[GE LOGO OMITTED]
[GRAPHIC OMITTED]
GE
Investments
Funds, Inc.
SEMI-ANNUAL REPORT
JUNE 30, 2000
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GE INVESTMENTS FUNDS, INC.
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UNDERSTANDING YOUR REPORT
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A LETTER FROM THE CHAIRMAN .............................................. 2
REVIEW OF PERFORMANCE AND SCHEDULE OF INVESTMENTS
Portfolio managers discuss your Funds and what they
have invested in and why
U.S. EQUITY FUND ................................................... 3
S&P 500 INDEX FUND ................................................. 8
PREMIER GROWTH EQUITY FUND ......................................... 15
VALUE EQUITY FUND .................................................. 18
MID-CAP VALUE EQUITY FUND (FORMERLY VALUE EQUITY FUND) ............. 22
SMALL-CAP VALUE EQUITY FUND ........................................ 25
INTERNATIONAL EQUITY FUND .......................................... 29
TOTAL RETURN FUND .................................................. 35
INCOME FUND ........................................................ 45
GLOBAL INCOME FUND ................................................. 53
MONEY MARKET FUND .................................................. 56
REAL ESTATE SECURITIES FUND ........................................ 58
NOTES TO PERFORMANCE AND NOTES TO SCHEDULES OF
INVESTMENTS ................................................... 61
FINANCIAL STATEMENTS
Financial Highlights ............................................... 63
Notes to Financial Highlights ........................................... 69
Statements of Assets and Liabilities,
Operations, and Changes in Net Assets ................................ 70
NOTES TO FINANCIAL STATEMENTS ........................................... 78
GE INVESTMENTS FUNDS' INVESTMENT TEAM ....................INSIDE BACK COVER
This report is prepared for Policyholders of certain variable contracts and may
be distributed to others only if preceded or accompanied by the variable
contract's current prospectus and the current prospectus of the Funds available
for investments thereunder.
1
<PAGE>
A LETTER FROM THE CHAIRMAN
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Dear Shareholders:
We are pleased to provide you with the GE Investments Funds, Inc. Semi-Annual
Report.
The first six months of 2000 were driven by rising interest rates as the Federal
Reserve responded to inflationary pressures. Those rates, coupled with companies
that did not reach their earnings targets, caused all of the major U.S. indices
to drop in value, especially small-cap stocks. We are cautiously optimistic that
this attack on inflation will result in stronger profits in the fourth quarter
of 2000.
Overseas, we were glad to note that other countries have begun to control their
national debt, as the U.S. has for years. This new attitude toward the economy
should help increase the financial stability of the globe. We consider both the
German and Canadian economies to be especially strong and are keeping an eye on
the Japanese economy.
PERFORMANCE HIGHLIGHTS
During one of the most volatile years in recent memory, several GE Investments
Funds outperformed their benchmarks and/or Lipper peer groups. Specifically, for
the six-month period ended June 30, 2000:
o THE U.S. EQUITY FUND earned 0.24%, while the Standard & Poor's 500 Composite
Price Index dropped 0.47%.
O THE INTERNATIONAL EQUITY FUND grew 2.28%, outperforming the Morgan Stanley
Capital International (MSCI) Europe, Australia and Far East (EAFE) benchmark,
which fell 4.06%.
O THE TOTAL RETURN FUND grew 3.15%, while its Lipper peer group of 89 Balanced
funds had an average return of 1.91%.
O THE REAL ESTATE SECURITIES FUND had a return of 16.28% - compared with the
Wilshire Real Estate Securities Index, which gained 15.21%, and the Lipper peer
group of 26 Real Estate annuity funds, which advanced an average of 13.79%.
MARKET OVERVIEW
The first six months of 2000 demonstrated how volatile the markets can be. Hints
of inflation caused largely by rising fuel prices caused the Federal Reserve to
hike interest rates three times. A shakeup in the "dot com" world, which first
experienced outstanding returns followed by huge price drops, had a ripple
effect throughout the market. For the quarter ended March 31, 2000, the S&P 500
Index gained 2.5%. As of the most recent quarter end, June 30, 2000, the S&P 500
declined 2.85%. Year-to-date, the S&P 500 is down 0.47%. In fact, for the first
time since 1994, most of the major averages have posted price declines. This
volatility occurred despite the fact that the environment in the U.S. is one of
solid economic growth, low inflation, solid corporate earnings, and modestly
higher interest rates.
The Fed's three interest rate hikes added a total of 100 basis points to the
federal funds rate. As would be expected, these actions had a negative effect on
both bond values and returns.
MARKET OUTLOOK
While in recent weeks the markets have shown some signs of stabilization, we
expect the markets to remain volatile in the near term. It is too early to tell
if recent rate increases will cool the markets sufficiently or if further rate
hikes will be required. Either way, concerns over potential rate increases could
drive down stock prices moving forward. Election-time rate hikes may be less
likely, since the Federal Reserve does not want to be thrust into the role of
kingmaker.
Turning to the international arena, we remain bullish on Germany, France and
especially Canada - but are eyeing Japan with some concern.
Sectors that bear watching include:
o financial services, which we feel could rebound after the past 12-month
performance; o energy stocks, which we believe should be helped by the strength
of the Asian economic recovery; and o telecommunications and media issues, which
could appreciate based on strong fundamentals and industry consolidation.
We feel that the best way to capitalize on the inherent volatility of the
financial markets is to invest in equities, which we still believe have the
potential to provide higher performance than most other investments - although
returns over the next few years will probably not equal the past five years'
growth.
In the months to come, stock selection will remain a major driver of
performance. The basic rules of investing still apply - know your investment
objectives and work with your financial advisor to consider which options fit
your profile and your tolerance for risk, then spend as much effort investing
your money as you spent earning it. These rules have always held true and we
suggest that you consider them in your future investment plans.
We thank you for the confidence you have shown in us and look forward to
continuing to serve your investment needs. Sincerely,
/S/SIGNATURE
Michael J. Cosgrove
CHAIRMAN, GE INVESTMENTS FUNDS, INC.
MIKE COSGROVE IS THE PRESIDENT OF THE ASSET MANAGEMENT SERVICES GROUP OF GE
FINANCIAL ASSURANCE HOLDINGS, INC., AND OF GE INVESTMENT DISTRIBUTORS, INC., THE
FUNDS' DISTRIBUTOR, AND SERVES AS A TRUSTEE OF THE GE PENSION TRUST AND GE'S
EMPLOYEE SAVINGS PROGRAM. PREVIOUSLY CHIEF FINANCIAL OFFICER OF GE ASSET
MANAGEMENT AND ASSISTANT TREASURER - GE COMPANY, MIKE JOINED GE IN 1970 AND
HELD A NUMBER OF MANAGERIAL POSITIONS IN FINANCE AND SALES IN GE'S INTERNATIONAL
OPERATION AND IN GE TRADING COMPANY. MIKE HAS A B.S. IN ECONOMICS FROM FORDHAM
UNIVERSITY AND AN M.B.A. FROM ST. JOHN'S UNIVERSITY.
2
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U.S. EQUITY FUND
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Q&A
GENE BOLTON IS RESPONSIBLE FOR THE OVERALL MANAGEMENT OF GE ASSET MANAGEMENT'S
U.S. EQUITY OPERATION. GENE MANAGES INDIVIDUAL, INSTITUTIONAL AND MUTUAL FUND
PORTFOLIOS WITH TOTAL ASSETS OF OVER $40 BILLION. HIS RESPONSIBILITIES INCLUDE
OVERSEEING THE PORTFOLIO MANAGEMENT TEAM OF THE U.S. EQUITY FUND. GENE JOINED GE
IN 1964. AFTER COMPLETING GE'S FINANCIAL MANAGEMENT PROGRAM HE HELD A NUMBER OF
FINANCIAL AND STRATEGIC PLANNING POSITIONS IN THE U.S. AND EUROPE. JOINING GE
ASSET MANAGEMENT IN 1984 AS CHIEF FINANCIAL OFFICER, HE MOVED TO EQUITIES AS A
PORTFOLIO MANAGER IN 1986 AND WAS NAMED TO HIS PRESENT POSITION IN 1991. GENE IS
A TRUSTEE OF THE GE PENSION TRUST AND GE'S EMPLOYEE SAVINGS PROGRAM, AS WELL AS
CHAIRMAN OF THE ASSET ALLOCATION COMMITTEE OF GE ASSET MANAGEMENT. HE ALSO
SERVES AS A TRUSTEE OF THE INVESTMENT MANAGEMENT WORKSHOP, SPONSORED BY THE
ASSOCIATION FOR INVESTMENT MANAGEMENT AND RESEARCH. GENE IS A GRADUATE OF
MUNDELEIN COLLEGE WITH A B.A. IN BUSINESS MANAGEMENT.
Q. HOW DID THE U.S. EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK FOR THE SIX
MONTHS ENDED JUNE 30, 2000?
A. The U.S. Equity Fund posted a return of 0.24% for the six-month period ended
June 30, 2000, while the Standard & Poor's 500 Composite Price Index returned a
negative 0.47% for the same period. The Fund outperformed the benchmark by 0.71%
for the period.
Q. WHY DID THE FUND OUTPERFORM ITS BENCHMARK FOR THE SIX-MONTH PERIOD ENDED JUNE
30, 2000?
A. The Fund outperformed the benchmark because of an underweighting in the
technology sector and an overweighting of the energy and consumer stable
sectors. Technology pulled back in the second quarter and that helped
performance as did solid stock selection. Energy did well in the quarter due to
positive supply/demand characteristics and the overweighting. Solid stock
selection also contributed to this sector's outperformance versus the benchmark.
The consumer stable area was a highlight in the quarter as healthcare issues in
the portfolio did particularly well versus the benchmark. Another sector which
added positively to performance was the financial sector as the portfolio
contained several investments that did better than the benchmark despite rising
interest rates.
Q. WHICH STOCKS/SECTORS HAVE PERFORMED WELL? WHICH HAVE NOT PERFORMED WELL?
A. The portfolio's underweighting in technology was very helpful to performance
for the six months ended June 30, 2000 because the sector corrected
significantly in the second quarter. Several holdings did well including Analog
Devices, Intel, EMC, and Applied Materials. In addition, the underweighting of
Microsoft added to performance as the anti-trust trial hurt the stock's
performance during this period. Healthcare issues within the consumer stable
sector were a standout during this period in terms of performance. Cardinal
Health, Watson Pharmaceuticals, and Merck all posted double digit price returns
over this period. The financial sector also contributed positively to
performance due to solid stock selection in names such as State Street and
Morgan Stanley, Dean Witter. The energy sector also did quite well during the
period as positive supply/demand characteristics helped most oil related stocks.
Holdings such as Schlumberger and Baker Hughes were up 34% and 53%,
respectively, over the six-month period.
The consumer cyclicals and capital goods sectors performed poorly over the
past six months amid rising interest rates and the prospects of an economic
slowdown in the United States. Retailers such as Lowes and Federated Department
Stores as well as newspaper publishers such as Gannett all hurt performance over
the period. Investors sold consumer stocks because of the potential slowdown in
consumer spending given the Federal Reserve's tough posture on inflation.
Capital goods stocks did poorly because of the potential for an economic
slowdown and holdings such as Textron reflected investor concerns.
Q. HOW HAS THE VOLATILITY IN THE MARKET IMPACTED THE FUND?
A. Over the past six to twelve months the markets have been particularly
volatile. The S&P 500 Index had gains of 15% for the quarter ended December 31,
1999 following a decline of 6.2% in the quarter ended September 30, 1999. For
the quarter ended March 31, 2000, the S&P 500 gained 2.5%. The most
3
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U.S. EQUITY FUND
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Q&A
recent quarter ended June 30, 2000 has seen the S&P 500 decline 2.85%.
Year-to-date, the S&P 500 is down 0.47%. What is notable is that these market
swings have been focused primarily on the technology sector. Despite an
environment in the U.S. of solid economic growth, low inflation, solid corporate
earnings, and modestly higher interest rates, the equity market has behaved much
like a roller coaster. Through the first half of 2000 most of the major averages
have posted price declines, which is a first since 1994.
In terms of the Fund, we continue to own those companies that have solid
earnings growth histories. While these swings do make us reflective of the
fundamentals of the market, we invest in those companies with solid fundamentals
and do not try to time the market.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
A. We believe the equity market will continue to be mixed and volatile because
of the backdrop of rising interest rates and the Federal Reserve's commitment to
keep inflation at acceptable levels. With the Fund broadly diversified in
high-quality, reasonably valued stocks, we believe it is well positioned for the
volatility that we expect for the remainder of the year. We remain focused on
company fundamentals and good quality of earnings from our investments.
4
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U.S. EQUITY FUND
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COMPARISON OF CHANGES IN VALUE OF A $10,000 INVESTMENT
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[LINE CHART OMITTED, PLOT POINTS FOLLOW]
U.S. Equity Fund S&P 500 Index
1/3/95 $10000 $10000
3/95 10940 10974
6/95 11973 12019
9/95 12873 12977
12/95 13558 13749
3/96 14353 14497
6/96 14888 15151
9/96 15218 15616
12/96 16502 16927
3/97 16854 17369
6/97 19598 20404
9/97 21255 21938
12/97 21805 22563
3/98 24394 25713
6/98 24989 26566
9/98 22447 23937
12/98 26910 29038
3/99 28396 30477
6/99 30710 32598
9/99 28766 30592
12/99 32187 35153
3/00 32841 36018
6/00 32263 35004
U.S. Equity Fund (ending value $32,263)
S&P 500 Index (ending value $35,004)
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AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2000
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SIX ONE THREE SINCE
MONTHS YEAR YEAR COMMENCEMENT
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U.S. Equity Fund 0.24% 5.06% 18.08% 23.77%
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S&P 500 Index (0.47%) 7.34% 19.70% 25.62%
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Lipper peer group average* (1.13%) 1.44% 12.63% N/A
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Commencement date 1/3/95
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INVESTMENT PROFILE
A fund designed for investors who seek long-term growth of capital by
investing primarily in equity securities of U.S. companies.
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TOP TEN LARGEST HOLDINGS AT JUNE 30, 2000
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Intel Corp. ...................................... 4.15%
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Citigroup Inc. ................................... 3.74%
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Merck & Co. Inc. ................................. 2.66%
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Microsoft Corp. .................................. 2.54%
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First Data Corp. ................................. 2.29%
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Exxon Mobil Corp. ................................ 2.23%
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Cisco Systems Inc. ............................... 2.21%
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Cardinal Health Inc. ............................. 2.02%
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Pfizer Inc. ...................................... 1.70%
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Dell Computer Corp. .............................. 1.60%
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PORTFOLIO COMPOSITION AS OF JUNE 30, 2000
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NET ASSETS OF $87,694 (IN THOUSANDS)
[PIE CHART OMITTED]
CONSUMER 30.1%
TECHNOLOGY 24.9%
FINANCIAL 15.0%
UTILITIES 7.9%
CAPITAL GOODS 7.7%
ENERGY 7.3%
CASH & OTHER 3.2%*
BASIC MATERIALS 2.5%
TRANSPORTATION 1.4%
+INCLUDES CASH EQUALIZED BY FUTURES OF 1.7%
* LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE PERIODS INDICATED IN THE GROWTH AND INCOME PEER GROUP CONSISTING OF 215, 203
AND 130 UNDERLYING ANNUITY FUNDS, RESPECTIVELY.
SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
5
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U.S. EQUITY FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
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U.S. EQUITY FUND
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NUMBER
OF SHARES VALUE
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COMMON STOCK -- 96.8%
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BASIC MATERIALS -- 2.5%
Airgas Inc. ........................ 3,110 $ 17,688(a)
Barrick Gold Corp. ................. 14,256 259,281
Bowater Inc. ....................... 3,499 154,394
Du Pont de Nemours (E.I.) & Co. .... 5,184 226,800
International Paper Co. ............ 3,338 99,514
Mead Corp. ......................... 3,629 91,632
Newmont Mining Corp. ............... 17,496 378,351
PPG Industries Inc. ................ 5,185 229,760
Rayonier Inc. ...................... 4,342 155,769
The Dow Chemical Co. ............... 3,888 117,369
Weyerhaeuser Co. ................... 11,456 492,608
2,223,166
CAPITAL GOODS -- 7.7%
Boeing Co. ......................... 9,137 382,041
Deere & Co. ........................ 4,534 167,758
Dover Corp. ........................ 25,855 1,048,743(h)
Eaton Corp. ........................ 3,110 208,370
Emerson Electric Co. ............... 13,440 811,440
General Dynamics Corp. ............. 4,277 223,473
Honeywell International Inc. ....... 17,146 577,606
Hubbell Inc. (Class B) ............. 10,174 259,437
Ingersoll-Rand Co. ................. 6,223 250,476
Martin Marietta Materials Inc. ..... 6,346 256,616
Masco Corp. ........................ 3,240 58,523
Molex Inc. (Class A) ............... 18,599 650,965
Parker-Hannifin Corp. .............. 4,666 159,810
Textron Inc. ....................... 12,506 679,232
United Technologies Corp. .......... 13,219 778,269
Waste Management Inc. .............. 12,960 246,240
6,758,999
CONSUMER - CYCLICAL -- 11.9%
Adelphia Communications Corp.
(Class A) ........................ 907 42,516(a)
AT&T Corp. - Liberty Media
Group (Class A) .................. 38,102 923,973(a,h)
Carnival Corp. (Class A) ........... 5,378 104,871
Catalina Marketing Corp. ........... 4,730 482,460(a)
Comcast Corp. (Class A) ............ 20,736 839,808
Costco Wholesale Corp. ............. 2,722 89,826(a)
CVS Corp. .......................... 12,895 515,800
Federated Department Stores Inc. ... 9,331 314,921 (a)
Ford Motor Co. ..................... 5,184 222,912
Gannett Co. Inc. ................... 10,044 600,757
Harman International
Industries Inc. .................. 365 22,265
Home Depot Inc. .................... 13,349 666,616
Interpublic Group Cos. Inc. ........ 19,764 849,852
Knight-Ridder Inc. ................. 5,443 289,500
Lowes Cos. Inc. .................... 11,664 478,953
McDonald's Corp. ................... 22,615 744,881
NTL Inc. ........................... 11,114 665,451(a)
Target Corp. ....................... 15,189 880,962
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NUMBER
OF SHARES VALUE
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Visteon Corp. ...................... 679 $ 8,230
Wal-Mart Stores Inc. ............... 16,589 955,941
Walt Disney Co. .................... 18,623 722,805
10,423,300
CONSUMER - STABLE -- 18.2%
Abbott Laboratories ................ 15,876 707,474(h)
American Home Products Corp. ....... 3,953 232,239
Amgen Inc. ......................... 7,841 550,830(a)
Anheuser Busch Cos. Inc. ........... 3,240 241,987
Avon Products Inc. ................. 3,240 144,180
Bestfoods .......................... 2,981 206,434
Bristol-Myers Squibb Co. ........... 21,384 1,245,618
Cardinal Health Inc. ............... 23,911 1,769,414
Colgate-Palmolive Co. .............. 1,659 99,333
Dentsply International Inc. ........ 3,629 111,819
Eli Lilly & Co. .................... 4,925 491,884
Energizer Holdings Inc. ............ 10,845 197,921(a)
General Mills Inc. ................. 5,443 208,195
Gillette Co. ....................... 9,811 342,772
Heinz (H.J.) Co. ................... 3,629 158,769
Henry Schein Inc. .................. 6,221 107,312(a)
Johnson & Johnson .................. 12,260 1,248,987
Lincare Holdings Inc. .............. 7,906 194,685(a)
Merck & Co. Inc. ................... 30,456 2,333,691
Pepsico Inc. ....................... 27,086 1,203,634
Pfizer Inc. ........................ 31,007 1,488,336
Pharmacia Corp. .................... 5,443 281,335
Philip Morris Cos. Inc. ............ 5,210 138,391(h)
Procter & Gamble Co. ............... 7,387 422,906
Ralston-Ralston Purina Group ....... 18,792 374,665
Sara Lee Corp. ..................... 11,016 212,747
Schering Plough Corp. .............. 10,498 530,149
Sybron International Corp. ......... 10,498 207,992(a)
The Quaker Oats Co. ................ 2,333 175,267
Watson Pharmaceuticals Inc. ........ 5,831 313,416(a)
15,942,382
ENERGY -- 7.3%
Anadarko Petroleum Corp. ........... 5,054 249,225
Baker Hughes Inc. .................. 6,610 211,520
BP Amoco PLC ADR ................... 2,851 161,260
Burlington Resources Inc. .......... 7,950 304,088
Calpine Corp. ...................... 2,203 144,847(a)
Chevron Corp. ...................... 3,110 263,767
Conoco Inc. (Class B) .............. 10,498 257,857
Exxon Mobil Corp. .................. 24,931 1,957,122(h)
Halliburton Co. .................... 7,128 336,353
Nabors Industries Inc. ............. 8,424 350,123(a)
Royal Dutch Petroleum Co. ADR ...... 11,664 718,065
Schlumberger Ltd. .................. 11,223 837,516
Texaco Inc. ........................ 2,333 124,232
Unocal Corp. ....................... 9,720 321,975
USX-Marathon Group ................. 5,573 139,673
6,377,623
FINANCIAL -- 15.0%
AFLAC Inc. ......................... 1,426 65,507
American Express Co. ............... 13,025 678,928(h)
American International Group Inc. .. 8,003 940,353
Associates First Capital Corp.
(Class A) ........................ 17,561 391,830
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See Notes to Schedule of Investments and Notes to Financial Statements.
