciation of the stock market and the
serious issues raised by events in Asia, we believe we are still able to find
attractive investment opportunities. Expected market volatility should
enhance opportunities as well. Given this backdrop, we will focus our
research on finding companies with attractive risk-reward characteristics and
catalysts that will recognize value or generate higher profits.
13
<PAGE>
VALUE EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMPARISON OF CHANGES IN
VALUE OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
VALUE EQUITY FUND S&P 500
4-97 10000 10000
5-97 10900 10613.9
6-97 11450 11085.9
7-97 12340 11967.01
8-97 12540 11303.32
9-97 13320 11919.57
10-97 13110 11527.18
11-97 12860 12056.05
12-97 13255.63 12259.07
..... Value Equity Fund (ending value $13,256)
- ----- S&P 500 (ending value $12,259)
- --------------------------------------------------------------------------------
TOTAL RETURN
FOR THE PERIOD ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
SINCE
INCEPTION
- --------------------------------------------------------------------------------
Value Equity Fund 32.56%
- --------------------------------------------------------------------------------
S&P 500 22.59%
- --------------------------------------------------------------------------------
Inception date 5/1/97
- --------------------------------------------------------------------------------
INVESTMENT PROFILE
A mutual fund designed for investors who seek long-term growth in capital by
investing primarily in common stock and other equity securities that are
undervalued by the market at the time of purchase and offer above-average
potential for capital growth.
- --------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS
AT DECEMBER 31, 1997
- --------------------------------------------------------------------------------
Chase Manhattan Corp. 3.9%
- --------------------------------------------------------------------------------
First Union Corp. 3.3%
- --------------------------------------------------------------------------------
Cellular Communications International Inc. 3.3%
- --------------------------------------------------------------------------------
Loews Corp. 3.2%
- --------------------------------------------------------------------------------
BJ Services Co. 2.8%
- --------------------------------------------------------------------------------
Ocean Energy Inc. 2.7%
- --------------------------------------------------------------------------------
U.S. West Communications Group Inc. 2.7%
- --------------------------------------------------------------------------------
The E.W. Scripps Co. 2.5%
- --------------------------------------------------------------------------------
Tele-Communications Inc. Liberty Media Group
(Series A) 2.5%
- --------------------------------------------------------------------------------
Hartford Financial Services Group Inc. 2.4%
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
SECTOR ALLOCATION
AS OF DECEMBER 31, 1997
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Energy 22.5%
Consumer - Cyclical 20.1%
Insurance 13.8%
Financial 12.4%
Technology - Electronics and Equipment 7.4%
Short-Term Investments 6.7%
Other 17.1%+
+ Percentage of individual sectors are less than 5.5% of the fund's net
assets.
See page 47 for Notes to Performance.
Past performance is no guarantee of future results.
14
<PAGE>
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
- --------------------------------------------------------------------------------
VALUE EQUITY FUND
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Common Stock -- 95.9%
- --------------------------------------------------------------------------------
Basic Materials -- 1.8%
Praxair Inc. 12,500 $ 562,500
Capital Goods -- 2.7%
Atchison Casting Corp. 10,500 170,625(a)
Case Corp. 11,000 664,813
835,438
Consumer - Cyclical -- 20.1%
@ Entertainment Inc. 39,900 443,887(a)
Circus Circus Enterprises Inc. 15,000 307,500(a)
Cox Communications Inc. 9,500 380,594(a)
Darden Restaurants Inc. 30,000 375,000
Ford Motor Co. 14,800 720,575
Hasbro Inc. 19,000 598,500
Hayes Lemmerz International Inc. 20,700 579,600(a)
Tele-Communications Inc. Liberty
Media Group (Series A) 21,000 761,250(a)
Tele-Communications International
Inc. (Series A) 12,500 225,000(a)
The E.W. Scripps Co. 16,000 775,000
U.S. West Communications
Group Inc. 29,000 837,375(a)
United Stationers Inc. 4,000 192,500(a)
6,196,781
Consumer - Stable -- 1.9%
Alberto-Culver Co. 21,500 580,500
Energy -- 22.5%
BJ Services Co. 12,000 863,250(a)
Diamond Offshore Drilling Inc. 15,500 745,937
Forcenergy Inc. 25,000 654,688(a)
Meridian Resource Corp. 25,000 239,063(a)
Noble Affiliates Inc. 16,000 564,000
Ocean Energy Inc. 17,000 838,312(a)
Santa Fe International Corp. 16,000 651,000
Tosco Corp. 15,900 601,219
Transocean Offshore Inc. 15,500 746,906
Triton Energy Ltd. 10,500 306,469(a)
United Meridian Corp. 26,000 731,250(a)
6,942,094
Financial -- 12.4%
BankAmerica Corp. 8,900 649,700
Bear Stearns Cos. Inc. 3,000 142,500
Chase Manhattan Corp. 11,000 1,204,500
First Union Corp. 20,000 1,025,000
Fleet Financial Group Inc. 8,000 599,500
INMC Mortgage Holdings Inc. 9,000 210,937
3,832,137
<PAGE>
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Healthcare -- 3.8%
Integrated Health Services Inc. 19,000 $ 592,563
Pharmacia & Upjohn Inc. 16,000 586,000
1,178,563
Insurance -- 13.8%
Aetna Inc. 8,800 620,950
Hartford Financial Services
Group Inc. 8,000 748,500
Loews Corp. 9,200 976,350
Provident Cos. Inc. 18,800 726,150
Torchmark Corp. 14,200 597,287
USF&G Corp. 27,000 595,688
4,264,925
Technology - Electronics and Equipment -- 7.4%
Allen Group Inc. 27,200 501,500(a)
Berg Electronics Corp. 27,000 614,250(a)
Quantum Corp. 22,000 441,375(a)
Storage Technology Corp. 11,800 730,862(a)
2,287,987
Telecommunications -- 5.2%
Cellular Communications
International Inc. 21,575 1,008,631(a)
Telephone & Data Systems Inc. 12,600 586,688
1,595,319
Utilities -- 4.3%
360 Communications Co. 31,000 625,812(a)
NTL Inc. 25,000 696,875(a)
1,322,687
Total Investments in Securities
(Cost $28,087,532) 29,598,931
- --------------------------------------------------------------------------------
Short-Term Investments -- 6.7%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund
(Cost $2,069,657) 2,069,657 2,069,657
Other Assets and Liabilities,
net (2.6%) (812,938)
-----------
NET ASSETS -- 100% $30,855,650
================================================================================
- ----------
See Notes to Schedule of Investments and Financial Statements
15
<PAGE>
U.S. EQUITY FUND
- --------------------------------------------------------------------------------
Q&A
Gene Bolton is responsible for the overall management of the U.S. equity
operation at GE Investments with total assets of over $30 billion. Gene joined
GE in 1964. After completing GE's Financial Management Program he held a number
of financial and strategic planning positions in the U.S. and Europe. Joining GE
Investments in 1984 as Chief Financial Officer, he moved to equities as a
Portfolio Manager in 1986 and was named to his present position in 1991. Gene is
a Trustee of the GE Pension Trust and GE's employee savings program, as well as
Chairman of the Asset Allocation Committee of GE Investments. He also serves as
a Trustee of the Investment Management Workshop, sponsored by the Association
for Investment Management and Research. Gene is a graduate of Mundelein College
with a B.A. in Business Management.
Q. HOW DID THE U.S. EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER
PEER GROUP FOR THE ONE-YEAR PERIOD ENDED DECEMBER 31, 1997?
A. The U.S. Equity Fund posted a total return of 32.13%. This compares with a
33.29% return for the Standard & Poor's 500 Index. Our Lipper peer group of
96 Growth and Income annuity funds posted an average return of 27.21% for the
same period.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. Financial services companies, an area where the fund is well represented,
recorded superior investment results due to ongoing consolidation within the
industry and a sharp decline in interest rates. The yield on the 30-year
Treasury Bond fell from 6.64% at the start of the year to 5.92% on December
31, 1997. Healthcare stocks also enjoyed solid gains. These stocks did
particularly well when the economy's growth prospects came into question as a
result of the economic and currency crisis in Asia. Healthcare stocks are
less sensitive to economic downturns than most other industry groups. We also
enjoyed good performance from our investments in electric and telephone
utilities, which benefited from the decline in interest rates. As uncertainty
in the market increased late in the year, we added to our positions in
utility stocks.
Q. WHICH INVESTMENTS RECORDED GOOD INVESTMENT RESULTS?
A. Three of our better investments in the financial services sector included
Morgan Stanley, Dean Witter, Federal National Mortgage Association and
Travelers Group. Several of our healthcare holdings performed especially
well, particularly the large, blue chip companies, such as Bristol-Myers and
Johnson & Johnson. We also enjoyed good performance from Schlumberger. During
the year, investors focused on the fact that energy demand has been rising,
but the supply of available drilling equipment has not, which enables oil
services companies to command higher prices. We believe this trend will
continue well into 1998.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
A. In general, the foundation of the U.S. economy remains solid. Inflation,
which grew at 1.7% in 1997, its lowest annual rate in more than a decade, is
still under control. Interest rates remain low and corporate earnings have
been strong but, the economic and currency problems in Asia have investors
concerned about the future earnings of American corporations. Thus, while
companies that meet analysts' earnings estimates should do well, companies
that fall short of earnings expectations are likely to see their values
decrease markedly. Given this backdrop, we expect above average market
volatility in the coming months. We intend to use market declines to add to
positions of high-quality investments that meet our strict investment
criteria. We will continue to make long-term investments in what we consider
to be financially sound, well-managed companies with good prospects for solid
earnings growth and greater market share in their areas of operation.
16
<PAGE>
U.S. EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMPARISON OF CHANGES IN
VALUE OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
US EQUITY FUND S&P 500
1-95 10000 10000
3-95 10940 10973.67
6-95 11973.33 12019.37
9-95 12873.34 12977.07
12-95 13558 13749.46
3-96 14353.05 14496.95
6-96 14887.76 15151.44
9-96 15218.46 15615.68
12-96 16502.46 17213.38
3-97 16854.24 17368.66
6-97 19598.14 20403.85
9-97 21255.42 21938.24
12-97 21805.41 22563.1
..... U.S. Equity Fund (ending value $21,805)
- ----- S&P 500 (ending value $22,563)
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
ONE SINCE
YEAR INCEPTION
- --------------------------------------------------------------------------------
U.S. Equity Fund 32.13% 29.67%
- --------------------------------------------------------------------------------
S&P 500 33.29% 31.19%
- --------------------------------------------------------------------------------
Lipper peer group average* 27.21%
- --------------------------------------------------------------------------------
Inception date 1/3/95
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS
AT DECEMBER 31, 1997
- --------------------------------------------------------------------------------
Federal National Mortgage Assoc. 2.1%
- --------------------------------------------------------------------------------
Travelers Group Inc. 2.0%
- --------------------------------------------------------------------------------
Bristol-Myers Squibb Co. 2.0%
- --------------------------------------------------------------------------------
International Business Machines 1.7%
- --------------------------------------------------------------------------------
AlliedSignal Inc. 1.7%
- --------------------------------------------------------------------------------
Schlumberger Ltd. 1.7%
- --------------------------------------------------------------------------------
Johnson & Johnson 1.7%
- --------------------------------------------------------------------------------
Dover Corp. 1.6%
- --------------------------------------------------------------------------------
Exxon Corp. 1.6%
- --------------------------------------------------------------------------------
Du Pont de Nemours (E.I.) & Co. 1.5%
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
SECTOR ALLOCATION
AS OF DECEMBER 31, 1997
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Financial 12.1%
Healthcare 12.0%
Capital Goods 10.9%
Energy 10.2%
Insurance 6.2%
Consumer - Stable 8.7%
Consumer - Cyclical 7.3%
Utilities 7.1%
Technology - Electronics and Equipment 5.6%
Other 19.9%+
* Lipper performance comparisons are based on average annual total returns
for the periods indicated in the Growth and Income peer group consisting of
96 underlying annuity funds.
+ Percentage of individual sectors are less than 5.5% of the fund's net
assets.
See page 47 for Notes to Performance.
Past performance is no guarantee of future results.
17
<PAGE>
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
- --------------------------------------------------------------------------------
U.S. EQUITY FUND
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Common Stock -- 95.1%
- --------------------------------------------------------------------------------
Basic Materials -- 3.8%
Air Products & Chemicals Inc. 992 $ 81,592
Airgas Inc. 1,844 25,816(a)
Barrick Gold Corp. 1,283 23,896
Champion International Corp. 401 18,170
Du Pont de Nemours (E.I.) & Co. 6,148 369,264
FMC Corp. 222 14,943(a)
IMC Global Inc. 1,122 36,746
Mead Corp. 1,792 50,176
Morton International Inc. 2,884 99,137
Newmont Mining Corp. 2,678 78,666
PPG Industries Inc. 176 10,054
Rayonier Inc. 967 41,158
Union Camp Corp. 337 18,093
W.R. Grace & Co. 199 16,007
Weyerhaeuser Co. 682 33,461
917,179
Capital Goods -- 10.9%
AlliedSignal Inc. 10,544 410,557
AMP Inc. 785 32,970
Armstrong World Industries Inc. 352 26,312
Avery Dennison Corp. 508 22,733
Boeing Co. 886 43,359
Browning-Ferris Industries Inc. 1,349 49,913
Cooper Industries Inc. 962 47,138
Corning Inc. 481 17,857
Deere & Co. 2,402 140,067
Dover Corp. 10,644 384,514
Emerson Electric Co. 5,486 309,616
Hubbell Inc. (Class B) 5,452 268,852
Jacobs Engineering Group Inc. 192 4,872(a)
Lockheed Martin Corp. 608 59,888
Mannesmann AG 28 14,148
Martin Marietta Materials Inc. 2,065 75,502
Masco Corp. 256 13,024
Molex Inc. (Class A) 1,496 43,010
National Service Industries Inc. 435 21,560
Parker Hannifin Corp. 489 22,433
Raytheon Co. (Class A) 21 1,060
Sherwin-Williams Co. 3,174 88,079
Textron Inc. 4,352 272,000
Timken Co. 673 23,134
Tyco International Ltd. 692 31,183
U.S.A. Waste Services Inc. 609 23,903(a)
United Technologies Corp. 1,768 128,732
Waste Management Inc. 898 24,695
2,601,111
Consumer - Cyclical -- 7.3%
ACNielsen Corp. 2,196 53,527(a)
Carnival Corp. (Class A) 753 41,697
Catalina Marketing Corp. 497 22,986(a)
Cendant Corp. 1,330 45,719(a)
Circus Circus Enterprises Inc. 2,036 41,738(a)
Comcast Corp. (Class A) 2,771 87,460
<PAGE>
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Comcast UK Cable Partners Ltd.
(Class A) 914 $ 8,626(a)
Disney (Walt) Co. 2,918 289,064
Echlin Inc. 264 9,554
Federal-Mogul Corp. 320 12,960
Ford Motor Co. 1,966 95,720
Gannett Inc. 3,232 199,778
General Motors Corp. 337 20,431
Goodyear Tire & Rubber Co. 773 49,182
Harman International
Industries Inc. 785 33,313
Interpublic Group Cos. Inc. 3,093 154,070
ITT Industries Inc. 777 24,378
Knight-Ridder Inc. 256 13,312
McDonald's Corp. 1,992 95,118
Metromedia International
Group Inc. 432 4,104(a)
Nine West Group Inc. 320 8,300(a)
Stanley Works 1,465 69,130
Tele-Communications Inc.
(Series A) 3,062 85,545(a)
Tele-Communications Inc. Liberty
Media Group (Series A) 1,010 36,612(a)
Tele-Communications TCI
Ventures Group 696 19,706(a)
Time Warner Inc. 860 53,320
Viad Corp. 721 13,924
Xerox Corp. 2,013 148,585
1,737,859
Consumer - Stable -- 8.7%
Anheuser Busch Cos. Inc. 4,455 196,020
Archer-Daniels Midland Co. 1,697 36,804
Avon Products Inc. 1,125 69,047
Coca Cola Co. 159 10,593
Colgate-Palmolive Co. 1,324 97,314
Conagra Inc. 1,998 65,559
CPC International Inc. 1,072 115,508
General Mills Inc. 898 64,319
Gillette Co. 305 30,633
Hershey Foods Corp. 379 23,474
International Flavours 325 16,738
International Multifoods Corp. 273 7,729
Kellogg Co. 401 19,900
Kimberly Clark Corp. 4,587 226,196
Nestle S.A. (Regd.) 30 44,943
Pepsico Inc. 7,939 289,277
Philip Morris Cos. Inc. 5,995 271,649(h)
Procter & Gamble Co. 2,855 227,865
Ralston Purina Co. 922 85,688
Sara Lee Corp. 2,129 119,889
Sysco Corp. 561 25,561
Unilever N.V 661 41,271
2,085,977
Energy -- 10.2%
Amoco Corp. 1,750 148,969
Anadarko Petroleum Co. 628 38,112
Atlantic Richfield Co. 1,926 154,321
Baker Hughes Inc. 2,782 121,365
British Petroleum PLC ADR 1,022 81,441
Burlington Resources Inc. 2,968 133,003
Diamond Offshore Drilling Inc. 320 15,400
Elf Aquitaine S.A. ADR 273 16,005
Exxon Corp. 6,068 371,286(h)
Halliburton Co. 641 33,292
- ----------
See Notes to Schedule of Investments and Financial Statements
18
<PAGE>
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Mobil Corp. 3,070 $ 221,615
Nabors Industries Inc. 1,970 61,932(a)
Pennzoil Co. 84 5,612
Royal Dutch Petroleum Co. ADR 4,770 258,474
Schlumberger Ltd. 4,932 397,026
Texaco Inc. 2,462 133,871
Tosco Corp. 609 23,028
Total S.A. ADR 1,026 56,943
Union Pacific Resources
Group Inc. 1,093 26,505
Unocal Corp. 2,703 104,910
Valero Energy Corp. 577 18,139
Western Atlas Inc. 208 15,392(a)
2,436,641
Financial -- 12.1%
American Express Co. 2,727 243,385(h)
AmSouth Bancorp 352 19,118
Bank of New York Inc. 1,565 90,477
BankAmerica Corp. 1,310 95,630
BankBoston Corp. 1,491 140,061
Barnett Banks Inc. 288 20,700
Chase Manhattan Corp. 887 97,126
Citicorp 2,777 351,117
CMAC Investment Corp. 57 3,441
Countrywide Credit Industries 754 32,328
Crestar Financial Corp. 355 20,224
Edwards A.G. Inc. 730 29,018
Federal National Mortgage Assoc 8,928 509,454
First Chicago NBD Corp. 338 28,223
Fleet Financial Group Inc. 357 26,753
ING Groep N.V. ADR 676 28,603
Mellon Bank Corp. 956 57,957
Merrill Lynch & Co. Inc. 417 30,415
Morgan Stanley, Dean Witter 4,459 263,638
Norwest Corp. 705 27,231
State Street Corp. 1,138 66,217
Summit Bancorp 561 29,873
T. Rowe Price & Associates 305 19,177
Travelers Group Inc. 9,062 488,215
Trizec Hahn Corp. 433 10,040
United States Bancorp 369 41,305
Wells Fargo & Co. 374 126,950
2,896,676
Healthcare -- 12.0%
Abbott Laboratories 4,568 299,489(h)
Allergan Inc. 3,300 110,756
American Home Products Corp. 729 55,769
Baxter International Inc. 901 45,444
Bristol-Myers Squibb Co. 4,992 472,368
Cardinal Health Inc. 1,827 137,253
Dentsply International Inc. 1,090 33,245
Eli Lilly & Co. 673 46,858
Johnson & Johnson 6,002 395,382
Lincare Holdings Inc. 753 42,921(a)
Merck & Co. Inc. 3,382 359,337
Pfizer Inc. 3,719 277,298
Scherer (R.P.) Corp. 1,406 85,766(a)
Schering Plough Corp. 2,437 151,399
Smithkline Beecham PLC ADR 2,831 145,620
Sun Healthcare Group Inc. 817 15,829(a)
Sybron International Corp. 481 22,577(a)
<PAGE>
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Tenet Healthcare Corp. 545 $ 18,053(a)
Watson Pharmaceuticals Inc. 4,713 152,878(a)
2,868,242
Insurance -- 6.2%
AEGON N.V 144 12,906
American International Group Inc. 2,384 259,260
Chubb Corp. 1,787 135,142
CIGNA Corp. 176 30,459
Equitable Cos. Inc. 320 15,920
General Reinsurance Corp. 1,204 255,248
Hartford Financial Services
Group Inc. 369 34,525
Jefferson-Pilot Corp. 164 12,772
Lincoln National Corp. 1,234 96,406
Loews Corp. 2,133 226,365
Marsh & McLennan Cos. Inc. 1,940 144,651
Provident Cos. Inc. 3,591 138,702
Reliastar Financial Corp. 1,312 54,038
TIG Holdings Inc. 962 31,926
UNUM Corp. 696 37,845
1,486,165
Retail Trade -- 4.6%
American Stores Co. 1,623 33,373
Arbor Drugs Inc. 2,668 49,358
Costco Cos. Inc. 1,298 57,923(a)
Dayton Hudson Corp. 1,555 104,963
Federated Department Stores Inc. 1,715 73,852(a)
Home Depot Inc. 3,075 181,041
Lowes Cos. Inc. 1,378 65,713
Sears Roebuck & Co. 3,443 155,796
Toys 'R Us Inc. 2,427 76,299(a)
Wal-Mart Stores Inc. 7,642 301,381
1,099,699
Technology - Electronics and Equipment -- 5.6%
Analog Devices Inc. 192 5,316(a)
Applied Materials Inc. 705 21,238(a,h)
Cisco Systems Inc. 2,717 151,445(a)
Compaq Computer Corp. 224 12,642
Hewlett Packard Co. 1,955 122,187
Intel Corp. 4,666 327,786
International Business Machines 3,986 416,786
Perkin Elmer Corp. 499 35,460
Pitney Bowes Inc. 1,603 144,170
Storage Technology Corp. 369 22,855(a)
Sun Microsystems Inc. 769 30,664(a)
Varian Associates Inc. 947 47,883
1,338,432
Technology - Software & Services -- 4.7%
Automatic Data Processing Inc. 3,222 197,750
Computer Associates
International Inc. 2,284 120,767
Equifax Inc. 8,447 299,341
First Data Corp. 10,269 300,368
Microsoft Corp. 339 43,816(a)
Reuters Holdings PLC ADR
(Class B) 2,384 157,940
UNOVA Inc. 522 8,580(a)
1,128,562
- ----------
See Notes to Schedule of Investments and Financial Statements
19
<PAGE>
U.S. EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Transportation -- 1.9%
Burlington Northern Santa Fe 1,611 $ 149,722
Canadian Pacific Ltd. 3,604 98,209
Continental Airlines Inc.(Class B) 2,068 99,523(a)
Delta Air Lines Inc. 256 30,464
GATX Corp. 58 4,209
Laidlaw Inc. 401 5,464
Pittston Brinks Group 641 25,800
Union Pacific Corp. N.V 593 37,025
450,416
Utilities -- 7.1%
360 Communications Co. 160 3,230(a)
Airtouch Communications Inc. 7,422 308,477
American Electric Power Inc. 1,395 72,017
American Telephone &
Telegraph Corp. 1,698 104,002(h)
Bell Atlantic Corp. 1,539 140,049
Bellsouth Corp. 2,176 122,536
CMS Energy Corp. 641 28,244
Duke Energy Corp. 1,507 83,450
El Paso Natural Gas Co. 417 27,731
Florida Progress Corp. 962 37,759
FPL Group Inc. 966 57,175
GTE Corp. 1,282 66,985
MCN Corp. 481 19,420
New Century Energies Inc. 705 33,796
Northern States Power Co. 316 18,407
NTL Inc. 4,054 113,005(a)
PG&E Corp. 433 13,179
Pinnacle West Capital Corp. 426 18,052
SBC Communications Inc. 3,002 219,896
Sonat Inc. 962 44,012
Sprint Corp. 782 45,845
U.S. West Inc. 1,131 51,036
WorldCom Inc. 2,565 77,591(a)
1,705,894
Total Common Stock
(Cost $22,201,424) 22,752,853
- --------------------------------------------------------------------------------
Preferred Stock -- 0.6%
- --------------------------------------------------------------------------------
Airtouch Communications Inc.