6
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U.S. EQUITY FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
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NUMBER
OF SHARES VALUE
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AXA Financial Inc. ................. 4,666 $ 158,644
Bank of America Corp. .............. 16,330 702,190
Bank One Corp. ..................... 4,147 110,155
Berkshire Hathaway Inc. (Class B) .. 102 179,520 (a)
Chase Manhattan Corp. .............. 12,182 561,133
Chubb Corp. ........................ 6,156 378,594
Citigroup Inc. ..................... 54,426 3,279,166(h)
Countrywide Credit Industries Inc. . 2,462 74,629
Federal National Mortgage Assoc. ... 18,312 955,657
Fidelity National Financial Inc. ... 4,925 90,189
FleetBoston Financial Corp. ........ 14,489 492,626
Goldman Sachs Group Inc. ........... 2,203 209,010
Hartford Financial Services
Group Inc. ....................... 8,683 485,705
Lehman Brothers Holdings Inc. ...... 5,262 497,588
Loews Corp. ........................ 2,009 120,540
Marsh & McLennan Cos. Inc. ......... 3,473 362,711
Morgan Stanley, Dean Witter & Co. . 13,997 1,165,250
PNC Financial Services Group ....... 7,387 346,266
Reliastar Financial Corp. .......... 4,406 231,040
St. Paul Cos. Inc. ................. 5,702 194,581
State Street Corp. ................. 3,305 350,537(i)
United States Bancorp. ............. 7,128 137,214
13,159,563
TECHNOLOGY -- 24.9%
Analog Devices Inc. ................ 13,205 1,003,580(a)
Applied Materials Inc. ............. 12,376 1,121,575(a,h)
Automatic Data Processing Inc. ..... 14,152 758,017
Cisco Systems Inc. ................. 30,521 1,939,991(a)
Dell Computer Corp. ................ 28,512 1,405,998(a)
EMC Corp. .......................... 14,217 1,093,820(a)
Equifax Inc. ....................... 35,899 942,349
First Data Corp. ................... 40,500 2,009,813
Intel Corp. ........................ 27,216 3,638,439
International Business Machines Corp. 4,147 454,356
Lucent Technologies Inc. ........... 9,072 537,516
Micron Technology Inc. ............. 5,472 481,878(a)
Microsoft Corp. .................... 27,864 2,229,120(a)
Motorola Inc. ...................... 23,221 674,860
Nortel Networks Corp. .............. 18,144 1,238,328
PerkinElmer Inc. ................... 2,424 160,287
Pitney Bowes Inc. .................. 11,534 461,360
Sun Microsystems Inc. .............. 4,795 436,045(a)
Tellabs Inc. ....................... 8,286 567,073(a)
Texas Instruments Inc. ............. 5,573 382,795
Unisys Corp. ....................... 24,105 351,029(a)
21,888,229
TRANSPORTATION -- 1.4%
Burlington Northern Santa Fe Corp. 15,098 346,310
Canadian Pacific Ltd. .............. 11,923 312,234
Continental Airlines Inc. (Class B) 7,452 350,244(a)
Delta Air Lines Inc. ............... 4,536 229,352
1,238,140
UTILITIES -- 7.9%
Alltel Corp. ....................... 4,666 289,000
AT&T Corp. ......................... 10,368 327,888(h)
AT&T Wireless Group ................ 2,592 72,252(a)
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NUMBER
OF SHARES VALUE
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Bell Atlantic Corp. ................ 6,480 $ 329,265(h)
Dominion Resources Inc. ............ 1,555 66,671
Duke Energy Corp. .................. 6,804 383,575
Edison International ............... 5,183 106,252
El Paso Energy Corp. ............... 7,970 405,972
Enron Corp. ........................ 2,333 150,479
FPL Group Inc. ..................... 2,074 102,663
Global Crossing Ltd. ............... 7,128 187,556(a)
GTE Corp. .......................... 13,414 835,021
New Century Energies Inc. .......... 9,072 272,160
NEXTLINK Communications
Inc. (Class A) ................... 2,074 78,682(a)
SBC Communications Inc. ............ 29,548 1,277,951
Sprint Corp. ....................... 9,137 465,987
U.S. WEST Inc. ..................... 9,655 827,916
Vodafone AirTouch PLC ADR .......... 10,562 437,663
WorldCom Inc. ...................... 6,610 303,233(a)
6,920,186
TOTAL INVESTMENTS IN SECURITIES
(COST $77,688,818) ............... 84,931,588
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SHORT-TERM INVESTMENTS -- 3.2%
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GEI Short Term Investment Fund
(COST $2,769,148) ..............2,769,148 2,769,148
OTHER ASSETS AND LIABILITIES, NET 0.0% (6,798)
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NET ASSETS-- 100% ................. $87,693,938
================================================================================
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OTHER INFORMATION
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The U.S. Equity Fund had the following long Futures Contracts open at June 30,
2000:
NUMBER
EXPIRATION OF UNDERLYING UNREALIZED
DESCRIPTION DATE CONTRACTS FACE VALUE LOSS
--------------------------------------------------------------------------------
S&P 500 Sept. 2000 4 $ 1,468,100 $ (14,025)
--------------
See Notes to Schedule of Investments and Notes to Financial Statements.
7
<PAGE>
S&P 500 INDEX FUND
--------------------------------------------------------------------------------
Q&A
JAMES B. MAY LEADS A TEAM OF PORTFOLIO MANAGERS AT STATE STREET GLOBAL ADVISORS,
THE SUB-ADVISER FOR THE S&P 500 INDEX FUND. SINCE 1994, JAMES HAS BEEN AN
INVESTMENT OFFICER AND PORTFOLIO MANAGER IN THE U.S. STRUCTURED PRODUCTS GROUP
AT STATE STREET BANK AND TRUST COMPANY WHICH HAS TOTAL ASSETS UNDER MANAGEMENT
EXCEEDING $723 BILLION. FROM 1991 TO 1993, JAMES SERVED AS AN INVESTMENT SUPPORT
ANALYST IN THE U.S. PASSIVE SERVICES GROUP AT STATE STREET. JAMES HOLDS A B.S.
IN FINANCE FROM BENTLEY COLLEGE AND AN M.B.A. FROM BOSTON COLLEGE.
Q. HOW DID THE S&P 500 INDEX FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER
PEER GROUP FOR THE SIX MONTHS ENDED JUNE 30, 2000?
A. The S&P 500 Fund had a return of negative 0.60% for the six-month period
ended June 30, 2000. The S&P 500 Index returned negative 0.47% and the Lipper
average returned negative 0.60% for the same period.
Q. WHY DID THE FUND UNDERPERFORM ITS BENCHMARK?
A. The Fund under performed its benchmark primarily due to fund expenses.
Q. WHAT HAS YOUR INVESTMENT STRATEGY BEEN?
A. We continue to utilize a full replication strategy to manage the S&P 500
Fund. With this strategy, all 500 constituents of the S&P 500 Index are owned by
the Fund in the approximate capitalization weight of the Index. This methodology
has provided consistent tracking.
Q. WHICH INVESTMENT STANDS OUT?
A. During the first quarter of 2000, the technology sector and large cap
securities powered the S&P 500 Index forward. Familiar tech stocks such as Intel
and Cisco provided much of that strength. LSI Logic and Scientific-Atlanta
posted dazzling returns of 115.18% and 145.19%, respectively. In the second
quarter of the year healthcare became the best performing sector in the Index
with a return of 22.70%. All of the pharmaceutical companies recorded positive
returns in the second quarter. Some of the best performing stocks were St. Jude
Medical, Cardinal Health and Eli Lilly with returns of 77.72%, 61.37% and
59.90%, respectively. Microsoft and their well documented legal troubles helped
drag tech stocks down. The tech sector actually posted a return of -9.20% for
the second quarter. Some of the worst performing stocks for the second quarter
were tech stocks. Citrix and Novell were pounded by the market after announcing
earnings disappointments. Citrix was down 71.42% while Novell dropped 67.69%.
Both of those stocks were among the worst performers for the six month period
ending June 30, 2000. Citrix was down 69.21% and Novell, the worst performer in
the Index for the six month period, was down 76.84%.
Q. WHAT IS THE OUTLOOK FOR THE FUND AND HOW HAVE YOU POSITIONED THE FUND
GOING FORWARD?
A. Due to the passive investment style of the Fund, it will remain fully
invested to the S&P 500 to provide as close tracking as possible to the S&P 500
Index.
8
<PAGE>
S&P 500 INDEX FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMPARISON OF CHANGES IN VALUE OF A $10,000 INVESTMENT
--------------------------------------------------------------------------------
[LINE GRAPH OMITTED, PLOT POINTS FOLLOW]
S&P 500 Index Fund S&P 500 Index
12/89 $10000 $10000
12/90 8977 9684
12/91 12063 12645
12/92 13074 13622
12/93 14956 14986
12/94 14944 15180
12/95 20345 20872
12/96 25332 25696
12/97 33015 34251
12/98 42339 44080
12/99 51065 53367
6/00 51494 53136
S&P 500 Index Fund (ending value $51,494)
S&P 500 Index (ending value $53,136)
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
SIX ONE FIVE TEN
MONTHS YEAR YEAR YEAR
--------------------------------------------------------------------------------
S&P 500 Index Fund (0.60%) 6.98% 23.24% 17.81%
--------------------------------------------------------------------------------
S&P 500 Index (0.47%) 7.34% 23.83% 17.82%
--------------------------------------------------------------------------------
Lipper peer group average* (0.60%) 6.85% 23.37% 17.39%
--------------------------------------------------------------------------------
Commencement date 4/15/85
--------------------------------------------------------------------------------
INVESTMENT PROFILE
Afund designed for investors who seek growth of capital and accumulation of
income that corresponds to the investment return of the Standard & Poor's 500
Composite Stock Price Index by investing primarily in equity securities of
companies contained in that Index.
--------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS AT JUNE 30, 2000
--------------------------------------------------------------------------------
General Electric Co. .............................. 4.10%
--------------------------------------------------------------------------------
Intel Corp. ....................................... 3.50%
--------------------------------------------------------------------------------
Cisco Systems Inc. ................................ 3.46%
--------------------------------------------------------------------------------
Microsoft Corp. ................................... 3.29%
--------------------------------------------------------------------------------
Pfizer Inc. ....................................... 2.36%
--------------------------------------------------------------------------------
Exxon Mobil Corp. ................................. 2.13%
--------------------------------------------------------------------------------
Wal-Mart Stores Inc. .............................. 2.01%
--------------------------------------------------------------------------------
Oracle Systems Corp. .............................. 1.86%
--------------------------------------------------------------------------------
Citigroup Inc. .................................... 1.59%
--------------------------------------------------------------------------------
Nortel Networks Corp. ............................. 1.58%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO COMPOSITION AS OF JUNE 30, 2000
--------------------------------------------------------------------------------
NET ASSETS OF $734,082 (IN THOUSANDS)
[PIE CHART OMITTED]
TECHNOLOGY 31.8%
CONSUMER 29.3%
FINANCIAL 12.4%
UTILITIES 8.9%
CAPITAL GOODS 8.0%
ENERGY 5.3%
BASIC MATERIALS 2.0%
CASH & OTHER 1.7%+
TRANSPORTATION 0.6%
+INCLUDES CASH EQUALIZED BY FUTURES OF 1.6%
* LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE PERIODS INDICATED IN THE S&P 500 INDEX OBJECTIVE PEER GROUP CONSISTING OF
41, 38, 19 AND 9 UNDERLYING ANNUITY FUNDS, RESPECTIVELY.
SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
9
<PAGE>
S&P 500 INDEX FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
S&P 500 INDEX FUND
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
COMMON STOCK -- 98.3%
--------------------------------------------------------------------------------
BASIC MATERIALS -- 2.0%
Air Products & Chemicals Inc. ...... 13,132 $ 404,630(h)
Alcan Aluminum Ltd. ................ 12,777 396,087(h)
Alcoa Inc. ......................... 50,340 1,459,860
Allegheny Teledyne Inc. ............ 5,151 92,718
Armstrong Holdings Inc. ............ 2,515 38,511
Avery Dennison Corp. ............... 6,255 419,867
Barrick Gold Corp. ................. 22,233 404,363
Bethlehem Steel Corp. .............. 8,566 30,516(a)
Boise Cascade Corp. ................ 2,823 73,045
Du Pont de Nemours (E.I.) & Co. .... 60,413 2,643,069
Eastman Chemical Co. ............... 4,459 212,917
Ecolab Inc. ........................ 7,126 278,359
Engelhard Corp. .................... 6,746 115,104
FMC Corp. .......................... 1,853 107,474(a)
Fort James Corp. ................... 11,784 272,505
Freeport McMoran Copper &
Gold Inc. (Class B) ............. 9,584 88,652
Georgia Pacific Corp. .............. 10,028 263,235
Goodrich (B.F.) Co. ................ 6,301 214,628
Great Lakes Chemical Corp. ......... 2,797 88,106
Hercules Inc. ...................... 6,128 86,175
Homestake Mining Co. ............... 14,489 99,612
Inco Ltd. .......................... 10,312 158,547
International Paper Co. ............ 27,775 828,042
Louisiana-Pacific Corp. ............ 6,622 72,014
Mead Corp. ......................... 6,258 158,015
Millipore Corp. .................... 2,745 206,904
Newmont Mining Corp. ............... 9,628 208,205
Nucor Corp. ........................ 4,609 152,961
Pall Corp. ......................... 7,778 143,893
Phelps Dodge Corp. ................. 4,810 178,872
Placer Dome Inc. ................... 17,374 166,139
Potlatch Corp. ..................... 1,430 47,369
PPG Industries Inc. ................ 9,737 431,471
Praxair Inc. ....................... 9,335 349,479
Rohm & Haas Co. .................... 12,514 431,733
Sealed Air Corp. ................... 4,857 254,385(a)
Sigma-Aldrich Corp. ................ 5,591 163,537
The Dow Chemical Co. ............... 38,760 1,170,067
Union Carbide Corp. ................ 7,501 371,299
USX-US Steel Group Inc. ............ 5,465 101,444
W.R. Grace & Co. ................... 2,987 36,217(a)
Westvaco Corp. ..................... 5,920 146,890
Weyerhaeuser Co. ................... 13,160 565,880
Willamette Industries Inc. ......... 6,150 167,588
Worthington Industries Inc. ........ 4,641 48,731
14,349,115
CAPITAL GOODS -- 8.0%
Allied Waste Industries Inc. ....... 10,100 101,000(a)
Boeing Co. ......................... 52,016 2,174,919
Briggs & Stratton Corp. ............ 1,234 42,265
Caterpillar Inc. ................... 20,516 694,979
Centex Corp. ....................... 2,960 69,560
Cooper Industries Inc. ............. 5,371 174,893
Corning Inc. ....................... 15,813 4,267,533
Crane Co. .......................... 3,327 80,888
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
Cummins Engine Co. Inc. ............ 2,089 $ 56,925
Danaher Corp. ...................... 8,200 405,388
Deere & Co. ........................ 13,320 492,840
Dover Corp. ........................ 11,758 476,934
Eaton Corp. ........................ 4,050 271,350
Emerson Electric Co. ............... 24,374 1,471,580
Fluor Corp. ........................ 4,752 150,282
General Dynamics Corp. ............. 11,682 610,384
General Electric Co. ............... 568,195 30,114,335
Grainger (W.W.) Inc. ............... 5,182 159,670
Honeywell International Inc. ....... 45,616 1,536,689
Illinois Tool Works Inc. ........... 17,097 974,529
Ingersoll-Rand Co. ................. 9,499 382,335
Johnson Controls Inc. .............. 4,841 248,404
Kaufman & Broad Home Corp. ......... 2,780 55,079
Lockheed Martin Corp. .............. 22,452 557,090
Masco Corp. ........................ 25,690 464,026
McDermott International Inc. ....... 2,919 25,724
Minnesota Mining & Manufacturing Co. 22,840 1,884,300
Molex Inc. ......................... 11,350 546,219
National Service Industries Inc. ... 2,376 46,332
Navistar International Corp. Inc. .. 3,295 102,351(a)
Northrop Grumman Corp. ............. 3,861 255,791
Owens Corning ...................... 3,976 36,778
PACCAR Inc. ........................ 4,460 177,006
Parker-Hannifin Corp. .............. 6,115 209,439
Pulte Corp. ........................ 2,322 50,213
Raytheon Co. (Class B) ............. 19,124 368,137
Rockwell International Corp. ....... 11,368 358,092
Sempra Energy ...................... 11,675 198,475
Sherwin-Williams Co. ............... 9,263 196,260
Textron Inc. ....................... 8,168 443,624
The Timken Co. ..................... 3,531 65,765
Thermo Electron Corp. .............. 9,028 190,152(a)
Thomas & Betts Corp. ............... 3,093 59,154
Tyco International Ltd. ............ 96,830 4,587,321
United Technologies Corp. .......... 27,086 1,594,688
Vulcan Materials Co. ............... 6,000 256,125
Waste Management Inc. .............. 35,412 672,828
58,358,651
CONSUMER - CYCLICAL -- 12.0%
Albertsons Inc. .................... 24,261 806,678(h)
American Greetings Corp. (Class A) 3,217 61,123(h)
Autozone Inc. ...................... 7,544 165,968(a)
Bed Bath & Beyond Inc. ............. 7,700 279,125(a)
Best Buy Co. Inc. .................. 11,700 740,025(a)
Black & Decker Corp. ............... 4,907 192,906
Block H & R Inc. ................... 5,652 182,984
Brunswick Corp. .................... 5,768 95,533
Carnival Corp. (Class A) ........... 35,500 692,250
Cendant Corp. ...................... 41,046 574,644(a)
Circuit City Stores Inc. ........... 11,526 382,519
Clear Channel Communications Inc. . 19,400 1,455,000(a)
Comcast Corp. (Class A) ............ 51,444 2,083,482
Consolidated Stores Corp. .......... 5,900 70,800(a)
Convergys Corp. .................... 8,900 461,687(a)
Cooper Tire & Rubber Co. ........... 4,223 46,981
Costco Wholesale Corp. ............. 25,666 846,978(a)
CVS Corp. .......................... 22,456 898,240
Dana Corp. ......................... 9,541 202,150
Darden Restaurants Inc. ............ 8,186 133,023
Delphi Automotive Systems Corp. .... 32,058 466,845
--------------
See Notes to Schedule of Investments and Notes to Financial Statements.