(Class B), 6.00% 166 5,914
Microsoft Corp. (Series A), $2.20 1,530 137,508
Total Preferred Stock
(Cost $143,277) 143,422
Total Investments in Securities
(Cost $22,344,701) 22,896,275
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Short-Term Investments -- 4.2%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund
(Cost $990,895) 990,895 $ 990,895
Other Assets and Liabilities,
net 0.1% 29,634
- --------------------------------------------------------------------------------
NET ASSETS -- 100% $23,916,804
================================================================================
<PAGE>
OTHER INFORMATION
- --------------------------------------------------------------------------------
The U.S. Equity Fund had the following long Futures Contracts open at December
31, 1997:
NUMBER
EXPIRATION OF UNDERLYING UNREALIZED
DESCRIPTION DATE CONTRACTS FACE VALUE (LOSS)
- --------------------------------------------------------------------------------
S&P 500 March 1998 2 $ 489,550 ($ 2,100)
- ----------
See Notes to Schedule of Investments and Financial Statements
20
<PAGE>
S&P 500 INDEX FUND
- --------------------------------------------------------------------------------
Q&A
James B. May leads a team of portfolio managers for the S&P 500 Index Fund.
James has been an investment officer and portfolio manager in the U.S.
Structured Products Group at State Street Bank and Trust Company since 1994.
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 PERIOD DECEMBER 30, 1996 THROUGH DECEMBER 31, 1997?
A. The S&P 500 Index Fund posted a total return of 30.33%. This compares with a
31.08% return for the Standard & Poor's 500 Index. Our Lipper peer group of
26 S&P 500 Index Objective annuity funds posted an average return of 32.55%
for the one-year period ended December 31, 1997.
GEIM assumed management responsibility for the fund on May 1, 1997. Effective
July 24, 1997, State Street Global Advisors, a division of State Street Bank
and Trust Company became the investment sub-adviser of the fund.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. Strong performance was largely due to a good environment for equities in
1997. For much of the year, falling interest rates, low inflation and solid
corporate earnings served as a favorable backdrop for stocks, particularly
the large-cap stocks that comprise the S&P 500 Index. The financial sector
was the best performing industry in the index, followed by health care. Since
stocks in the financial sector are interest-rate sensitive, the decline in
rates was a positive development for these investments. The sector also
benefitted from strong corporate earnings and industry consolidation.
Healthcare stocks did particularly well when the economy's growth prospects
came into question as a result of the economic and currency crisis in
southeast Asia. Healthcare stocks are less sensitive to economic downturns
than most other industry groups.
Q. WHAT IS YOUR OUTLOOK FOR THE S&P 500 INDEX FUND?
A. The stock market may experience above average market volatility in the
coming months due to the financial turmoil in Asia and the spillover effect
it is likely to have on the earnings of U.S. corporations. However, the
foundation of the U.S. economy remains solid, with inflation low and interest
rates still trending lower. Since we are passive managers we will maintain a
fully invested position at all times in our ongoing effort to duplicate the
S&P 500 Index.
21
<PAGE>
S&P 500 INDEX FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMPARISON OF CHANGES IN
VALUE OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
S&P 500 INDEX FUND S&P 500
12-87 10000 10000
12-88 12327.93 11664.54
12-89 15468.67 15343.32
12-90 13886.6 14858.2
12-91 18659.5 19401.24
12-92 20223.5 20900.74
12-93 23134.39 22992.73
12-94 23116.79 23291.23
12-95 31471.44 32024.19
12-96 39185.61 40092.07
12-97 51069.3 52552.22
..... S&P 500 Index Fund (ending value $51,069)
- ----- S&P 500 (ending value $52,552)
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
ONE FIVE TEN
YEAR YEAR YEAR
- --------------------------------------------------------------------------------
S&P 500 Index Fund 30.33%* 20.35% 17.71%
- --------------------------------------------------------------------------------
S&P 500 31.08%* 20.25% 18.05%
- --------------------------------------------------------------------------------
Lipper peer group average** 32.55% 19.81% 17.52%
- --------------------------------------------------------------------------------
Inception date 4/15/85
- --------------------------------------------------------------------------------
INVESTMENT PROFILE
A mutual fund designed for investors who seek long-term growth of capital and
accumulation of income by investing in common stocks comprised in the Standard &
Poor's 500 Composite Stock Price Index.
- --------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS
AT DECEMBER 31, 1997
- --------------------------------------------------------------------------------
General Electric Co. 3.0%
- --------------------------------------------------------------------------------
Coca Cola Co. 2.1%
- --------------------------------------------------------------------------------
Microsoft Corp. 1.9%
- --------------------------------------------------------------------------------
Exxon Corp. 1.9%
- --------------------------------------------------------------------------------
Merck & Co. Inc. 1.6%
- --------------------------------------------------------------------------------
Royal Dutch Petroleum Co. ADR 1.5%
- --------------------------------------------------------------------------------
Intel Corp. 1.4%
- --------------------------------------------------------------------------------
Philip Morris Cos. Inc. 1.4%
- --------------------------------------------------------------------------------
Procter & Gamble Co. 1.3%
- --------------------------------------------------------------------------------
International Business Machines 1.3%
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
SECTOR ALLOCATION
AS OF DECEMBER 31, 1997
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Financial 12.4%
Consumer - Stable 10.9%
Healthcare 10.6%
Utilities 9.7%
Capital Goods 8.9%
Technology - Electronics and Equipment 8.4%
Consumer - Cyclical 8.2%
Energy 7.9%
Short-Term Investments 6.1%
Other 16.9%+
* For the period December 30, 1996 through December 31, 1997.
** Lipper performance comparison are based on average annual total returns for
the periods indicated in the S&P 500 Objective peer group consisting of 26,
15 and 7 underlying annuity funds, respectively.
+ Percentage of individual sectors are less than 5.5% of the fund's net
assets.
See page 47 for Notes to Performance.
Past performance is no guarantee of future results.
22
<PAGE>
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
- --------------------------------------------------------------------------------
S&P 500 INDEX FUND
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Common Stock -- 93.6%
- --------------------------------------------------------------------------------
Basic Materials -- 4.0%
Air Products & Chemicals Inc. 2,266 $ 186,378(h)
Alcan Aluminum Ltd. 4,477 123,677
Allegheny Teldyne Inc. 3,502 90,614
Aluminum Co. of America 3,488 245,468
Armco Inc. 1,591 7,856(a)
Asarco Inc. 838 18,803
Barrick Gold Corp. 7,433 138,440
Battle Gold Co. 4,553 26,749
Bethlehem Steel Corp. 2,266 19,544(a)
Boise Cascade Corp. 1,123 33,971
Champion International Corp. 1,925 87,227
Cyprus Amax Minerals Co. 1,691 25,999
Dow Chemical Co. 4,720 479,080
Du Pont de Nemours (E.I.) & Co. 23,111 1,388,104
Eastman Chemical Co. 1,559 92,858
Echo Bay Mines Ltd. 2,079 5,068
Ecolab Inc. 1,263 70,018
Engelhard Corp. 2,846 49,449
FMC Corp. 753 50,686(a)
Fort James Corp. 4,384 167,688
Freeport McMoran Copper &
Gold Inc. (Class A) 3,984 62,748
Georgia Pacific Corp. 1,864 113,238
Goodrich (B.F.) Co. 1,601 66,341
Great Lakes Chemical Corp. 1,197 53,715
Hercules Inc. 2,028 101,527
Homestake Mining Co. 2,889 25,640
Inco Ltd. 3,312 56,304
Inland Steel Industries Inc. 931 15,943
International Paper Co. 6,081 262,243
Louisiana Pacific Corp. 2,022 38,418
Mead Corp. 1,958 54,824
Monsanto Co. 12,079 507,318
Morton International Inc. 2,623 90,166
Nalco Chemical Co. 1,305 51,629
Newmont Mining Corp. 3,128 91,885
Nucor Corp. 1,809 87,397
Phelps Dodge Corp. 1,167 72,646
Placer Dome Inc. 4,774 60,570
Potlatch Corp. 530 22,790
PPG Industries Inc. 3,737 213,476
Praxair Inc. 3,135 141,075
Reynolds Metals Co. 1,485 89,100
Rohm Co. 1,254 120,070
Sigma-Aldrich Corp. 1,991 79,142
Union Camp Corp. 1,339 71,888
Union Carbide Corp. 2,401 103,093
USX-US Steel Group Inc. 1,665 52,031
W.R. Grace & Co. 1,487 119,611
Westvaco Corp. 2,020 63,504
Weyerhaeuser Co. 3,960 194,287
Willamette Industries Inc. 2,250 72,422
Worthington Industries Inc. 2,141 35,327
6,498,045
Capital Goods -- 8.9%
Aeroquip-Vickers Inc. 517 25,365
AlliedSignal Inc. 11,644 453,388
<PAGE>
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
AMP Inc. 4,377 $ 183,834
Armstrong World Industries Inc. 815 60,921
Avery Dennison Corp. 2,055 91,961
Boeing Co. 20,316 994,214
Browning-Ferris Industries Inc. 3,980 147,260
Case Corp. 1,495 90,354
Caterpillar Inc. 7,516 364,996
CBS Corp. 14,570 428,904
Centex Corp. 530 33,357
Cincinnati Milacron Inc. 794 20,594
Cooper Industries Inc. 2,371 116,179
Corning Inc. 4,613 171,258
Crane Co. 885 38,387
Cummins Engine Co. Inc. 789 46,600
Deere & Co. 5,220 304,391
Dover Corp. 4,758 171,883
Eaton Corp. 1,550 138,337
Emerson Electric Co. 9,174 517,758
Fleetwood Enterprises Inc. 730 30,979
Fluor Corp. 1,652 61,744
Foster Wheeler Corp. 806 21,812
General Dynamics Corp. 1,241 107,269
General Electric Co. 66,765 4,898,882
General Signal Corp. 1,044 44,044
Grainger (W.W.) Inc. 991 96,313
Harnischfeger Industries Inc. 933 32,947
Honeywell Inc. 2,592 177,552
Illinois Tool Works Inc. 4,997 300,445
Ingersoll Rand Co. 3,299 133,610
Johnson Controls Inc. 1,741 83,133
Kaufman & Broad Home Corp. 780 17,501
Lockheed Martin Corp. 3,976 391,636
Masco Corp. 3,295 167,633
McDermott International Inc. 1,119 40,983
Millipore Corp. 945 32,071
Minnesota Mining &
Manufacturing Co. 8,340 684,401
Nacco Industries Inc. 122 13,077
National Service Industries Inc. 976 48,373
Navistar International Corp. Inc. 1,595 39,576(a)
Northrop Grumman Corp. 1,361 156,515
Owens Corning 1,176 40,131
PACCAR Inc. 1,660 87,150
Pall Corp. 2,478 51,264
Parker Hannifin Corp. 2,215 101,613
Pulte Corp. 411 17,185
Raychem Corp. 1,732 74,584
Raytheon Co. (Class B) 6,825 344,650
Rockwell International Corp. 4,168 217,778
Sherwin-Williams Co. 3,363 93,323
Tenneco Inc. 3,348 132,246
Textron Inc. 3,268 204,250
Thermo Electron Corp. 3,228 143,646(a)
Thomas & Betts Corp. 1,093 51,644
Timken Co. 1,231 42,316
Tyco International Ltd. 10,900 491,181
United Technologies Corp. 4,743 345,350
Waste Management Inc. 9,520 261,800
14,680,548
Consumer - Cyclical -- 8.2%
American Greetings Corp.
(Class A) 1,417 55,440(h)
Black & Decker Corp. 1,907 74,492
Block H & R Inc. 2,052 91,955
Briggs & Stratton Corp. 534 25,932
- ----------
See Notes to Schedule of Investments and Financial Statements
23
<PAGE>
S&P 500 INDEX FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Brunswick Corp. 1,968 $ 59,655
Cendant Corp. 16,308 560,576(a)
Ceridian Corp. 1,504 68,902(a)
Chrysler Corp. 13,490 474,679
Clear Channel Communications
Inc 2,000 158,875(a)
Cognizant Corp. 3,242 144,472
Comcast Corp. (Class A) 6,972 220,054
Cooper Tire & Rubber Co. 1,823 44,436
Dana Corp. 2,319 110,153
Darden Restaurants Inc. 3,086 38,575
Deluxe Corp. 1,629 56,201
Disney (Walt) Co. 13,779 1,364,982
Donnelley (R.R.) & Sons Co. 2,952 109,962
Dow Jones & Co. Inc. 1,942 104,261
Dun & Bradstreet Corp. 3,442 106,487
Eastman Kodak Co. 6,675 405,923
Echlin Inc. 1,331 48,166
Ford Motor Co. 24,500 1,192,844
Fruit of the Loom Inc. 1,647 42,204(a)
Gannett Inc. 5,708 352,826
General Motors Corp. 14,394 872,636
Genuine Parts Co. 3,596 122,039
Goodyear Tire & Rubber Co. 3,119 198,446
Harland (John H.) Co. 460 9,660
Harrahs Entertainment Inc. 1,835 34,636(a)
Hasbro Inc. 2,531 79,727
Hilton Hotels Corp. 4,988 148,393
Interpublic Group Cos. Inc. 2,515 125,278
ITT Corp. 2,336 193,596(a)
ITT Industries Inc. 2,363 74,139
Jostens Inc. 776 17,897
King World Productions Inc. 757 43,717
Knight Ridder Inc. 1,700 88,400
Liz Claiborne Inc. 1,365 57,074
Marriot International Inc. 2,711 187,737
Mattel Inc. 5,811 216,460
Maytag Corp. 1,995 74,438
McDonald's Corp. 14,017 669,312
McGraw Hill Cos. Inc. 1,985 146,890
Meredith Corp. 998 35,616
Mirage Resorts Inc. 3,600 81,900(a)
New York Times Co. 1,944 128,547
Newell Co. 3,171 134,767
Nike Inc. 5,804 227,807
Omnicom Group 3,400 144,075
Polaroid Corp. 978 47,616
Reebok International Ltd. 1,130 32,558(a)
Rubbermaid Inc. 3,036 75,900
Russell Corp. 770 20,453
Safety-Kleen Corp. 1,368 37,535
Service Corp. International 5,018 185,352
Shared Medical System Corp. 453 29,898
Snap-On Inc. 1,209 52,743
Springs Industries Inc. 400 20,800
Stanley Works 1,826 86,164
Tele-Communications Inc.
(Series A) 10,525 294,042(a)
Time Warner Inc. 11,388 706,056
Times Mirror Co. 1,895 116,542
Tribune Co. 2,438 151,765
TRW Inc. 2,495 133,171
Tupperware Corp. 1,228 34,231
U.S. West Communications Group 12,626 364,576(a)
VF Corp. 2,502 114,936
Viacom Inc. (Class B) 7,082 293,460(a)
Wendy's International Inc. 2,631 63,308
<PAGE>
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Whirlpool Corp. 1,509 $ 82,995
Xerox Corp. 6,745 497,865
13,467,205
Consumer - Stable -- 10.9%
Adolph Coors Co. 765 25,436
Alberto-Culver Co. 1,033 33,121
Anheuser Busch Cos. Inc. 10,154 446,776
Archer-Daniels Midland Co. 11,235 243,659
Avon Products Inc. 2,682 164,608
Ball Corp. 554 19,563
Bemis Inc. 1,081 47,631
Brown-Forman Corp. 1,329 73,427
Campbell Soup Co. 9,376 544,980
Clorox Co. 2,042 161,446
Coca Cola Co. 50,551 3,367,960(h)
Colgate-Palmolive Co. 6,086 447,321
Conagra Inc. 9,468 310,669
CPC International Inc. 2,945 317,324
Crown Cork & Seal Inc. 2,614 131,027
Fortune Brands Inc. 3,441 127,532
General Mills Inc. 3,211 229,988
Gillette Co. 11,483 1,153,324
Heinz (H.J.) Co. 7,397 375,860
Hershey Foods Corp. 2,892 179,123
International Flavours 2,147 110,570
Kellogg Co. 8,290 411,391
Kimberly Clark Corp. 11,436 563,938
Owens Illinois Inc. 2,800 106,225(a)
Pepsico Inc. 31,010 1,129,927
Philip Morris Cos. Inc. 49,379 2,237,486
Pioneer Hi-Bred International Inc. 1,300 139,425
Procter & Gamble Co. 27,388 2,185,905
Quaker Oats Co. 2,728 143,902
Ralston Purina Co. 2,186 203,161
Sara Lee Corp. 9,881 556,424
Seagram Ltd. 7,435 240,243
Stone Container Corp. 1,979 20,656
Supervalu Inc. 1,200 50,250
Sysco Corp. 3,436 156,553
Temple Inland Inc. 1,126 58,904
Unilever N.V 13,156 821,428
UST Inc. 3,679 135,893
Whitman Corp. 2,049 53,402
Wrigley (W.M.) Junior Co. 2,334 185,699
17,912,157
Energy -- 7.9%
Amerada Hess Corp. 1,790 98,226
Amoco Corp. 10,023 853,208
Anadarko Petroleum Co. 1,200 72,825
Apache Corp. 1,900 66,619
Ashland Oil Inc. 1,507 80,907
Atlantic Richfield Co. 6,609 529,546
Baker Hughes Inc. 3,600 157,050
Burlington Resources Inc. 3,541 158,681
Chevron Corp. 13,441 1,034,957
Dresser Industries Inc. 3,524 147,788
Exxon Corp. 50,189 3,070,939
Halliburton Co. 5,336 277,138
Helmerich & Payne Inc. 471 31,969
Kerr-McGee Corp. 923 58,437
Mobil Corp. 16,062 1,159,476
Occidental Petroleum Corp. 7,010 205,481
ONEOK Inc. 707 28,545
Oryx Energy Co. 2,064 52,632(a)
- ----------
See Notes to Schedule of Investments and Financial Statements
24
<PAGE>
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Pennzoil Co. 994 $ 66,412
Phillips Petroleum Co. 5,529 268,848
Rowan Cos. Inc. 1,777 54,199(a)
Royal Dutch Petroleum Co. ADR 43,816 2,374,279
Schlumberger Ltd. 10,054 809,347
Sun Co. Inc. 1,388 58,383
Texaco Inc. 11,096 603,345
Union Pacific Resources Group Inc. 5,029 121,953
Unocal Corp. 4,938 191,656
USX-Marathon Group 5,792 195,480
Western Atlas Inc. 1,100 81,400(a)
12,909,726
Financial -- 12.4%
Ahmanson (H.F.) & Co. 1,974 132,135(h)
American Express Co. 9,574 854,479(h)
American General Corp. 5,003 270,476(h)
Banc One Corp. 11,900 646,319
Bank of New York Inc. 7,755 448,336
BankAmerica Corp. 14,214 1,037,622
BankBoston Corp. 2,983 280,216
Bankers Trust New York Corp. 2,019 227,011
Barnett Banks Inc. 4,015 288,578
BB&T Corp. 2,800 179,375
Beneficial Corp. 1,106 91,936
Charles Schwab Corp. 5,558 233,089
Chase Manhattan Corp. 8,577 939,181
Cipsco Inc. 600 26,556
Citicorp 9,316 1,177,892
Comerica Inc. 2,104 189,886
Corestates Financial Corp. 4,040 323,452
Countrywide Credit Industries 2,100 90,038
Federal Home Loan Mortgage
Corp 14,165 594,045
Federal National Mortgage Assoc 21,776 1,242,593
Fifth Third Bancorp 3,171 259,229
First Chicago NBD Corp. 5,960 497,660
First Union Corp. 12,870 659,587
Fleet Financial Group Inc. 5,216 390,874
Golden West Financial Corp. 1,155 112,973
Green Tree Financial Corp. 2,651 69,423
Household International Inc. 2,200 280,637
Huntington Bancshares Inc. 3,800 136,800
KeyCorp 4,564 323,188
MBIA Inc. 1,790 119,594
Mellon Bank Corp. 5,264 319,130
Merrill Lynch & Co. Inc. 6,817 497,215
MGIC Investment Corp. 2,259 150,224
Morgan (J.P.) & Co. Inc. 3,664 413,574
Morgan Stanley, Dean Witter 11,998 709,382
National City Corp. 4,332 284,829
Nationsbank Corp. 14,605 888,167
Norwest Corp. 15,358 593,203
PNC Bank Corp. 6,308 359,950
Providian Financial Corp. 1,898 85,766
Republic of New York Corp. 1,123 128,233
State Street Corp. 3,200 186,200
Suntrust Banks Inc. 4,229 301,845
Synovus Financial Corp. 3,500 114,625
Transamerica Corp. 1,288 137,172
Travelers Group Inc. 23,445 1,263,099
United States Bancorp 5,009 560,695
Wachovia Corp. 4,266 346,079
Washington Mutual Inc. 5,301 338,238
Wells Fargo & Co. 1,746 592,658
20,393,464
<PAGE>
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Healthcare -- 10.6%
Abbott Laboratories 15,598 $ 1,022,644(h)
Allergan Inc. 1,276 42,826
Alza Corp. 1,761 56,022(a)
American Home Products Corp. 13,327 1,019,515(h)
Amgen Inc. 5,348 289,460(h)
Bard (C.R.) Inc. 1,251 39,172
Bausch & Lomb Inc. 1,128 44,697
Baxter International Inc. 5,874 296,270
Becton, Dickinson & Co. 2,435 121,750
Biomet Inc. 2,207 56,554
Boston Scientific Corp. 4,094 187,812(a)
Bristol-Myers Squibb Co. 20,354 1,925,997(h)
Cardinal Health Inc. 2,349 176,469
Columbia/HCA Healthcare
Corp. 13,023 385,806(h)
Eli Lilly & Co. 22,616 1,574,639
Guidant Corp. 3,112 193,722
HBO & Co. 4,000 192,000
Healthsouth Corp. 8,236 228,549(a)
Humana Inc. 3,227 66,960(a)
Johnson & Johnson 27,383 1,803,855
Mallinckrodt Inc. 1,504 57,152
Manor Care Inc. 1,237 43,295
Medtronic Inc. 9,666 505,653
Merck & Co. Inc. 24,475 2,600,469
Pfizer Inc. 26,348 1,964,573
Pharmacia & Upjohn Inc. 10,485 384,013
Schering Plough Corp. 14,929 927,464(h)
St. Jude Medical Inc. 1,923 58,652(a)
Tenet Healthcare Corp. 6,397 211,901(a)
United Healthcare Corp. 3,747 186,179
United States Surgical Corp. 1,445 42,357
Warner-Lambert Co. 5,549 688,076
17,394,503
Insurance -- 3.6%
Aetna Inc. 2,952 208,300(h)
Allstate Corp. 8,738 794,066
American International
Group Inc. 14,315 1,556,756(h)
Aon Corp. 3,524 206,595
Chubb Corp. 3,597 272,023
CIGNA Corp. 1,521 263,228
Cincinnati Financial Corp. 1,100 154,825
Conseco Inc. 3,747 170,254
General Reinsurance Corp. 1,628 345,136
Hartford Financial Services
Group Inc. 2,352 220,059
Jefferson-Pilot Corp. 1,455 113,308
Lincoln National Corp. 2,056 160,625
Loews Corp. 2,316 245,785
Marsh & McLennan Cos. Inc. 3,536 263,653
Progressive Corp. 1,500 179,813
Safeco Corp. 2,781 135,574
St. Paul Cos. Inc. 1,738 142,625
SunAmerica Inc. 3,900 166,725
Torchmark Corp. 2,800 117,775
UNUM Corp. 2,782 151,271
USF & G Corp. 2,168 47,832
5,916,228
Retail Trade -- 4.5%
Albertsons Inc. 5,147 243,839
American Stores Co. 5,452 112,107(h)
Autozone Inc. 3,044 88,276(a)
- ----------
See Notes to Schedule of Investments and Financial Statements
25
<PAGE>
S&P 500 INDEX FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Charming Shoppes Inc. 1,573 $ 7,373(a)
Circuit City Stores Inc. 2,063 73,365
Costco Cos. Inc. 4,233 188,898(a)
CVS Corp. 3,428 219,606
Dayton Hudson Corp. 4,538 306,315
Dillards Inc. 2,295 80,899
Federated Department Stores Inc. 4,204 181,035(a)
Gap Inc. 8,054 285,396
Giant Foods Inc. 1,092 36,787
Great Atlantic & Pacific Tea Co.