10
<PAGE>
S&P 500 INDEX FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
Deluxe Corp. ....................... 4,029 $ 94,933
Dillards Inc. (Class A) ............ 6,095 74,664
Dollar General Corp. ............... 19,491 380,074
Donnelley (R.R.) & Sons Co. ........ 7,152 161,367
Dow Jones & Co. Inc. ............... 5,042 369,327
Dun & Bradstreet Corp. ............. 9,242 264,552
Eastman Kodak Co. .................. 17,675 1,051,662
Federated Department Stores Inc. ... 12,204 411,885(a)
Ford Motor Co. ..................... 69,400 2,984,200
Fortune Brands Inc. ................ 9,041 208,508
Gannett Co. Inc. ................... 15,208 909,628
Gap Inc. ........................... 48,718 1,522,437
General Motors Corp. ............... 30,647 1,779,441
Genuine Parts Co. .................. 10,596 211,920
Goodyear Tire & Rubber Co. ......... 9,319 186,380
Great Atlantic & Pacific Tea Co. Inc. 1,470 24,439
Harcourt General Inc. .............. 4,061 220,817
Harley-Davidson Inc. ............... 17,100 658,350
Harrahs Entertainment Inc. ......... 6,735 141,014(a)
Hasbro Inc. ........................ 9,296 140,021
Hilton Hotels Corp. ................ 20,188 189,263
Home Depot Inc. .................... 132,818 6,632,599
Interpublic Group Cos. Inc. ........ 17,330 745,190
ITT Industries Inc. ................ 5,563 168,976
J.C. Penney Co. Inc. ............... 14,387 265,260
K Mart Corp. ....................... 25,931 176,655(a)
Knight-Ridder Inc. ................. 4,600 244,663
Kohl's Corp. ....................... 18,700 1,040,187(a)
Kroger Co. ......................... 47,630 1,050,837(a)
Leggett & Platt Inc. ............... 12,100 199,650
Limited Inc. ....................... 24,136 521,937
Liz Claiborne Inc. ................. 3,065 108,041
Longs Drug Stores Corp. ............ 3,082 67,034
Lowes Cos. Inc. .................... 21,664 889,578
Marriott International Inc. (Class A) 13,522 487,637
Mattel Inc. ........................ 24,951 329,041
May Department Stores Co. .......... 19,384 465,216
Maytag Corp. ....................... 4,695 173,128
McDonald's Corp. ................... 76,534 2,520,839
McGraw Hill Cos. Inc. .............. 11,170 603,180
MediaOne Group Inc. ................ 35,426 2,349,231(a)
Meredith Corp. ..................... 2,998 101,183
New York Times Co. (Class A) ....... 9,988 394,526
Newell Rubbermaid Inc. ............. 15,056 387,692
Nike Inc. (Class B) ................ 15,804 629,197
Nordstrom Inc. ..................... 7,692 185,570
Office Depot Inc. .................. 19,000 118,750(a)
Omnicom Group Inc. ................. 10,400 926,250
Polaroid Corp. ..................... 2,478 44,759
RadioShack Corp. ................... 10,556 500,090
Reebok International Ltd. .......... 4,630 73,791(a)
Rite Aid Corp. ..................... 16,058 105,381
Russell Corp. ...................... 1,270 25,400
Sabre Holdings Corp. ............... 7,108 202,578
Safeway Inc. ....................... 28,400 1,281,550(a)
Seagram Co. Ltd. ................... 24,835 1,440,430
Sears Roebuck & Co. ................ 20,045 653,968
Snap-on Inc. ....................... 2,909 77,452
Springs Industries Inc. ............ 700 22,531
Staples Inc. ....................... 27,200 418,200(a)
Starbucks Corp. .................... 10,700 408,606(a)
Target Corp. ....................... 26,176 1,518,208
The Stanley Works .................. 5,726 135,993
Tiffany & Co. ...................... 4,200 283,500
Time Warner Inc. ................... 75,476 5,736,176
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
TJX Cos. Inc. ...................... 18,140 $ 340,125
Toys `R Us Inc. .................... 11,935 173,803(a)
Tribune Co. ........................ 18,819 658,647
Tricon Global Restaurants Inc. ..... 8,911 251,736(a)
TRW Inc. ........................... 7,095 307,746
Tupperware Corp. ................... 3,128 68,816
VF Corp. ........................... 6,702 159,591
Viacom Inc. (Class B) .............. 87,807 5,987,340(a)
Visteon Corp. ...................... 9,087 110,177
Wal-Mart Stores Inc. ............... 256,224 14,764,908
Walgreen Co. ....................... 57,400 1,847,562
Walt Disney Co. .................... 119,337 4,631,767
Wendy's International Inc. ......... 7,531 134,146
Whirlpool Corp. .................... 4,109 191,582
Winn Dixie Stores Inc. ............. 8,440 120,798
Xerox Corp. ........................ 38,090 790,367
Young & Rubicam Inc. ............... 4,100 234,469
88,308,063
CONSUMER - STABLE -- 17.3%
Abbott Laboratories ................ 88,896 3,961,428
Adolph Coors Co. (Class B) ......... 2,065 124,933
Aetna Inc. ......................... 7,952 510,419
Alberto-Culver Co. (Class B) ....... 3,133 95,752
Allergan Inc. ...................... 7,352 547,724
Alza Corp. ......................... 5,861 346,532(a,h)
American Home Products Corp. ....... 74,754 4,391,797(h)
Amgen Inc. ......................... 58,692 4,123,113(a)
Anheuser Busch Cos. Inc. ........... 25,954 1,938,439(h)
Archer-Daniels Midland Co. ......... 33,517 328,886
Avon Products Inc. ................. 13,564 603,598
Ball Corp. ......................... 1,954 62,894
Bard (C.R.) Inc. ................... 3,251 156,454
Bausch & Lomb Inc. ................. 3,128 242,029
Baxter International Inc. .......... 16,574 1,165,359
Becton Dickinson & Co. ............. 14,870 426,583
Bemis Co. Inc. ..................... 2,881 96,874
Bestfoods .......................... 15,990 1,107,307
Biogen Inc. ........................ 8,700 561,150(a)
Biomet Inc. ........................ 6,807 261,644
Boston Scientific Corp. ............ 24,088 528,431(a)
Bristol-Myers Squibb Co. ........... 113,208 6,594,366(h)
Brown-Forman Corp. (Class B) ....... 3,929 211,184
Campbell Soup Co. .................. 24,876 724,514
Cardinal Health Inc. ............... 16,101 1,191,474
CIGNA Corp. ........................ 9,263 866,091
Clorox Co. ......................... 13,184 590,808
Coca-Cola Co. ...................... 142,451 8,182,029(h)
Coca-Cola Enterprises Inc. ......... 24,800 404,550
Colgate-Palmolive Co. .............. 33,472 2,004,136
Conagra Inc. ....................... 27,768 529,328
Crown Cork & Seal Inc. ............. 7,014 105,210
Eli Lilly & Co. .................... 64,716 6,463,510
General Mills Inc. ................. 16,522 631,967
Gillette Co. ....................... 59,866 2,091,568
Guidant Corp. ...................... 18,024 892,188
HCA-The Healthcare Corp. ........... 32,123 975,736
Healthsouth Corp. .................. 21,336 153,353(a)
Heinz (H.J.) Co. ................... 20,097 879,244
Hershey Foods Corp. ................ 8,092 392,462
Humana Inc. ........................ 10,727 52,294(a)
IMS Health Inc. .................... 18,284 329,112
International Flavours ............. 5,547 167,450
Johnson & Johnson .................. 79,783 8,127,893
Kellogg Co. ........................ 23,690 704,778
Kimberly Clark Corp. ............... 31,936 1,832,328
--------------
See Notes to Schedule of Investments and Notes to Financial Statements.
11
<PAGE>
S&P 500 INDEX FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
Mallinckrodt Inc. .................. 3,404 $ 147,861
Manor Care Inc. .................... 6,037 42,259(a)
McKesson HBOC Inc. ................. 15,561 325,808
MedImmune Inc. ..................... 11,800 873,200(a)
Medtronic Inc. ..................... 68,632 3,418,731
Merck & Co. Inc. ................... 131,850 10,103,006
Nabisco Group Holdings Corp. ....... 19,300 500,594
Owens-Illinois Inc. ................ 7,500 87,656(a)
Pactiv Corp. ....................... 9,448 74,403(a)
PE Corp. - PE Biosystems Group ..... 11,900 783,913
Pepsico Inc. ....................... 82,610 3,670,982
Pfizer Inc. ........................ 360,898 17,323,104
Pharmacia Corp. .................... 72,757 3,760,627
Philip Morris Cos. Inc. ............ 131,179 3,484,442
Procter & Gamble Co. ............... 75,488 4,321,688
Quintiles Transnational Corp. ...... 6,800 96,050(a)
Ralston-Ralston Purina Group ....... 17,558 350,063
Sara Lee Corp. ..................... 49,562 957,166
Schering Plough Corp. .............. 84,358 4,260,079(h)
St. Jude Medical Inc. .............. 5,123 235,018(a)
Supervalu Inc. ..................... 7,200 137,250
Sysco Corp. ........................ 19,072 803,408
Temple-Inland Inc. ................. 3,326 139,692
Tenet Healthcare Corp. ............. 18,397 496,719
The Quaker Oats Co. ................ 7,428 558,029
Unilever N.V. ...................... 32,834 1,411,874
UnitedHealth Group Inc. ............ 9,247 792,930
UST Inc. ........................... 10,279 150,973
Watson Pharmaceuticals Inc. ........ 5,500 295,625(a)
Wellpoint Health Networks Inc.
(Class A) ....................... 3,500 253,531(a)
Wrigley (W.M.) Junior Co. .......... 6,634 531,964
127,067,564
ENERGY -- 5.3%
Amerada Hess Corp. ................. 5,190 320,483(h)
Anadarko Petroleum Corp. ........... 7,300 359,981
Apache Corp. ....................... 6,600 388,162
Ashland Oil Inc. ................... 3,707 129,977
Baker Hughes Inc. .................. 18,950 606,400
Burlington Resources Inc. .......... 12,741 487,343
Chevron Corp. ...................... 37,341 3,166,984
Conoco Inc. (Class B) .............. 36,605 899,110
Exxon Mobil Corp. .................. 199,612 15,669,542
Halliburton Co. .................... 25,560 1,206,112
Kerr-McGee Corp. ................... 5,501 324,215
Occidental Petroleum Corp. ......... 21,310 448,842
Phillips Petroleum Co. ............. 14,729 746,576
Rowan Cos. Inc. .................... 5,677 172,439(a)
Royal Dutch Petroleum Co. ADR ...... 123,016 7,573,172
Schlumberger Ltd. .................. 32,654 2,436,805
Sunoco Inc. ........................ 4,988 146,834
Texaco Inc. ........................ 31,596 1,682,487
Tosco Corp. ........................ 8,300 234,994
Transocean Sedco Forex Inc. ........ 12,066 644,777
Union Pacific Resources Group Inc. . 14,129 310,838
Unocal Corp. ....................... 13,638 451,759
USX-Marathon Group ................. 18,092 453,431
38,861,263
FINANCIAL -- 12.4%
AFLAC Inc. ......................... 15,600 716,625
Allstate Corp. ..................... 42,676 949,541(h)
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
American Express Co. ............... 76,622 $ 3,993,922(h)
American General Corp. ............. 14,303 872,483(h)
American International Group Inc. .. 88,426 10,390,055(h)
AmSouth Bancorp. ................... 22,550 355,163
Aon Corp. .......................... 14,836 460,843
Associates First Capital Corp.
(Class A) ........................ 41,552 927,129
Bank of America Corp. .............. 95,040 4,086,720
Bank of New York Inc. .............. 42,110 1,958,115(h)
Bank One Corp. ..................... 66,427 1,764,467(h)
BB&T Corp. ......................... 20,000 477,500
Capital One Financial Corp. ........ 11,600 517,650
Charles Schwab Corp. ............... 78,111 2,626,482
Charter One Financial Inc. ......... 12,200 280,600
Chase Manhattan Corp. .............. 71,181 3,278,775
Chubb Corp. ........................ 9,897 608,665
Cincinnati Financial Corp. ......... 9,400 295,513
Citigroup Inc. ..................... 193,952 11,685,608
Comerica Inc. ...................... 8,956 401,900
Conseco Inc. ....................... 17,384 169,494
Countrywide Credit Industries Inc. . 6,600 200,063
Federal Home Loan Mortgage Corp. .. 40,065 1,622,632
Federal National Mortgage Assoc. ... 57,776 3,015,185
Fifth Third Bancorp ................ 17,756 1,123,067
First Union Corp. .................. 56,948 1,413,022
Firstar Corp. ...................... 56,646 1,193,106
FleetBoston Financial Corp. ........ 51,518 1,751,612
Franklin Resources Inc. ............ 14,500 440,437
Golden West Financial Corp. ........ 8,865 361,803
Hartford Financial Services
Group Inc. ....................... 12,704 710,630
Household International Inc. ....... 27,111 1,126,801
Huntington Bancshares Inc. ......... 13,122 207,492
Jefferson-Pilot Corp. .............. 6,082 343,253
KeyCorp ............................ 26,128 460,506
Lehman Brothers Holdings Inc. ...... 6,900 652,481
Lincoln National Corp. ............. 10,912 394,196
Loews Corp. ........................ 5,516 330,960
Marsh & McLennan Cos. Inc. ......... 15,454 1,613,977
MBIA Inc. .......................... 5,990 288,643
MBNA Corp. ......................... 46,374 1,257,895
Mellon Financial Corp. ............. 28,028 1,021,270
Merrill Lynch & Co. Inc. ........... 26,017 2,991,955
MGIC Investment Corp. .............. 5,859 266,585
Morgan (J.P.) & Co. Inc. ........... 9,264 1,020,198
Morgan Stanley, Dean Witter & Co. . 64,896 5,402,592
National City Corp. ................ 35,764 610,223
Northern Trust Corp. ............... 12,600 819,787
Old Kent Financial Corp. ........... 8,085 216,274
Paychex Inc. ....................... 21,625 908,250
PNC Financial Services Group ....... 16,708 783,187
Progressive Corp. .................. 4,300 318,200
Providian Financial Corp. .......... 8,347 751,230
Regions Financial Corp. ............ 12,700 252,413
Safeco Corp. ....................... 7,381 146,697
SLM Holding Corp. .................. 9,000 336,938
SouthTrust Corp. ................... 9,300 210,413
St. Paul Cos. Inc. ................. 11,980 408,817
State Street Corp. ................. 9,300 986,381(i)
Summit Bancorp. .................... 10,200 251,175
Suntrust Banks Inc. ................ 17,229 787,150
Synovus Financial Corp. ............ 15,750 277,594
T. Rowe Price Associates Inc. ...... 6,800 289,000
The Bear Stearns Cos. Inc. ......... 6,169 256,785
--------------
See Notes to Schedule of Investments and Notes to Financial Statements.
12
<PAGE>
S&P 500 INDEX FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
Torchmark Corp. .................... 7,300 $ 180,219
Union Planters Corp. ............... 8,500 237,469
United States Bancorp. ............. 43,027 828,270
UNUMProvident Corp. ................ 13,289 266,611
Wachovia Corp. ..................... 11,566 627,455
Washington Mutual Inc. ............. 31,218 901,420
Wells Fargo & Co. .................. 92,418 3,581,197
91,260,766
TECHNOLOGY -- 31.8%
3Com Corp. ......................... 20,154 1,161,374(a)
Adaptec Inc. ....................... 5,500 125,125(a)
ADC Telecommunications Inc. ........ 19,400 1,627,175(a)
Adobe Systems Inc. ................. 6,896 896,480(h)
Advanced Micro Devices Inc. ........ 8,637 667,208(a,h)
Agilent Technologies Inc. .......... 25,807 1,903,266(a)
Altera Corp. ....................... 11,500 1,172,281(a)
America Online Inc. ................ 131,600 6,941,900(a)
American Power Conversion Corp. .... 11,100 453,019(a)
Analog Devices Inc. ................ 20,300 1,542,800(a)
Andrew Corp. ....................... 4,456 149,555(a)
Apple Computer ..................... 18,520 969,985(a)
Applied Materials Inc. ............. 46,300 4,195,937(a)
Autodesk Inc. ...................... 3,512 121,823
Automatic Data Processing Inc. ..... 35,918 1,923,858
BMC Software Inc. .................. 14,100 514,430(a)
Broadcom Corp. (Class A) ........... 12,500 2,736,719(a)
Cabletron Systems Inc. ............. 9,926 250,632(a)
Ceridian Corp. ..................... 8,108 195,099(a)
Cisco Systems Inc. ................. 399,504 25,393,473(a)
Citrix Systems Inc. ................ 10,600 200,738(a)
Compaq Computer Corp. .............. 98,105 2,507,809
Computer Associates
International Inc. ............... 34,081 1,744,521
Computer Sciences Corp. ............ 9,682 723,124(a)
Compuware Corp. .................... 20,700 214,763(a)
Comverse Technology Inc. ........... 8,700 809,100(a)
Conexant Systems Inc. .............. 12,300 598,087(a)
Dell Computer Corp. ................ 148,048 7,300,617(a,h)
Electronic Data Systems Corp. ...... 27,200 1,122,000
EMC Corp. .......................... 124,414 9,572,102(a)
Equifax Inc. ....................... 7,700 202,125
First Data Corp. ................... 23,581 1,170,207
Gateway 2000 Inc. .................. 18,500 1,049,875(a)
Hewlett Packard Co. ................ 57,341 7,160,457
Intel Corp. ........................ 192,304 25,708,641
International Business
Machines Corp. ................... 101,630 11,134,837
KLA-Tencor Corp. ................... 10,500 614,906(a)
Lexmark International
Group Inc. (Class A) ............. 7,300 490,925(a)
Linear Technology Corp. ............ 17,700 1,131,694
LSI Logic Corp. .................... 17,392 941,342(a)
Lucent Technologies Inc. ........... 186,718 11,063,041(h)
Maxim Integrated Products Inc. ..... 16,200 1,100,587(a)
Mercury Interactive Corp. .......... 3,400 328,950(a)
Micron Technology Inc. ............. 31,854 2,805,143(a)
Microsoft Corp. .................... 302,156 24,172,480(a,h)
Motorola Inc. ...................... 123,450 3,587,766
National Semiconductor Corp. ....... 10,183 577,885(a)
NCR Corp. .......................... 5,800 225,838(a)
Network Appliance Inc. ............. 17,500 1,408,750(a)
Nortel Networks Corp. .............. 169,924 11,597,313
Novell Inc. ........................ 17,866 165,261(a)
Novellus Systems Inc. .............. 7,300 412,906(a)
Oracle Systems Corp. ............... 162,816 13,686,720(a)
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
Parametric Technology Corp. ........ 15,306 $ 168,366(a)
PeopleSoft Inc. .................... 15,800 264,650(a)
PerkinElmer Inc. ................... 2,805 185,481
Pitney Bowes Inc. .................. 15,032 601,280
QUALCOMM Inc. ...................... 42,500 2,550,000
Sanmina Corp. ...................... 7,500 641,250(a)
Sapient Corp. ...................... 3,300 352,894(a)
Scientific-Atlanta Inc. ............ 9,206 685,847
Seagate Technology ................. 13,290 730,950(a)
Shared Medical System Corp. ........ 1,753 127,859
Siebel Systems Inc. ................ 11,400 1,864,612(a)
Solectron Corp. .................... 34,600 1,448,875(a)
Sun Microsystems Inc. .............. 90,880 8,264,400(a)
Tektronix Inc. ..................... 2,838 210,012
Tellabs Inc. ....................... 23,452 1,604,996(a)
Teradyne Inc. ...................... 9,800 720,300(a)
Texas Instruments Inc. ............. 93,736 6,438,491
Unisys Corp. ....................... 18,209 265,169(a)
VERITAS Software Corp. ............. 22,400 2,531,550(a)
Xilinx Inc. ........................ 18,400 1,519,150(a)
Yahoo! Inc. ........................ 31,200 3,864,900(a)
233,513,681
TRANSPORTATION -- 0.6%
AMR Corp. .......................... 8,314 219,801(a,h)
Burlington Northern Santa Fe Corp. 24,349 558,505
CSX Corp. .......................... 13,138 278,361
Delta Air Lines Inc. ............... 6,882 347,971
FedEx Corp. ........................ 16,660 633,080(a)
Kansas City Southern Industries Inc. 6,400 567,600
Norfolk Southern Corp. ............. 22,501 334,703
Ryder System Inc. .................. 4,231 80,125
Southwest Airlines Co. ............. 29,166 552,331
U.S. Airways Group Inc. ............ 3,807 148,473(a)
Union Pacific Corp. N.V. ........... 14,654 544,946
4,265,896
UTILITIES -- 8.9%
AES Corp. .......................... 24,300 1,108,687(a)
Alltel Corp. ....................... 18,294 1,133,085
Ameren Corp. ....................... 7,542 254,543
American Electric Power Inc. ....... 18,125 536,953(h)
AT&T Corp. ......................... 182,174 5,761,253
Bell Atlantic Corp. ................ 89,168 4,530,849
Bellsouth Corp. .................... 108,498 4,624,727(h)
CenturyTel Inc. .................... 8,050 231,438
CINergy Corp. ...................... 9,353 237,917
CMS Energy Corp. ................... 6,000 132,750
Coastal Corp. ...................... 12,342 751,319
Columbia Gas Systems Inc. .......... 4,484 294,262
Consolidated Edison Inc. ........... 12,907 382,370
Constellation Energy Group ......... 8,503 276,879
CP&L Inc. .......................... 8,760 279,773
Dominion Resources Inc. ............ 13,718 588,159
DTE Energy Co. ..................... 7,866 240,405
Duke Energy Corp. .................. 21,066 1,187,596
Eastern Enterprises ................ 1,502 94,626
Edison International ............... 18,742 384,211
El Paso Energy Corp. ............... 13,387 681,900
Enron Corp. ........................ 42,000 2,709,000
Entergy Corp. ...................... 12,947 351,997
FirstEnergy Corp. .................. 13,077 305,675
Florida Progress Corp. ............. 5,800 271,875
--------------
See Notes to Schedule of Investments and Notes to Financial Statements.
13
<PAGE>
S&P 500 INDEX FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
FPL Group Inc. ..................... 10,631 $ 526,234
Global Crossing Ltd. ............... 50,713 1,334,386(a)
GPU Inc. ........................... 7,300 197,556
GTE Corp. .......................... 55,261 3,439,997
New Century Energies Inc. .......... 6,400 192,000
Nextel Communications Inc. (Class A) 43,500 2,661,656(a)
Niagara Mohawk Holdings Inc. ....... 10,554 147,096(a)
Nicor Inc. ......................... 2,743 89,490
Northern States Power Co. .......... 9,360 188,955
ONEOK Inc. ......................... 1,307 33,900
PECO Energy Co. .................... 9,522 383,856
Peoples Energy Corp. ............... 1,721 55,717
PG&E Corp. ......................... 22,254 548,005
Pinnacle West Capital Corp. ........ 5,100 172,763
PPL Corp. .......................... 8,422 184,758
Public Service Enterprise Group .... 12,459 431,393
Reliant Energy Inc. ................ 17,218 509,007
SBC Communications Inc. ............ 195,069 8,436,734
Southern Co. ....................... 36,958 861,583
Sprint Corp. ....................... 50,352 2,567,952
Sprint Corp. (PCS Group) ........... 52,526 3,125,297(a)
TXU Corp. .......................... 15,786 465,687
U.S. WEST Inc. ..................... 29,288 2,511,446
Unicom Corp. ....................... 10,219 395,348
Williams Cos. Inc. ................. 25,286 1,054,110
WorldCom Inc. ...................... 164,232 7,534,142(a)
65,401,317
TOTAL INVESTMENTS IN SECURITIES
(COST $575,974,803) .............. 721,386,316
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.7%
--------------------------------------------------------------------------------
GEI Short Term Investment Fund ..... 850,073 850,073
Money Market Obligations Trust ....4,191,485 4,191,485
Short Term Investment Co. .........6,966,949 6,966,949
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
U.S. GOVERNMENT -- 0.1%
United States Treasury Bills
5.78% 9/14/00 ................. $905,000 $ 894,254(d)
TOTAL SHORT-TERM INVESTMENTS
(COST $12,902,761) .............. 12,902,761
OTHER ASSETS AND LIABILITIES,
NET 0.0% ....................... (207,076)
--------------------------------------------------------------------------------
NET ASSETS-- 100% ................. $734,082,001
================================================================================
--------------------------------------------------------------------------------
OTHER INFORMATION
--------------------------------------------------------------------------------
The S&P 500 Index Fund had the following long Futures Contracts open at June 30,
2000:
NUMBER
EXPIRATION OF UNDERLYING UNREALIZED
DESCRIPTION DATE CONTRACTS FACE VALUE LOSS
--------------------------------------------------------------------------------
S&P 500 Sept. 2000 32 $ 11,744,800 $(129,600)
--------------
See Notes to Schedule of Investments and Notes to Financial Statements.