Inc. 770 22,859
Harcourt General Inc. 1,461 79,990
Home Depot Inc. 14,856 874,647
K Mart Corp. 9,731 112,515(a)
Kroger Co. 5,065 187,088(a)
Limited Inc. 5,447 138,899
Longs Drug Stores Corp. 782 25,122
Lowes Cos. Inc. 3,482 166,048
May Department Stores Co. 4,656 245,313
Mercantile Stores Inc. 749 45,595
Nordstrom Inc. 1,496 90,321
Penney J.C. Inc. 5,187 312,841
Pep Boys Manny Moe & Jack 1,103 26,334
Rite Aid Corp. 2,629 154,289
Sears Roebuck & Co. 8,145 368,561
Tandy Corp. 2,028 78,205
TJX Cos. Inc. 3,220 110,688
Toys 'R Us Inc. 5,735 180,294(a)
Tricon Global Restaurants Inc. 3,011 87,507(a)
Wal-Mart Stores Inc. 46,112 1,818,542
Walgreen Co. 10,250 321,594
Winn Dixie Stores Inc. 2,940 128,441
Woolworth Corp. 2,600 52,975(a)
7,452,564
Technology - Electronics and Equipment -- 8.4%
3Com Corp. 7,254 253,437(a)
Advanced Micro Devices Inc. 2,737 49,095(a,h)
Andrew Corp. 1,856 44,544(a)
Apple Computer 2,360 30,975(a)
Applied Materials Inc. 7,300 219,912(a)
Bay Networks Inc. 4,245 108,513(a)
Cabletron Systems Inc. 3,126 46,890(a)
Cisco Systems Inc. 20,635 1,150,373(a)
Compaq Computer Corp. 15,585 879,578
Data General Corp. 895 15,607(a)
Dell Computer Corp. 6,656 559,104(a)
Digital Equipment Corp. 3,047 112,739(a)
DSC Communications Corp. 2,350 56,400(a)
EG & G Inc. 705 14,673
EMC Corp. 10,336 283,594(a)
General Semiconductor Inc. 1 9(a)
Harris Corp. 1,662 76,244
Hewlett Packard Co. 21,341 1,333,812
Ikon Office Solutions Inc. 2,910 81,844
Intel Corp. 33,302 2,339,465
International Business Machines 19,865 2,077,134
KLA-Tencor Corp. 1,700 65,662(a)
LSI Logic Corp. 2,996 59,171(a)
Lucent Technologies Inc. 13,027 1,040,532
Micron Technology Inc. 4,227 109,902(a)
Moore Corp. Ltd. 1,774 26,832
Motorola Inc. 12,251 699,073
National Semiconductor Corp. 3,583 92,934(a)
NextLevel Systems Inc. 2,943 52,606(a)
Northern Telecom Ltd. 5,457 485,673
<PAGE>
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Perkin Elmer Corp. 850 $ 60,403
Pitney Bowes Inc. 2,916 262,258
Scientific-Atlanta Inc. 1,553 26,013
Seagate Technology 4,890 94,132(a)
Silicon Graphics Inc. 3,533 43,942(a)
Sun Microsystems Inc. 7,695 306,838(a)
Tektronix Inc. 1,038 41,196
Tellabs Inc. 3,776 199,656(a)
Texas Instruments Inc. 7,984 359,280
13,760,045
Technology - Software & Services -- 3.3%
Adobe Systems Inc. 1,498 61,793(h)
Autodesk Inc. 912 33,744
Automatic Data Processing Inc. 6,059 371,871
Computer Associates International
Inc . 11,181 591,195
Computer Sciences Corp. 1,541 128,673(a)
Equifax Inc. 3,000 106,313
First Data Corp. 8,881 259,769
Microsoft Corp. 24,564 3,174,897(a)
Novell Inc. 6,466 48,495(a)
Oracle Systems Corp. 20,272 452,319(a)
Parametric Technology Corp. 2,503 118,580(a)
Unisys Corp. 3,509 48,687(a)
5,396,336
Transportation -- 1.2%
AMR Corp. 1,857 238,624(a,h)
Burlington Northern Santa Fe 3,183 295,820
Caliber System Inc. 784 38,171
CSX Corp. 4,538 245,052
Delta Air Lines Inc. 1,491 177,429
Federal Express Corp. 2,303 140,627(a)
Laidlaw Inc. 6,488 88,399
Norfolk Southern Corp. 7,901 243,450
Ryder System Inc. 1,531 50,140
Southwest Airlines Co. 4,296 105,789
U.S. Airways Group Inc. 1,807 112,938(a)
Union Pacific Corp. N.V 4,954 309,315
2,045,754
Utilities -- 9.7%
Airtouch Communications Inc. 10,386 431,668(a,h)
Alltel Corp. 3,794 155,791(h)
American Electric Power Inc. 3,797 196,020(h)
American Telephone & Telegraph
Corp. 33,092 2,026,885(h)
Ameritech Corp. 11,202 901,761(h)
Baltimore Gas & Electric Co. 3,103 105,696
Bell Atlantic Corp. 15,834 1,440,894
Bellsouth Corp. 20,199 1,137,456
Carolina Power & Light Co. 3,060 129,859
Central & South West Corp. 4,248 114,962
CINergy Corp. 3,153 120,799
Coastal Corp. 2,271 140,660
Columbia Gas Systems Inc. 1,123 88,226
Consolidated Edison Co. of
New York Inc. 4,907 201,187
Consolidated Natural Gas Co. 1,915 115,858
Dominion Resources Inc. 3,689 157,013
DTE Energy Co. 2,866 99,414
Duke Energy Corp. 7,467 413,485
Eastern Enterprises 402 18,090
Edison International 7,942 215,923
- ----------
See Notes to Schedule of Investments and Financial Statements
26
<PAGE>
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Enron Corp. 6,500 $ 270,156
Entergy Corp. 4,847 145,107
FirstEnergy Corp. 4,577 132,733(a)
FPL Group Inc. 3,631 214,910
Frontier Corp. 3,243 78,035
GPU Inc. 2,400 101,100
GTE Corp. 19,661 1,027,287
Houston Industries Inc. 6,918 184,624
MCI Communications Corp. 14,125 604,727
Niagara Mohawk Power Corp. 2,854 29,967(a)
Nicor Inc. 943 39,783
Northern States Power Co. 1,430 83,298
Pacific Enterprises 1,669 62,796
Pacificorp 6,299 172,041
Peco Energy Co. 4,422 107,234
Peoples Energy Corp. 721 28,389
PG&E Corp. 9,154 278,625
PP&L Resources Inc. 3,422 81,914
Public Service Enterprise Group 4,659 147,632
SBC Communications Inc. 18,690 1,369,043
Sonat Inc. 1,787 81,755
Southern Co. 14,158 366,338
Sprint Corp. 8,826 517,424
Texas Utilities Co. 5,087 211,419
U.S. West Inc. 9,856 444,752(a)
Unicom Corp. 4,319 132,809
Union Electric Co. 2,024 87,538
Williams Cos. Inc. 6,686 189,715
WorldCom Inc. 18,398 556,540(a)
15,959,338
Total Common Stock
(Cost $123,391,790) 153,785,913
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Bonds and Notes -- 0.4%
- --------------------------------------------------------------------------------
U.S. Treasury Bills
5.07% 03/05/98
(Cost $693,703) $700,000 693,777(d)
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Preferred Stock -- 0.2%
- --------------------------------------------------------------------------------
MBNA Corp.
(Cost $202,957) 10,483 286,317
Total Investments in Securities
(Cost $124,288,450) 154,766,007
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Short-Term Investments -- 6.1%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund 5,995,040 $ 5,995,040
Money Market Obligations Trust 2,147,586 2,147,586
Valiant Fund 1,816,116 1,816,116
TOTAL SHORT-TERM INVESTMENTS
(Cost $9,958,742) 9,958,742
Other Assets and Liabilities,
net (0.3%) (430,668)
------------
NET ASSETS -- 100% $164,294,081
============
<PAGE>
OTHER INFORMATION
- --------------------------------------------------------------------------------
The S&P 500 Index Fund had the following long Futures Contracts open at December
31, 1997:
NUMBER
EXPIRATION OF UNDERLYING UNREALIZED
DESCRIPTION DATE CONTRACTS FACE VALUE GAIN
- --------------------------------------------------------------------------------
S&P 500 March 1998 37 $ 9,056,675 $ 76,725
S&P 500 June 1998 2 494,550 6,300
--------
$ 83,025
========
- ----------
See Notes to Schedule of Investments and Financial Statements
27
<PAGE>
TOTAL RETURN FUND
- --------------------------------------------------------------------------------
Q&A
David Carlson, Ralph Layman and Robert MacDougall share portfolio management
responsibility for the Total Return Fund. Dave Carlson manages the domestic
equity portion, Ralph Layman manages the international equity portion and Bob
MacDougall manages the fixed income portion of the Fund. Please refer to page 3
for Ralph's biographical details, page 10 for Dave's biographical details, and
page 38 for Bob's biographical details.
Q. HOW DID THE TOTAL RETURN FUND PERFORM COMPARED TO ITS BENCHMARKS AND LIPPER
PEER GROUP FOR THE PERIOD DECEMBER 30, 1996 THROUGH DECEMBER 31, 1997?
A. The Total Return Fund posted a total return of 17.99%. The Total Return Fund
allocates its invest-ments among several asset classes and, therefore, must
be compared with multiple benchmarks. Specifically, for the same period, U.S.
stocks as measured by the S&P 500 returned 31.08% and fixed income
securities, as measured by the Lehman Bros. Aggregate Bond Index returned
9.12%. Our Lipper peer group of 75 Flexible annuity funds posted an average
return of 18.92% for the one-year period ended December 31, 1997.
GEIM assumed portfolio management responsibility for the fund on May 1, 1997.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. Last year, U.S. stocks once again outperformed international stocks by a wide
margin. While our international holdings did well versus their respective
benchmark, they lagged the U.S. return. The Total Return Fund is somewhat
unique versus its peer balanced funds in that it holds a higher-than-average
weighting in international stocks. This allocation decision negatively
impacted our peer ranking. Our exposure to U.S. stocks participated in the
strong U.S. stock market, and the U.S. fixed income securities benefited from
low inflation and the resulting decline in interest rates.
Q. WHAT SECTORS AND INDIVIDUAL SECURITIES CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. In the U.S., the fund enjoyed superior investment results from its exposure
to financial services and healthcare stocks, two of the market's top
performing industry groups. In the financial services sector, we realized
excellent performance from American Express, Travelers Group, and Federal
National Mortgage Association, among others. Some of our better performing
healthcare stocks were Eli Lilly, Bristol-Myers and Pfizer. NTT Data, a
leading networking, integration systems and consulting company in Japan, was
among our top international stock holdings.
Q. WHAT WERE SOME REASONS THAT HAMPERED THE FUND'S PERFORMANCE?
A. Our exposure to the Japanese market was a drag on performance. However, while
the Japanese market was down about 24% due to an anemic economy, our holdings
there advanced 9%. Our above-average cash position also hindered our
investment results.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
A. Fundamentally, the economic backdrop for U.S. stocks continues to be in good
shape. Inflation remains subdued and interest rates remain low. However,
given the current level of valuations, we don't expect returns to be as high
in the U.S. as they were last year. The turmoil in Asia is likely to keep
U.S. economy from growing too strongly, which should keep interest rates from
spiking. And that should be good news for domestic fixed income securities.
Asia markets are likely to be jittery until economic stability returns to the
region. The direction of the Japanese market depends on how the government
plans to revive the economy. Finally, low interest rates and corporate
restructuring should continue to help bolster stock prices in Europe.
28
<PAGE>
TOTAL RETURN FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMPARISON OF CHANGES IN
VALUE OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
TOTAL RETURN FUND LB AGGREGATE S&P 500
12-87 10000 10000 10000
12-88 11796.04 10788.97 11664.54
12-89 13590.03 12356.53 15343.32
12-90 13537.87 13460.53 14858.2
12-91 17241.12 15614.29 19401.24
12-92 18531.39 16768.82 20900.74
12-93 21042.9 18403.91 22992.73
12-94 21574.9 17866.78 23291.23
12-95 27631.32 21167.87 32024.19
12-96 30559.24 22045.47 40092.07
12-97 36055.63 24057.08 52552.22
- ----- Total Return Fund (ending value $36,056)
..... S&P 500 (ending value $52,552)
- ----- LB Aggregate (ending value $24,057)
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
ONE FIVE TEN
YEAR YEAR YEAR
- --------------------------------------------------------------------------------
Total Return Fund 17.99%* 14.24% 13.68%
- --------------------------------------------------------------------------------
S&P 500 31.08%* 20.25% 18.05%
- --------------------------------------------------------------------------------
LB Aggregate 9.12%* 7.49% 9.18%
- --------------------------------------------------------------------------------
Lipper peer group average** 18.92% 13.00% 12.87%
- --------------------------------------------------------------------------------
Inception date 7/1/85
- --------------------------------------------------------------------------------
INVESTMENT PROFILE
Amutual fund designed for investors who seek to maximize total return through
current income and capital appreciation by investing in a range of securities,
including, common stocks, bonds and money market instruments.
- --------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS
AT DECEMBER 31, 1997
- --------------------------------------------------------------------------------
U.S. Treasury Notes 5.88% 8/31/99 2.6%
- --------------------------------------------------------------------------------
U.S. Treasury Notes 6.50% 8/31/01 2.2%
- --------------------------------------------------------------------------------
Travelers Group Inc. 1.8%
- --------------------------------------------------------------------------------
Federal National Mortgage Assoc. 1.6%
- --------------------------------------------------------------------------------
U.S. Treasury Bonds 10.63% 8/15/15 1.6%
- --------------------------------------------------------------------------------
Dover Corp. 1.5%
- --------------------------------------------------------------------------------
U.S. Treasury Notes 5.75% 11/15/00 1.5%
- --------------------------------------------------------------------------------
Schlumberger Ltd. 1.4%
- --------------------------------------------------------------------------------
U.S. Treasury Notes 7.75% 1/31/00 1.4%
- --------------------------------------------------------------------------------
U.S. Treasury Bonds 6.13% 11/15/27 1.3%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ASSET ALLOCATION
AS OF DECEMBER 31, 1997
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Domestic Equity 46.6%
Foreign Equity 16.1%
Bonds & Notes 33.9%
Other 3.4%
* For the period December 30, 1996 through December 31, 1997.
** Lipper performance comparisons are based on average annual total returns
for the periods indicated in the Flexible peer group consisting of 75, 50
and 25 underlying annuity funds, respectively.
See page 47 for Notes to Performance.
Past performance is no guarantee of future results.
29
<PAGE>
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
- --------------------------------------------------------------------------------
TOTAL RETURN FUND
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Domestic Equity -- 46.3%
- --------------------------------------------------------------------------------
Basic Materials -- 1.1%
Air Products & Chemicals Inc. 1,527 $ 125,596
Airgas Inc. 7,682 107,548(a)
Du Pont de Nemours (E.I.) & Co. 868 52,134
Morton International Inc. 7,081 243,409
528,687
Capital Goods -- 5.5%
AlliedSignal Inc. 15,866 617,782
AMP Inc. 2,592 108,864
Browning-Ferris Industries Inc. 1,281 47,397
Dover Corp. 20,824 752,267
Emerson Electric Co. 4,065 229,418
Hubbell Inc. (Class B) 7,482 368,956
Molex Inc. (Class A) 6,441 185,179
Sherwin-Williams Co. 2,470 68,543
Textron Inc. 1,240 77,500
Tyco International Ltd. 2,884 129,960
United Technologies Corp. 865 62,983
Waste Management Inc. 3,741 102,878
2,751,727
Consumer - Cyclical -- 5.0%
Carnival Corp. (Class A) 3,300 182,737
Catalina Marketing Corp. 2,071 95,784(a)
Cendant Corp. 3,140 107,937(a)
Circus Circus Enterprises Inc. 3,540 72,570(a)
Comcast Corp. (Class A) 7,141 225,388
Disney (Walt) Co. 4,977 493,034
Gannett Inc. 3,781 233,713
Harman International Industries Inc. 3,274 138,940
Interpublic Group Cos. Inc. 5,144 256,235
McDonald's Corp. 2,560 122,240
Metromedia International Group
Inc 1,801 17,110(a)
Stanley Works 1,737 81,965
Tele-Communications Inc.