14
<PAGE>
PREMIER GROWTH EQUITY FUND
--------------------------------------------------------------------------------
Q&A
DAVID CARLSON MANAGES INDIVIDUAL, INSTITUTIONAL AND MUTUAL FUND PORTFOLIOS WITH
TOTAL ASSETS OF OVER $7 BILLION. DAVE JOINED GE IN 1980 ON THE GE FINANCIAL
MANAGEMENT PROGRAM. IN 1982, HE JOINED GE ASSET MANAGEMENT AS A SECURITY ANALYST
RESPONSIBLE FOR SEVERAL CONSUMER INDUSTRIES. IN 1988, DAVE ASSUMED
RESPONSIBILITY FOR MANAGING ELFUN TRUSTS AND HAS MANAGED THE PREMIER GROWTH
EQUITY FUND SINCE IT'S INCEPTION. 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 SIX MONTHS ENDED JUNE 30, 2000?
A. The Premier Growth Fund posted a return of negative 0.53% for the six-month
period ended June 30, 2000, while the S&P 500 Index returned negative 0.47%
for the same period. The Fund underperformed the Index by six basis points
during this period.
Q. HOW DID THE FUND PERFORM COMPARED TO ITS PEER GROUP?
A. For a peer group comparison we use the Lipper Analytical Services Growth
Fund category of annuity mutual funds. This peer group numbers some 224
growth funds. The average return for the peer group was 3.29% for the six
months ended June 30, 2000. Many funds in this category have technology
weightings in excess of 50% while the Fund maintains a technology weighting
of approximately 31% -- in-line with the benchmark. Technology stocks
outperformed the market during the six-month period ended June 30, 2000,
consequently boosting many peer fund returns due to this substantial
overweight situation. While the portfolio had very solid stock selection in
technology, our relative sector weighting was responsible for the
differential in performance. We continue to be constructive about
technology stocks but are sensitive to valuation levels.
Q. WHY DID THE FUND UNDERPERFORM ITS BENCHMARK FOR THE SIX-MONTH PERIOD ENDED
JUNE 30, 2000?
A. In looking at a breakdown of returns for the S&P 500 Index for the
six-month period, the consumer stable, energy, and technology sectors were
the only sectors with a positive return during the period. The consumer
stable sector gained 10.7%, energy rose 4.8% and technology rose 3.7%. All
other sectors underperformed the Index for this period. The Fund
underperformed the benchmark due to a dramatic pullback in consumer
cyclical stocks despite solid stock selection in the consumer stable,
energy, and technology sectors over this time period.
Q. DOES ANY PARTICULAR STOCK PERFORMANCE STAND OUT IN THE PERIOD?
A. Within the consumer stable sector, holdings in the pharmaceutical and
healthcare distribution industries helped performance over the past six
months. For example, holdings such as Cardinal Health gained 55%, Pfizer
rose 49%, and Dentsply gained 31% during this period. The energy sector
performed very well given positive industry supply/demand characteristics
with names like Baker Hughes up 53%, and Schlumberger posting gains of 34%
over this period. Despite the volatility in technology, holdings such as
Intel posted gains of 63%, Applied Materials rose 43%, and EMC gained 41%
during the six-month period. On the downside, consumer cyclical holdings
Carnival Corp, NTL and Home Depot were down 59%, 40% and 27%, respectively,
and consequently hurt the Fund's performance for the period.
Q. HOW HAS THE VOLATILITY IN THE MARKET IMPACTED THE FUND?
A. Over the past six to twelve months the markets have been particularly
volatile. The S&P 500 Index had gains of 15% for the quarter ended December
31, 1999, following a decline of 6.2% in the quarter ended September 30,
1999. For the quarter ended March 31, 2000, the S&P 500 gained 2.5%. The
most recent quarter ended June 30, 2000 has seen the S&P 500 decline 2.85%.
Year-to-date, the S&P 500 is down 0.47%. What is notable is that these
market swings have been focused primarily on the technology sector. Despite
an environment in the U.S. of solid economic growth, low inflation, solid
corporate earnings, modestly higher interest rates, and declining oil
prices, the equity market has behaved much like a roller coaster. Through
the first half of 2000 most of the major averages have posted price
declines which is a first since 1994.
In terms of the Fund, we continue to own those companies that have solid
earnings growth. While these swings do make us reflective of the
fundamentals of the market, we invest in those companies with solid
fundamentals and do not try to time the market.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
A. The Fund remains concentrated in 33 holdings. We reduced the weighting in
technology stocks to match the level of the S&P 500 Index. The rationale
was based on valuation levels. The fundamentals of the technology sector
are positive, but the valuation levels remain high in our opinion. We are
finding more compelling investment opportunities in other sectors where
growth rates are high and valuation levels more reasonable. We continue to
focus on industry leaders with strong fundamentals. We estimate the
earnings growth of our holdings to be in the 15-20% range, and we expect
above-average growth will drive above-average stock price performance over
the long term.
15
<PAGE>
PREMIER GROWTH EQUITY FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMPARISON OF CHANGES IN VALUE OF A $10,000 INVESTMENT
--------------------------------------------------------------------------------
[LINE GRAPH OMITTED, PLOT POINTS FOLLOW]
PREMIER GROWTH EQUITY FUND S&P 500 Index
12/12/97 $10000 $10000
12/97 10346 10182
3/98 11712 11604
6/98 12193 11988
9/98 11395 10788
12/98 14125 13087
3/99 15399 13735
6/99 16968 14691
9/99 15924 13787
12/99 19247 15842
3/00 19959 16239
6/00 19145 15775
Premier Growth Equity Fund (ending value $19,145)
S&P 500 Index (ending value $15,775)
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
SIX ONE SINCE
MONTHS YEAR COMMENCEMENT
--------------------------------------------------------------------------------
Premier Growth Equity Fund (0.53%) 12.83% 28.98%
--------------------------------------------------------------------------------
S&P 500 Index (0.47%) 7.34% 19.57%
--------------------------------------------------------------------------------
Lipper peer group average* 3.29% 20.83% N/A
--------------------------------------------------------------------------------
Commencement date 12/12/97
--------------------------------------------------------------------------------
INVESTMENT PROFILE
A fund designed for investors who seek long-term growth of capital and
future income rather than current income by investing primarily in a limited
number of equity securities of large- and medium-sized companies that the
portfolio manager believes have
above-average growth histories and/or growth potential.
--------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS AT JUNE 30, 2000
--------------------------------------------------------------------------------
Cardinal Health Inc. ............................. 7.28%
--------------------------------------------------------------------------------
Intel Corp. ...................................... 6.36%
--------------------------------------------------------------------------------
EMC Corp. ........................................ 6.35%
--------------------------------------------------------------------------------
AT&T Corp. - Liberty Media Group (Class A) ....... 6.16%
--------------------------------------------------------------------------------
Cisco Systems Inc. ............................... 6.05%
--------------------------------------------------------------------------------
First Data Corp. ................................. 5.98%
--------------------------------------------------------------------------------
Molex Inc. (Class A) ............................. 5.97%
--------------------------------------------------------------------------------
Citigroup Inc. ................................... 5.73%
--------------------------------------------------------------------------------
Catalina Marketing Corp. ......................... 5.34%
--------------------------------------------------------------------------------
Microsoft Corp. .................................. 5.08%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO COMPOSITION AS OF JUNE 30, 2000
--------------------------------------------------------------------------------
NET ASSETS OF $82,717 (IN THOUSANDS)
[PIE CHART OMITTED]
CONSUMER 41.4%
TECHNOLOGY 30.8%
CAPITAL GOODS 6.5%
FINANCIAL SERVICES 6.2%
UTILITIES 5.6%
ENERGY 4.8%
CASH & OTHER 4.7%+
+INCLUDES CASH EQUALIZED BY FUTURES OF 1.3%
* LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE PERIODS INDICATED IN THE GROWTH PEER GROUP CONSISTING OF 224 AND 211
UNDERLYING ANNUITY FUNDS, RESPECTIVELY.
SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
16
<PAGE>
PREMIER GROWTH EQUITY FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
PREMIER GROWTH EQUITY FUND
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
COMMON STOCK -- 95.3%
--------------------------------------------------------------------------------
CAPITAL GOODS -- 6.5%
Dover Corp. ........................ 52,839 $ 2,143,282
Molex Inc. (Class A) ............... 91,615 3,206,525
5,349,807
CONSUMER - CYCLICAL -- 22.9%
AT&T Corp. - Liberty Media
Group (Class A) .................. 136,358 3,306,681(a)
Carnival Corp. ..................... 54,543 1,063,589
Catalina Marketing Corp. ........... 28,124 2,868,648(a)
Comcast Corp. (Class A) ............ 61,361 2,485,121
CVS Corp. .......................... 47,725 1,909,000
Home Depot Inc. .................... 51,134 2,553,504
Interpublic Group Cos. Inc. ........ 57,952 2,491,936
NTL Inc. ........................... 37,498 2,245,193(a)
18,923,672
CONSUMER - STABLE -- 18.5%
Cardinal Health Inc. ............... 52,839 3,910,086
Dentsply International Inc. ........ 25,567 787,783
Gillette Co. ....................... 32,385 1,131,451
Henry Schein Inc. .................. 34,089 588,035(a)
Lincare Holdings Inc. .............. 85,224 2,098,641(a)
Merck & Co. Inc. ................... 32,385 2,481,501
Pfizer Inc. ........................ 51,134 2,454,432
Sybron International Corp. ......... 93,746 1,857,343(a)
15,309,272
ENERGY -- 4.8%
Baker Hughes Inc. .................. 69,883 2,236,256
Schlumberger Ltd. .................. 23,863 1,780,776
4,017,032
FINANCIAL -- 6.2%
AFLAC Inc. ......................... 44,316 2,035,766
Citigroup Inc. ..................... 51,134 3,080,824
5,116,590
TECHNOLOGY -- 30.8%
Applied Materials Inc. ............. 28,976 2,625,950(a)
Automatic Data Processing Inc. ..... 46,021 2,465,000
Cisco Systems Inc. ................. 51,134 3,250,205(a,h)
Dell Computer Corp. ................ 44,316 2,185,333(a)
EMC Corp. .......................... 44,316 3,409,562(a)
Equifax Inc. ....................... 85,224 2,237,130
First Data Corp. ................... 64,770 3,214,211
Intel Corp. ........................ 25,567 3,417,988
Microsoft Corp. .................... 34,089 2,727,120(a)
25,532,499
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
UTILITIES -- 5.6%
Vodafone AirTouch PLC ADR .......... 51,134 $ 2,118,865(h)
WorldCom Inc. ...................... 54,543 2,502,160(a)
4,621,025
TOTAL INVESTMENTS IN SECURITIES
(COST $68,062,670) ............... 78,869,897
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 6.8%
--------------------------------------------------------------------------------
GEI Short Term Investment Fund
(COST $5,612,966) ...............5,612,966 5,612,966
OTHER ASSETS AND LIABILITIES,
NET (2.1)% ..................... (1,765,891)
--------------------------------------------------------------------------------
NET ASSETS-- 100% ................. $82,716,972
================================================================================
--------------------------------------------------------------------------------
OTHER INFORMATION
--------------------------------------------------------------------------------
The Premier Growth Equity Fund had the following long Futures Contracts open at
June 30, 2000:
NUMBER
EXPIRATION OF UNDERLYING UNREALIZED
DESCRIPTION DATE CONTRACTS FACE VALUE LOSS
--------------------------------------------------------------------------------
S&P 500 Sept. 2000 3 $ 1,101,075 $(1,750)
--------------------------------------------------------------------------------
------------
See Notes to Schedule of Investments and Notes to Financial Statements.
17
<PAGE>
VALUE EQUITY FUND
--------------------------------------------------------------------------------
Q&A
PETER J. HATHAWAY IS THE PORTFOLIO MANAGER FOR THE VALUE EQUITY FUND. HE IS
CURRENTLY A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT AND MANAGES EQUITY
ASSETS OF APPROXIMATELY $9 BILLION. PETE HAS MORE THAN 36 YEARS OF INVESTMENT
EXPERIENCE AND HAS HELD POSITIONS WITH GE ASSET MANAGEMENT SINCE 1985. PETE WAS
SENIOR VICE PRESIDENT AND PORTFOLIO MANAGER AT AMERITRUST FROM 1975 TO 1985, AND
PREVIOUSLY HELD INVESTMENT POSITIONS AT MERRILL LYNCH, EQUITABLE LIFE AND US
TRUST. HE HOLDS AN M.B.A. FROM THE WHARTON SCHOOL AT THE UNIVERSITY OF
PENNSYLVANIA AND A BS IN FINANCE FROM ARIZONA STATE UNIVERSITY.
Q. HOW DID THE VALUE EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK FOR THE
PERIOD APRIL 28, 2000 (COMMENCEMENT OF OPERATIONS) THROUGH JUNE 30, 2000?
A. The portfolio returned negative 0.30% versus negative 3.56% for the Russell
1000 Value Index for the period ended June 30, 2000, thereby outperforming
by 3.26%.
Q. WHY DID THE FUND OUTPERFORM ITS BENCHMARK FOR THE PERIOD ENDED JUNE 30,
2000?
A. The outperformance of the Fund relative to the benchmark was broadly based
with six of nine sectors contributing positively. These six include basic
materials, consumer stable, technology, transportation, utilities, and
financials. Capital goods, consumer cyclical and energy detracted from
performance for the period.
Q. WHICH STOCKS HAVE PERFORMED WELL? WHICH HAVE NOT PERFORMED WELL?
A. An overweight position in the consumer stable sector significantly helped
portfolio performance for the period ended June 30, 2000. Healthcare issues
were very strong during the second quarter and holdings such as Pfizer,
Lilly, and Merck contributed solidly during this period. Our technology
investments in Intel, Micron, and Analog Devices also helped portfolio
returns. Basic materials did well because the sector was underweighted in
the portfolio and several stocks did well, specifically DuPont and
International Paper. Transportation also helped performance due to
investments in Canadian Pacific and Continental Airlines. The utilities
sector performed well due to favorable supply/demand characteristics in the
electric and natural gas industries. Overweight positions in El Paso,
Dynergy, and Duke helped to boost performance. Investments in BlackRock,
Waddell & Reed, and Reliastar all helped performance within the financial
sector as the area experienced increased volatility due to market gyrations
and interest rates. The capital goods, consumer cyclicals, and energy
sectors all detracted from performance over this period. The capital goods
sector pulled back sharply in the second quarter and holdings such as
Textron were hit hard. Interest-rate-sensitive retail stocks within
consumer cyclicals were also hit hard amid worries of a slowing economy
with holdings such as Wal-Mart, Target, and Home Depot declining. Holdings
in the energy sector such as Nabors and Halliburton performed well but an
underweight of the sector detracted from performance.
Q. HOW HAS THE VOLATILITY IN THE MARKET IMPACTED THE FUND?
A. Over the past six to twelve months the markets have been particularly
volatile. The S&P 500 Index had gains of 15% for the quarter ended December
31, 1999, following a decline of 6.2% in the quarter ended September 30,
1999. For the quarter ended March 31, 2000, the S&P 500 gained 2.5%. The
most recent quarter ended June 30, 2000 has seen the S&P 500 decline 2.85%.
Year-to-date, the S&P 500 is down 0.47%. What is notable is that these
market swings have been focused primarily on the technology sector. Despite
an environment in the U.S. of solid economic growth, low inflation, solid
corporate earnings, modestly higher interest rates, and declining oil
prices, the equity market has behaved much like a roller coaster. Through
the first half of 2000 most of the major averages have posted price
declines which is a first since 1994.
In terms of the Fund, we continue to own those companies that have solid
earnings growth. We look at the swings in the market as opportunities to
scale buy or sell those stocks that become respectively undervalued or
overvalued relative to the market, to their peers and/or to their earnings
growth rate.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
A. Over the near term, we expect the equity markets to remain volatile. We
also believe that the performance and valuation discrepancy between
technology and almost everything else may have only partially corrected and
that there may be further declines as the year progresses. We continue to
focus on fundamental research and stock selection, and plan to maintain the
valuation discipline that has rewarded us over the years. We believe the
portfolio is well positioned for solid relative performance in this
environment.
18
<PAGE>
VALUE EQUITY FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMPARISON OF CHANGES IN VALUE OF A $10,000 INVESTMENT
--------------------------------------------------------------------------------
[LINE GRAPH OMITTED, PLOT POINTS FOLLOW]
Value Equity Fund Russell 1000 Value Index
4/28/2000 $10000 $10000
4/00 10000 10000
10120 10105
9980 9980
9790 9802
9780 9793
9930 9858
9910 9933
9840 9888
9670 9783
9850 9959
9930 10030
10120 10244
10210 10273
10100 10159
10060 10169
9890 10005
9880 10010
9760 9957
9910 10055
9770 9888
9750 9893
10000 10069
5/00 10020 10105
10190 10254
10350 10374
10270 10279
10210 10257
10260 10300
10190 10225
10170 10180
10110 10183
10240 10247
10280 10306
10250 10211
10140 10020
10270 10102
10180 10044
10210 10027
10070 9956
10040 9926
10090 9939
10070 9927
10070 9907
9990 9866
6/00 9970 9644
Value Equity Fund (ending value $9,970)
Russell 1000 Value Index (ending value $9,644)
--------------------------------------------------------------------------------
AVERAGE TOTAL RETURN FOR THE PERIOD ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
SINCE
COMMENCEMENT
--------------------------------------------------------------------------------
Value Equity Fund (0.30%)
--------------------------------------------------------------------------------
Russell 1000 Value Index (3.56%)
--------------------------------------------------------------------------------
Commencement date 4/28/00
--------------------------------------------------------------------------------
INVESTMENT PROFILE
A fund designed for investors who seek long-term growth of capital and
future income by investing primarily in equity securities of large U.S.
companies that the portfolio manager believes are undervalued by the
market but have solid growth prospects.
--------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS AT JUNE 30, 2000
--------------------------------------------------------------------------------
Intel Corp. ...................................... 3.95%
--------------------------------------------------------------------------------
Citigroup Inc. ................................... 2.87%
--------------------------------------------------------------------------------
Exxon Mobil Corp. ................................ 2.50%
--------------------------------------------------------------------------------
Merck & Co., Inc. ................................ 2.46%
--------------------------------------------------------------------------------
Microsoft Corp. .................................. 2.37%
--------------------------------------------------------------------------------
Morgan Stanley, Dean Witter & Co. ................ 2.05%
--------------------------------------------------------------------------------
Nortel Networks Corp. ............................ 1.71%
--------------------------------------------------------------------------------
SBC Communications Inc. .......................... 1.70%
--------------------------------------------------------------------------------
Wal-Mart Stores Inc. ............................. 1.68%
--------------------------------------------------------------------------------
Cisco Systems Inc. ............................... 1.66%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO COMPOSITION AS OF JUNE 30, 2000
--------------------------------------------------------------------------------
NET ASSETS OF $9,976 (IN THOUSANDS)
[PIE CHART OMITTED]
CONSUMER 27.0%
TECHNOLOGY 24.2%
FINANCIAL SERVICES 15.9%
UTILITIES 9.3%
CAPITAL GOODS 7.8%
ENERGY 7.3%
BASIC MATERIALS 3.7%
TRANSPORTATION 2.1%
MISCELLANEOUS 1.6%
CASH & OTHER 1.1%
SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
19
<PAGE>
VALUE EQUITY FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
VALUE EQUITY FUND
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
COMMON STOCK -- 98.9%
--------------------------------------------------------------------------------
BASIC MATERIALS -- 3.7%
Avery Dennison Corp. ............... 250 $ 16,781
Barrick Gold Corp. ................. 2,497 45,414
Bowater Inc. ....................... 612 27,005
Du Pont de Nemours (E.I.) & Co. .... 907 39,681
International Paper Co. ............ 585 17,440
Mead Corp. ......................... 636 16,059
Newmont Mining Corp. ............... 1,928 41,693
PPG Industries Inc. ................ 908 40,236
Rayonier Inc. ...................... 760 27,265
The Dow Chemical Co. ............... 681 20,558
Westvaco Corp. ..................... 420 10,421
Weyerhaeuser Co. ................... 1,623 69,789
372,342
CAPITAL GOODS -- 7.8%
Boeing Co. ......................... 908 37,966
Cooper Industries Inc. ............. 340 11,071
Deere & Co. ........................ 795 29,415
Dover Corp. ........................ 1,731 70,214
Eaton Corp. ........................ 544 36,448
Emerson Electric Co. ............... 1,707 103,060
General Dynamics Corp. ............. 749 39,135
Honeywell International Inc. ....... 1,979 66,668
Hubbell Inc. (Class B) ............. 1,022 26,061
Illinois Tool Works Inc. ........... 90 5,130
Ingersoll-Rand Co. ................. 715 28,779
Martin Marietta Materials Inc. ..... 1,110 44,886
Masco Corp. ........................ 566 10,223
Molex Inc. (Class A) ............... 726 25,410
Parker-Hannifin Corp. .............. 815 27,914
Sherwin-Williams Co. ............... 386 8,178
Textron Inc. ....................... 1,656 89,941
The Timken Co. ..................... 204 3,800
United Technologies Corp. .......... 1,990 117,161
781,460
CONSUMER - CYCLICAL -- 10.3%
AT&T Corp. - Liberty Media
Group (Class A) ................. 682 16,538(a)
Catalina Marketing Corp. ........... 160 16,320(a)
Comcast Corp. (Class A) ............ 1,407 56,983
Costco Wholesale Corp. ............. 477 15,741(a)
CVS Corp. .......................... 772 30,880
Delphi Automotive Systems Corp. .... 794 11,562
Eastman Kodak Co. .................. 136 8,092
Federated Department Stores Inc. ... 1,158 39,082(a)
Ford Motor Co. ..................... 908 39,044
Gannett Co. Inc. ................... 1,101 65,854
Home Depot Inc. .................... 1,089 54,382
Interpublic Group Cos. Inc. ........ 1,373 59,039
Knight-Ridder Inc. ................. 954 50,741
Lowes Cos. Inc. .................... 1,385 56,872
McDonald's Corp. ................... 2,724 89,722
McGraw Hill Cos. Inc. .............. 227 12,258
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
Omnicom Group Inc. ................. 113 $ 10,064
Target Corp. ....................... 2,156 125,048
TRW Inc. ........................... 68 2,950
Viacom Inc. (Class B) .............. 261 17,797(a)
Visteon Corp. ...................... 119 1,442
Wal-Mart Stores Inc. ............... 2,906 167,458
Walt Disney Co. .................... 2,089 81,079
1,028,948
CONSUMER - STABLE -- 16.7%
Abbott Laboratories ................ 908 40,463
Amgen Inc. ......................... 919 64,560(a)
Anheuser Busch Cos. Inc. ........... 567 42,348
Archer-Daniels Midland Co. ......... 1,090 10,696
Avon Products Inc. ................. 363 16,153
Baxter International Inc. .......... 329 23,133
Bestfoods .......................... 523 36,218
Bristol-Myers Squibb Co. ........... 2,043 119,005
Cardinal Health Inc. ............... 1,408 104,192
Colgate-Palmolive Co. .............. 318 19,040
Eli Lilly & Co. .................... 863 86,192
Energizer Holdings Inc. ............ 1,408 25,696(a)
General Mills Inc. ................. 953 36,452
Gillette Co. ....................... 568 19,844
Heinz (H.J.) Co. ................... 636 27,825
Johnson & Johnson .................. 1,214 123,676
Keebler Foods Co. .................. 45 1,671
Kimberly Clark Corp. ............... 431 24,729
Merck & Co. Inc. ................... 3,201 245,277
Nabisco Holdings Corp. (Class A) ... 125 6,562
PE Corp. - PE Biosystems Group ..... 192 12,648
Pepsico Inc. ....................... 2,724 121,048
Pfizer Inc. ........................ 2,186 104,928
Pharmacia Corp. .................... 953 49,258
Procter & Gamble Co. ............... 863 49,407
Ralston-Ralston Purina Group ....... 3,292 65,634
Sara Lee Corp. ..................... 1,930 37,273
Schering Plough Corp. .............. 1,839 92,869
Sysco Corp. ........................ 613 25,823
The Quaker Oats Co. ................ 204 15,325
Watson Pharmaceuticals Inc. ........ 353 18,974(a)
1,666,919
ENERGY -- 7.3%
BP Amoco PLC ADR ................... 499 28,225
Burlington Resources Inc. .......... 909 34,769
Chevron Corp. ...................... 545 46,223
Conoco Inc. (Class B) .............. 1,839 45,170
Exxon Mobil Corp. .................. 3,178 249,473
Halliburton Co. .................... 1,248 58,890
Nabors Industries Inc. ............. 727 30,216(a)
Royal Dutch Petroleum Co. ADR ...... 1,135 69,873
Schlumberger Ltd. .................. 545 40,671
Texaco Inc. ........................ 409 21,779
Tosco Corp. ........................ 477 13,505
Transocean Sedco Forex Inc. ........ 198 10,581
Unocal Corp. ....................... 1,702 56,379
USX-Marathon Group ................. 976 24,461
730,215
--------------
See Notes to Schedule of Investments and Notes to Financial Statements.
20
<PAGE>
VALUE EQUITY FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
FINANCIAL -- 15.9%
AFLAC Inc. ......................... 182 $ 8,361
Allstate Corp. ..................... 159 3,538
American Express Co. ............... 1,702 88,717
American International Group Inc. .. 677 79,547
Associates First Capital Corp.
(Class A) ........................ 2,112 47,124
AXA ADR ............................ 294 23,391
AXA Financial Inc. ................. 91 3,094
Bank of America Corp. .............. 2,157 92,751
Bank of New York Inc. .............. 329 15,299
BlackRock Inc. ..................... 997 28,913(a)
Chase Manhattan Corp. .............. 1,362 62,737
Chubb Corp. ........................ 749 46,064
Citigroup Inc. ..................... 4,753 286,368
Comerica Inc. ...................... 318 14,270
Edwards A.G. Inc. .................. 409 15,951
Federal National Mortgage Assoc. ... 1,645 85,848
Fidelity National Financial Inc. ... 1,498 27,432
FleetBoston Financial Corp. ........ 1,657 56,338
Franklin Resources Inc. ............ 386 11,725
Goldman Sachs Group Inc. ........... 386 36,622
Hartford Financial Services Group Inc. 1,520 85,025
Lehman Brothers Holdings Inc. ...... 681 64,397
MetLife Inc. ....................... 68 1,432(a)
Morgan Stanley, Dean Witter & Co. . 2,451 204,046
PNC Financial Services Group ....... 1,294 60,656
Progressive Corp. .................. 91 6,734
Reliastar Financial Corp. .......... 772 40,482
St. Paul Cos. Inc. ................. 999 34,091
Torchmark Corp. .................... 125 3,086
United States Bancorp. ............. 1,248 24,024
Wachovia Corp. ..................... 159 8,626
Waddell & Reed Financial Inc. (Class A) 590 19,359
1,586,048
MISCELLANEOUS -- 1.6%
SPDR Trust ......................... 1,127 163,732
TECHNOLOGY -- 24.2%
Analog Devices Inc. ................ 1,659 126,084(a)
Applied Materials Inc. ............. 1,202 108,931(a)
Automatic Data Processing Inc. ..... 907 48,581
Cisco Systems Inc. ................. 2,599 165,199(a)
Computer Associates International Inc. 283 14,486
Dell Computer Corp. ................ 3,088 152,277(a)
EarthLink Inc. ..................... 227 3,504(a)
EMC Corp. .......................... 875 67,320(a)
Equifax Inc. ....................... 2,270 59,588
First Data Corp. ................... 2,906 144,210
Intel Corp. ........................ 2,951 394,512
International Business Machines Corp. 725 79,433
Lucent Technologies Inc. ........... 1,589 94,148
Micron Technology Inc. ............. 772 67,984(a)
Microsoft Corp. .................... 2,951 236,080(a)
Motorola Inc. ...................... 3,429 99,655
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
Nokia Oyj ADR ...................... 125 $ 6,242
Nortel Networks Corp. .............. 2,498 170,489
PerkinElmer Inc. ................... 409 27,045
Pitney Bowes Inc. .................. 1,668 66,720
SCI Systems Inc. ................... 227 8,896(a)
Sun Microsystems Inc. .............. 841 76,479(a)
Synopsys Inc. ...................... 318 10,991(a)
Tellabs Inc. ....................... 1,044 71,449(a)
Texas Instruments Inc. ............. 976 67,039
Unisys Corp. ....................... 2,928 42,639(a)
2,409,981
TRANSPORTATION -- 2.1%
AMR Corp. .......................... 113 2,987(a)
Burlington Northern
Santa Fe Corp. ................... 2,384 54,683
Canadian Pacific Ltd. .............. 2,088 54,679
Continental Airlines Inc.
(Class B) ......................... 1,135 53,345(a)
Delta Air Lines Inc. ............... 794 40,147
205,841
UTILITIES -- 9.3%
Alltel Corp. ....................... 817 50,603
AT&T Corp. ......................... 1,815 57,399(h)
Bell Atlantic Corp. ................ 1,136 57,723(h)
Constellation Energy Group ......... 591 19,244
Dominion Resources Inc. ............ 272 11,662
Duke Energy Corp. .................. 1,192 67,199
Dynegy Inc. (Class A) .............. 170 11,613
Edison International ............... 907 18,593
El Paso Energy Corp. ............... 1,396 71,109
FPL Group Inc. ..................... 363 17,969
Global Crossing Ltd. ............... 1,250 32,891(a)
GTE Corp. .......................... 1,680 104,580
New Century Energies Inc. .......... 1,589 47,670
PECO Energy Co. .................... 249 10,038
SBC Communications Inc. ............ 3,927 169,843
Sprint Corp. ....................... 1,204 61,404
U.S. WEST Inc. ..................... 1,203 103,157
Williams Cos. Inc. ................. 250 10,422
923,119
TOTAL INVESTMENTS IN SECURITIES
(COST $9,888,659) ................ 9,868,605
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.2%
--------------------------------------------------------------------------------
GEI Short Term Investment Fund
(COST $113,959) .................. 113,959 113,959
OTHER ASSETS AND LIABILITIES,
NET (0.1)% ....................... (6,508)
--------------------------------------------------------------------------------
NET ASSETS-- 100% .................. $9,976,056
================================================================================
-------------
See Notes to Schedule of Investments and Notes to Financial Statements.
21
<PAGE>
MID-CAP VALUE EQUITY FUND
--------------------------------------------------------------------------------
Q&A
JON D. BOSSE OF NWQ INVESTMENT MANAGEMENT COMPANY (NWQ), THE FUND'S SUB-ADVISER,
WHICH HAS TOTAL ASSETS UNDER MANAGEMENT EXCEEDING $5.2 BILLION, IS THE PORTFOLIO
MANAGER OF THE MID-CAP VALUE EQUITY FUND. PRIOR TO JOINING NWQ IN 1996, 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 WHERE HE
RECEIVED THE JOHN M. OLIN AWARD FOR EXCELLENCE IN ECONOMICS AND HIS M.B.A. FROM
WHARTON BUSINESS SCHOOL, UNIVERSITY OF PENNSYLVANIA. JON IS ALSO A CHARTERED
FINANCIAL ANALYST (CFA) AND A MEMBER OF THE ASSOCIATION FOR INVESTMENT
MANAGEMENT AND RESEARCH AND THE LOS ANGELES SOCIETY OF FINANCIAL ANALYSTS.
Q. HOW DID THE MID-CAP VALUE EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK FOR
THE SIX MONTHS ENDED JUNE 30, 2000?
A. The Mid-Cap Value Equity Fund posted a return of negative 4.31% for the
six-month period ended June 30, 2000. This compares with a negative 0.47%
return for the S&P 500 Index.
Q. WHY DID THE FUND UNDERPERFORM ITS BENCHMARK?
A. The Fund's underperformance relative to its benchmark can be attributed to
weakness over the last three months in several telecommunications and media
holdings such as Corecomm and NTL, Inc. The Fund's holdings in these
sectors have generated spectacular returns for shareholders over the past
several years. We had been actively reducing the Fund's exposure in this
group earlier this year, prior to the fall-off in valuation. We are
confident in our investments and their weighting in the Fund.
Q. WHICH INVESTMENTS STAND OUT?
A. Fund holdings that positively contributed to performance the past six
months include Alberto-Culver, E.W. Scripps, Pharmacia Corp., Tenet
Healthcare, and Quantum-Hard Disk Drive Group. Aetna rebounded sharply as
new management stepped in and buyers for all or part of the company
emerged. Our best performing stock was Nabisco Group Holdings, which
received a $30 cash takeout offer from RJ Reynolds Tobacco Holdings. The
best performing sector was energy, including holdings BJ Services, Ocean
Energy, and Noble Affiliates. On the downside, CoreComm Ltd. and NTL
underperformed due to the very weak market environment for
telecommunication and media stocks. These companies have been outstanding
contributors to the Fund's performance over the past several years and we
remain extremely optimistic of their capability going forward.
Q. HOW DO YOU SELECT STOCKS?
A. Our investment philosophy is to identify undervalued companies with
catalysts present to improve profitability and unlock value. Catalysts may
include new management, industry consolidation, restructuring, and a
positive turn in the fundamentals. We are value-oriented and invest in
attractive risk/reward opportunities.
Q. WHAT IS THE OUTLOOK FOR THE FUND AND HOW HAVE YOU POSITIONED THE FUND GOING
FORWARD?
A. Looking forward, we believe the market's performance will be highly
correlated to the actions of the Federal Reserve Bank. There remains little
evidence of a significant inflation problem outside the oil and natural gas
areas, however, given the Fed's well-known fears about inflation, investors
should be prepared for at least one more rate increase this year. Financial
service stocks are poised for a rebound following their underperformance
the past year while our energy holdings should continue to outperform on
the strength of the economic recovery in Asia. Finally, the performance of
our telecommunications and media holdings should improve on the strength of
strong fundamentals and industry consolidation.
The market continues to be extremely volatile. We believe that this
volatility provides exceptional investment opportunities. We have recently
taken new positions in companies such as Snap-on, Sara Lee, Tenet
Healthcare, Countrywide Credit Inds., and Conoco.
Q. WHAT ARE THE FOUR BEST AND WORST PERFORMING STOCKS HELD DURING THE
SIX-MONTH PERIOD?
BEST WORST
--------------------------------------------------------------------------
Nabisco Group Holdings +154.1% Dillards Inc. - 39.3%
Ocean Energy +83.1% NTL Inc. - 40.0%
Noble Affiliates +73.8% Smurfit-Stone
Quantum Corp. - Container - 47.7%
Hard Disk Drive +59.5% CoreComm Ltd. - 50.7%
22
<PAGE>
MID-CAP VALUE EQUITY FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMPARISON OF CHANGES IN VALUE OF A $10,000 INVESTMENT
--------------------------------------------------------------------------------
[LINE GRAPH OMITTED, PLOT POINTS TO FOLLOW]
Mid-Cap Value Equity Fund S&P 400 Index S&P 500 Index
5/1/97 $10000 $10000 $10000
6/97 11450 11181 11086
9/97 13320 12979 11920
12/97 13256 13086 12259
3/98 15055 14531 13971
6/98 14975 14219 14434
9/98 12406 12170 13006
12/98 14142 15555 15777
3/99 15007 14569 16560
6/99 17393 16629 17713
9/99 15163 15233 16622
12/99 16583 17852 19101
3/00 16783 20119 19577
6/00 15869 19461 19019
Mid-Cap Value Equity Fund (ending value $15,869)
S&P 500 Index (ending value $19,019)
S&P Mid-Cap 400 Index (ending value $19,461)
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
SIX ONE SINCE
MONTHS YEAR COMMENCEMENT
--------------------------------------------------------------------------------
Mid-Cap Value Equity Fund (4.31%) (8.76%) 15.70%
--------------------------------------------------------------------------------
S&P 500 Index (0.47%) 7.34% 22.50%
--------------------------------------------------------------------------------
S&P Mid-Cap 400 Index 9.00% 17.02% 23.40%
--------------------------------------------------------------------------------
Commencement date 5/1/97
--------------------------------------------------------------------------------
INVESTMENT PROFILE
A fund designed for investors who seek long-term growth of capital and future
income by investing primarily in equity securities of mid-cap companies
that the portfolio manager believes are undervalued by the market and have
above-average growth potential.
--------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS AT JUNE 30, 2000
--------------------------------------------------------------------------------
AT&T Corp. - Liberty Media Group (Class A) ....... 3.56%
--------------------------------------------------------------------------------
Hartford Financial Services Group Inc. ............ 3.36%
--------------------------------------------------------------------------------
Tenet Healthcare Corp. ............................ 3.24%
--------------------------------------------------------------------------------
MediaOne Group Inc. ............................... 3.19%
--------------------------------------------------------------------------------
NTL Inc. .......................................... 2.90%
--------------------------------------------------------------------------------
Telephone & Data Systems Inc. ..................... 2.81%
--------------------------------------------------------------------------------
Noble Affiliates Inc. ............................. 2.80%
--------------------------------------------------------------------------------
The E.W. Scripps Co. Inc. (Class A) ............... 2.45%
--------------------------------------------------------------------------------
MGIC Investment Corp. ............................. 2.39%
--------------------------------------------------------------------------------
Heller Financial Inc. ............................. 2.39%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO COMPOSITION AS OF JUNE 30, 2000
--------------------------------------------------------------------------------
NET ASSETS OF $99,878 (IN THOUSANDS)
[PIE CHART OMITTED]
CONSUMER 26.5%
FINANCIAL SERVICES 21.7%
TELECOMMUNICATIONS 9.6%
ENERGY 7.3%
HEALTHCARE 7.2%
MATERIALS & PROCESSING 7.0%
CASH & OTHER 6.4%
CAPITAL GOODS 5.6%
TECHNOLOGY 5.3%
MISCELLANEOUS 1.7%
TRANSPORTATION 1.7%
SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
23
<PAGE>
MID-CAP VALUE EQUITY FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
MID-CAP VALUE EQUITY FUND
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
COMMON STOCK -- 93.6%
--------------------------------------------------------------------------------
CAPITAL GOODS -- 5.6%
CNH Global N.V. .................... 98,300 $ 909,275
Ingersoll-Rand Co. ................. 46,100 1,855,525
Parker-Hannifin Corp. .............. 40,400 1,383,700
York International Corp. ........... 56,000 1,414,000
5,562,500
CONSUMER - DISCRETIONARY -- 21.9%
AT&T Corp. - Liberty Media
Group (Class A) .................. 146,680 3,556,990(a)
Carnival Corp. ..................... 53,800 1,049,100
Darden Restaurants Inc. ............ 85,000 1,381,250
Delphi Automotive Systems Corp. .... 100,000 1,456,250
Dillards Inc. (Class A) ............ 109,400 1,340,150
Ford Motor Co. ..................... 39,400 1,694,200
Hasbro Inc. ........................ 105,050 1,582,316
Lear Corp. ......................... 40,000 800,000(a)
Mandalay Resort Group .............. 90,000 1,800,000(a)
MediaOne Group Inc. ................ 48,000 3,183,060(a)
Snap-on Inc. ....................... 56,700 1,509,637
The E.W. Scripps Co. Inc. (Class A) 49,600 2,442,800
Visteon Corp. ...................... 5,159 62,550
21,858,303
CONSUMER - STABLE -- 4.6%
Alberto-Culver Co. (Class A) ....... 57,000 1,496,250
Philip Morris Cos. Inc. ............ 65,000 1,726,562
Sara Lee Corp. ..................... 70,300 1,357,669
4,580,481
ENERGY -- 7.3%
Conoco Inc. (Class B) .............. 75,000 1,842,187
Noble Affiliates Inc. .............. 75,000 2,793,750
Ocean Energy Inc. .................. 74,050 1,050,584(a)
Tosco Corp. ........................ 55,000 1,557,188
7,243,709
FINANCIAL -- 13.6%
Bank of America Corp. .............. 38,031 1,635,333
Chase Manhattan Corp. .............. 27,150 1,250,597
Countrywide Credit Industries Inc. . 67,900 2,058,219
First Union Corp. .................. 42,300 1,049,569
Heller Financial Inc. .............. 116,300 2,384,150
IndyMac Mortgage Holdings Inc. ..... 149,900 2,033,019
The Bear Stearns Cos. Inc. ......... 38,500 1,602,562
Waddell & Reed Financial
Inc. (Class A) ................... 49,149 1,612,701
13,626,150
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
HEALTHCARE -- 7.2%
Aetna Inc. ......................... 31,000 $ 1,989,813
Pharmacia Corp. .................... 38,080 1,968,260
Tenet Healthcare Corp. ............. 120,000 3,240,000
7,198,073
INSURANCE -- 8.1%
Hartford Financial Service
Group Inc. ....................... 60,000 3,356,250
MGIC Investment Corp. .............. 52,500 2,388,750
Torchmark Corp. .................... 95,000 2,345,313
8,090,313
MATERIALS & PROCESSING -- 7.0%
Bowater Inc. ....................... 23,000 1,014,875
IMC Global Inc. .................... 50,000 650,000
Packaging Corp. of America ......... 119,400 1,208,925(a)
Praxair Inc. ....................... 47,000 1,759,563
Rohm & Hass Co. .................... 56,900 1,963,050
Smurfit-Stone Container Corp. ...... 31,000 399,125(a)
6,995,538
MISCELLANEOUS -- 1.7%
Loews Corp. ........................ 27,900 1,674,000
TECHNOLOGY -- 5.3%
Applied Power Inc. (Class A) ....... 43,100 1,443,850
Computer Associates
International Inc. ............... 28,800 1,474,200
Quantum Corp. - DLT &
Storage Systems .................. 85,200 825,375(a)
Quantum Corp. - Hard Disk Drive .... 138,900 1,536,581(a)
5,280,006
TELECOMMUNICATIONS -- 9.6%
Alltel Corp. ....................... 27,380 1,695,849
CoreComm Ltd. ...................... 114,150 2,225,925(a)
NTL Inc. ........................... 48,437 2,900,165(a)
Telephone & Data Systems Inc. ...... 28,000 2,807,000
9,628,939
TRANSPORTATION -- 1.7%
Delta Air Lines Inc. ............... 34,000 1,719,125
TOTAL INVESTMENTS IN SECURITIES
(COST $86,727,448) ............... 93,457,137
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 6.5%
--------------------------------------------------------------------------------
GEI Short Term Investment Fund
(COST $6,554,893) ...............6,554,893 6,554,893
OTHER ASSETS AND LIABILITIES,
NET (0.1)% ...................... (134,070)
--------------------------------------------------------------------------------
NET ASSETS-- 100% ................. $99,877,960
================================================================================
------------
See Notes to Schedule of Investments and Notes to Financial Statements.
24
<PAGE>
SMALL-CAP VALUE EQUITY FUND
--------------------------------------------------------------------------------
Q&A
PALISADE CAPITAL MANAGEMENT, L.L.C. ("PALISADE") WITH TOTAL ASSETS UNDER
MANAGEMENT EXCEEDING $2 BILLION, IS THE FUND'S SUB-ADVISER. THE FUND IS MANAGED
BY PALISADE'S SENIOR INVESTMENT COMMITTEE WHICH IS COMPOSED OF THE FOLLOWING
MEMBERS: JACK FEILER, MARTIN L. BERMAN, STEVEN E. BERMAN AND RICHARD MEISENBERG.