(Series A) 5,411 151,170(a)
Tele-Communications Inc. Liberty
Media Group (Series A) 4,208 152,540(a)
Tele-Communications TCI Ventures
Group 2,899 82,078(a)
Time Warner Inc. 1,706 105,772
2,519,213
Consumer - Stable -- 3.7%
Anheuser Busch Cos. Inc. 2,939 129,316
Avon Products Inc. 3,221 197,689
Coca Cola Co. 663 44,172
Colgate-Palmolive Co. 1,440 105,840
Gillette Co. 1,269 127,455
Kimberly Clark Corp. 8,083 398,593
Pepsico Inc. 9,887 360,257
Philip Morris Cos. Inc. 9,018 408,628
Procter & Gamble Co. 1,213 96,813
1,868,763
<PAGE>
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Energy -- 2.7%
Amoco Corp. 947 $ 80,613
Anadarko Petroleum Co. 2,514 152,569
Atlantic Richfield Co. 2,199 176,195
Baker Hughes Inc. 4,210 183,661
Burlington Resources Inc. 1,335 59,825
Exxon Corp. 3,367 206,018
Nabors Industries Inc. 1,964 61,743(a)
Texaco Inc. 2,424 131,805
Union Pacific Resources
Group Inc. 3,206 77,746
Unocal Corp. 6,064 235,359
1,365,534
Financial -- 6.5%
American Express Co. 2,405 214,646
Citicorp 3,895 492,474
Countrywide Credit Industries 2,514 107,788
Federal National Mortgage Assoc 14,100 804,581
Green Tree Financial Corp. 393 10,292
Morgan Stanley, Dean Witter 1,202 71,068
State Street Corp. 4,743 275,983
Travelers Group Inc. 16,889 909,895
Wells Fargo & Co. 1,122 380,849
3,267,576
Healthcare -- 8.5%
Abbott Laboratories 8,283 543,054
American Home Products Corp. 1,603 122,629
Bristol-Myers Squibb Co. 4,737 448,239
Cardinal Health Inc. 5,478 411,535
Dentsply International Inc. 4,542 138,531
Eli Lilly & Co. 2,070 144,124
Johnson & Johnson 9,219 607,301
Lincare Holdings Inc. 3,140 178,980(a)
Merck & Co. Inc. 4,543 482,694
Pfizer Inc. 7,214 537,894
Scherer (R.P.) Corp. 2,606 158,966(a)
Sun Healthcare Group Inc. 3,140 60,837(a)
Sybron International Corp. 2,005 94,110(a)
Tenet Healthcare Corp. 2,272 75,260(a)
Watson Pharmaceuticals Inc. 6,948 225,376(a)
4,229,530
Insurance -- 3.1%
American International Group
Inc. 3,359 365,291
Chubb Corp. 2,872 217,195
General Reinsurance Corp. 1,136 240,832
Loews Corp. 3,474 368,679
Marsh & McLennan Cos. Inc. 3,874 288,855
UNUM Corp. 1,470 79,931
1,560,783
Miscellaneous -- 1.2%
SPDR Trust 6,000 581,625
Retail Trade -- 1.1%
Arbor Drugs Inc. 7,314 135,309
Home Depot Inc. 3,128 184,161
Toys 'R Us Inc. 6,880 216,290(a)
535,760
- ----------
See Notes to Schedule of Investments and Financial Statements
30
<PAGE>
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Technology - Electronics and Equipment -- 1.3%
Applied Materials Inc. 1,068 $ 32,174(a)
Cisco Systems Inc. 2,606 145,257(a)
Comverse Technology Inc. 628 24,492(a)
Hewlett Packard Co. 1,603 100,187
Intel Corp. 5,184 364,176
666,286
Technology - Software & Services -- 3.8%
Automatic Data Processing Inc. 7,749 475,595
Equifax Inc. 16,700 591,806
First Data Corp. 21,446 627,295
Microsoft Corp. 1,414 182,760(a)
1,877,456
Transportation -- 0.5%
Pittston Brinks Group 2,673 107,588
Union Pacific Corp. N.V 2,472 154,346
261,934
Utilities -- 2.3%
Airtouch Communications Inc. 15,498 644,136(a)
Bell Atlantic Corp. 1,470 133,770
GTE Corp. 668 34,903
NTL Inc. 10,154 283,043(a)
WorldCom Inc. 1,202 36,360(a)
1,132,212
Total Domestic Equity
(Cost $18,488,189) 23,147,086
- --------------------------------------------------------------------------------
Foreign Equity -- 16.1%
- --------------------------------------------------------------------------------
Basic Materials -- 0.6%
BASF AG 244 8,647
Billiton PLC 14,682 37,620(a)
Fresenius Medical Care AG 605 40,189(a)
Iscor Ltd. 19,910 5,891
Johnson Matthey PLC 586 5,246
Montedison S.p.A 78,875 70,849
SGL Carbon AG 844 108,846
Usinor Sacilor 3,130 45,193
322,481
Capital Goods -- 1.6%
ABB AG 96 120,558
Barlow Ltd. 2,948 25,018
Grupo Carso S.A. de C.V. ADR 2,988 35,856
Holderbank Financiere Glarus AG 44 35,894
Lyonnaise Des Eaux S.A 924 102,249
Mannesmann AG 229 115,712
PT Mulia Industrindo 37,000 4,204
Schneider S.A 1,590 86,336
Siebe PLC 9,578 187,996
Siemens AG 272 16,103
VA Technologie AG 529 80,325
810,251
<PAGE>
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Consumer - Cyclical -- 2.6%
Airtours PLC 7,579 $ 154,362
Autoliv Inc. SDR 3,404 110,824
Canon Inc. 6,000 139,695
Comcast UK Cable Partners Ltd.
(Class A) 3,807 35,929(a)
Cordiant PLC 6,793 12,273(a)
Daimler-Benz AG 1,217 85,375
Electrolux AB (Series B) 243 16,863
Granada Group PLC 8,169 124,784
Honda Motor Co. 3,000 110,056
Industrie Natuzzi S.p.A. ADR 638 13,159
Johnson Electric Holdings 10,000 28,778
Kinnevik AB (Series B) 757 12,537
LucasVarity PLC 23,989 84,714
Michelin CGDE (Regd.) (Class B) 1,117 56,235
Reed International PLC 9,181 87,463
Renault S.A 2,133 60,001(a)
Sony Corp. 1,800 159,914
1,292,962
Consumer - Stable -- 0.4%
Coca Cola Amatil Ltd. 7,671 57,325
Gruma S.A. de C.V. (Series B) 3,632 14,401(a)
Nestle S.A. (Regd.) 18 26,966
Panamerican Beverages Inc.
(Class A) 1,936 63,162
San Miguel Corp. 13,330 16,292
178,146
Energy -- 3.2%
Coflexip S.A. ADR 1,669 92,629
ENI S.p.A. (Regd.) 2,217 12,570
OMV AG 297 41,147
Repsol S.A 3,480 148,474
Royal Dutch Petroleum Co. ADR 7,519 407,436
Schlumberger Ltd. 8,684 699,062
Total S.A. (Class B) 1,789 194,699
Veba AG 77 5,243
1,601,260
Financial -- 2.0%
Alpha Credit Bank (Regd.) 330 19,256
Banco Comercial Portugues
(Regd.) 3,352 68,552
Banco Comercial Portugues ADR 1,363 27,601
Banco Santander S.A. (Regd.) 1,781 59,503
Bank of Scotland PLC 5,487 49,838
Bayerische Vereinsbank AG 1,404 91,859
Cheung Kong (Holdings) Ltd. 2,000 13,098
Credito Italiano 25,593 78,920
Den Danske Bank 881 117,391
HSBC Holdings PLC (Regd.) 2,045 50,406
ING Groep N.V 3,211 135,240
Investor AB (Series B) 178 8,676
Istituto Bancario San Paolodi
Torino 4,488 42,876
Merita Ltd. (Series A) 12,393 67,752
Metro Bank & Trust Co. 3,480 23,415
National Westminster Bank PLC 2,445 40,641
Sumitomo Realty & Development 4,000 22,976
Sumitomo Sitix Corp. 1,000 10,646
Uniao de Banco Brasiliero
S.A. GDR 1,902 61,221(a)
989,867
- ----------
See Notes to Schedule of Investments and Financial Statements
31
<PAGE>
TOTAL RETURN FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Healthcare -- 1.1%
Medeva PLC 9,291 $ 24,722
Novartis AG (Regd.) 126 204,366
PT Astra International Inc. 23,500 6,089
Roche Holdings AG 6 59,560
Smithkline Beecham PLC ADR 4,208 216,449
Teva Pharmaceutical Industries
Ltd. ADR 1,168 55,261
566,447
Insurance -- 1.0%
AXA-UAP 2,641 204,356
Commercial Union PLC 3,541 49,379
Pohjola Insurance Group
(Series B) 527 19,529
Royal & Sun Alliance Insurance
Group 6,950 69,976
Sampo Insurance Co. Ltd. 392 12,729
Schw Rueckversicher (Regd.) 35 65,439
ZurichVersicherungsgesellschaft
(Regd.) 148 70,495
491,903
Miscellaneous -- 0.0%
Saatchi & Saatchi PLC 6,793 12,162(a)
Retail Trade -- 0.4%
Carrefour S.A 190 99,128
Credit Saison Co. Ltd. 3,600 88,780
Giordano International Ltd. 50,000 17,260
205,168
Technology - Electronics and Equipment -- 0.4%
Brambles Industries Ltd. 4,650 92,283
ECI Telecommunications Ltd. 3,474 88,587
NetCom Systems AB (Series B) 1,002 21,517
202,387
Technology - Software & Services -- 1.5%
Cap Gemini S.A 1,172 96,101
Dimension Data Holdings Ltd. 12,179 52,555
NTT Data Corp. 2 107,682
Reuters Holdings PLC ADR
(Class B) 7,214 477,927
SEMA Group PLC 669 16,263
750,528
Transportation -- 0.5%
IHC Caland N.V 1,608 83,428
Railtrack Group PLC 10,243 162,689
246,117
Utilities -- 0.8%
Telecom Italia Mobile S.p.A 29,194 134,748
Telecomunicacoes Brasileiras S.A
ADR 1,316 153,232
<PAGE>
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Telefonica del Peru S.A. ADR
(Class B) 3,786 $ 88,261
376,241
Total Foreign Equity
(Cost $7,267,183) 8,045,920
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Bonds and Notes -- 33.9%
- --------------------------------------------------------------------------------
Federal Agencies -- 1.2%
Federal Home Loan Bank
6.15% 10/23/00 $ 30,000 29,991
6.172% 11/24/00 55,000 55,017
85,008
Federal National Mortgage Assoc.
7.05% 12/10/98 105,000 106,280
5.96% 07/23/99 120,000 120,281
5.82% 08/25/99 50,000 50,023(a)
6.41% 07/08/02 45,000 45,822(a)
5.45% 10/10/03 40,000 38,938
6.99% 07/09/07 80,000 82,013
443,357
Small Business Administration
6.55% 10/01/17 70,000 70,053
Total Federal Agencies
(Cost $593,820) 598,418
U.S. Treasuries -- 16.7%
U.S. Treasury Bonds
12.00% 05/15/05 37,000 50,603
12.50% 08/15/14 138,000 213,318
10.625% 08/15/15 532,000 799,580
6.625% 02/15/27 415,000 450,532
6.375% 08/15/27 313,000 330,118
6.125% 11/15/27 649,000 666,951(h)
2,511,102
U.S. Treasury Notes
6.00% 05/31/98 300,000 300,516
5.875% 07/31/99 - 08/31/99 1,829,000 1,834,535
7.125% 09/30/99 339,000 347,051
7.75% 01/31/00 663,000 689,520
5.75% 11/15/00 737,000 738,378
6.50% 08/31/01 1,075,000 1,101,703
5.625% 12/31/02 234,000 233,123
6.50% 08/15/05 15,000 15,652
6.125% 08/15/07 417,000 428,534
5,689,012
U.S. Treasury STRIP
6.02% 08/15/11 283,000 126,255(d)
Total U.S. Treasuries
(Cost $8,149,316) 8,326,369
Asset Backed -- 0.4%
California Infrastructure
6.42% 12/26/09 14,000 14,163
Carco Auto Loan Master Trust
6.689% 08/15/04 55,000 55,172
Fleetwood Credit Grantor Trust
6.40% 05/15/13 27,391 27,537
- ----------
See Notes to Schedule of Investments and Financial Statements
32
<PAGE>
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
IMC Home Equity Loan Trust
7.23% 05/20/27 $ 28,000 $ 28,726
Salomon Brothers Mortgage
Securities Inc.
7.00% 07/25/24 48,942 49,027
Tiers Trust
6.69% 11/15/03 35,000 35,126
Total Asset Backed
(Cost $207,911) 209,751
Corporate Notes -- 7.3%
Airtouch Communications Inc.
7.00% 10/01/03 212,000 217,063
Brunswick Corp. - Pennsylvania
6.75% 12/15/06 200,000 202,078
Chrysler Financial Corp.
6.95% 03/25/02 500,000 512,185
Columbia University Trustees
6.83% 12/15/20 25,000 25,933
Commercial Credit Group Inc.
6.00% 06/15/00 64,000 63,743
Deutsche Bank Financial Inc.
6.70% 12/13/06 125,000 126,721
Ford Motor Credit Corp.
7.32% 05/23/02 69,000 69,820
Hydro-Quebec
8.25% 04/15/26 125,000 145,736
Korea Development Bank
6.625% 11/21/03 20,000 15,561
7.375% 09/17/04 5,000 4,001
Merrill Lynch & Co. Inc.
7.00% 01/15/07 500,000 517,420
NationsBank Corp.
7.50% 09/15/06 424,000 452,234
New Jersey Economic Development
Authority
7.425% 02/15/29 25,000 27,601
Niagara Mohawk Power Corp.
9.50% 06/01/00 25,000 26,451
Norfolk Southern Corp.
7.90% 05/15/97 55,000 62,448
Oracle Corp.
6.72% 02/15/04 250,000 249,467
Paramount Communications Inc.
7.50% 01/15/02 75,000 76,839
Raytheon Co.
7.20% 08/15/27 100,000 104,324
Republic New York Corp.
7.20% 07/15/97 25,000 26,085
Republic of Argentina
9.50% 11/30/02 32,000 31,820
Southdown Inc.
10.00% 03/01/06 212,000 232,670
Tele-Communications Inc.
6.469% 12/20/00 26,000 26,216
Tribune Co. (new)
6.875% 11/01/06 200,000 205,982
US West Capital Funding Inc.
6.85% 01/15/02 200,000 202,252
Videotron Holdings PLC
11.00% 08/15/05 25,000 22,112
Washington Mutual Capital
8.375% 06/01/27 22,000 24,252
Total Corporate Notes
(Cost $3,547,685) 3,671,014
<PAGE>
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Mortgage Backed -- 8.3%
Federal Home Loan Mortgage Corp.
7.50% 06/01/10 $ 194,825 $ 200,474
9.00% 04/01/25 - 10/01/25 113,210 120,844
4.95% 04/01/27 83,912 60,548(d,f)
381,866
Federal National Mortgage Assoc.
7.00% 08/01/27 249,999 252,577
7.50% 09/01/27 - 11/01/27 2,309,567 2,363,680
6.103% 03/01/33 27,081 27,072(e)
6.139% 05/01/36 37,901 37,890(e)
6.142% 05/01/36 84,971 84,945(e)
7.00% TBA 567,000 571,253(c)
3,337,417
Government National Mortgage Assoc.
7.50% 12/15/23 21,698 22,301
6.50% 04/15/24 195,514 193,987
216,288
Collateralized Mortgage Obligations
Federal National Mortgage Assoc.
8.00% 08/25/23 110,000 32,175(f)
5.15% 12/15/24 110,000 74,353(f)
Mid State Trust
7.54% 07/01/35 15,466 16,230
Morgan Stanley Capital Inc.
6.59% 10/03/30 18,915 19,113
Residential Assets Securitization
Trust
7.75% 06/25/27 32,610 33,817
Salomon Brothers Mortgage
Securities Inc.
7.00% 07/25/24 35,958 35,616
Structured Asset Securities Corp.
6.79% 06/12/04 27,899 28,496
239,800
Total Mortgage Backed
(Cost $4,126,313) 4,175,371
Total Bonds and Notes
(Cost $16,625,045) 16,980,923
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Preferred Stock -- 0.3%
- --------------------------------------------------------------------------------
Domestic Preferred -- 0.3%
Microsoft Corp. (Series A), $2.20 1,209 108,659
New Plan Realty Trust, 7.80% 593 30,762
139,421
Foreign Preferred -- 0.0%
Fresenius Medical Care AG 408 21,999(a)
Telecomunicacoes de Sao Paulo
S.A. (receipts) 838 223(a)
Telecomunicacoes de Sao Paulo
S.A. - Telesp 20,000 5,322
27,544
Total Preferred Stock
(Cost $172,866) 166,965
Total Investments in Securities
(Cost $42,553,283) 48,340,894
- ----------
See Notes to Schedule of Investments and Financial Statements
33
<PAGE>
TOTAL RETURN FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Short-Term Investments -- 4.4%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund
(Cost $2,188,990) 2,188,990 $ 2,188,990
Number
Expiration Date/ of
Strike Price Contracts Value
- --------------------------------------------------------------------------------
Call Options Written -- 0.0%
- --------------------------------------------------------------------------------
U.S. Treasury Bond Jan. 98/106.19 125,000 (391)
U.S. Treasury Bond Jan. 98/105.50 135,000 (496)
(Premium $(887))
- --------------------------------------------------------------------------------
Put Options Written -- 0.0%
- --------------------------------------------------------------------------------
U.S. Treasury Bond Jan. 98/100.19 125,000 (400)
U.S. Treasury Bond Jan. 98/99.50 135,000 (538)
(Premium $(938))
Other Assets and Liabilities,
net (1.0%) (520,864)
- --------------------------------------------------------------------------------
NET ASSETS -- 100% $50,007,195
================================================================================
- ----------
See Notes to Schedule of Investments and Financial Statements
34
<PAGE>
GLOBAL INCOME FUND
- --------------------------------------------------------------------------------
Q&A
William R. Wright, portfolio manager of the Global Income Fund, joined GEIM in
1993 and assumed responsibility for GE Investments (US) Limited (GEIUS) at its
inception in 1995. He is also a Vice President of GEIM. Prior to joining GEIM,
Bill worked for Continental Asset Management Corp. where he was a portfolio
manager of its U.K. subsidiary. After serving as a language specialist in the
U.S. Army Security Agency, he began his career in 1979 with Coopers & Lybrand,
and joined Bankers Trust Company in 1980. Bill received his B.A. in political
science/Asian studies from Wittenberg University and an MBA in finance from New
York University. He is a member of the Association for Investment Management and
Research and the New York Society of Security Analysts.
Q. HOW DID THE GLOBAL INCOME FUND PERFORM COMPARED TO ITS BENCHMARK FOR THE
PERIOD MAY 1, 1997 (INCEPTION OF THE FUND) THROUGH DECEMBER 31, 1997?
A. The Global Income Fund posted a total return of 3.41% from May 1, 1997,
though December 31, 1997. The JP Morgan Global Government Bond Index return
for the same period was 6.13%.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. During the year, interest rates trended lower in most major regions of the
world, which enabled bond prices to rise in value. The main reason for the
decline in interest rates was that global inflation remained under control,
due in large part to the economic and currency problems in Asia.
Q. WHAT WERE SOME REASONS THAT HAMPERED PERFORMANCE?
A. The fund's relatively conservative investment approach was one reason. For
much of the period, the fund's average duration was below that of its index,
because we feared renewed inflation. The other reason was our decision to
hedge the currency in U.S. dollars late in the year. While the dollar
performed well during much of the year, it fell sharply against most major
currencies in October.
Q. WHAT IS YOUR ASSET ALLOCATION?
A. At year end, the fund had approximately 55% of its assets in European bonds.
Most of those assets were invested in Germany, Spain and the United Kingdom.
About 6% was invested in the United States. We had roughly 16% invested in
Canada and approximately 5% in Japan.
Q. WHAT IS YOUR OUTLOOK FOR 1998?
A. Our outlook is generally favorable. Interest rates could go lower now that
global economic growth shows signs of slowing. We continue to believe the
dollar will maintain its strength against major currencies, due to the
economic uncertainty in Asia. We also believe the Canadian dollar is
extremely undervalued given the country's prospects for continuing low
inflation and solid economic growth. The convergence of interest rates in
Europe is likely to continue throughout the year as countries prepare for a
single currency in 1999. In light of our forecast for the coming year, we
have already begun to extend the fund's average duration and expect to
continue that strategy. As always, we will continue to focus our research
efforts on identifying high-quality securities that meet our strict
investment criteria.
35
<PAGE>
GLOBAL INCOME FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMPARISON OF CHANGES IN
VALUE OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
GLOBAL INCOME FUND JPM GLOBAL BOND INDEX
Apr-97 10000 10000
May-97 10090 10236
Jun-97 10190 10352.38
Jul-91 10090 10314.29
Aug-97 10130 10301.6
Sep-97 10320 10530.3
Oct-97 10400 10753.54
Nov-97 10340 10624.5
Dec-97 10341.01 10612.91
..... Global Income Fund (ending value $10,341)
- ----- JPM Global Bond (ending value $10,613)
- --------------------------------------------------------------------------------
TOTAL RETURN
FOR THE PERIOD ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
SINCE
INCEPTION
- --------------------------------------------------------------------------------
Global Income Fund 3.41%
- --------------------------------------------------------------------------------
JPM Global Bond 6.13%
- --------------------------------------------------------------------------------
Inception date 5/1/97
- --------------------------------------------------------------------------------
INVESTMENT PROFILE
A mutual fund designed for investors who seek total return through emphasis on
current income and less emphasis on capital appreciation by investing primarily
in foreign and domestic income-bearing debt securities and instruments.
- --------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS
AT DECEMBER 31, 1997
- --------------------------------------------------------------------------------
Government of Spain 10.10% 2/28/01 12.9%
- --------------------------------------------------------------------------------
Treasury 8.00% 9/25/09 4.5%
- --------------------------------------------------------------------------------
Federal Republic of Germany 6.00% 1/4/07 4.2%
- --------------------------------------------------------------------------------
Thomson Corp 7.15% 10/23/06 4.1%
- --------------------------------------------------------------------------------
SmithKline Beecham Plc 8.38% 12/29/00 4.1%
- --------------------------------------------------------------------------------
Dresdner Finance 5.50% 4/30/04 4.0%
- --------------------------------------------------------------------------------
Merrill Lynch & Co. Inc. 4.79% 5/18/00 4.0%
- --------------------------------------------------------------------------------
Toyota Credit Canada Inc. 7.38% 12/31/01 3.9%
- --------------------------------------------------------------------------------
Bayerische Vereinsbank 4.50% 8/24/02 3.8%
- --------------------------------------------------------------------------------
Province of New Brunswick 11.25% 12/13/00 3.7%
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
COUNTRY ALLOCATION
AS OF DECEMBER 31, 1997
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Spain 17.1%
Canada 15.9%
United Kingdom 14.6%
Short-Term Investments 17.5%
Germany 12.0%
United States 5.9%
Other 17.0%+
+ Percentage of individual countries are less than 5.5% of the fund's net
assets.
See page 47 for Notes to Performance.
Past performance is no guarantee of future results.
36
<PAGE>
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
- --------------------------------------------------------------------------------
GLOBAL INCOME FUND
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Bonds and Notes -- 81.1%
- --------------------------------------------------------------------------------
Austria -- 1.6%
Republic of Austria
6.25% 10/16/03 JPY 10,000,000 $ 96,787
Canada -- 15.9%
Government of Canada
7.50% 03/01/01 CAD 150,000 111,419
7.00% 12/01/06 CAD 170,000 130,417
Province of New Brunswick
11.25% 12/13/00 CAD 270,000 217,681
Thomson Corp.
7.15% 10/23/06 CAD 320,000 241,044
Toyota Credit Canada Inc.
7.375% 12/31/01 CAD 310,000 228,045
928,606
Denmark -- 1.9%
Kingdom of Denmark
6.00% 12/10/99 DKK 310,000 46,496
6.00% 11/15/02 DKK 130,000 19,703
7.00% 12/15/04 DKK 140,000 22,271
7.00% 11/15/07 DKK 130,000 20,829
109,299
Germany -- 12.0%
Bayerische Vereinsbank
4.50% 06/24/02 DEM 410,000 224,401
Dresdner Finance
5.50% 04/30/04 DEM 420,000 236,038
Federal Republic of Germany
6.00% 01/04/07 DEM 420,000 245,049
705,488
Japan -- 5.4%
Government of Japan
3.00% 09/20/17 JPY 20,000,000 163,599
International Bank for
Reconstruction & Development
4.50% 03/20/03 JPY 16,900,000 150,061
313,660
Italy -- 2.1%
Republic of Italy
3.75% 06/08/05 JPY 14,000,000 121,161
Netherlands -- 2.7%
Dutch Government
7.50% 06/15/99 NLG 70,000 36,093
5.75% 09/15/02 NLG 95,000 48,553
5.75% 02/15/07 NLG 145,000 73,657
158,303
Spain -- 17.1%
Government of Spain
10.10% 02/28/01 ESP 100,000,000 756,646
8.80% 04/30/06 ESP 20,000,000 158,188
Kingdom of Spain
3.10% 09/20/06 JPY 10,000,000 83,959
998,793
<PAGE>
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Sweden -- 1.9%
Kingdom of Sweden
10.25% 05/05/00 SEK 500,000 $ 69,561
8.00% 08/15/07 SEK 300,000 43,348
112,909
United Kingdom -- 14.6%
Commonwealth Bank of Australia
8.125% 12/07/06 GBP 99,000 175,210
Halifax Building Society
8.75% 07/10/06 GBP 100,000 180,880
SmithKline Beecham Plc
8.375% 12/29/00 GBP 140,000 236,992
Treasury
8.00% 09/25/09 GBP 140,000 261,568
854,650
United States -- 5.9%
Federal National Mortgage Assoc.
5.75% 09/05/00 AUD 100,000 65,361
6.375% 08/15/07 AUD 70,000 45,895
Merrill Lynch & Co. Inc.
4.79% 05/18/00 DEM 480,000 232,136
343,392
Total Investments in Securities
(Cost $4,864,883) 4,743,048
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Short-Term Investments -- 17.5%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund
(Cost $1,026,013) 1,026,013 1,026,013
Other Assets and Liabilities,
net 1.4% 82,279
- --------------------------------------------------------------------------------
NET ASSETS -- 100% $5,851,340
================================================================================
FORWARD FOREIGN CURRENCY CONTRACTS
- --------------------------------------------------------------------------------
At December 31, 1997, the outstanding forward foreign currency contracts, which
obligate the Global Income Fund to deliver currencies at a specified date, were
as follows:
<TABLE>
<CAPTION>
U.S. $ COST U.S. $
FOREIGN ON ORIGINATION CURRENT UNREALIZED
FOREIGN CURRENCY SALE CONTRACTS CURRENCY DATE VALUE APPRECIATION
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AUD, expiring 01/12/98 86,686 $ 58,638 $ 56,512 $ 2,126
CAD, expiring 01/12/98 702,664 496,337 491,913 4,424
DEM, expiring 01/12/98 867,840 490,860 482,756 8,104
DKK, expiring 01/12/98 763,827 113,705 111,546 2,159
ESP, expiring 01/12/98 74,339,667 497,896 488,090 9,806
GBP, expiring 01/12/98 273,170 458,896 448,420 10,476
JPY, expiring 01/12/98 81,490,266 637,589 625,196 12,393
SEK, expiring 01/12/98 932,271 120,371 117,456 2,915
---------- ---------- -------
$2,874,292 $2,821,889 $52,403
========== ========== =======
</TABLE>
- ----------
See Notes to Schedule of Investments and Financial Statements
37
<PAGE>
INCOME FUND
- --------------------------------------------------------------------------------
Q&A
Robert MacDougall leads the fixed income team at GE Investments. Assets under
management exceed $23 billion. Bob joined GE Investments in 1986 as Mutual Fund
Portfolio Manager, became Senior Vice President- Fixed Income in 1992 and was
named to his present position 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 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. HOW DID THE INCOME FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER PEER
GROUP FOR THE ONE-YEAR PERIOD ENDED DECEMBER 31, 1997?
A. The Income Fund posted a total return of 9.00%. This compares with a 9.65%
return for the Lehman Brothers Aggregate Bond Index. Our Lipper peer group of
13 Intermediate U.S. Bond annuity funds had an average return of 8.77% for
the same period.
Q. WHAT HAPPENED IN THE BOND MARKET DURING THE PAST 12 MONTHS?
A. Throughout much of 1997, interest rates trended lower and bond prices moved
higher. The year began with the economy showing signs of strength, raising
concerns about higher inflation. In turn, the Federal Reserve (the "Fed")
raised short-term interest rates by one-quarter of one percent in March. It
was the Fed's first rate hike in two years and the only change in monetary
policy by the Fed in 1997. The economy showed signs of slowing in April
through July. In late July, the bond market received a big boost when Fed
chairman Mr. Greenspan gave a generally positive forecast for both the
financial markets and the economy during his Humphrey-Hawkins testimony
before the Senate. In August, inflationary concerns re-ignited on a slightly
stronger-than-expected employment report for July and a robust increase in
order of goods reported by the National Association of Purchasing Managers.
In September, however, those concerns abated on news that the economy was
growing moderately and inflation was under control. Concerns about the future
growth potential of countries along the Pacific Rim and their impact on the
global economy sent interest rates tumbling in October and throughout most of
November and December.
Q. WHAT DROVE THE FUND'S PERFORMANCE?
A. The fund's sector allocation was largely responsible for its performance.
Early in the year, the fund's overweighted positions in corporate bonds and
mortgage backed securities contributed significantly to performance. In 1997,
corporate bonds produced the best investment results compared with Treasuries
and mortgage backed securities. The fund's decision to increase its exposure
to Treasuries in July and September also contributed favorably to its
investment results, as Treasuries outperformed mortgage securities during
that period.
Q. WHAT IS YOUR OUTLOOK?
A. Our outlook for fixed-income securities is good. Compared to other markets,
real rates of return on fixed-income securities are still attractive in the
United States. Inflation remains under control and is unlikely to become a
problem due to the general slowdown in the global economy brought on by the
Asian economic crisis. Finally, the need for the U.S. government to issue
more fixed-income securities is diminishing, thanks to the declining federal
budget deficit. This should be good news for fixed-income securities, because
when the supply of available bonds decreases, prices generally rise.
38
<PAGE>
INCOME FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMPARISON OF CHANGES IN
VALUE OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
INCOME FUND LB AGGREGATE
1-95 10000 10000
3-95 10453.08 10504.4
6-95 11015.85 11144.44
9-95 11209.62 11363.64
12-95 11682.58 11847.61
3-96 11444.89 11636.27
6-96 11462.78 11702.71
9-96 11673.53 11918.19
12-96 12024.21 12338.81
3-97 11953.22 12207.69
6-97 12377.38 12657.37
9-97 12769.36 13079.38
12-97 13105.92 13464.7
..... Income Fund (ending value $13,106)
- ----- LB Aggregate (ending value $13,465)
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
ONE SINCE
YEAR INCEPTION
- --------------------------------------------------------------------------------
Income Fund 9.00% 9.44%
- --------------------------------------------------------------------------------
LB Aggregate 9.65% 10.42%
- --------------------------------------------------------------------------------
Lipper peer group average* 8.77%
- --------------------------------------------------------------------------------
Inception date 1/3/95
- --------------------------------------------------------------------------------
INVESTMENT PROFILE
A mutual fund designed for investors who seek to maximize income consistent with
prudent investment management and preservation of capital by investing primarily
in income-bearing debt securities and instruments.
- --------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS
AT DECEMBER 31, 1997
- --------------------------------------------------------------------------------
U.S. Treasury Notes 5.63% 11/30/99 18.2%
- --------------------------------------------------------------------------------
U.S. Treasury Bonds 6.13% 11/15/27 5.7%
- --------------------------------------------------------------------------------
U.S. Treasury Notes 6.13% 8/15/07 4.6%
- --------------------------------------------------------------------------------
Federal National Mortgage Assoc.
REMIC 6.91% 6/25/16 3.2%
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. 7.00% 8/1/25 1.9%
- --------------------------------------------------------------------------------
U.S. Treasury Notes 5.75% 11/30/02 1.8%
- --------------------------------------------------------------------------------
Federal National Mortgage Assoc. 6.10% 3/1/33 1.7%
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. 7.00% 4/1/24 1.5%
- --------------------------------------------------------------------------------
U.S. Treasury Notes 6.00% 6/30/99 1.2%
- --------------------------------------------------------------------------------
Government National Mortgage Assoc. 8.50% 10/15/17 1.2%
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
QUALITY RATINGS
AT DECEMBER 31, 1997
- --------------------------------------------------------------------------------
MOODY'S / S&P PERCENTAGE OF
RATINGS MARKET VALUE
- --------------------------------------------------------------------------------
Aaa / AAA 84.2%
- --------------------------------------------------------------------------------
Aa / AA 2.1%
- --------------------------------------------------------------------------------
A / A 2.7%
- --------------------------------------------------------------------------------
Baa / BBB 6.8%
- --------------------------------------------------------------------------------
Ba / BB 4.2%
- --------------------------------------------------------------------------------
* Lipper performance comparisons are based on average annual total returns
for the periods indicated in the Intermediate U.S. Bond peer group
consisting of 13 underlying annuity funds.
See page 47 for Notes to Performance.
Past performance is no guarantee of future results.
39
<PAGE>
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
- --------------------------------------------------------------------------------
INCOME FUND
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Bonds and Notes -- 91.1%
- --------------------------------------------------------------------------------
Federal Agencies -- 4.6%
Federal Farm Credit Bank
5.27% 02/01/99 $ 500,000 $ 497,030
9.15% 02/14/05 100,000 117,703
614,733
Federal Farm Credit Bks Medium Term Note
8.60% 05/30/06 400,000 431,624
Federal Home Loan Banks
6.15% 10/23/00 15,000 14,995
5.72% 11/22/00 360,000 356,457
6.172% 11/24/00 15,000 15,005
7.64% 05/08/02 100,000 100,578
487,035
Federal Home Loan Mortgage Corp.
8.25% 06/01/16 60,000 72,300
Federal National Mortgage Assoc.
5.96% 07/23/99 35,000 35,082
5.82% 08/25/99 35,000 35,016
6.41% 07/08/02 20,000 20,366
7.70% 08/10/04 100,000 102,391
6.99% 07/09/07 30,000 30,755
223,610
Private Export Funding Corp.
9.10% 10/30/98 100,000 102,609
Tennessee Valley Authority
6.125% 07/15/03 133,000 132,210
Total Federal Agencies
(Cost $2,065,139) 2,064,121
U.S. Treasuries -- 37.7%
U.S. Treasury Bonds
13.75% 08/15/04 94,000 134,655(h)
12.00% 05/15/05 25,000 34,192(h)
12.50% 08/15/14 81,000 125,208(h)
10.625% 08/15/15 198,000 297,588(h)
7.875% 02/15/21 450,000 552,514(h)
6.625% 02/15/27 118,000 128,103(h)
6.375% 08/15/27 52,000 54,844(h)
6.125% 11/15/27 2,530,000 2,599,980(h)
3,927,084
U.S. Treasury Notes
5.875% 01/31/99 480,000 481,285
6.00% 06/30/99 565,000 567,825
5.625% 11/30/99 8,320,000 8,312,179
7.75% 12/31/99 44,000 45,712(h)
5.75% 11/15/00 205,000 205,384
6.625% 07/31/01 80,000 82,250
5.75% 11/30/02 826,000 826,644(h)
6.50% 08/15/05 5,000 5,217
6.125% 08/15/07 2,050,000 2,106,703
12,633,199
<PAGE>
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
U.S. Treasury STRIP
5.70% 02/15/00 $ 100,000 $ 88,815(d,h)
6.02% 08/15/11 80,000 35,690(d,h)
6.11% 02/15/19 1,750,000 490,928(d,h)
615,433
Total U.S. Treasuries
(Cost $17,182,698) 17,175,716
Asset Backed -- 0.2%
Advanta Mortgage Loan Trust Corp.
6.30% 07/25/25 5,096 5,008
California Infrastructure & Economic
6.42% 12/26/09 5,000 5,058
Carco Auto Loan Master Trust
6.689% 08/15/04 20,000 20,063
Fleetwood Credit Grantor Trust
6.40% 05/15/13 10,390 10,445
Green Tree Recreational,
Equipment & Consumer Trust
6.49% 02/15/18 9,335 9,370
Iroquois Trust
6.68% 11/10/03 16,000 16,034(b)
6.75% 06/25/07 19,000 19,068(b)
Tiers Trust
6.69% 11/15/03 13,000 13,047
Total Asset Backed
(Cost $98,172) 98,093
Corporate Notes -- 17.0%
Abbey National PLC
7.35% 10/29/49 181,000 189,496
AFC Capital Trust
8.207% 02/03/27 195,000 214,773
Associated Estates Reality Corp.
6.18% 09/27/99 245,000 245,588
Bancomer S.A.
9.00% 06/01/00 7,000 6,965 (b)
Bell Telephone Co. - Canada
9.50% 10/15/10 10,000 12,482
Bell Telephone Co. - Pennsylvania
8.35% 12/15/30 243,000 302,708
BT Preferred Capital Trust
7.875% 02/25/27 309,000 321,616
Carter Holt Harvey Ltd.
8.875% 12/01/04 50,000 55,888
China International Trust &
Investment Corp.
9.00% 10/15/06 5,000 5,232
Circus Circus Enterprises Inc.
6.70% 11/15/96 10,000 9,989
Cleveland Electric Co.
7.19% 07/01/00 5,000 5,074
Columbia University Trustees
New York
6.83% 12/15/20 5,000 5,187
Conseco Inc.
8.70% 11/15/26 192,000 214,666
Continental Cablevision Inc.
8.50% 09/15/01 10,000 10,621
8.30% 05/15/06 233,000 254,299
CSX Corp.
7.05% 05/01/02 10,000 10,251
DDR Pass-Through Asset Trust
7.125% 03/15/02 65,000 65,988(b)
- ----------
See Notes to Schedule of Investments and Financial Statements
40
<PAGE>
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Deutsche Bank Financial Inc.
6.70% 12/13/06 $ 15,000 $ 15,207
Energy Group Overseas
7.375% 10/15/17 10,000 10,336(b)
Farmers Insurance Exchange
8.625% 05/01/24 5,000 5,785 (b)
FBOP Capital Trust
10.20% 02/06/27 5,000 5,773(b)
Federated Department Stores Inc.
10.00% 02/15/01 30,000 32,955
First Security Capital
8.41% 12/15/26 7,000 7,668
Ford Motor Credit Corp.
7.32% 05/23/02 26,000 26,309
Guangdong International Trust &
Investment Corp.
8.75% 10/24/16 10,000 10,320(b)
Hydro-Quebec
8.05% 07/07/24 260,000 299,330
Ikon Capital Resource Inc.
6.27% 07/19/99 50,000 50,139
Ikon Office Solutions Inc.
6.75% 12/01/25 20,000 19,310
Korea Development Bank
7.125% 09/17/01 20,000 16,765
6.625% 11/21/03 5,000 3,890
7.375% 09/17/04 5,000 4,001
Korea Electric Power Corp.
7.75% 04/01/13 10,000 7,204
Landeskreditbank Baden
7.875% 04/15/04 218,000 237,762
LCI International Inc.
7.25% 06/15/07 8,000 8,290
Lehman Brothers Holdings Inc.
6.90% 03/30/01 235,000 238,786
Loewen Group International Inc.
7.50% 04/15/01 368,000 372,902
Loewen Pass Through Asset Trust
6.70% 10/01/99 322,000 320,487(b)
Long Island Lighting
7.30% 07/15/99 10,000 10,132
MIC Financing Trust
8.375% 02/01/27 15,000 15,754(b)
Morgan Stanley Finance PLC
8.03% 02/28/17 5,000 5,306
National Westminster Bank PLC
7.75% 04/29/49 185,000 199,243
New Jersey Economic Development
Authority
7.425% 02/15/29 10,000 11,040
New York State Dormitory Authority
Revenue
6.32% 04/01/99 234,000 234,658
News America Holdings Inc.
8.15% 10/17/36 279,000 302,260
Norfolk Southern Corp.
7.90% 05/15/97 312,000 354,248
North Atlantic Energy Corp.
9.05% 06/01/02 13,000 13,359
NRG Energy Inc.
7.50% 06/15/07 15,000 15,504(b)
NWCG Holding Corp.
6.33% 06/15/99 266,000 243,177(d)
Oryx Energy Co.
10.00% 06/15/99 50,000 52,212
Paramount Communications Inc.
5.875% 07/15/00 50,000 48,908
<PAGE>
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Petroleos Mexicanos
7.75% 10/29/99 $ 15,000 $ 15,075(b)
Raytheon Co.
7.20% 08/15/27 30,000 31,297
Reliance Industries Ltd.
10.50% 08/06/46 5,000 5,146(b)
Republic New York Corp.
7.20% 07/15/2097 10,000 10,434
Riggs Capital Trust
8.625% 12/31/26 10,000 10,611(b)
RJR Nabisco Inc.
8.00% 07/15/01 50,000 51,649
Sun Life Canada Capital Trust
8.526% 05/29/49 214,000 236,265(b)
Taubman Realty Group L.P.
8.00% 06/15/99 264,000 269,914
TCI Communications Inc.
8.65% 09/15/04 35,000 38,344
Tele-Communications Inc.
6.469% 12/20/00 10,000 10,083
Tenet Healthcare Corp.
8.00% 01/15/05 10,000 10,175
Time Warner Entertainment Co. L.P.
10.15% 05/01/12 224,000 286,498(b)
Time Warner Inc.
4.90% 07/29/99 400,000 392,044(b)
6.10% 12/30/01 25,000 24,495(b)
Toledo Edison Co.
7.38% 03/31/00 272,000 274,889
Triton Energy Ltd.
8.75% 04/15/02 203,000 208,379
Universal Outdoor Inc.
9.75% 10/15/06 5,000 5,613
Viacom Inc.
7.75% 06/01/05 368,000 374,289
Videotron Holdings PLC
11.00% 08/15/05 10,000 8,845
Washington Mutual Capital
8.375% 06/01/27 12,000 13,229
Yale University Notes
7.375% 04/15/96 305,000 337,720
Total Corporate Notes
(Cost $7,750,013) 7,744,837
Mortgage Backed -- 31.6%
Federal Home Loan Mortgage Corp.
8.00% 01/01/00 - 04/01/00 55,999 56,900
8.50% 12/01/01 67,179 68,489
9.00% 11/01/04 15,136 15,888
6.75% 10/01/08 173,269 175,932
8.00% 09/01/09 169,755 175,536
7.50% 06/01/10 58,447 60,142
8.50% 07/01/10 171,779 177,697
6.50% 02/01/11 55,961 56,293
9.00% 02/01/17 60,243 64,492
8.00% 04/01/17 204,967 214,191
7.00% 04/01/24 687,158 696,286
9.00% 04/01/24 - 09/01/24 72,745 77,678
7.00% 08/01/25 862,433 873,214
2,712,738
Federal National Mortgage Assoc.
6.142% 05/01/36 131,018 130,977(e)
8.00% 06/01/98 - 07/01/98 43,811 43,904
7.00% 09/01/99 8,820 8,874
7.50% 07/01/02 44,510 45,343
6.50% 02/01/03 232,495 233,490
6.50% 01/01/04 1,907 1,912
- ----------
See Notes to Schedule of Investments and Financial Statements
41
<PAGE>
INCOME FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
6.00% 08/01/08 $ 84,485 $ 83,629
6.50% 12/01/10 63,380 63,776
8.506% 07/01/19 140,378 142,440(e)
7.41% 03/25/21 18,000 19,046
6.50% 01/01/24 - 05/01/24 223,038 221,224
9.00% 05/01/25 328,476 350,132
6.50% 03/01/26 98,286 97,058
7.00% 10/01/27 549,199 554,862
6.103% 03/01/33 757,062 756,827(e)
6.139% 05/01/36 58,399 58,381(e)
6.50% TBA 560,000 559,825(c)
7.00% TBA 178,000 179,335(c)
3,551,035
Government National Mortgage Assoc.
6.875% 01/01/98 255,329 262,197
7.00% 01/01/98 279,059 286,046
7.50% 04/15/01 18,437 18,722
8.50% 02/15/02 54,934 56,305
8.50% 05/15/03 71,725 73,516
6.50% 10/15/10 84,165 84,980
8.50% 10/15/17 531,241 567,758
9.00% 12/15/17 302,929 329,907
8.00% 03/15/23 - 12/15/23 71,139 74,099
6.50% 02/15/24 88,713 87,964
6.50% TBA 430,000 424,625(c)
2,266,119
Collateralized Mortgage Obligations
Asset Securitization Corp.
7.41% 01/27/27 50,000 53,180
BHN Mortgage Trust
7.916% 07/25/09 9,129 8,918(b)
7.54% 05/31/17 9,818 9,422(b)
DLJ Mortgage Acceptance Corp.
6.55% 11/15/06 39,633 39,930(b)
Federal Home Loan Mortgage Corp.
7.50% 04/15/21 214,001 219,366
4.95% 04/01/27 728,866 525,922(d,f)
Federal Home Loan Mortgage Pc Guaranteed
5.85% 02/15/08 110,000 108,727
6.50% 07/15/08 50,000 50,141
6.50% 02/15/21 100,000 99,125
7.00% 02/15/21 50,000 50,500
Federal National Mortgage Assoc.