JACK FEILER, CHIEF INVESTMENT OFFICER AT PALISADE, HAS DAY-TO-DAY RESPONSIBILITY
FOR MANAGING THE FUND AND WORKS WITH THE SENIOR INVESTMENT COMMITTEE FOR
DEVELOPING AND EXECUTING THE FUND'S INVESTMENT PROGRAM. JACK HAS MORE THAN 30
YEARS OF INVESTMENT EXPERIENCE AND HAS SERVED AS THE PRINCIPAL SMALL-CAP
PORTFOLIO MANAGER AT PALISADE SINCE THE COMMENCEMENT OF PALISADE'S OPERATIONS IN
APRIL 1995. PRIOR TO JOINING PALISADE, JACK WORKED FOR BURNHAM & CO. AS AN
ACCOUNT EXECUTIVE AND WAS PROMOTED TO SENIOR EXECUTIVE VICE PRESIDENT OF BROAD
STREET INVESTMENT MANAGEMENT IN 1981. IN 1990 HE JOINED SMITH BARNEY AS SENIOR
VICE PRESIDENT OF INVESTMENTS. JACK RECEIVED HIS BACHELOR'S DEGREE IN 1964 FROM
CITY COLLEGE OF NEW YORK AND HIS JURIS DOCTOR DEGREE FROM BROOKLYN LAW SCHOOL IN
1967.
Q. HOW DID THE SMALL-CAP VALUE EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK
FOR THE PERIOD APRIL 28, 2000 (COMMENCEMENT OF OPERATIONS) THROUGH JUNE 30,
2000?
A. The Small-Cap Value Equity Fund posted a slight decline of 1.1% for the
period ended June 30, 2000. The Russell 2000 Index, the Fund's benchmark,
returned 2.38% for the same period.
Q. WHY DID THE FUND UNDERPERFORM ITS BENCHMARK?
A. The Fund's performance for the period ended June 30, 2000 was hampered by
market conditions that drove down technology and semi-equipment stock
prices. During the initial investment period, we used the market weakness
to buy at reduced prices while monitoring sector momentum to avoid further
volatility and depreciation. Exposure in technology stocks hampered returns
as market sentiment turned negative during the quarter. Among our top
performers were companies with strong management and robust growth
potential: Universal Health, Triad Hospitals, Oxford Health, Keebler Foods,
Grant Prideco, Photronics, JM Smuckers, and AnnTaylor Stores. We believe
that the market is again focusing on more realistic valuations and prudent
stock selection will again be rewarded.
Q. WHAT HAS YOUR INVESTMENT STRATEGY BEEN?
A. We believe that, over the long term, the stocks of small to medium
capitalization companies will outperform those of large capitalization
companies. These companies are often more efficient in bringing recently
developed products to the market in a timely manner and reacting to changes
in the marketplace. Our primary focus is on quality of management. We
attempt to maintain a balance between an investment candidate's projected
growth and valuation.
Q. WHY DID THE WEIGHTING OF THE FUND CHANGE?
A. There is no limit as to the amount we will be under- or over-weighted in a
sector or industry group compared to the Russell 2000. First and foremost,
we consider ourselves stock pickers. We view sector allocation as a tool to
help manage risk but rely upon our stock selection as the primary component
of portfolio construction.
Q. WHAT IS THE OUTLOOK FOR THE FUND AND HOW HAVE YOU POSITIONED THE FUND GOING
FORWARD?
A. We remain committed to finding companies we believe have strong product
lines, robust projected growth, reasonable valuations and forward-thinking
management.
25
<PAGE>
SMALL-CAP VALUE EQUITY FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMPARISON OF CHANGES IN VALUE OF A $10,000 INVESTMENT
--------------------------------------------------------------------------------
[LINE GRAPH OMITTED, PLOT POINTS TO FOLLOW}
SMALL-CAP VALUE EQUITY FUND RUSSELL 2000 INDEX
4/28/2000 $10000 $10000
4/00 10000 10000
10010 10252
9870 9982
9740 9791
9820 9916
9870 10133
9800 9881
9740 9699
9590 9374
9780 9674
9780 9704
9850 9838
9860 10001
9780 9877
9670 9705
9550 9482
9510 9324
9470 9074
9500 9132
9400 9019
9360 9044
9580 9426
5/00 9540 9417
9770 9741
9980 10145
9920 10153
9920 10119
9940 10218
9970 10179
9980 10349
9840 10062
9860 10167
9830 10091
9900 10143
9870 10171
9890 10351
9960 10409
9910 10449
9770 10202
9740 10109
9810 10226
9770 10065
9950 10321
9900 10156
6/00 9890 10238
Small-Cap Value Equity Fund (ending value $9,890)
Russell 2000 Index (ending value $10,238)
--------------------------------------------------------------------------------
AVERAGE TOTAL RETURN FOR THE PERIOD ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
SINCE
COMMENCEMENT
--------------------------------------------------------------------------------
Small-Cap Value Equity Fund (1.10%)
--------------------------------------------------------------------------------
Russell 2000 Index 2.38%
--------------------------------------------------------------------------------
Commencement date 4/28/00
--------------------------------------------------------------------------------
INVESTMENT PROFILE
A fund designed for investors who seek long-term growth of
capital by investing primarily in equity securities of
small-cap companies that the portfolio managers believe are
undervalued by the market but have solid growth prospects.
--------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS AT JUNE 30, 2000
--------------------------------------------------------------------------------
Eastern Enterprises ............................... 3.95%
--------------------------------------------------------------------------------
Triad Hospitals Inc. .............................. 3.94%
--------------------------------------------------------------------------------
Grant Prideco Inc. ................................ 3.54%
--------------------------------------------------------------------------------
Universal Health Services Inc. (Class B) .......... 3.11%
--------------------------------------------------------------------------------
Noble Affiliates Inc. ............................. 3.05%
--------------------------------------------------------------------------------
Beckman Coulter Inc. .............................. 2.77%
--------------------------------------------------------------------------------
IndyMac Mortgage Holdings Inc. .................... 2.74%
--------------------------------------------------------------------------------
Quantum Corp. - Hard Disk Drive ................... 2.57%
--------------------------------------------------------------------------------
CommScope Inc. .................................... 2.36%
--------------------------------------------------------------------------------
AmeriCredit Corp. ................................. 2.30%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO COMPOSITION AS OF JUNE 30, 2000
--------------------------------------------------------------------------------
NET ASSETS OF $9,892 (IN THOUSANDS)
[PIE CHART OMITTED]
TECHNOLOGY 17.6%
CONSUMER 15.8%
HEALTHCARE 15.7%
FINANCIAL SERVICES 10.5%
UTILITIES 8.7%
CASH & OTHER 7.8%
PRODUCER DURABLES 5.7%
MATERIALS & PROCESSING 5.5%
ENERGY 3.9%
REITS 3.0%
TELECOMMUNICATIONS 2.8%
AUTO & TRANSPORTATION 1.9%
CAPITAL GOODS 1.1%
SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
26
<PAGE>
SMALL-CAP VALUE EQUITY FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
SMALL-CAP VALUE EQUITY FUND
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
COMMON STOCK -- 92.2%
--------------------------------------------------------------------------------
AUTO & TRANSPORTATION -- 1.9%
Kirby Corp. ......................... 8,600 $ 182,750(a)
CAPITAL GOODS -- 1.1%
Advanced Energy Industries Inc. ..... 1,800 106,088(a)
CONSUMER - CYCLICAL -- 0.3%
International Speedway Corp. (Class A) 600 24,825
CONSUMER - DISCRETIONARY -- 12.3%
AnnTaylor Stores Corp. .............. 5,500 182,187(a)
Credence Systems Corp. .............. 3,400 187,637(a)
Emmis Communications Corp. (Class A) 2,900 119,988(a)
F.Y.I. Inc. ......................... 3,700 124,644(a)
Fastenal Co. ........................ 2,100 106,313
InterTAN Inc. ....................... 15,400 180,950(a)
Iron Mountain Inc. .................. 4,000 136,000(a)
School Specialty Inc. ............... 7,800 144,787(a)
The Topps Co. Inc. .................. 3,200 36,800(a)
1,219,306
CONSUMER - STABLE -- 3.2%
Keebler Foods Co. ................... 5,100 189,338
The Earthgrains Co. ................. 5,600 108,850
The J.M. Smucker Co. (Class A) ...... 1,100 21,175
319,363
ENERGY -- 3.9%
Louis Dreyfus Natural Gas Corp. ..... 2,800 87,675(a)
Noble Affiliates Inc. ............... 8,100 301,725
389,400
FINANCIAL SERVICES -- 10.5%
Affiliated Computer Services Inc.
(Class A) ......................... 2,800 92,575(a)
AmeriCredit Corp. ................... 13,400 227,800(a)
Commerce Bancorp Inc. ............... 3,800 174,800
IndyMac Mortgage Holdings Inc. ...... 20,000 271,250
Jefferies Group Inc. ................ 4,600 92,862
The BISYS Group Inc. ................ 2,900 178,350(a)
1,037,637
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
HEALTHCARE -- 15.7%
Barr Laboratories Inc. .............. 3,150 $ 141,159(a)
Beckman Coulter Inc. ................ 4,700 274,362
Digene Corp. ........................ 3,200 129,200(a)
Oxford Health Plans Inc. ............ 6,500 154,781(a)
The Cooper Cos. Inc. ................ 4,300 156,413
Triad Hospitals Inc. ................ 16,100 389,419(a)
Universal Health Services Inc.
(Class B) ........................ 4,700 307,850(a)
1,553,184
MATERIALS & PROCESSING -- 5.5%
Grant Prideco Inc. .................. 14,000 350,000(a)
Kaydon Corp. ........................ 4,200 88,200
Mueller Industries Inc. ............. 3,600 100,800(a)
539,000
PRODUCER DURABLES -- 5.7%
Baldor Electric Co. ................. 8,000 149,000
Kulicke & Soffa Industries Inc. ..... 2,400 142,500(a)
LTX Corp. ........................... 1,500 52,055(a)
MKS Instruments Inc. ................ 2,000 78,250(a)
Photronics Inc. ..................... 1,300 36,888(a)
The Manitowoc Co. Inc. .............. 4,100 109,675
568,368
REAL ESTATE INVESTMENT TRUST -- 3.0%
First Industrial Realty Trust Inc. .. 6,600 194,700
Mid-Atlantic Realty Trust ........... 10,400 104,000
298,700
TECHNOLOGY -- 17.6%
Aeroflex Inc. ....................... 3,400 168,937(a)
Arrow Electronics Inc. .............. 5,100 158,100(a)
C-COR.net Corp. ..................... 3,400 91,800(a)
CommScope Inc. ...................... 5,700 233,700(a)
General Semiconductor Inc. .......... 14,600 215,350(a)
Glenayre Technologies Inc. .......... 8,200 86,613(a)
Quantum Corp. - Hard Disk Drive .... 23,000 254,437(a)
S3 Inc. ............................. 5,900 87,025(a)
The Titan Corp. ..................... 4,700 210,325(a)
Vishay Intertechnology Inc. ......... 4,200 159,338(a)
Zebra Technologies Corp. (Class A) . 1,700 75,331(a)
1,740,956
TELECOMMUNICATIONS -- 2.8%
ITC DeltaCom Inc. ................... 6,100 136,106(a)
Microcell Telecommunications
Inc. (Class B) .................... 4,000 144,500(a)
280,606
--------------
See Notes to Schedule of Investments and Notes to Financial Statements.
27
<PAGE>
SMALL-CAP VALUE EQUITY FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
UTILITIES -- 8.7%
American Water Works Co. Inc. ....... 8,600 $ 215,000
Eastern Enterprises ................. 6,200 390,600
ICG Communications Inc. ............. 3,300 72,806(a)
NSTAR ............................... 4,500 183,095
861,501
TOTAL INVESTMENTS IN SECURITIES
(COST $9,088,596) .................. 9,121,684
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 8.5%
--------------------------------------------------------------------------------
GEI Short Term Investment Fund
(COST $836,210) ...................836,210 836,210
OTHER ASSETS AND LIABILITIES,
NET (0.7)% ....................... (66,230)
--------------------------------------------------------------------------------
NET ASSETS-- 100% ................... $9,891,664
================================================================================
--------------
See Notes to Schedule of Investments and Notes to Financial Statements.
28
<PAGE>
INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
Q&A
RALPH LAYMAN IS RESPONSIBLE FOR THE INTERNATIONAL EQUITY OPERATION AT GE ASSET
MANAGEMENT. RALPH MANAGES INDIVIDUAL, INSTITUTIONAL AND MUTUAL FUND PORTFOLIOS
WITH TOTAL ASSETS UNDER MANAGEMENT EXCEEDING $15 BILLION. PRIOR TO JOINING GE
ASSET MANAGEMENT IN 1991, RALPH WAS EXECUTIVE VICE PRESIDENT, PARTNER AND
PORTFOLIO MANAGER OF INTERNATIONAL EQUITY OPERATIONS AT NORTHERN CAPITAL
MANAGEMENT. PREVIOUSLY, HE WAS A VICE PRESIDENT AND PORTFOLIO MANAGER AT
TEMPLETON INVESTMENT COUNSEL, INC. HE WAS INSTRUMENTAL IN FORMING TEMPLETON'S
EMERGING MARKETS FUND, THE FIRST LISTED EMERGING MARKETS EQUITY FUND IN THE U.S.
RALPH IS A TRUSTEE OF THE GE PENSION TRUST AND GE'S EMPLOYEE SAVINGS PROGRAM,
AND SERVES ON GE ASSET MANAGEMENT'S 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 FOR
THE SIX MONTHS ENDED JUNE 30, 2000?
A. The International Equity Fund rose 2.28% in the first half of 2000,
outperforming the MSCI EAFE benchmark which fell 4.06%.
Q. WHY DID THE FUND OUTPERFORM ITS BENCHMARK?
A. The Fund outperformed the EAFE benchmark by 634 basis points during the
first half of 2000. Country attribution was positive. Stock selection,
however, drove the Fund's outperformance with strong positive contributions
from all regions. Holdings which contributed the most were the French media
company Lagardere, Swedish telecoms equipment manufacturer Ericsson, and
Philips and Toshiba, the Dutch and Japanese electronics manufacturers.
Our discipline of investing in companies whose long term future growth in
cash earnings is greater than its current price to cash earnings valuation
led us to sell many Technology, Media & Telecommunications ("TMT") stocks
in February and early March because the rise in share prices could no
longer be justified by the long-term growth of these stocks. In retrospect,
our timing was good, as we were able to sell into a rising price
environment and buy stocks that were not yet within the focus of many
investors.
Q. WHAT WORLD EVENTS HAD A MAJOR IMPACT ON THE FINANCIAL MARKETS IN THE PAST
SIX MONTHS AND HOW DID THEY IMPACT THE FUND?
A. World equity markets enjoyed a very sharp rise in the first quarter of
2000, led by the TMT sectors. Valuations in these sectors went to levels
rarely achieved and we became concerned that such high levels were
unsustainable. The U.S. economy grew at a rate that the Federal Reserve
considered to be inflationary and so the Fed continued its program of
interest rate hikes with hints of more to come. In mid March, another
interest rate hike caused the NASDAQ market index to fall and other
markets, both in the U.S. and overseas, followed suit.
International equity markets continued to fall in April and most of May,
rose some 10% at the end of May and then moved in a narrow range in June.
For the first half of 2000, the EAFE index fell 4.1% although much of this
was due to the strength of the U.S. dollar against the euro, the yen and
the British pound. In U.S. dollar terms, Europe fell 3.1%, the U.K. fell
11.7%, Asia fell 9.3% and Japan fell 5.4%. The best performing countries
were Canada (+23.2%), Sweden (+9.6%), France (+6.0%) and Italy (+3.9%) and
the worst performers were Singapore (-22.7%), Ireland (-17.8%), New Zealand
(-16.7%) and Hong Kong (-13.1%). Emerging markets also performed badly, the
MSCI EMF index fell by 8.0%.
Q. WHAT WERE THE MAJOR BUYS AND SELLS DURING THE PERIOD AND WHY?
A. The first quarter of 2000 will be remembered as a period when many TMT
share prices rose to levels that could not be justified by their underlying
growth. Our discipline of owning companies which have forecasted 3 to 5
year cash earnings growth greater than the underlying price/cash earnings
ratio lead us to sell such stocks once they became expensive. As a result,
we sold our holding in Nokia, the Finnish telecoms equipment manufacturer,
and began the sell program in many others including Cap Gemini (French
software), Nortel (Canadian telecoms equipment), Sonera (Finnish telecoms
operator) and STMicroelectronics (French computer
29
<PAGE>
INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
chip manufacturer). In addition, we sold Airtours (UK Travel agent) because
of weakening earnings expectations amid an overly competitive environment,
and FKI (UK engineering company) because of valuations. New positions added
during the 1st quarter included BMW (German car manufacturer) where
earnings expectations improved on the sale of the loss making Rover Car
operation, Samsung Electronics (Korea, electronics), and KPN (Netherlands,
telecoms operator).
Activity in the second half was much lighter, we sold holdings in Synnex
Technology (Taiwan) and Comverse Technology (Israel). Additions included
Alcatel (France), ASM Lithography (Netherlands) and Datacraft Asia
(Singapore).
Q. WHAT IS YOUR OUTLOOK FOR THE FUND GOING FORWARD?
A. The Fed has been concerned about the strength of the U.S. economy for a
long time, and Fed Chairman Alan Greenspan has warned about "irrational
exuberance" within the stock markets. Recent interest rate hikes have
slowed the markets somewhat but it is too early to tell whether the U.S.
economy will be subject to further interest rate hikes which will
inevitably reduce liquidity across markets. We continue to take a cautious
stance but believe that our discipline of concentrating on stocks that are
attractively priced relative to their long-term growth will continue to
create value.
30
<PAGE>
INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMPARISON OF CHANGES IN VALUE OF A $10,000 INVESTMENT
--------------------------------------------------------------------------------
[LINE GRAPH OMITTED, PLOT POINTS FOLLOW]
INTERNATIONAL EQUITY FUND MSCI EAFE
5/1/95 $10000 $10000
6/95 10010 9707
9/95 10350 10112
12/95 10670 10522
3/96 11323 10826
6/96 11628 10997
9/96 11455 10983
12/96 11728 11158
3/97 12346 10983
6/97 13786 12408
9/97 13927 12320
12/97 12921 11356
3/98 15135 13026
6/98 15510 13164
9/98 12788 11293
12/98 15175 13626
3/99 15673 13816
6/99 16082 14167
9/99 16286 14789
12/99 19778 17301
6/00 20229 16599
International Equity Fund (ending value $20,229)
MSCI EAFE (ending value $16,599)
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
SIX ONE THREE SINCE
MONTHS YEAR YEAR COMMENCEMENT
--------------------------------------------------------------------------------
International Equity Fund 2.28% 25.79% 13.64% 14.61%
--------------------------------------------------------------------------------
MSCI EAFE (4.06%) 17.16% 10.19% 10.30%
--------------------------------------------------------------------------------
Lipper peer group average* (3.59%) 27.75% 13.34% N/A
--------------------------------------------------------------------------------
Commencement date 5/1/95
--------------------------------------------------------------------------------
INVESTMENT PROFILE
A fund designed for investors who seek long-term
growth of capital by investing primarily in
equity securities of companies located in
developed and developing countries other than
the United States.
--------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS AT JUNE 30, 2000
--------------------------------------------------------------------------------
AXA-UAP .......................................... 2.54%
--------------------------------------------------------------------------------
Taiwan Semiconductor Manufacturing Co. ........... 2.48%
--------------------------------------------------------------------------------
BAE Systems PLC .................................. 2.39%
--------------------------------------------------------------------------------
Canon Inc. ....................................... 2.38%
--------------------------------------------------------------------------------
Koninklijke (Royal) Philips Electronics N.V. ..... 2.37%
--------------------------------------------------------------------------------
Toshiba Corp. .................................... 2.37%
--------------------------------------------------------------------------------
ING Groep N.V. ................................... 2.30%
--------------------------------------------------------------------------------
Invensys PLC ..................................... 2.11%
--------------------------------------------------------------------------------
Fujitsu Ltd. ..................................... 2.06%
--------------------------------------------------------------------------------
Total S.A. (Class B) ............................. 1.98%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO COMPOSITION AS OF JUNE 30, 2000
--------------------------------------------------------------------------------
NET ASSETS OF $58,656 (IN THOUSANDS)
[PIE CHART OMITTED]
EUROPE 61.5%
JAPAN 15.2%
PACIFIC RIM 10.9%
OTHER REGIONS 7.4%
CASH & OTHER 5.0%
* LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE PERIODS INDICATED IN THE INTERNATIONAL PEER GROUP CONSISTING OF 131, 129
AND 94 UNDERLYING ANNUITY FUNDS, RESPECTIVELY.
SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
31
<PAGE>
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
COMMON STOCK -- 94.4%
--------------------------------------------------------------------------------
AUSTRALIA -- 2.2%
Brambles Industries Ltd. ........... 32,115 $ 985,978
Cable & Wireless Optus Ltd. ........ 97,577 290,613(a)
1,276,591
BRAZIL -- 0.7%
Telecomunicacoes Brasileiras
S.A. ADR ......................... 1,243 120,727
Uniao de Bancos Brasilieros
S.A. GDR ......................... 9,339 268,496
389,223
CANADA -- 1.7%
ATI Technologies Inc. .............. 27,284 230,439(a)
Celestica Inc. ..................... 10,587 525,380(a)
CGI Group Inc. (Class A) ........... 28,349 231,772(a)
987,591
DENMARK -- 0.1%
GN Store Nord A/S .................. 314 30,907
FINLAND -- 1.3%
Pohjola Group Insurance Corp.
(Series B) ....................... 1,391 49,162
Sampo Insurance Co. Ltd.
(Series A) ....................... 13,093 531,246
Sonera Oyj ......................... 476 21,699
Stora Enso Oyj ..................... 17,028 155,251
Tietoenator Oyj .................... 988 32,966
790,324
FRANCE -- 16.3%
Aerospatiale Matra (Regd.) ......... 15,876 333,450
Alcatel ............................ 5,790 379,754
Alstom ............................. 30,739 830,800
Aventis S.A. (Class A) ............. 11,497 839,130
AXA-UAP ............................ 9,458 1,489,877
Banque Nationale de Paris .......... 5,295 509,558
Carrefour S.A. ..................... 1,649 112,720
Coflexip S.A. ADR .................. 6,311 381,815
Lagardere S.C.A. ................... 15,063 1,150,452
Lyonnaise Des Eaux S.A. ............ 2,448 428,859
Michelin CGDE (Regd.) (Class B) .... 13,440 431,256
Rhodia S.A. ........................ 15,398 258,728
Schneider S.A. ..................... 7,457 519,702
STMicroelectronics N.V. ............ 3,509 221,103
Total S.A. (Class B) ............... 7,587 1,163,276
Vivendi ............................ 5,823 513,950
9,564,430
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
GERMANY -- 7.8%
Bayer AG ........................... 5,843 $ 228,041
Bayerische Hypo-und Vereinsbank AG 3,996 258,122
Bayerische Motoren Werke (BMW) AG .. 17,029 514,553
DaimlerChrysler AG ................. 3,241 169,035
Deutsche Bank AG ................... 6,538 538,046
Fresenius Medical Care AG .......... 7,416 591,326
Metallgesellschaft AG .............. 41,346 552,623
Muenchener Rueckversicherungs-
Gesellschaft AG (Regd.) ......... 2,665 837,067
Preussag AG ........................ 11,658 376,747
Veba AG ............................ 10,367 499,818
4,565,378
GREECE -- 0.6%
Hellenic Telecommunication
Organization S.A. ADR ............ 9,774 119,121
Hellenic Telecommunication
Organization S.A. GDR ............ 9,080 222,477
341,598
HONG KONG -- 2.5%
Cheung Kong (Holdings) Ltd. ........ 30,472 335,190
China Unicom Ltd. .................. 36,000 75,967(a)
Giordano International Ltd. ........ 206,000 313,142
Hutchison Whampoa Ltd. ............. 4,300 54,057
Johnson Electric Holdings Ltd. ..... 71,800 681,573
1,459,929
IRELAND -- 2.0%
Bank of Ireland .................... 81,487 509,951
CRH PLC ............................ 28,954 523,823
Jefferson Smurfit Group PLC ........ 86,496 147,224
1,180,998
ISRAEL -- 2.3%
ECI Telecommunications Ltd. ........ 24,012 858,429
Teva Pharmaceutical Industries
Ltd. ADR ........................ 9,235 511,965
1,370,394
ITALY -- 2.6%
Banca Intesa S.p.A. ................ 109,305 489,418
Riunione Adriatica di Sicurta S.p.A 37,254 409,014
Saipem ............................. 72,969 431,914
Telecom Italia S.p.A ............... 62 411(e)
Telecom Italia S.p.A ............... 13,998 192,440
1,523,197
JAPAN -- 15.2%
Asahi Bank Ltd. .................... 12,520 52,627
Canon Inc. ......................... 28,000 1,393,337
Fujitsu Ltd. ....................... 35,000 1,210,593
ITOCHU Corp. ....................... 57,361 289,224(a)
Kao Corp. .......................... 20,234 617,861
------------
See Notes to Schedule of Investments and Notes to Financial Statements.
32
<PAGE>
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
Mazda Motor Corp. .................. 136,000 $ 367,862
Minebea Co. Ltd. ................... 50,000 626,738
Mitsukoshi Ltd. .................... 272 1,205(a)
NAMCO Ltd. ......................... 2,500 90,005
Nippon Telegraph and Telephone
Corp. (NTT) ...................... 435 71,415
Shin-Etsu Chemical Co. ............. 14,000 709,863
Sony Corp. ......................... 8,100 755,761
Sumitomo Electric Industries ....... 18,000 308,412
The Fuji Bank Ltd. ................. 28,000 212,695
The Tokyo Electric Power Co. Inc. .. 12,900 314,278
Toshiba Corp. ...................... 123,000 1,387,597
8,909,473
MEXICO -- 2.4%
Desc S.A. de C.V. (Series B) ....... 80,588 51,565
Desc S.A. de C.V. ADR .............. 9,568 123,188
Grupo Carso S.A. de C.V. ADR ....... 14,260 101,246(a)
Grupo Financiero Banamex
Accival S.A. de C.V. (Class B) ... 107,571 452,309(a)
Grupo Televisa S.A. GDR ............ 5,730 395,012(a)
Telefonos de Mexico S.A.
de C.V. ADR ..................... 5,348 305,504
1,428,824
NETHERLANDS -- 8.0%
ASM Lithography Holding N.V. ....... 3,701 159,071(a)
Getronics N.V. ..................... 12,015 185,252
IHC Caland N.V. .................... 9,277 451,695
ING Groep N.V. ..................... 19,927 1,346,921
Ispat International N.V. (Regd.)
(Class A) ........................ 12,680 120,460
Koninklijke (Royal) Philips
Electronics N.V. ................. 29,458 1,389,304
Koninklijke Ahold N.V. ............. 10,343 304,430
KPN NV ............................. 14,758 660,092
Vendex KBB N.V. .................... 6,097 103,552
4,720,777
PANAMA -- 0.1%
Panamerican Beverages Inc. (Class A) 2,804 41,885
POLAND -- 0.4%
Telekomunikacja Polska S.A.
GDR (Series A) .................. 31,439 215,357(a,b)
PORTUGAL -- 0.2%
Banco Comercial Portugues
(Regd.) .......................... 22,819 118,730
SINGAPORE -- 0.2%
Datacraft Asia Ltd. ................ 16,160 142,208
SOUTH KOREA -- 3.5%
Kookmin Bank GDR ................... 6,894 86,175(b)
Korea Electric Power Corp. ADR ..... 10,694 197,171
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
Korea Telecom Corp. ADR ............ 10,228 $ 494,779
Pohang Iron & Steel Co. Ltd. ADR ... 17,658 423,792
Samsung Electronics GDR ............ 4,374 855,117(b)
2,057,034
SPAIN -- 2.0%
Repsol S.A. ........................ 6,122 121,861
Telefonica S.A. .................... 49,340 1,059,861(a)
1,181,722
SWEDEN -- 2.9%
Autoliv Inc. SDR ................... 16,877 413,314
Investor AB (Series B) ............. 5,433 74,226
Invik & Co. AB ..................... 1,201 124,457
Kinnevik AB (Series B) ............. 2,028 51,735
NetCom Systems AB (Series B) ....... 1,504 111,010(a)
Nordic Baltic Holding (NBH) AB FDR . 44,727 325,381
Svenska Handelsbanken AB (Series A) 4,957 71,938
Telefonaktiebolaget LM Ericsson AB
(Series B) ....................... 26,629 526,844
1,698,905
SWITZERLAND -- 1.6%
ABB Ltd. ........................... 4,086 489,053
Credit Suisse Group (Regd.) ........ 2,192 436,035
925,088
TAIWAN -- 2.5%
Taiwan Semiconductor
Manufacturing Co. ................ 305,517 1,451,765
UNITED KINGDOM -- 15.2%
BAE Systems PLC .................... 224,739 1,401,016
Bank of Scotland ................... 20,036 190,539
British Energy PLC ................. 1 2
Cable & Wireless PLC ............... 52,505 888,993
Commercial Union PLC ............... 67,360 1,121,146
Corus Group PLC .................... 360,550 526,454(a)
Granada Group PLC .................. 99,128 989,938
Invensys PLC ....................... 329,464 1,236,309
Nycomed Amersham PLC ............... 58,456 580,230
Prudential PLC ..................... 10,024 146,820
Railtrack Group PLC ................ 8,874 137,831
Reed International PLC ............. 36,387 316,579
Royal & Sun Alliance Insurance
Group PLC ....................... 52,113 338,279
Saatchi & Saatchi PLC .............. 16,152 103,951
Somerfield PLC ..................... 122,731 107,708
Vodafone AirTouch PLC .............. 199,926 807,696
8,893,491
UNITED STATES -- 0.1%
Pharmacia Corp. .................... 1,563 80,788
TOTAL COMMON STOCK
(COST $47,888,469) ............... 55,346,607
----------------
See Notes to Schedule of Investments and Notes to Financial Statements.
33
<PAGE>
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
PREFERRED STOCKS -- 0.6%
--------------------------------------------------------------------------------
Henkel KGaA ........................ 5,178 $ 295,618
Tele Norte Leste Participacoes
S.A. ADR ......................... 145 3,426
Tele Sudeste Celular Participacoes
S.A. ADR ......................... 248 7,564
Telesp-Telecomunicacoes
de Sao Paulo S.A. ................ 1,243 22,995
TOTAL PREFERRED STOCKS (COST $356,166) 329,603
--------------------------------------------------------------------------------
WARRANTS -- 0.0%
--------------------------------------------------------------------------------
Muenchener Rueckversicherungs-
Gesellschaft AG (Regd.) (COST $0) 48 4,010(a)
TOTAL INVESTMENTS IN SECURITIES
(COST $48,244,635) ............... 55,680,220
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 5.0%
--------------------------------------------------------------------------------
GEI Short Term Investment Fund
(COST $2,948,717) ...............2,948,717 2,948,717
OTHER ASSETS AND LIABILITIES,
NET 0.0% ........................ 26,668
--------------------------------------------------------------------------------
NET ASSETS-- 100% ................. $58,655,605
================================================================================
--------------------------------------------------------------------------------
OTHER INFORMATION
--------------------------------------------------------------------------------
The International Equity Fund invested in the following sectors at June 30,
2000:
SECTOR PERCENTAGE (BASED ON TOTAL NET ASSETS)
--------------------------------------------------------------------------------
Financials .......................... 19.41%
Information Technology .............. 16.69%
Industrials ......................... 15.25%
Consumer Goods ...................... 14.81%
Telecommunication Services .......... 10.61%
Materials ........................... 6.81%
Health Care ......................... 4.44%
Energy .............................. 3.58%
Utilities ........................... 3.33%
Cash and Other ...................... 5.07%
--------
100.00%
========
--------------
See Notes to Schedule of Investments and Notes to Financial Statements.
34
<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 29
FOR RALPH'S BIOGRAPHICAL DETAILS, PAGE 15 FOR DAVE'S BIOGRAPHICAL DETAILS, AND
PAGE 45FOR BOB'S BIOGRAPHICAL DETAILS.
Q. HOW DID THE TOTAL RETURN FUND PERFORM COMPARED TO ITS BENCHMARK FOR THE SIX
MONTHS ENDED JUNE 30, 2000?
A. The Total Return Fund posted a return of 3.15% for the six-month period ended
June 30, 2000. The Fund allocates investments among several asset classes and
therefore the results of the Fund need to be compared to multiple benchmarks:
S&P 500 Index which returned negative 0.47% and the Lehman Brothers Aggregate
Bond Index which returned 3.98%. For the same period, our Lipper peer group of
89 balanced funds had an average return of 1.91%. The Fund's performance is
ranked in the top quartile relative to the peer group.
Q. WHY DID THE FUND PERFORM WELL RELATIVE TO THE BENCHMARKS FOR THE SIX-MONTH
PERIOD ENDED JUNE 30, 2000?
A. The Fund's performance was driven by asset allocation and strong stock
selection within each asset class. Currently, the strategy is allocated
approximately 45% U.S. equities, 16% international equities, 34% fixed income
and 5% cash. The U.S. equity markets were volatile over this period however the
Fund outperformed relative to the S&P 500 benchmark substantially due to solid
stock selection. The international markets were also volatile with the MSCI EAFE
Index finishing down over 4% for the period. Portfolio returns for this portion
of the portfolio were strong relative to this benchmark and exceeded 3% for the
six months ended June 30, 2000. Fixed income markets did well for the first six
months of 2000 amid a backdrop of rising interest rates and the potential for a
slow down in the economy. Our allocation in international stocks sets us apart
from many other balanced funds, which only concentrate on the U.S. financial
markets. Please read the commentary on the International Equity Fund and the
Income Fund for a more detailed description of the individual asset classes.
Q. HOW HAS THE VOLATILITY IN THE U.S. EQUITY MARKETS IMPACTED THE FUND?
A. Over the past six to twelve months the markets have been particularly
volatile. The S&P 500 Index had gains of 15% for the quarter ended December 31,
1999, following a decline of 6.2% in the quarter ended September 30, 1999. For
the quarter ended March 31, 2000, the S&P 500 gained 2.5%. The most recent
quarter ended June 30, 2000 has seen the S&P 500 decline 2.85%. Year-to-date,
the S&P 500 is down 0.47%. What is notable is that these market swings have been
focused primarily on the technology sector. Despite an environment in the U.S.
of solid economic growth, low inflation, solid corporate earnings, and modestly
higher interest rates, the equity market has behaved much like a roller coaster.
Through the first half of 2000 most of the major U.S. averages have posted price
declines which is a first since 1994. The international markets have behaved
much the same way with areas like technology, telecom, and media garnering
investor's attention on both the upside and the downside.
In terms of the Fund, we continue to own those companies that have solid
earnings growth. We look at the swings in the market as opportunities to scale
buy or sell those stocks that become undervalued or overvalued, respectively,
relative to the market and to their peers. Our focus on security selection
across asset classes will continue to provide the Fund with high-quality
companies that are reasonably valued. With the Fund broadly diversified, we
believe it is well positioned for the volatility we expect.
Q. WHAT ARE THE CURRENT WEIGHTINGS OF THE VARIOUS ASSET CLASSES AND HOW HAVE
THEY CHANGED OVER THE PAST SIX MONTHS?
A. Currently, the Fund's asset allocation mix reflects 44% of the asset in U.S.
equities, 16% in international equities, 34% in fixed income, and 6% in cash. We
continue to directionally model the weights of this portfolio in conjunction
with the policy governing the GE Pension Plan. Our Asset Allocation Committee
meets regularly to discuss any changes to the policy. The target weightings have
shifted marginally away from equities as valuations remain a concern. The total
equity allocation is 61% and the fixed income allocation is 34%, in line with
the Committee's policy targets.
35
<PAGE>
TOTAL RETURN FUND
--------------------------------------------------------------------------------
Q&A
Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
A. The returns for the Fund will continue to reflect the strong demand for
equities in both U.S. and international issues. The U.S. economy's underpinnings
are encouraging for the long term. Despite the Federal Reserve's commitment to
containing any inflationary pressures through rate increases, we believe
companies are executing their business plans and should produce solid earnings
over the next few quarters. We believe that the U.S. market and consequently the
international markets will continue to be volatile although this should be
beneficial as the speculative excesses are eliminated from the system. The fixed
income market may experience some relief as the market anticipates an end to
rate increases over the near term. We believe the diversified approach of this
strategy will continue to reward investors in this dynamic investment
environment.
36
<PAGE>
TOTAL RETURN FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMPARISON OF CHANGES IN VALUE OF A $10,000 INVESTMENT
--------------------------------------------------------------------------------
[LINE GRAPH OMITTED, PLOT POINTS FOLLOW]
Total Return Fund S&P 500 Index LB Aggregate
12/89 $10000 $10000 $10000
12/90 9962 9684 10895
12/91 12687 12645 12638
12/92 13636 13622 13573
12/93 15484 14986 14896
12/94 15876 15180 14462
12/95 20332 20872 17133
12/96 22487 25696 17752
12/97 26531 34251 19472
12/98 31068 44080 21161
12/99 35184 53363 20985
6/00 35011 53136 21820
Total Return Fund (ending value $35,011)
S&P 500 Index (ending value $53,136)
LB Aggregate (ending value $21,820)
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
SIX ONE FIVE TEN
MONTHS YEAR YEAR YEAR
--------------------------------------------------------------------------------
Total Return Fund 3.15% 9.43% 14.85% 13.35%
--------------------------------------------------------------------------------
S&P 500 Index (0.47%) 7.34% 23.83% 17.82%
--------------------------------------------------------------------------------
LB Aggregate 3.98% 4.56% 6.25% 7.81%
--------------------------------------------------------------------------------
Lipper peer group average* 1.91% 7.59% 14.27% 12.68%
--------------------------------------------------------------------------------
Commencement date 7/1/85
--------------------------------------------------------------------------------
INVESTMENT PROFILE
A fund designed for investors who seek the highest total return, composed
of current income and capital appreciation, as is consistent with
prudent investment risk by investing in a combination of equity and
investment grade debt securities.
--------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS AT JUNE 30, 2000
--------------------------------------------------------------------------------
Citigroup Inc. .................................... 2.61%
--------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. 8.00% TBA .... 2.28%
--------------------------------------------------------------------------------
Cardinal Health Inc. .............................. 2.11%
--------------------------------------------------------------------------------
First Data Corp. .................................. 1.96%
--------------------------------------------------------------------------------
U.S. Treasury Bonds 8.125% 8/15/19 ............ 1.76%
--------------------------------------------------------------------------------
Intel Corp. ....................................... 1.76%
--------------------------------------------------------------------------------
AT&T Corp. - Liberty Media Group (Class A) ........ 1.68%
--------------------------------------------------------------------------------
Federal Home Loan Bank 6.75% 5/1/02 ........... 1.40%
--------------------------------------------------------------------------------
Merck & Co., Inc. ................................. 1.27%
--------------------------------------------------------------------------------
Dover Corp. ....................................... 1.26%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO COMPOSITION AS OF JUNE 30, 2000
--------------------------------------------------------------------------------
NET ASSETS OF $119,923 (IN THOUSANDS)
[PIE CHART OMITTED]
DOMESTIC EQUITY 43.9%
BONDS AND NOTES 33.7%
FOREIGN EQUITY 15.9%
CASH & OTHER 6.5%
* LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE PERIODS INDICATED IN THE FLEXIBLE PEER GROUP CONSISTING OF 89, 89, 65 AND 44
UNDERLYING ANNUITY FUNDS, RESPECTIVELY.
SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
37
<PAGE>
TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
TOTAL RETURN FUND
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
DOMESTIC EQUITY -- 43.9%
--------------------------------------------------------------------------------
BASIC MATERIALS -- 0.0%
Airgas Inc. ........................ 7,566 $ 43,032(a)
CAPITAL GOODS -- 3.9%
Alleghany Corp. .................... 313 52,584
Dover Corp. ........................ 37,245 1,510,750
Emerson Electric Co. ............... 3,278 197,909
Honeywell International Inc. ....... 12,677 427,057
Hubbell Inc. (Class B) ............. 10,561 269,306(h)
Molex Inc. (Class A) ............... 35,152 1,230,320
Textron Inc. ....................... 2,705 146,915
United Technologies Corp. .......... 3,342 196,760
Waste Management Inc. .............. 31,527 599,013
4,630,614
CONSUMER - CYCLICAL -- 7.3%
Adelphia Communications Corp.
(Class A) ........................ 2,207 103,453(a)
AT&T Corp. - Liberty Media
Group (Class A) .................. 83,230 2,018,327(a)
Carnival Corp. (Class A) ........... 13,084 255,138
Catalina Marketing Corp. ........... 11,507 1,173,714(a)
Comcast Corp. (Class A) ............ 30,896 1,251,288
CVS Corp. .......................... 7,251 290,040
Gannett Co. Inc. ................... 2,049 122,556
Harman International Industries Inc. 887 54,107
Home Depot Inc. .................... 17,340 865,916
Interpublic Group Cos. Inc. ........ 16,394 704,942
NTL Inc. ........................... 23,172 1,387,424(a)
Walt Disney Co. .................... 15,217 590,610
8,817,515
CONSUMER - STABLE -- 10.8%
Abbott Laboratories ................ 26,009 1,159,026
American Home Products Corp. ....... 9,616 564,940
Avon Products Inc. ................. 2,837 126,247
Bristol-Myers Squibb Co. ........... 16,394 954,950
Cardinal Health Inc. ............... 34,206 2,531,244(h)
Colgate-Palmolive Co. .............. 4,035 241,596
Dentsply International Inc. ........ 8,827 271,982
Energizer Holdings Inc. ............ 5,044 92,053(a)
Gillette Co. ....................... 13,872 484,653
Henry Schein Inc. .................. 15,133 261,044(a)
Johnson & Johnson .................. 12,957 1,319,994(h)
Lincare Holdings Inc. .............. 19,231 473,563(a,h)
Merck & Co. Inc. ................... 19,862 1,521,926
Pepsico Inc. ....................... 17,970 798,542
Pfizer Inc. ........................ 19,074 915,552
Pharmacia Corp. .................... 536 27,705
Philip Morris Cos. Inc. ............ 12,674 336,653
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
Sybron International Corp. ......... 25,537 $ 505,952(a)
Watson Pharmaceuticals Inc. ........ 5,832 313,470(a)
12,901,092
ENERGY -- 3.3%
Anadarko Petroleum Corp. ........... 12,295 606,297
Baker Hughes Inc. .................. 16,079 514,528
Exxon Mobil Corp. .................. 5,832 457,812
Nabors Industries Inc. ............. 10,404 432,416(a)
Royal Dutch Petroleum Co. ADR ...... 12,611 776,365
Schlumberger Ltd. .................. 14,944 1,115,196
3,902,614
FINANCIAL -- 7.5%
AFLAC Inc. ......................... 3,468 159,311
American Express Co. ............... 8,039 419,033
American International Group Inc. .. 9,397 1,104,148
Bank One Corp. ..................... 10,089 267,989
Berkshire Hathaway Inc. (Class B) .. 248 436,480(a)
Citigroup Inc. ..................... 51,861 3,124,625
Countrywide Credit Industries Inc. . 5,990 181,572
Federal National Mortgage Assoc. ... 20,555 1,072,714
Fidelity National Financial Inc. ... 11,980 219,384
Loews Corp. ........................ 4,887 293,220
Marsh & McLennan Cos. Inc. ......... 8,449 882,392
State Street Corp. ................. 8,039 852,636(i)
9,013,504
MISCELLANEOUS -- 0.0%
SPDR Trust ......................... 201 29,201
TECHNOLOGY -- 9.9%
Analog Devices Inc. ................ 2,522 191,672(a)
Applied Materials Inc. ............. 9,458 857,131(a)
Automatic Data Processing Inc. ..... 21,816 1,168,520
Cisco Systems Inc. ................. 22,699 1,442,805(a)
Dell Computer Corp. ................ 5,675 279,848(a)
EMC Corp. .......................... 13,241 1,018,730(a)
Equifax Inc. ....................... 45,714 1,199,993
First Data Corp. ................... 47,290 2,346,766
Intel Corp. ........................ 15,763 2,107,316
Microsoft Corp. .................... 13,872 1,109,760(a)
Pitney Bowes Inc. .................. 4,887 195,480
11,918,021
UTILITIES -- 1.2%
NEXTLINK Communications Inc. (Class A) 5,044 191,357(a)
SBC Communications Inc. ............ 4,099 177,282
Sprint Corp. ....................... 5,517 281,367
WorldCom Inc. ...................... 16,079 737,624(a)
1,387,630
TOTAL DOMESTIC EQUITY
(COST $38,128,662) ................ 52,643,223
--------------
See Notes to Schedule of Investments and Notes to Financial Statements.