7.148% 10/17/09 196,000 203,166
7.00% 06/18/20 27,658 27,869
9.00% 05/25/22 12,143 3,229(g)
8.50% 07/01/22 18,821 5,154
7.50% 05/01/23 67,975 18,098(g)
5.22% 07/01/26 2,729 2,089(d)
5.05% 04/01/27 9,557 7,413(d,f)
Federal National Mortgage Assoc. REMIC
6.00% 06/25/01 69,397 68,074
7.623% 12/17/04 14,229 14,865
7.00% 11/25/09 50,553 50,426
6.856% 06/17/11 11,000 11,186
6.909% 06/25/16 1,423,000 1,456,796
6.50% 09/25/18 51,423 51,262
6.00% 03/25/19 86,400 85,698
6.82% 07/25/20 17,409 16,178(d,f)
7.00% 09/25/20 25,000 25,187
5.67% 12/25/22 11,993 9,648(d,f)
8.02% 09/25/23 35,000 25,787(d,f)
<PAGE>
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Federal National Mortgage Assoc. STRIP Mortgage
8.00% 08/25/23 $ 282,000 $ 82,485(g)
5.15% 12/15/24 282,000 190,614(d,f)
First Plus Home Improvement Loan Trust
7.80% 03/20/16 10,000 10,531
GS Mortgage Securities Corp.
6.46% 07/13/30 219,000 223,243
Mid State Trust
7.54% 07/01/35 7,733 8,115
Morgan Stanley Capital Inc.
6.86% 05/15/06 244,087 248,740(b)
6.504% 10/15/10 140,624 141,283(b)
6.59% 10/03/30 9,955 10,059(b)
Residential Assets Securitization Trust
7.75% 04/25/27 334,640 346,376
7.50% 08/25/27 19,440 20,227
Salomon Brothers Mortgage
Secs Vii Inc.
7.70% 07/25/24 15,981 16,009
Salomon Brothers Mortgage Securities Inc.
7.00% 07/25/24 522,000 517,041
Sawgrass Finance REMIC Trust
6.45% 01/20/06 272,000 274,550
Structured Asset Securities Corp.
5.65% 09/25/99 8,785 8,785(b)
6.79% 06/12/04 9,964 10,177(b)
Vornado Finance Corp.
6.36% 12/01/00 521,000 521,163
5,876,754
Total Mortgage Backed
(Cost $14,397,510) 14,406,646
Total Bonds and Notes
(Cost $41,493,532) 41,489,413
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Preferred Stock -- 0.5%
- --------------------------------------------------------------------------------
New Plan Realty Trust, 7.80% 567 29,413
News Corp. Exchange Trust, 5.00% 80 5,540(a,b)
Pinto Totta International Finance
Ltd., 7.77% 181 188,255(a,b)
Simon DeBartolo Group Inc.
(Series C), 7.89% 205 10,634
Total Preferred Stock
(Cost $233,387) 233,842
Total Investments in Securities
(Cost $41,726,919) 41,723,255
- ----------
See Notes to Schedule of Investments and Financial Statements
42
<PAGE>
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Short-Term Investments -- 35.1%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund 9,718,315 $9,718,315
Principal
Amount Value
- --------------------------------------------------------------------------------
Commercial Paper
International Bank For
Reconstruction & Development
5.70% 01/06/98 $1,298,737 1,298,737
U.S. Government Agencies
Federal Home Loan Bank
5.10% 01/02/98 800,000 799,887
Federal Home Loan Mortgage
6.00% 01/02/98 1,320,000 1,319,780
5.60% 01/26/98 2,855,000 2,843,749
4,163,529
Total U.S. Government Agencies 4,963,416
Total Short-Term Investments
(Cost $15,980,468) 15,980,468
Number
Expiration Date/ of
Strike Price Contracts Value
- --------------------------------------------------------------------------------
Call Options Written -- 0.0%
- --------------------------------------------------------------------------------
U.S. Treasury Bond Jan. 98/106.19 360,000 (598)
(Premium $(1,126))
- --------------------------------------------------------------------------------
Put Options Written -- 0.0%
- --------------------------------------------------------------------------------
U.S. Treasury Bond Jan. 98/100.19 360,000 (1,044)
(Premium $(1,153))
Other Assets and Liabilities,
net (26.7%) (12,148,790)
- --------------------------------------------------------------------------------
NET ASSETS -- 100% $45,553,291
================================================================================
- ----------
See Notes to Schedule of Investments and Financial Statements
43
<PAGE>
MONEY MARKET FUND
- --------------------------------------------------------------------------------
Q&A
Robert MacDougall is responsible for portfolio management of the Money Market
Fund. Refer to page 38 for Bob MacDougall 's biographical details.
Q. HOW DID THE MONEY MARKET FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER
PEER GROUP FOR THE PERIOD DECEMBER 30, 1996 THROUGH DECEMBER 31, 1997?
A. The Money Market Fund posted a total return of 5.41%. This compares with a
5.21% return for the 90-day Treasury Bill for the same period. Our Lipper
peer group of 102 Money Market annuity funds posted an average return of
5.13% for the one-year period ended December 31, 1997.
GEIM assumed portfolio management responsibility for the fund on May 1, 1997.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. As always, we invested in high-quality, liquid securities with relatively
attractive yields and kept costs under control. In keeping with our emphasis
on high-quality issues, we did not purchase derivatives to enhance yields. We
made some adjustments to the fund's average maturity that bolstered
performance. For example, early in the year, we maintained a slightly lower
duration than our benchmark due to our belief that interest rates would trend
higher as the economy strengthened. This helped the fund's performance when
interest rates rose in March. In general, however, our emphasis on
high-quality, liquid securities played the biggest role in boosting the
fund's investment results.
Q. WHAT MAJOR ECONOMIC EVENTS TOOK PLACE DURING THE YEAR?
A. The first major event was the Federal Reserve's (the "Fed") decision to raise
short-term interest rates in March to stem concerns over rising inflation.
This was the first rate hike by the Fed in approximately two years and the
Fed's only move in monetary policy in 1997. For the rest of the year,
excluding August, inflation was under control and interest rates, for the
most part, trended lower. Another significant event was the sharp decline in
interest rates ignited by the economic and currency crisis in Asia late in
the year.
Q. WHAT IS YOUR OUTLOOK?
A. In general, the foundation of the U.S. economy remains solid. Inflation,
which grew at its lowest annual rate (1.7%) in more than a decade, is still
under control. Interest rates remain low, and corporate earnings are trending
down, which we believe will drive rates even lower. We would not be surprised
to see one or two Federal Reserve rate cuts during the first half of this
year to stimulate economic activity. The turmoil in Asia is likely to keep
the U.S. economy from growing, which should be good news for domestic fixed
income securities.
44
<PAGE>
MONEY MARKET FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMPARISON OF CHANGES IN
VALUE OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
MONEY MARKET FUND 90 DAY T-BILL
12-87 10000 10000
12-88 10669.89 10688.09
12-89 11593.7 11585.09
12-90 12421.64 12482
12-91 13078.89 13173.08
12-92 13473.87 13636.12
12-93 13790.59 14054.07
12-94 14305.38 14667.22
12-95 15149.91 15497.35
12-96 15968.83 16293.61
12-97 16832.48 17142.41
.... Money Market Fund (ending value $16,832)
- ---- 90-Day T-Bill (ending value $17,142)
AN INVESTMENT IN THE MONEY MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT, AND NO ASSURANCE CAN BE GIVEN THAT THE MONEY MARKET FUND WILL
BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
INVESTMENT PROFILE
A mutual fund designed for investors who seek current income and liquidity while
preserving their capital by investing in short-term, high grade money market
securities.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
ONE FIVE TEN
YEAR YEAR YEAR
- --------------------------------------------------------------------------------
Money Market Fund 5.41%* 4.55% 5.35%
- --------------------------------------------------------------------------------
90-Day T-Bill 5.21%* 4.68% 5.54%
- --------------------------------------------------------------------------------
Lipper peer group average** 5.13% 4.44% 5.55%
- --------------------------------------------------------------------------------
Inception date 7/1/85
- --------------------------------------------------------------------------------
FUND YIELD AT DECEMBER 31, 1997
- --------------------------------------------------------------------------------
FUND IBC MONEY FUND
7 day current 5.25%+ 5.12%
7 day effective 5.39% 5.25%
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.
* For the period December 30, 1996 through December 31, 1997.
** Lipper performance comparisons are based on average annual total returns
for the periods indicated in the Money Market peer group consisting of 102,
73 and 39 underlying annuity funds, respectively.
+ The seven day current yield, rather than the total return, more closely
reflects the current earnings of the Money Market Fund at December 31,
1997.
See page 47 for Notes to Performance.
Past performance is no guarantee of future results.
45
<PAGE>
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
- --------------------------------------------------------------------------------
MONEY MARKET FUND
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Short-Term Investments -- 94.9%
- --------------------------------------------------------------------------------
U.S. Governments(d) -- 40.2%
Federal Farm Credit Bank
5.52% 04/07/98 $ 120,000 $ 118,262
5.59% 04/07/98 4,000,000 3,942,080
4,060,342
Federal Home Loan Bank
5.69% 01/14/98 3,800,000 3,792,480
5.72% 06/10/98 4,600,000 4,487,556
8,280,036
Federal Home Loan Mortgage Corp.
6.00% 01/02/98 5,110,000 5,109,148
5.62% 01/26/98 4,000,000 3,984,445
5.55% 02/11/98 200,000 198,747
5.57% 02/11/98 5,000,000 4,968,681
5.89% 02/20/98 5,000,000 4,960,764
5.69% 03/10/98 5,140,000 5,085,533
24,307,318
Federal National Mortgage Assoc.
5.62% 01/12/98 4,640,000 4,632,230
5.51% 02/06/98 120,000 119,344
5.67% 02/06/98 4,140,000 4,117,354
5.73% 06/19/98 6,000,000 5,844,802
14,713,730
International Bank for
Reconstruction & Development
6.42% 01/06/98 1,585,000 1,583,716
6.00% 01/26/98 2,600,000 2,589,564
5.54% 03/13/98 120,000 118,707
5.57% 03/13/98 2,570,000 2,542,300
6,834,287
Total U.S. Governments
(Cost $58,195,713) 58,195,713
Commercial Paper(d) -- 43.0%
Abbey National PLC
5.61% 01/09/98 4,410,000 4,404,581
Associates Corp. of North America
5.80% 03/16/98 5,800,000 5,731,805
Chase Manhattan Corp.
5.72% 02/24/98 140,000 138,800
5.74% 02/24/98 4,400,000 4,362,281
Credit Suisse
5.80% 02/06/98 1,160,000 1,153,342
5.65% 02/12/98 140,000 139,072
5.69% 02/12/98 3,710,000 3,685,404
First Union Corp.
5.59% 02/02/98 170,000 169,161
5.63% 02/02/98 4,910,000 4,885,778
Halifax Building Society
5.75% 03/20/98 5,800,000 5,728,747
Merrill Lynch & Co. Inc.
5.81% 01/30/98 170,000 169,210
5.83% 01/30/98 5,000,000 4,976,759
<PAGE>
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Morgan (J.P.) & Co. Inc.
5.80% 02/03/98 $5,170,000 $ 4,973,600
5.81% 02/03/98 620,000 785,836
Morgan Stanley Group Inc.
5.80% 03/11/98 170,000 168,136
5.81% 03/11/98 4,680,000 4,628,692
NationsBank Corp.
5.65% 02/12/98 170,000 168,889
5.69% 02/12/98 5,470,000 5,434,263
Norwest Corp.
5.74% 01/23/98 100,000 99,652
5.75% 01/23/98 2,830,000 2,820,142
5.83% 01/23/98 1,850,000 1,843,465
Toronto Dominion Bank
5.70% 02/18/98 3,720,000 3,691,976
5.72% 02/18/98 150,000 148,868
5.74% 02/18/98 2,000,000 1,984,907
Total Commercial Paper
(Cost $62,293,366) 62,293,366
Certificates of Deposit -- 11.6%
Bank of Montreal
5.61% 01/08/98 4,940,000 4,940,000
Deutsche Bank AG
5.60% 01/02/98 5,170,000 5,170,000
Dresdner Bank AG
5.62% 01/22/98 4,870,000 4,870,000
Swiss Bank Corp.
5.77% 03/17/98 1,780,000 1,780,000
Total Certificates of Deposit
(Cost $16,760,000) 16,760,000
Time Deposits -- 0.1%
State Street Cayman Islands
6.50% 01/02/98 180,000 180,000
Total Short-Term Investments
(Cost $137,429,079) 137,429,079
Other Assets and Liabilities,
net 5.1% 7,386,408
- --------------------------------------------------------------------------------
NET ASSETS -- 100% $144,815,487
================================================================================
- ----------
See Notes to Schedule of Investments and Financial Statements
46
<PAGE>
NOTES TO PERFORMANCE DECEMBER 31, 1997 (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 loss or gain when you sell
your shares.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT INCLUDE
ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANIES' SEPARATE ACCOUNT. IF
PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL CHARGES, THE
TOTAL RETURNS WOULD HAVE BEEN LOWER.
The performance data related to the shares of the U.S. Equity and the Income
Fund, reflect the prior performance and expense ratios of the Variable
Investment Trust GE U.S. Equity Portfolio and GE Fixed Income Portfolio, the
assets of which were transferred to corresponding GE Investments Funds, Inc.
pursuant to an exemptive order granted by the Securities and Exchange Commission
permitting a substitution of funds that occurred on December 12, 1997.
Certain fees and fund expenses have been waived and/or borne by the funds'
prior investment advisers. GEIM currently waives certain fees for the Money
Market Fund. Had these fees and expenses not been absorbed, the returns (and/or
yields) would have been lower.
The Standard & Poor's ("S&P") Composite Index of 500 stocks (S&P 500 Index), 90
Day U.S. Treasury Index (90 Day T-Bill), Lehman Brothers Aggregate Bond Index
(LB Aggregate), Morgan Stanley Capital International EAFE Index (MSCI EAFE),
Wilshire Real Estate Index, and JP Morgan Global Government Bond Index (JPM
Global Bond) 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
composite of the prices of 500 widely held stocks recognized by investors to be
representative of the stock market in general. The 90 Day U.S. T-Bill is the
average return on three month U.S. Treasury Bills. The LB Aggregate is a
composite index of short-, medium-, and long-term bond performance and is widely
recognized as a barometer of the bond market in general. MSCI EAFE Index is a
composite of 1,088 stocks of companies from 21 countries representing stock
markets of Europe, Australasia, New Zealand and the Far East. The Wilshire Real
Estate Index is a market capitalization-weighted index comprised of publicly
traded real estate investment trusts (REITs), real estate operating
companies(REOCs) and partnerships. The JPM Global Bond is an unhedged index
comprised of government bonds from several countries including the U.S. The IBC
Money Fund Report yields represent the average yields of 876 taxable money
market funds. The results shown for the foregoing indices assume reinvestment of
net dividends or interest and are unaudited.
The peer universe of the underlying annuity fund used in our peer ranking
calculation is based on the average returns of Lipper peer categories, as shown.
Lipper is an independent mutual fund rating service.
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
<PAGE>
NOTES TO SCHEDULES OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Pursuant to Rule 144A of the Securities Act of 1933, these securities may
be only resold in transactions exempt from registration, normally to
qualified institutional buyers. At December 31, 1997, these securities
amounted to $172,706, $600,000 and $2,133,257 or 0.5%, 1.2% and 4.7% of net
assets for the International Equity Fund, Real Estate Securities Fund and
Income Fund, respectively. These securities have been determined to be
liquid using guidelines established by the Board of Directors.
(c) Settlement is on a delayed delivery or when-issued basis with final
maturity to be announced (TBA) in the future.
(d) Rate represents effective yield.
(e) Adjustable rate mortgage coupon. The stated rate represents the rate at
December 31, 1997.
(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 December 31, 1997, all or a portion of this security was pledged to
cover collateral requirements for futures, options or TBA's.
ABBREVIATIONS: CURRENCY TERMS:
ADR -- American Depositary Receipt AUD -- Australian Dollar
GDR -- Global Depositary Receipt CAD -- Canadian Dollar
Pfd. -- Preferred DEM -- Deutsche Mark
Regd. -- Registered DKK -- Danish Krona
REMIC -- Real Estate Mortgage Investment ESP -- Spanish Peseta
Conduit GBP -- Pound Sterling
SDR -- Special Drawing Rights JPY -- Japanese Yen
STRIPS -- Separate Trading of Registered NLG -- Netherland Guilder
Interest and Principal of Securities SEK -- Swedish Krona
47
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data based on a share outstanding throughout the period(s) indicated
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
12/31/97(l) 12/30/96(h) 12/31/95(i)
- --------------------------------------------------------------------------------
INCEPTION DATE -- -- 5/1/95
Net asset value, beginning of period $10.83 $10.47 $10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.02 0.03 0.20
Net realized and unrealized
gains (losses) on investments 1.10 1.01 0.47
- --------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS 1.12 1.04 0.67
- --------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income 0.08 0.03 0.20
Net realized gains 1.19 0.65 0.00
- --------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 1.27 0.68 0.20
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.68 $10.83 $10.47
================================================================================
TOTAL RETURN (a) 10.17% 9.91% 6.70%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) $31,931 $17,644 $15,348
Ratios to average net assets:
Net investment income* 0.14% 0.23% 0.44%
Net expenses* 1.34% 1.50% 1.54%
Gross expenses* 1.43% 1.56% 2.17%
Portfolio turnover rate 166% 150% 58%
Average brokerage commissions (b) $0.016 $0.030 N/A
- --------------------------------------------------------------------------------
REAL ESTATE SECURITIES FUND
12/31/97(l) 12/30/96 12/31/95(i)
- --------------------------------------------------------------------------------
INCEPTION DATE -- -- 5/1/95
Net asset value, beginning of period $14.11 $11.05 $10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.74 0.64 0.46
Net realized and unrealized
gains (losses) on investments 2.01 3.36 1.23
- --------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS 2.75 4.00 1.69
- --------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income 0.53 0.65 0.46
Net realized gains 1.05 0.29 0.18
- --------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 1.58 0.94 0.64
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $15.28 $14.11 $11.05
================================================================================
TOTAL RETURN (a) 19.49% 36.24% 17.00%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) $48,887 $24,533 $13,429
Ratios to average net assets:
Net investment income* 4.83% 5.90% 6.85%
Net expenses* 0.95% 1.07% 1.31%
Gross expenses* 0.95% 1.07% 1.61%
Portfolio turnover rate 58% 30% 54%
Average brokerage commissions (b) $0.055 $0.060 N/A
- ----------
See Notes to Financial Highlights on page 53 and Notes to Financial Statements
48
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data based on a share outstanding throughout the period(s) indicated
- --------------------------------------------------------------------------------
PREMIER GROWTH EQUITY FUND
12/31/97(f)
- --------------------------------------------------------------------------------
INCEPTION DATE 12/12/97
Net asset value, beginning of period $49.79
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.03
Net realized and unrealized
gains (losses) on investments 1.69
- --------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS 1.72
- --------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income 0.03
Net realized gains 0.00
- --------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 0.03
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $51.48
================================================================================
TOTAL RETURN (a) 3.46%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) $16,237
Ratios to average net assets:
Net investment income* 1.04%
Expenses* 0.69%
Portfolio turnover rate 3%
Average brokerage commissions (b) $ 0.032
- --------------------------------------------------------------------------------
VALUE EQUITY FUND
12/31/97(j)
- --------------------------------------------------------------------------------
INCEPTION DATE 5/1/97
Net asset value, beginning of period $10.00
INCOME (LOSS)
FROM INVESTMENT OPERATIONS:
Net investment income 0.02
Net realized and unrealized
gains (losses) on investments 3.23
- --------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS 3.25
- --------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income 0.02
Net realized gains 0.12
- --------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 0.14
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $13.11
- --------------------------------------------------------------------------------
TOTAL RETURN (a) 32.56%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) $30,856
Ratios to average net assets:
Net investment income* 0.38%
Expenses* 0.69%
Portfolio turnover rate 18%
Average brokerage commissions(B) $0.064
- ----------
See Notes to Financial Highlights on page 53 and Notes to Financial Statements
49
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data based on a share outstanding throughout the period(s) indicated
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. EQUITY FUND
12/31/97(l) 12/31/96 12/31/95(k)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCEPTION DATE -- -- 1/3/95
Net asset value, beginning of period $21.11 $19.27 $15.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.24 0.34 0.46
Net realized and unrealized
gains (losses) on investments 6.54 3.90 4.87
- -------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS 6.78 4.24 5.33
- -------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income 0.00 0.35 0.47
Net realized gains 0.01 2.05 0.59
- -------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 0.01 2.40 1.06
- -------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $27.88 $21.11 $19.27
- -------------------------------------------------------------------------------------------
TOTAL RETURN (A) 32.13% 21.72% 35.58%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) $23,917 $18,027 $9,071
Ratios to average net assets:
Net investment income* 0.94% 1.80% 2.10%
Net expenses* 0.80% 0.80% 0.80%
Gross expenses* 0.86% 0.88% 1.03%
Portfolio turnover rate 33% 35% 71%
Average brokerage commissions (b) $0.054 $0.071 N/A
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
S&P 500 INDEX FUND
12/31/97(d l) 12/30/96(c) 12/31/95(c) 12/31/94 12/31/93(e)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCEPTION DATE -- -- -- -- 4/15/85
Net asset value, beginning of period $15.14 $20.99 $15.72 $15.99 $17.04
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.23 0.78 0.27 0.22 0.31
Net realized and unrealized
gains (losses) on investments 4.36 4.36 5.41 (0.23) 2.16
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS 4.59 5.14 5.68 (0.01) 2.47
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income 0.23 0.77 0.27 0.22 0.31
Net realized gains 0.27 10.22 0.14 0.04 3.21
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 0.50 10.99 0.41 0.26 3.52
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $19.23 $15.14 $20.99 $15.72 $15.99
====================================================================================================================================
TOTAL RETURN (A) 30.33% 24.51% 36.14% (0.06%) 14.52%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) $164,294 $35,522 $66,017 $23,930 $8,277
Ratios to average net assets:
Net investment income*. 1.70% 1.91% 1.98% 2.22% 2.00%
Net expenses* 0.46% 0.48% 0.66% 0.75% 0.87%
Gross expenses* 0.46% 0.48% 0.66% 1.10% 0.87%
Portfolio turnover rate 6% 63% 15% 4% 73%
Average brokerage commissions (b) $0.026 $0.050 N/A N/A N/A
</TABLE>
- ----------
See Notes to Financial Highlights on page 53 and Notes to Financial Statements
50
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data based on a share outstanding throughout the period(s) indicated
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURN FUND
12/31/97(l) 12/30/96(c) 12/31/95(c) 12/31/94 12/31/93
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCEPTION DATE -- -- -- -- 7/1/85
Net asset value, beginning of period $12.73 $15.93 $13.40 $13.59 $13.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.34 1.02 0.41 0.35 0.42
Net realized and unrealized
gains (losses) on investments 1.95 0.67 3.34 (0.01) 1.35
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS 2.29 1.69 3.75 0.34 1.77
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income 0.34 1.02 0.42 0.35 0.41
Net realized gains 1.47 3.87 0.80 0.18 0.76
Tax return of capital 0.00 0.00 0.00 0.00 0.01
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 1.81 4.89 1.22 0.53 1.18
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $13.21 $12.73 $15.93 $13.40 $13.59
====================================================================================================================================
TOTAL RETURN (a) 17.99% 10.60% 28.07% 2.54% 13.67%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) $50,007 $27,814 $70,507 $34,708 $12,609
Ratios to average net assets:
Net investment income* 2.56% 2.73% 3.42% 4.00% 3.80%
Expenses* 0.65% 0.60% 0.65% 0.77% 0.85%
Portfolio turnover rate 135% 144% 106% 67% 48%
Average brokerage commissions (b) $0.026 $0.060 N/A N/A N/A
</TABLE>
- --------------------------------------------------------------------------------
GLOBAL INCOME FUND
12/31/97(j)
- --------------------------------------------------------------------------------
INCEPTION DATE 5/1/97
Net asset value, beginning of period $10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.35
Net realized and unrealized
gains (losses) on investments (0.01)
- --------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS 0.34
- --------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income 0.45
Net realized gains 0.04
- --------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 0.49
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $9.85
- --------------------------------------------------------------------------------
TOTAL RETURN (a) 3.41%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) $5,851
Ratios to average net assets:
Net investment income* 5.54%
Expenses* 0.84%
Portfolio turnover rate 119%
- ----------
See Notes to Financial Highlights on page 53 and Notes to Financial Statements
51
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data based on a share outstanding throughout the period(s) indicated
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
INCOME FUND
12/31/97(l) 12/31/96 12/31/95(k)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCEPTION DATE -- -- 1/3/95
Net asset value, beginning of period $11.84 $12.53 $12.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.76 0.76 0.82
Net realized and unrealized
gains (losses) on investments 0.27 (0.43) 1.13
- ---------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS 1.03 0.33 1.95
- ---------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income 0.76 0.76 0.84
Net realized gains 0.00 0.26 0.58
- ---------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 0.76 1.02 1.42
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $12.11 $11.84 $12.53
===============================================================================================================
TOTAL RETURN (a) 9.00% 2.92% 16.83%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) $45,555 $5,388 $3,271
Ratios to average net assets:
Net investment income* 5.11% 6.37% 6.52%
Net expenses* 0.59% 0.75% 0.75%
Gross expenses* 0.77% 1.03% 1.15%
Portfolio turnover rate 356% 222% 253%
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
MONEY MARKET FUND
12/31/97(g l) 12/30/96(c,g) 12/31/95(c,g) 12/31/94(g) 12/31/93(g)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCEPTION DATE -- -- -- -- 7/1/85
Net asset value, beginning of period $1.00 $1.00 $0.98 $0.97 $0.97
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.05 0.05 0.06 0.03 0.02
Net realized and unrealized
gains (losses) on investments 0.00 0.00 0.00 0.01 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS 0.05 0.05 0.06 0.04 0.02
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income 0.05 0.05 0.04 0.03 0.02
Net realized gains 0.00 0.00 0.00 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 0.05 0.05 0.04 0.03 0.02
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $0.98 $0.97
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (a) 5.41% 5.41% 5.90% 3.77% 2.39%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) $144,815 $113,263 $63,083 $33,529 $9,094
Ratios to average net assets:
Net investment income* 5.17% 5.29% 5.74% 4.04% 2.53%
Net expenses* 0.32% 0.15% 0.23% 0.42% 0.75%
Gross expenses* 0.48% 0.55% 0.63% 0.70% 0.75%
</TABLE>
- ----------
See Notes to Financial Highlights on page 53 and Notes to Financial Statements
52
<PAGE>
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains. Had the adviser not absorbed a
portion of expenses, total returns would have been lower. Periods less than
one year are not annualized.
(b) For the fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged. Mark-ups, mark-downs and spreads on shares
traded on a principal basis are not included unless they are disclosed on
confirmations prepared in accordance with rule 10b-10 under the 1934 Act.
(c) Due to the significant increase in fund shares in 1995 and the significant
decrease in 1996 related to Aon Savings Plan, the net changes from the 1994
and 1995 Net Asset Value per share as calculated in accordance with the
requirements of Form N-1A are not commensurate with the Statement of
Changes in Net Assets.
(d) As of April 30, 1997, the fund's name was changed to S&P 500 Index Fund
from Common Stock Index Portfolio.
(e) As of May 1, 1993, the fund's name was changed to Common Stock Index
Portfolio from Common Stock Portfolio.
(f) Information is for the period December 12, 1997, inception of investment
operations, through December 31, 1997.
(g) Effective May 5, 1997, the fund's primary investment policy was amended to
comply with Rule 2a-7 of the Investment Company Act of 1940 governing money
market funds. The Fund's investment objective, however, remains to seek a
high level of current income consistent with high liquidity and safety of
principal. Per share information prior to January 1, 1997 have been
restated to reflect the 10.41 to 1 stock split.
(h) Yen-based convertible bonds are excluded from the average commission rate
paid due to the nominal commissions paid which dilutes the results. Had
those securities been included, the average commission rate would have been
$0.00.
(i) Information is for the period May 1, 1995, inception of investment
operations, through December 31, 1995.
(j) Information is for the period May 1, 1997, inception of investment
operations, through December 31, 1997.
(k) Information is for the period January 3, 1995, inception of investment
operations, through December 31, 1995.
(l) GEIM assumed management responsibilities for the Funds effective May 1,
1997. See Note 3 in the Notes to Financial Statements for further
information.
* Annualized for periods less than one year.
- ----------
See Notes to Financial Statements
53
<PAGE>
STATEMENTS OF ASSETS
AND LIABILITIES DECEMBER 31, 1997
<TABLE>
<CAPTION>
PREMIER
INTERNATIONAL REAL ESTATE GROWTH VALUE
EQUITY SECURITIES EQUITY EQUITY
FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at market
(cost $28,986,509; $38,259,479; $14,394,545;
$28,087,532; $22,344,701; $124,288,450; $42,553,283;
$4,864,883; $41,726,919; and $0, respectively) $ 30,330,803 $ 46,902,212 $ 14,936,246 $ 29,598,931
Short term investments (at amortized cost) 1,461,929 6,523,933 1,310,700 2,069,657
Cash 64,548 988 3,177 1,656
Foreign currency (cost $183,181; $0; $0; $0; $964; $0;
$33,065; $98,405; $0; and $0, respectively) 182,204 0 0 0
Receivable for investments sold 128,778 484,756 0 89,652
Income receivables 84,865 301,501 10,707 20,478
Receivable for fund shares sold 15,859 0 0 166,326
Receivable on forward foreign currency contracts 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 32,268,986 54,213,390 16,260,830 31,946,700
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Options written, at market* 0 0 0 0
Distributions payable to shareholders 0 5,066,362 9,921 0
Payable for investments purchased 95,846 140,925 0 1,051,710
Payable for fund shares redeemed 102,337 75,170 2,924 17,458
Payable to GEIM 140,205 44,411 11,076 21,882
Variation margin payable 0 0 0 0
Payable to custodian 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 338,388 5,326,868 23,921 1,091,050
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 31,930,598 $ 48,886,522 $ 16,236,909 $ 30,855,650
====================================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in $ 30,840,272 $ 40,741,481 $ 15,701,115 $ 29,272,728
Undistributed (overdistributed) net investment income (15,966) 76,049 (1,140) 6,713
Accumulated net realized gain (loss) (235,610) (573,741) (4,770) 64,810
Net unrealized appreciation / (depreciation) on:
Investments 1,344,294 8,642,733 541,701 1,511,399
Futures 0 0 0 0
Written options 0 0 0 0
Foreign currency related transactions (2,392) 0 3 0
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 31,930,598 $ 48,886,522 $ 16,236,909 $ 30,855,650
====================================================================================================================================
Shares outstanding ($.001 par value) 2,990,279 3,200,379 315,376 2,353,624
Net asset value, offering and redemption price per share 10.68 15.28 51.48 13.11
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
U.S. S&P 500 TOTAL GLOBAL MONEY
EQUITY INDEX RETURN INCOME INCOME MARKET
FUND FUND FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
$ 22,896,275 $ 154,766,007 $ 48,340,894 $ 4,743,048 $ 41,723,255 $ 0
990,895 9,958,742 2,188,990 1,026,013 15,980,468 137,429,079
39,407 66,707 45,091 18 0 960,626
947 0 32,693 97,156 0 0
141,368 31,763 1,187,304 0 11,093 0
28,085 264,079 315,038 137,387 493,392 201,208
122 53,471 257 89,789 10,977 6,406,666
0 0 0 52,403 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
24,097,099 165,140,769 52,110,267 6,145,814 58,219,185 144,997,579
- ------------------------------------------------------------------------------------------------------------------------------------
0 0 1,825 0 1,642 0
11,632 0 0 287,245 118,578 132,495
153,281 784,109 2,073,105 0 1,518,545 0
6,638 0 0 0 1,115 866
8,644 60,529 28,142 7,229 19,791 48,731
100 2,050 0 0 0 0
0 0 0 0 11,006,223 0
- ------------------------------------------------------------------------------------------------------------------------------------
180,295 846,688 2,103,072 294,474 12,665,894 182,092
- ------------------------------------------------------------------------------------------------------------------------------------
$ 23,916,804 $ 164,294,081 $ 50,007,195 $ 5,851,340 $ 45,553,291 $ 144,815,487
====================================================================================================================================
$ 23,364,438 $ 133,780,285 $ 44,239,795 $ 5,960,397 $ 45,588,164 144,816,777
0 6,589 (2,576) (35,156) 523 0
2,915 (53,375) (17,128) 0 (32,369) (1,290)
551,574 30,477,557 5,787,611 (121,835) (3,664) 0
(2,100) 83,025 0 0 0 0
0 0 0 0 637 0
(23) 0 (507) 47,934 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
$ 23,916,804 $ 164,294,081 $ 50,007,195 $ 5,851,340 $ 45,553,291 144,815,487
====================================================================================================================================
857,944 8,543,387 3,786,215 594,120 3,760,734 144,815,793
$ 27.88 $ 19.23 $ 13.21 $ 9.85 $ 12.11 $ 1.00
</TABLE>
* Premium received for the Total Return Fund and Income Fund were $1,825 and
$2,279, respectively.
- ----------
See Notes to Financial Statements
54 & 55
<PAGE>
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PREMIER
INTERNATIONAL REAL ESTATE GROWTH VALUE
EQUITY SECURITIES EQUITY EQUITY
FUND FUND FUND* FUND**
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
INCOME:
Dividends $ 374,462 $ 2,137,000 $ 4,774 $ 41,566
Interest 13,854 222,725 9,804 34,009
Less: Foreign taxes withheld (42,710) (49) 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME 345,606 2,359,676 14,578 75,575
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administration fees 228,143 339,758 4,750 38,851
Transfer agent 3,073 3,073 373 3,073
Trustees' fees 3,044 4,828 57 806
Custody and accounting expenses 86,967 22,573 343 2,570
Professional fees 12,001 18,500 248 3,175
Amortization of deferred organization expense 0 0 0 0
Other expenses 1,395 2,183 26 359
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER 334,623 390,915 5,797 48,834
Less: Expenses waived or borne by
the adviser (22,680) (3,337) 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses 311,943 387,578 5,797 48,834
- ------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 33,663 1,972,098 8,781 26,741
====================================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments 2,270,161 2,605,868 (4,770) 183,795
Futures 0 0 0 0
Written options 0 0 0 5,364
Foreign currency related transactions 54,593 0 0 0
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
DEPRECIATION ON:
Investments (170,363) 2,450,338 541,701 1,511,399
Futures 0 0 0 0
Written options 0 0 0 0
Foreign currency related transactions 4,777 0 3 0
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 2,159,168 5,056,206 536,934 1,700,558
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 2,192,831 $ 7,028,304 $ 545,715 $ 1,727,299
====================================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
U.S. S&P 500 TOTAL GLOBAL MONEY
EQUITY INDEX RETURN INCOME INCOME MARKET
FUND FUND FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
$ 339,239 $ 1,735,734 $ 396,202 $ 0 $ 3,108 $ 0
38,368 696,980 1,024,171 235,512 486,323 6,878,316
(2,844) (9,780) (9,357) 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
374,763 2,422,934 1,411,016 235,512 489,431 6,878,316
- ------------------------------------------------------------------------------------------------------------------------------------
118,248 379,643 218,469 21,909 35,540 455,394
8,478 3,073 3,073 3,073 8,478 3,073
8,406 10,969 6,120 738 2,669 16,052
3,015 72,320 31,628 2,166 1,778 59,344
44,418 42,535 23,522 2,883 13,953 62,322
2,958 0 0 0 2,958 0
1,020 4,914 2,758 329 370 7,174
- ------------------------------------------------------------------------------------------------------------------------------------
186,543 513,454 285,570 31,098 65,746 603,359
(14,546) 0 0 0 (15,306) (204,135)
- ------------------------------------------------------------------------------------------------------------------------------------
171,997 513,454 285,570 31,098 50,440 399,224
- ------------------------------------------------------------------------------------------------------------------------------------
202,766 1,909,480 1,125,446 204,414 438,991 6,479,092
====================================================================================================================================
8,057,756 1,729,875 4,921,721 26,252 134,716 (544)
156,050 461,668 0 0 199 0
0 0 0 0 872 0
(112) 0 (7,585) 21,423 0 0
(2,562,569) 22,367,742 1,113,030 (121,835) (46,360) 0
6,750 83,025 0 0 0 0
0 0 0 0 637 0
(272) 0 (507) 47,934 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
5,657,603 24,642,310 6,026,659 (26,226) 90,064 (544)
- ------------------------------------------------------------------------------------------------------------------------------------
$ 5,860,369 $ 26,551,790 $ 7,152,105 $ 178,188 $ 529,055 $ 6,478,548
====================================================================================================================================
</TABLE>
* For the period December 12, 1997 (inception) thru December 31, 1997.
** For the period May 1, 1997 (inception) thru December 31, 1997.
- ----------
See Notes to Financial Statements
56 & 57
<PAGE>
STATEMENTS OF CHANGES
IN NET ASSETS
<TABLE>
<CAPTION>
PREMIER
INTERNATIONAL REAL ESTATE GROWTH VALUE
EQUITY SECURITIES EQUITY EQUITY
FUND FUND FUND* FUND**
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Period Ended Period Ended
December 31, December 30, December 31, December 30, December 31, December 31,
1997 1996 1997 1996 1997 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income $ 33,663 $ 55,092 $ 1,972,098 $ 1,124,059 $ 8,781 $ 26,741
Net realized gain (loss) on
investments, futures, and
foreign currency
related transactions 2,324,754 1,034,935 2,605,868 509,943 (4,770) 189,159
Net increase (decrease) in unrealized
appreciation/depreciation (165,586) 571,033 2,450,338 5,092,453 541,704 1,511,399
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase from operations 2,192,831 1,661,060 7,028,304 6,726,455 545,715 1,727,299
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (155,651) (69,707) (1,694,121) (1,133,355) (9,921) (20,028)
Net realized gains (2,349,968) (1,034,935) (3,372,241) (509,943) 0 (124,349)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (2,505,619) (1,104,642) (5,066,362) (1,643,298) (9,921) (144,377)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
operations and distributions (312,788) 556,418 1,961,942 5,083,157 535,794 1,582,922
- ------------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares 14,820,466 26,614,888 27,924,962 11,868,291 11,437 15,768,462
Value of distributions reinvested 3,610,282 0 1,643,298 0 0 144,380
Cost of shares redeemed (12,355,053) (24,875,243) (7,176,928) (5,847,077) (13,785) (1,016,670)
Proceeds from substitution of fund 8,523,846 0 0 0 15,703,463 14,376,556
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from
share transactions 14,599,541 1,739,645 22,391,332 6,021,214 15,701,115 29,272,728
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS 14,286,753 2,296,063 24,353,274 11,104,371 16,236,909 30,855,650
NET ASSETS
Beginning of period 17,643,845 15,347,782 24,533,248 13,428,877 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
End of period 31,930,598 17,643,845 48,886,522 24,533,248 16,236,909 30,855,650
====================================================================================================================================
UNDISTRIBUTED (OVERDISTRIBUTED)
NET INVESTMENT
INCOME, END OF PERIOD $ (15,966) $ 0 $ 76,049 $ 0 $ (1,140) $ 6,713
- ------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN PORTFOLIO SHARES:
Shares sold by subscription 1,235,204 2,420,951 1,808,623 962,667 256 1,297,933
Issued for distributions reinvested 333,787 0 116,463 0 0 11,140
Shares redeemed (1,022,876) (2,258,249) (463,647) (438,509) (274) (77,741)
Shares from substitution of fund 814,899 0 0 0 315,394 1,122,292
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in fund shares 1,361,014 162,702 1,461,439 524,158 315,376 2,353,624
====================================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
U.S. S&P 500 TOTAL GLOBAL
EQUITY INDEX RETURN INCOME
FUND FUND FUND FUND**
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Period Ended
December 31, December 31, December 31, December 30, December 31, December 30, December 31,
1997 1996 1997 1996 1997 1996 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 202,766 $ 263,127 $ 1,909,480 $ 1,833,619 $ 1,125,446 $ 2,215,251 $ 204,414
8,213,694 1,083,526 2,191,543 23,983,222 4,914,136 8,450,564 47,675
(2,556,091) 1,564,581 22,450,767 (3,717,302) 1,112,523 (3,141,042) (73,901)
- ------------------------------------------------------------------------------------------------------------------------------------
5,860,369 2,911,234 26,551,790 22,099,539 7,152,105 7,524,773 178,188
- ------------------------------------------------------------------------------------------------------------------------------------
(4,168) (266,657) (1,914,729) (1,807,487) (1,108,399) (2,230,657) (263,343)
(7,464) (1,569,398) (2,259,212) (23,983,222) (4,917,675) (8,448,019) (23,902)
- ------------------------------------------------------------------------------------------------------------------------------------
(11,632) (1,836,055) (4,173,941) (25,790,709) (6,026,074) (10,678,676) (287,245)
- ------------------------------------------------------------------------------------------------------------------------------------
5,848,737 1,075,179 22,377,849 (3,691,170) 1,126,031 (3,153,903) (109,057)
- ------------------------------------------------------------------------------------------------------------------------------------
1,013,255 6,384,529 82,623,523 46,416,381 8,490,461 21,203,447 6,089,468
0 1,836,055 29,965,259 0 16,704,749 0 0
(971,729) (340,318) (6,194,702) (73,219,899) (4,128,074) (60,742,609) (129,071)
0 0 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
41,526 7,880,266 106,394,080 (26,803,518) 21,067,136 (39,539,162) 5,960,397
- ------------------------------------------------------------------------------------------------------------------------------------
5,890,263 8,955,445 128,771,929 (30,494,688) 22,193,167 (42,693,065) 5,851,340
18,026,541 9,071,096 35,522,152 66,016,840 27,814,028 70,507,093 0
- ------------------------------------------------------------------------------------------------------------------------------------
23,916,804 18,026,541 164,294,081 35,522,152 50,007,195 27,814,028 5,851,340
====================================================================================================================================
$ 0 $ 267 $ 6,589 $ 40,636 $ (2,576) $ 0 $ (35,156)
- ------------------------------------------------------------------------------------------------------------------------------------
42,501 313,305 4,614,080 2,040,664 610,645 1,306,831 606,644
0 85,239 1,921,660 0 1,295,034 0 0
(38,356) (15,566) (338,017) (2,839,987) (304,136) (3,548,503) (12,524)
0 0 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
4,145 382,978 6,197,723 (799,323) 1,601,543 (2,241,672) 594,120
====================================================================================================================================
</TABLE>
<PAGE>
MONEY
INCOME MARKET
FUND FUND
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 30,
1997 1996 1997 1996
- --------------------------------------------------------------------------------
$ 438,991 $ 296,905 $ 6,479,092 $ 5,899,989
135,787 (20,781) (544) (745)
(45,723) (101,681) 0 0
- --------------------------------------------------------------------------------
529,055 174,443 6,478,548 5,899,244
- --------------------------------------------------------------------------------
(438,469) (296,905) (6,487,022) (5,892,059)
0 (114,424) 0 0
- --------------------------------------------------------------------------------
(438,469) (411,329) (6,487,022) (5,892,059)
- --------------------------------------------------------------------------------
90,586 (236,886) (8,474) 7,185
- --------------------------------------------------------------------------------
621,763 2,351,196 271,188,589 190,250,466
308,539 405,749 12,245,586 0
(749,066) (403,559) (274,705,155) (140,078,242)
39,893,774 0 22,832,172 0
- --------------------------------------------------------------------------------
40,075,010 2,353,386 31,561,192 50,172,224
- --------------------------------------------------------------------------------
40,165,596 2,116,500 31,552,718 50,179,409
5,387,695 3,271,195 113,262,769 63,083,360
- --------------------------------------------------------------------------------
45,553,291 5,387,695 144,815,487 113,262,769
================================================================================
$ 523 $ (3,063) $ 0 $ 7,930
- --------------------------------------------------------------------------------
50,870 193,912 198,347,812 17,868,330
26,070 34,209 121,908,143 0
(63,001) (33,870) (209,183,555) (13,044,358)
3,291,565 0 22,832,172 0
- --------------------------------------------------------------------------------
3,305,504 194,251 133,904,572 4,823,972
================================================================================
* For the period December 12, 1997 (inception) thru December 31, 1997.
** For the period May 1, 1997 (inception) thru December 31, 1997.
58 & 59
<PAGE>
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997
- --------------------------------------------------------------------------------
1. ORGANIZATION OF THE FUNDS
GE Investments Funds, Inc. (the "Company") (formerly, Life of Virginia Series
Funds, Inc.) was incorporated under the laws of the Commonwealth of Virginia on
May 14, 1984 and is registered under the Investment Company Act of 1940 (as
amended) (the "1940 Act") as an open-end management investment company. The
Company is comprised of eleven investment Funds (each a "Fund" and collectively
the "Funds"), only ten of which are currently being offered, as follows:
International Equity Fund, Real Estate Securities Fund, Premier Growth Equity
Fund, Value Equity Fund, U.S. Equity Fund, S&P 500 Index Fund, Total Return
Fund, Global Income Fund, Income Fund, and Money Market Fund. The Government
Securities Fund is not currently being offered by the Company.
Shares of the Company are offered only to insurance company separate accounts
that fund certain variable life insurance contracts and variable annuity
contracts. These insurance companies may include insurance companies affiliated
with GE Investment Management Incorporated ("GEIM"), the investment adviser and
administrator of each Fund. As of December 31, 1997, The Life Insurance Company
of Virginia ("Life of Virginia") and Great Northern Insured Annuity Corporation
("GNA"), each an affiliated insurance company, controlled the Funds by
ownership, through separate accounts, of virtually all of the Funds' shares of
beneficial interest. Life of Virginia and GNA are indirect wholly-owned
subsidiaries of General Electric Capital Corporation and, as such are affiliates
of GEIM.
Effective May 1, 1997, the Common Stock Index Portfolio changed its name to S&P
500 Index Fund. On May 5, 1997, the Money Market Fund's investment policy was
changed to maintain a constant net asset value in accordance with Rule 2a-7 of
the 1940 Act, as amended, governing money market funds. To effect this change
the Money Market Fund declared a stock split in the ratio of 10.41 to 1. As a
result of the stock split, the Money Market Fund began maintaining a constant
net asset value per share of $1.00. The financial highlights of the Money Market
Fund have been restated to reflect this stock split. The Global Income Fund and
Value Equity Fund commenced operations on May 1, 1997. The Premier Growth Equity
Fund commenced operations on December 12, 1997.
As of December 12, 1997, shares of the Government Securities Fund were no longer
offered.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following summarizes the significant accounting policies of the Company:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results may differ from those estimates, but are
expected to be immaterial.
SECURITY VALUATION AND TRANSACTIONS
Securities for which exchange quotations are readily available are valued at the
last sale price, or if no sales occurred on that day, at the last quoted bid
price. Certain fixed income securities are valued by a dealer or by a pricing
service based upon a computerized matrix system, which considers market
transactions and dealer supplied valuations. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on which
they are principally traded. Options are valued at the last sale price, or if no
sales occurred on that day, at the last quoted bid price. Forward foreign
currency contracts are valued at the mean between the bid and the offered
forward rates as last quoted by a recognized dealer. Short-term investments
maturing within 60 days are valued at amortized cost. Fund positions which
cannot be valued as set forth above are valued at fair value determined under
procedures approved by the Board of Directors of the Funds.
The Money Market Fund values its securities using the amortized cost method, in
accordance with Rule 2a-7 of the 1940 Act, which values securities initially at
cost and thereafter assumes a constant amortization to maturity of any discount
or premium. Amortized cost approximates fair value.
Transactions are accounted for as of the trade date. Realized gains and losses
on investments sold are recorded on the basis of specific identified cost for
both financial statement and federal tax purposes.
FOREIGN CURRENCY
Accounting records of the Funds are maintained in U.S. dollars. Investment
securities and other assets and liabilities and purchases and sales of
investment securities
60
<PAGE>
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997
- --------------------------------------------------------------------------------
denominated in a foreign currency are translated to U.S. dollars at the
prevailing exchange rate on the respective dates of such transactions.
The Funds do not isolate the portion of the results of operations resulting from
changes in foreign exchange rates on investments from the fluctuations arising
from changes in their market prices. Such fluctuations are included in net
realized and unrealized gain or loss from investments. Reported net realized
exchange gains or losses from foreign currency transactions represent sale of
foreign currencies, currency gains or losses between the trade date and the
settlement date on securities transactions, realized gains and losses on forward
foreign currency contracts, and the difference between the amounts of dividends,
interest, and foreign withholding taxes recorded on the Funds' books, and the
U.S. dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of assets and
liabilities, other than investments in securities as a result of changes in
exchange rates.
INCOME TAXES
It is each Fund's policy to comply with all sections of the Internal Revenue
Code applicable to regulated investment companies and to distribute
substantially all of its taxable income and gains to its shareholders and,
therefore, no provision for federal income tax has been made. Each Fund is
treated as a separate taxpayer for federal income tax purposes. Any net capital
and currency losses incurred after October 31, within each Fund's tax year, are
deemed to arise on the first day of the Fund's next tax year if the Fund so
elects to defer such losses.
INVESTMENT INCOME
Corporate actions (including cash dividends) are recorded net of nonreclaimable
tax withholdings on the ex-dividend date, except for certain foreign securities
for which corporate actions are recorded as soon after ex-dividend date as such
information is available. Interest income is recorded on the accrual basis. All
discounts and premiums on taxable bonds are accreted or amortized to call or
maturity date, whichever is shorter, using the effective yield method.
EXPENSES
Expenses of the Company which are directly identifiable to a specific fund are
allocated to that fund. Expenses which are not readily identifiable to a
specific fund are allocated in such a manner as deemed equitable, taking into
consideration the nature and type of expense and the relative sizes of the
Funds. All expenses of the Funds are paid by GEIM, investment adviser to the
Funds, and reimbursed by the Funds.
DISTRIBUTIONS TO SHAREHOLDERS
The Money Market Fund declares net investment income dividends daily and pays
them monthly. All other Funds declare and pay dividends of net investment income
annually. All Funds declare and pay net realized capital gain 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, losses on wash sale transactions, and
deferred organization expenses. 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. The calculation of net
investment income per share in the Financial Highlights table excludes these
adjustments. During any particular year, net realized gains from investment
transactions in excess of any applicable capital loss carryforwards would be
taxable to the Funds if not distributed and, therefore, will be declared and
paid to their shareholders annually.
WHEN-ISSUED SECURITIES
The Funds may purchase or sell securities on a when-issued or forward commitment
basis. Payment and delivery may take place a month or more after the date of the
transaction. The price of the underlying securities and the date when the
securities will be delivered and paid for are fixed at the time the transaction
is negotiated. This may increase the risk if the other party involved in the
transaction fails to deliver and causes the Funds to subsequently invest at less
advantageous yields. In connection with such purchases, the Funds are required
to hold liquid assets as collateral with the Funds' custodian sufficient to
cover the purchase price, unless they enter into an offsetting contract for the
sale of equal securities and value.
FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward") is an agreement between two
parties to buy and sell a currency at a set price on a future date. The market
value of the Forward fluctuates with changes in currency exchange rates. The
Forward is marked-to-market daily and the change in the market value is recorded
by the Funds as an unrealized gain or loss. When the Forward is closed, the
61
<PAGE>
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997
- --------------------------------------------------------------------------------
Funds record a realized gain or loss equal to the difference between the value
at the time it was opened and the value at the time it was closed. The Funds
could be exposed to risk if a counterparty is unable to meet the terms of the
contract or if the value of the currency changes unfavorably. The Funds may
enter into Forwards in connection with planned purchases and sales of
securities, to hedge specific receivables or payables against changes in future
exchange rates or to hedge the U.S. dollar value of portfolio securities
denominated in a foreign currency.
FUTURES AND OPTIONS
The Funds, other than the Money Market Fund, may invest in futures contracts and
purchase and write options. These investments involve, to varying degrees,
elements of market risk and risks in excess of the amount recognized in the
Statements of Assets and Liabilities. The face or contract amounts reflect the
extent of the involvement the Funds have in the particular classes of these
instruments. Risks may be caused by an imperfect correlation between movements
in the price of the instruments and the price of the underlying securities and
interest rates. Risks also may arise if there is an illiquid secondary market
for the instruments, or an inability of counterparties to perform. The Funds may
invest in futures contracts for the following reasons: (1) for the purpose of
hedging against the effects of changes in the value of portfolio securities or
other investments due to anticipated changes in interest rates, stock market
conditions and currency market conditions, (2) to gain stock, bond, or currency
market exposure for accumulating and residual cash positions, (3) for duration
management, (4) when such transactions are an economically appropriate way to
reduce risks inherent in the management of a Fund, and (5) for non-hedging
purposes such as seeking additional income or otherwise seeking to increase
total return.
Upon entering into a futures contract, the Funds are required to deposit with
the Funds' custodian in a segregated account either cash or securities in an
amount (initial margin) equal to a certain percentage of the contract value.
Subsequent payments (variation margin) are made or received by the Funds each
day. The variation margin payments are equal to the daily change in the contract
value and are recorded as unrealized gains and losses. The Funds recognize a
realized gain or loss when the futures contract is closed. The Funds will
realize a gain or loss upon the expiration or closing of an option transaction.
When an option is exercised, the proceeds on sales for a written call option,
the purchase cost for a written put option, or the proceeds on the sale of the
security for a purchased put or cost of the security for a call option is
adjusted by the amount of premium received or paid.
SECURITY LENDING
The Funds may loan securities to brokers, dealers, and financial institutions
determined by GEIM (and under the supervision of the Board of Directors) to be
creditworthy, up to a maximum of 20% of the total value of the Fund's assets.
The loans of securities will be secured by collateral in the form of cash or
other liquid assets, which will be segregated and maintained with the custodian
in an amount at least equal to the current market value of the loaned
securities. The Funds receive a lender fee in addition to the interest and
dividends on the loaned securities during the term of the loan. The Funds will
receive any gain or loss in the market value of its loaned securities and of
securities in which cash collateral is invested during the term of the loan. In
the event the counterparty (borrower) does not meet its contracted obligation to
return the securities, the Fund may be exposed to the risk of loss of
reacquiring the loaned securities at prevailing market prices.
OTHER
There are certain additional risks involved when investing in foreign securities
that are not inherent in domestic securities. These risks may involve foreign
currency exchange rate fluctuations, adverse political and economic developments
and the imposition of unfavorable foreign governmental laws and restrictions.
3. FEES AND COMPENSATION PAID TO AFFILIATES
ADVISORY AND ADMINISTRATION FEES
GE Investment Management, Inc., a registered investment adviser, was retained by
the Company's Board of Directors effective May 1, 1997 to act as investment
adviser and administrator of the Funds.
Compensation of GEIM, a wholly-owned subsidiary of General Electric Company, for
investment advisory and administrative services, is paid monthly based on the
average daily net assets of each Fund. The administrative and advisory fees
payable to GEIM for each Fund are at the following annual rates, based on
average daily net assets:
International Equity Fund: 1.00% of the first $100,000,000; .95% of the
next $100,000,000; and .90% of the amounts in excess of $200,000,000
62
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NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997
- --------------------------------------------------------------------------------
Real Estate Securities Fund: .85% of the first $100,000,000; .80% of the
next $100,000,000; and .75% of the amounts in excess of $200,000,000
Premier Growth Equity Fund: .65%
U.S. Equity Fund: .55%
Value Equity Fund: .65%
S&P 500 Index Fund: .35%
Global Income Fund: .60%
Income Fund, Money Market Fund and Total Return Fund: .50% of the first
$100,000,000; .45% of the next $100,000,000; .40% of the next $100,000,000;
.35% of the next $100,000,000; and .30% of the amounts in excess of
$400,000,000*
* The Adviser has voluntarily agreed to waive a portion of the fee paid by
the Money Market Fund so that the fee paid by the Money Market Fund is
equal to .25%.
DIRECTORS' FEES
The Funds pay no compensation to their Directors who are officers or employees
of Life of Virginia or GEIM. Directors who are not officers or employees of Life
of Virginia or GEIM receive an annual fee of $6,000 plus $500 per Directors'
board meeting attended in person and an additional fee of $250 for each
Directors' conference call meeting attended.
4. SUB-ADVISORY FEES
Pursuant to an investment sub-advisory agreement with GEIM, effective July 23,
1997, Seneca Capital Management, L.L.C. ("Seneca") is the investment sub-adviser
to the Real Estate Securities Fund, and pursuant to investment sub-advisory
agreements with GEIM, effective May 1, 1997, GE Investments (US) Limited
("GEIUS") is the investment sub-adviser to the Global Income Fund and NWQ
Investment Management Company ("NWQ") is the investment sub-adviser to the Value
Equity Fund. Pursuant to an investment sub-advisory agreement with GEIM,
effective July 24, 1997, State Street Global Advisors ("SSGA"), a division of
State Street Bank and Trust Company, is the investment sub-adviser to the S&P
500 Index Fund.
For their services GEIM pays Seneca, GEIUS, NWQ and SSGA monthly compensation in
the form of an investment sub-advisory fee. The fee is paid by GEIM monthly and
is a percentage of the average daily net assets of the Fund that each
sub-adviser manages at the following annual rates:
Real Estate Securities Fund: .425% of the first $100,000,000; .40% of the
next $100,000,000; and .375% of amounts in excess of $200,000,000
Global Income Fund: .05%
Value Equity Fund: .4875% of the first $50,000,000; .325% of amounts in
excess of $50,000,000
S&P 500 Index Fund: .05% of the first $100,000,000; .04% of the next
$200,000,000; and .03% of amounts in excess of $200,000,000
<PAGE>
5. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION
Aggregate gross unrealized appreciation/(depreciation) of investments for each
Fund at December 31, 1997, were as follows:
NET
GROSS GROSS UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
APPRECIATION DEPRECIATION (DEPRECIATION)
- --------------------------------------------------------------------------------
International
Equity Fund $ 2,656,170 $ 1,311,876 $ 1,344,294
Real Estate
Securities Fund 8,813,000 170,267 8,642,733
Premier Growth
Equity Fund 627,733 86,032 541,701
Value Equity Fund 2,070,946 559,547 1,511,399
U.S. Equity Fund 664,133 112,559 551,574
S&P 500
Index Fund 32,219,941 1,742,384 30,477,577
Total Return Fund 6,321,609 533,998 5,787,611
Global
Income Fund 37,666 159,501 (121,835)
Income Fund 52,565 56,229 (3,664)
The aggregate cost of each Fund's investments was substantially the same for
book and federal income tax purposes at December 31, 1997.
63
<PAGE>
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997
- --------------------------------------------------------------------------------
6. OPTIONS
During the period ended December 31, 1997, the following option contracts were
written:
VALUE EQUITY FUND INCOME FUND
- ------------------------------------------------------------------------------
NUMBER NUMBER
OF CONTRACTS PREMIUM OF CONTRACTS PREMIUM
- ------------------------------------------------------------------------------
Balance as of
December
31, 1996 0 $ 0 0 $ 0
Written 12 5,364 970 3,161
Closed and
Expired (12) (5,364) (250) (883)
Exercised (0) (0) (0) (0)
- --------------------------------------------------------------------------------
Balance as of
December
31, 1997 0 $ 0 720 $ 2,278
================================================================================
7. INVESTMENT TRANSACTIONS
The cost of purchases and the proceeds from sales of investments, other than
U.S. Government securities, short term securities and options, for the period
ended December 31, 1997, were:
PURCHASES SALES
- --------------------------------------------------------------------------------
International
Equity Fund $46,716,357 $36,835,516
Real Estate
Securities Fund 37,435,463 20,844,387
Premier Growth
Equity Fund 14,844,615 445,299
Value Equity Fund 29,769,525 1,781,500
U.S. Equity Fund 8,336,339 6,867,568
S&P 500 Index Fund 79,080,580 5,026,420
Total Return Fund 37,952,554 36,697,887
Global Income Fund 2,037,200 411,745
Income Fund 19,128,345 1,736,998
The cost of purchases and the proceeds from sales of long-term U.S. Government
securities for the period ended December 31, 1997, were:
PURCHASES SALES
- --------------------------------------------------------------------------------
S&P 500 Index Fund $ 1,387,423 $ 700,000
Total Return Fund 23,987,124 16,330,264
Global Income Fund 8,422,292 5,209,115
Income Fund 45,291,286 26,156,763
8. SUBSTITUTION ORDER
On or about May 16, 1997, Life of Virginia, GNA and several other applicants
filed an application with the Securities and Exchange Commission ("SEC") seeking
an order approving the substitution of shares of certain investment funds of the
Company for shares of the portfolios of GNA Variable Series Trust ("VST") and
Variable Investment Trust ("VIT"), the Money Market Portfolio of Variable
Insurance Products Fund ("VIPF"), the Oppenheimer Money Market Fund of
Oppenheimer Variable Account Funds ("OVAF") and the Limited Maturity Bond
Portfolio of Neuberger & Berman Advisers Management Trust ("AMT"), each a
diversified, open-end investment company (collectively the "Substituted
Portfolios").
The effect of such a share substitution was to replace the Substituted
Portfolios with investment funds of the Company as investment options under
certain variable annuity contracts. The substitution order also involved the
proposed substitution of shares of the Company's Government Securities Fund for
shares of the Income Fund.
On December 12, 1997, the substitution was executed. Shares of the Substituted
Portfolios and the Government Securities Fund were substituted by shares of
specified investment funds of the Company. Information related to the
substitution order for the Substituted Portfolios are as follows:
64
<PAGE>
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SUBSTITUTED SHARES NET ASSETS NET ASSETS AFTER
FUNDS SUBSTITUTED BY ISSUED SUBSTITUTED SUBSTITUTION
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
VIT GE Money Market Portfolio Money Market 22,832,172 $22,832,172 $144,797,288
Fund
VIPF Money Market Portfolio
OVAF Oppenheimer Money Market Fund
Government Securities Fund Income Fund 3,726,789 45,168,688 50,443,998
VST GNA Adjustable Rate Portfolio
VST GNA Government Portfolio
VIT GE Fixed Income Portfolio*
AMT Limited Maturity Bond Portfolio
VST GNA Value Portfolio Value Equity 1,122,292 14,376,556 29,448,743
Fund
VIT GE International Equity Portfolio International 814,899 8,523,846 31,174,385
Equity Fund
VIT GE U.S. Equity Portfolio* U.S. Equity 857,652 23,353,860 23,353,860
Fund
VST GNA Growth Portfolio Premier Growth 315,394 15,703,463 15,703,463
Equity Fund
</TABLE>
The VIT GE U.S. Equity Portfolio and VIT GE Fixed Income Portfolio were deemed
the accounting survivors in the transaction; therefore, the financial statements
of the U.S. Equity Fund and Income Fund reflect the financial information of VIT
GE U.S. Equity Portfolio and VIT GE Fixed Income Portfolio, respectively.
* Shares and proceeds from the substitution from the VIT GE U.S. Equity
Portfolio and the VIT GE Fixed Income Portfolio into the U.S. Equity Fund
and the Income Fund, respectively, are reflected in the above table.
However, these amounts are netted from the "Proceeds from substitution of
fund" and "Shares from substitution of fund" in the Statements of Changes
in Net Assets on pages 58 to 59 for each of the respective funds.
65
<PAGE>
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The Board of Directors and Shareholders
GE Investments Funds, Inc.:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the International Equity Fund, Real Estate
Securities Fund, Premier Growth Equity Fund, Value Equity Fund, U.S. Equity Fund
(formerly, Variable Investment Trust - GE U.S. Equity Portfolio), S&P 500 Index
Fund (formerly, Common Stock Index), Total Return Fund, Global Income Fund,
Income Fund (formerly, Variable Investment Trust - GE Fixed Income Portfolio)
and Money Market Fund of GE Investments Funds, Inc. (formerly, Life of Virginia
Series Fund, Inc.) (the Funds), as of December 31, 1997, and the related
statements of operations, statements of changes in net assets and financial
highlights for the period then ended. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The statements of changes in net assets for the year ended
December 30, 1996 and the financial highlights for each of the years in the
four-year period ended December 30, 1996 for the International Equity Fund, Real
Estate Securities Fund, S&P 500 Index Fund, Total Return Fund and Money Market
Fund and the statements of changes in net assets for the year ended December 31,
1996 and the financial highlights for the year ended December 31, 1996 and for
the period from January 3, 1995 to December 31, 1995 for the GE U.S. Equity
Portfolio and GE Fixed Income Portfolio were audited by other auditors whose
reports thereon dated February 12, 1997 and February 11, 1997, respectively,
expressed unqualified opinions on those financial statements and financial
highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1997 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Funds as of December 31, 1997, the results of their operations, the changes in
their net assets and their financial highlights for the year or period then
ended, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
February 6, 1998
66
<PAGE>
GE INVESTMENTS FUNDS INVESTMENT TEAM
- --------------------------------------------------------------------------------
Portfolio Managers
INTERNATIONAL EQUITY FUND
Team led by
Ralph R. Layman, GEIM
REAL ESTATE SECURITIES FUND
David A. Shapiro, Seneca
PREMIER GROWTH EQUITY FUND
David B. Carlson, GEIM
VALUE EQUITY FUND
Jon D. Bosse, NWQ
U.S. EQUITY FUND
Team led by
Eugene K. Bolton, GEIM
S&P 500 INDEX FUND
Team led by
James B. May, SSGA
TOTAL RETURN FUND
David B. Carlson, GEIM
Ralph R. Layman, GEIM
Robert A. MacDougall, GEIM
GLOBAL INCOME FUND
William R. Wright, GEIUS
INCOME FUND
MONEY MARKET FUND
Team led by
Robert A. MacDougall, GEIM
INVESTMENT ADVISER
and Administrator
GE Investment Management Incorporated
BOARD OF DIRECTORS
Michael J. Cosgrove, Chairman
John R. Costantino
William J. Lucas
Robert P. Martin, Jr.
J. Clifford Miller, III
J. Garnett Nelson
Lee A. Putney
Robert P. Quinn
SECRETARY
Matthew J. Simpson
TREASURER
Jeffrey A. Groh
ASSISTANT TREASURER
Robert J. Zalucki
DISTRIBUTOR
GE Investment Distributors, Inc.
COUNSEL
Sutherland, Asbill & Brennan, L.L.P.
CUSTODIAN
State Street Bank & Trust Company
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick 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
Ralph R. Layman, EVP, International Equities
Alan M. Lewis, EVP, General Counsel and Secretary
Robert A. MacDougall, EVP, Fixed Income
Geoffrey R. Norman, EVP, Institutional Marketing
Thomas J. Szkutak, EVP, Chief Financial Officer
Don W. Torey, EVP, Alternative Investments and Real Estate
67
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