38
<PAGE>
TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
FOREIGN EQUITY -- 15.8%
--------------------------------------------------------------------------------
BASIC MATERIALS -- 0.8%
Bayer AG ........................... 1,806 $ 70,485
Corus Group PLC .................... 110,150 160,835(a)
Ispat International N.V. (Regd.)
(Class A) ........................ 3,540 33,630
Jefferson Smurfit Group PLC ........ 27,169 46,244
Metallgesellschaft AG .............. 15,837 211,674
Pohang Iron & Steel Co. Ltd. ADR ... 6,807 163,368
Shin-Etsu Chemical Co. ............. 4,000 202,818
Stora Enso Oyj ..................... 5,298 48,304
937,358
CAPITAL GOODS -- 2.0%
ABB Ltd. ........................... 1,648 197,249
Alstom ............................. 10,298 278,330
ATI Technologies Inc. .............. 8,421 71,123(a)
BAE Systems PLC .................... 79,048 492,783
Celestica Inc. ..................... 4,172 207,035(a)
CRH PLC ............................ 8,882 160,689
Desc S.A. de C.V. (Series B) ....... 24,165 15,462
Desc S.A. de C.V. ADR .............. 2,742 35,303
Grupo Carso S.A. de C.V. ADR ....... 4,491 31,886(a)
Invensys PLC ....................... 105,272 395,032
Lyonnaise Des Eaux S.A. ............ 744 130,340
Minebea Co. Ltd. ................... 16,000 200,556
Preussag AG ........................ 4,228 136,635
Rhodia S.A. ........................ 4,719 79,292
2,431,715
CONSUMER - CYCLICAL -- 2.2%
Autoliv Inc. SDR ................... 6,012 147,233
Bayerische Motoren Werke (BMW) AG .. 5,151 155,644
Canon Inc. ......................... 9,000 447,858
Carrefour S.A. ..................... 890 60,837
DaimlerChrysler AG ................. 1,011 52,729
Giordano International Ltd. ........ 88,000 133,770
Granada Group PLC .................. 33,213 331,680
Grupo Televisa S.A. GDR ............ 1,710 117,883(a)
ITOCHU Corp. ....................... 18,093 91,228(a)
Johnson Electric Holdings Ltd. ..... 22,000 208,839
Kinnevik AB (Series B) ............. 582 14,847
Koninklijke Ahold N.V. ............. 3,215 94,638
Mazda Motor Corp. .................. 42,000 113,605
Michelin CGDE (Regd.) (Class B) .... 4,701 150,843
NAMCO Ltd. ......................... 800 28,802
Reed International PLC ............. 10,627 92,458
Saatchi & Saatchi PLC .............. 4,388 28,240
Somerfield PLC ..................... 35,799 31,417
Sony Corp. ......................... 2,900 270,581
Vendex KBB N.V. .................... 1,766 29,996
2,603,128
CONSUMER - STABLE -- 0.9%
Aventis S.A. ....................... 4,102 299,392
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
Fresenius Medical Care AG .......... 2,684 $ 214,013
Kao Corp. .......................... 6,592 201,292
Nycomed Amersham PLC ............... 17,898 177,654
Panamerican Beverages Inc.
(Class A) ........................ 855 12,771
Teva Pharmaceutical Industries
Ltd. ADR ......................... 2,838 157,332
1,062,454
DIVERSIFIED -- 0.3%
Hutchison Whampoa Ltd. ............. 1,100 13,828
Lagardere S.C.A. ................... 5,259 401,662
415,490
ENERGY -- 0.9%
British Energy PLC ................. 1 1
Coflexip S.A. ADR .................. 1,937 117,189
Repsol S.A. ........................ 1,670 33,242
Saipem ............................. 22,185 131,316
Total S.A. (Class B) ............... 2,580 395,578
Veba AG ............................ 3,656 176,264
Vivendi ............................ 2,244 198,060
1,051,650
FINANCIAL -- 2.9%
Asahi Bank Ltd. .................... 4,008 16,847
AXA-UAP ............................ 2,940 463,125
Banca Intesa S.p.A. ................ 33,220 148,744
Banco Comercial Portugues (Regd.) 7,007 36,458
Bank of Ireland .................... 25,526 159,743
Bank of Scotland ................... 6,086 57,877
Banque Nationale de Paris .......... 1,610 154,936
Bayerische Hypo-und Vereinsbank AG 1,246 80,485
Commercial Union PLC ............... 24,382 405,816
Credit Suisse Group (Regd.) ........ 670 133,277
Deutsche Bank AG ................... 1,986 163,438
Grupo Financiero Banamex
Accival S.A. de C.V. (Class B) ... 32,585 137,012(a)
ING Groep N.V. ..................... 6,705 453,210
Investor AB (Series B) ............. 1,392 19,018
Invik & Co. AB ..................... 317 32,850
Muenchener Rueckversicherungs-
Gesellschaft AG (Regd.) .......... 998 313,468(a)
Nordic Baltic Holding (NBH)
AB FDR ........................... 13,673 99,469
Pohjola Group Insurance Corp.
(Series B) ....................... 358 12,653
Riunione Adriatica di Sicurta S.p.A 11,416 125,337
Royal & Sun Alliance Insurance
Group PLC ........................ 15,839 102,814
Sampo Insurance Co. Ltd.
(Series A) ....................... 4,018 163,030
Svenska Handelsbanken AB
(Series A) ....................... 1,562 22,669
The Fuji Bank Ltd. ................. 10,000 75,963
Uniao de Bancos Brasilieros
S.A. GDR ......................... 2,839 81,621
3,459,860
--------------
See Notes to Schedule of Investments and Notes to Financial Statements.
39
<PAGE>
TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST -- 0.1%
Cheung Kong (Holdings) Ltd. ........ 12,982 $ 142,801
TECHNOLOGY -- 2.7%
ASM Lithography Holding N.V. ....... 1,124 48,310(a)
Brambles Industries Ltd. ........... 10,790 331,269
Cable & Wireless Optus Ltd. ........ 32,016 95,353(a)
CGI Group Inc. (Class A) ........... 8,698 71,112
Datacraft Asia Ltd. ................ 4,040 35,552
ECI Telecommunications Ltd. ........ 9,107 325,575
Fujitsu Ltd. ....................... 11,000 380,472
Getronics N.V. ..................... 3,764 58,035
GN Store Nord A/S .................. 95 9,351
Koninklijke (Royal) Philips
Electronics N.V. ................. 10,128 477,659
NetCom Systems AB (Series B) ....... 280 20,667(a)
Prudential PLC ..................... 3,043 44,570
Schneider S.A. ..................... 2,686 187,196
STMicroelectronics N.V. ............ 1,070 67,421
Sumitomo Electric Industries ....... 7,000 119,938
Taiwan Semiconductor
Manufacturing Co. ................ 102,826 488,612
Tietoenator Oyj .................... 315 10,510
Toshiba Corp. ...................... 43,000 485,095
3,256,697
TELECOMMUNICATIONS -- 1.0%
Alcatel ............................ 1,768 115,959
Cable & Wireless PLC ............... 19,272 326,306
China Unicom Ltd. .................. 10,000 21,102(a)
KPN NV ............................. 5,476 244,929
Nippon Telegraph and
Telephone Corp. (NTT) ............ 172 25,908
Sonera Oyj ......................... 151 6,884
Telefonaktiebolaget LM
Ericsson AB (Series B) ........... 8,883 175,746
Telefonos de Mexico S.A.
de C.V. ADR ...................... 1,623 92,714
1,209,548
TRANSPORTATION -- 0.2%
IHC Caland N.V. .................... 2,820 137,305
Railtrack Group PLC ................ 2,598 40,352
177,657
UTILITIES -- 1.8%
Hellenic Telecommunication
Organization S.A. ADR ............ 2,522 30,737
Hellenic Telecommunication
Organization S.A. ................ 2,760 67,625
Korea Telecom Corp. ADR ............ 3,384 163,701
Tele Norte Leste Participacoes
S.A. ADR ......................... 46 1,087
Tele Sudeste Celular Participacoes
S.A. ADR ......................... 79 2,409
Telecom Italia S.p.A ............... 4,813 66,168
Telefonica S.A. .................... 16,904 363,111(a)
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
Telesp-Telecomunicacoes de
Sao Paulo S.A. ................... 395 $ 7,307
The Tokyo Electric Power Co. Inc. .. 4,000 97,451
Vodafone AirTouch PLC .............. 73,042 295,088
Vodafone AirTouch PLC ADR .......... 25,694 1,064,695
2,159,379
TOTAL FOREIGN EQUITY
(COST $16,020,491) ................ 18,907,737
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
BONDS AND NOTES -- 33.7%
--------------------------------------------------------------------------------
U.S. TREASURIES -- 4.7%
U.S. Treasury Bonds
8.125% 08/15/19 .............$1,745,000 2,109,548(h)
6.125% 08/15/29 ............. 633,000 639,330(h)
6.25% 05/15/30 ............. 1,246,000 1,307,328(h)
4,056,206
U.S. Treasury Notes
5.875% 11/15/04 ............. 35,000 34,491(h)
6.75% 05/15/05 ............. 1,320,000 1,350,730(h)
6.50% 02/15/10 ............. 218,000 225,460(h)
1,610,681
TOTAL U.S. TREASURIES
(COST $5,626,582) ............... 5,666,887
FEDERAL AGENCIES -- 3.8%
Federal Home Loan Bank
6.75% 05/01/02 ............. 1,685,000 1,678,951
Federal Home Loan Mortgage Corp.
7.375% 05/15/03 ............. 805,000 812,704
6.22% 03/18/08 ............. 215,000 198,673
1,011,377
Federal National Mortgage Assoc.
5.75% 04/15/03 ............. 250,000 242,080
5.125% 02/13/04 ............. 360,000 337,892
5.78% 05/05/04 ............. 230,000 219,363
6.99% 07/09/07 ............. 80,000 77,062
5.64% 12/10/08 ............. 255,000 235,819
6.04% 02/25/09 ............. 385,000 352,876
7.25% 01/15/10 ............. 390,000 393,927
1,859,019
TOTAL FEDERAL AGENCIES
(COST $4,614,836) ............... 4,549,347
AGENCY MORTGAGE BACKED -- 13.4%
Federal Home Loan Mortgage Corp.
7.50% 11/01/09 ............. 127,180 127,452
7.50% 06/01/10 ............. 83,574 83,753
9.00% 10/01/25 ............. 12,560 12,932
8.00% 05/01/27 ............. 82,397 82,887
6.00% 04/01/29 - 06/01/29 .. 660,454 605,142
--------------
See Notes to Schedule of Investments and Notes to Financial Statements.
40
<PAGE>
TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
6.50% 06/01/29 - 07/01/29 .. $ 804,454 $ 759,880
7.50% 10/01/29 ............. 197,231 194,563
7.00% 11/01/29 ............. 133,779 129,264
7.00% 01/01/30 - 02/01/30 .. 206,733 199,726
8.00% 02/01/30 - 03/01/30 .. 1,316,795 1,324,195
7.50% 04/01/30 ............. 187,458 184,895
6.00% TBA .................. 1,104,000 1,011,363(c)
6.50% TBA .................. 880,000 830,570(c)
8.00% TBA .................. 2,720,000 2,735,314(c)
8,281,936
Federal National Mortgage Assoc.
9.00% 06/01/09 ............. 137,885 142,478
7.50% 12/01/09 ............. 345,974 346,420
7.00% 08/01/13 ............. 23,494 23,193
7.50% 02/01/14 ............. 136,991 137,034
6.50% 06/01/14 ............. 26,302 25,336
9.00% 04/01/16 ............. 73,278 75,228
8.00% 12/01/17 ............. 57,109 57,863
9.00% 12/01/17 ............. 50,385 51,896
9.00% 12/01/22 ............. 58,812 60,575
7.50% 12/01/23 ............. 311,149 308,890
7.00% 12/01/25 ............. 45,762 44,346
7.00% 08/01/27 ............. 193,294 186,771
7.00% 07/01/28 ............. 47,423 45,822
6.50% 01/01/29 - 10/01/29 .. 1,915,255 1,806,111
6.00% 10/01/29 ............. 544,720 498,588
7.50% 11/01/29 ............. 373,249 367,882
7.50% 02/01/30 ............. 696,130 686,119
8.50% 04/01/30 - 06/01/30 .. 649,936 661,914
5,526,466
Government National Mortgage Assoc.
7.00% 03/15/12 ............. 465,089 460,582
9.00% 11/15/16 ............. 103,375 107,993
9.00% 01/15/17 - 11/15/17 .. 93,368 97,539
9.00% 12/15/21 ............. 11,471 11,916
6.50% 04/15/24 ............. 150,481 143,709
7.50% 01/15/28 ............. 80,332 79,856
6.50% 04/15/28 ............. 367,699 349,082
8.00% 03/15/30 - 06/15/30 .. 1,035,103 1,046,096
2,296,773
TOTAL AGENCY MORTGAGE BACKED
(COST $16,195,646) .............. 16,105,175
AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 1.2%
Federal Home Loan Mortgage Corp.
6.094% 02/15/22 ............. 46,000 41,724(k)
7.75% 03/15/22 ............. 204,123 205,398
8.00% 02/01/23 ............. 35,837 10,538
5.75% 06/15/23 ............. 60,000 56,726
7.00% 01/15/28 ............. 28,000 11,629
6.50% 12/15/28 ............. 137,000 124,370
7.50% 06/15/29 - 07/15/29 .. 206,901 47,500
497,885
Federal Home Loan Mortgage Corp. STRIP
5.58% 08/01/27 ............. 86,231 60,415(d,f)
6.68% 04/01/29 ............. 105,210 64,688(d,f)
6.81% 06/01/29 ............. 848,448 515,167(d,f)
640,270
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
Federal National Mortgage Assoc.
8.00% 10/25/20 ............. $ 20,573 $ 20,753
7.00% 08/01/25 ............. 73,665 71,386
92,139
Federal National Mortgage Assoc. STRIP
8.00% 02/01/23 - 08/01/23 .. 201,614 61,218(g)
8.00% 07/01/24 ............. 132,081 40,408(g)
8.00% 11/01/26 ............. 87,177 25,935(g)
7.50% 07/01/27 ............. 76,376 24,129(g)
6.58% 05/01/28 ............. 36,152 22,662(d,f)
8.00% 11/01/29 ............. 86,332 23,903(g)
198,255
TOTAL AGENCY COLLATERALIZED
MORTGAGE OBLIGATIONS (COST $1,434,381) 1,428,549
ASSET BACKED -- 1.2%
American Express Credit Account Master Trust
6.851% 03/15/05 ............. 32,000 32,080(k)
American Express Master Trust
6.801% 08/15/04 ............. 376,000 376,703(k)
Citibank Credit Card Master Trust I
5.80% 01/15/03 ............. 8,000 7,930
Discover Card Master Trust I
6.761% 09/15/04 ............. 410,000 410,254
Ford Credit Auto Loan Master Trust
5.50% 02/15/03 ............. 19,000 18,809
Green Tree Financial Corp. Series 1993-1
6.90% 04/15/18 ............. 18,056 17,780
6.97% 04/01/31 ............. 44,000 43,202
MBNA Master Credit Card Trust
6.911% 10/15/03 ............. 315,000 315,787 (k)
6.881% 04/15/05 ............. 107,000 107,367 (k)
Mid State Trust
7.54% 07/01/35 ............. 11,684 10,906
West Penn Funding LLC
6.81% 09/25/08 ............. 33,000 32,288
TOTAL ASSET BACKED (COST $1,375,719) 1,373,106
CORPORATE NOTES -- 8.2%
Abbey National Capital Trust I
8.963% 12/29/49 ............. 45,000 44,688 (k)
Abbey National PLC
7.95% 10/26/29 ............. 50,000 49,420
6.70% 06/29/49 ............. 105,000 93,567
Aetna Services Inc.
6.97% 08/15/36 ............. 100,000 95,151
AFLAC Inc.
6.50% 04/15/09 ............. 165,000 149,629
Allstate Corp.
7.20% 12/01/09 ............. 65,000 62,135
Amerada Hess Corp.
7.875% 10/01/29 ............. 100,000 97,781
--------------
See Notes to Schedule of Investments and Notes to Financial Statements.
41
<PAGE>
TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
American Airlines Inc.
6.855% 04/15/09 ............. $ 93,565 $ 91,349
Armstrong World Industries Inc.
7.45% 05/15/29 ............. 100,000 67,625
Arvin Industries Inc.
7.125% 03/15/09 ............. 55,000 48,336
Associates Corp. of North America
6.375% 10/15/02 ............. 100,000 97,898
Bank One Corp.
6.40% 08/01/02 ............. 70,000 68,541
Bear Stearns Cos. Inc.
7.625% 12/07/09 ............. 80,000 76,157
Bellsouth Capital Funding
7.875% 02/15/30 ............. 100,000 100,177
Bellsouth Telecomm Inc.
6.375% 06/01/28 ............. 50,000 41,526
Boston University
7.625% 07/15/97 ............. 80,000 72,274
Brascan Ltd.
7.375% 10/01/02 ............. 15,000 14,686
Bristol-Myers Squibb Co.
6.875% 08/01/97 ............. 75,000 67,827
CIT Group Inc.
7.125% 10/15/04 ............. 35,000 33,955
Citigroup Inc.
7.45% 06/06/02 ............. 85,000 85,233
Clear Channel Communications Inc.
7.875% 06/15/05 ............. 235,000 235,674
Coastal Corp.
7.75% 06/15/10 ............. 90,000 88,980
Corporacion Andina de Fomento
6.75% 03/15/05 ............. 130,000 122,538
CSC Holdings Inc.
8.125% 07/15/09 ............. 60,000 57,900
CSX Corp.
6.25% 10/15/08 ............. 105,000 91,311
DaimlerChrysler AG
7.40% 01/20/05 ............. 85,000 84,328
8.00% 06/15/10 ............. 115,000 117,552
Delphi Automotive Systems Corp.
6.125% 05/01/04 ............. 60,000 56,189
Deutsche Telekom AG
7.75% 06/15/05 ............. 520,000 523,549
8.25% 06/15/30 ............. 355,000 360,531
Dominion Resources Inc.
8.125% 06/15/10 ............. 45,000 45,304
Du Pont de Nemours (E.I.) & Co.
6.75% 10/15/04 ............. 30,000 29,552
Duke Capital Corp.
7.25% 10/01/04 ............. 165,000 162,575
Duke Energy Corp.
5.38% 01/01/09 ............. 200,000 172,796
Electronic Data Systems Corp.
6.85% 10/15/04 ............. 50,000 48,897
Federated Department Stores Inc.
6.125% 09/01/01 ............. 35,000 34,423
8.50% 06/01/10 ............. 45,000 45,850
Ford Motor Co.
6.70% 07/16/04 ............. 55,000 53,287
7.50% 03/15/05 ............. 95,000 94,530
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
5.80% 01/12/09 ............. $ 45,000 $ 39,150
7.375% 10/28/09 ............. 105,000 101,563
7.45% 07/16/31 ............. 150,000 141,859
Ford Motor Credit Co.
7.50% 06/15/03 ............. 50,000 49,883
7.875% 06/15/10 ............. 90,000 89,984
FPL Group Capital Inc.
7.375% 06/01/09 ............. 505,000 493,718
General Motors Acceptance Corp.
5.75% 11/10/03 ............. 20,000 18,937
6.125% 01/22/08 ............. 55,000 49,492
Georgia-Pacific Group
9.95% 06/15/02 ............. 25,000 25,884
Goldman Sachs Group L.P.
6.65% 05/15/09 ............. 200,000 183,604
Heritage Media Corp.
8.75% 02/15/06 ............. 40,000 39,800
Household Finance Corp.
6.125% 07/15/02 ............. 15,000 14,542
Hydro-Quebec
8.25% 04/15/26 ............. 125,000 133,880
Korea Development Bank
6.625% 11/21/03 ............. 20,000 19,230
Kroger Co.
7.375% 03/01/05 ............. 140,000 136,202
LCI International Inc.
7.25% 06/15/07 ............. 70,000 66,278
Lehman Brothers Holdings Inc.
7.75% 01/15/05 ............. 100,000 99,073
7.50% 08/01/26 ............. 45,000 44,515
Lenfest Communications Inc.
8.375% 11/01/05 ............. 50,000 50,672
Liberty Property Ltd. Partnership
7.50% 01/15/18 ............. 30,000 26,068
Lockheed Martin Corp.
7.95% 12/01/05 ............. 80,000 80,456
8.20% 12/01/09 ............. 50,000 50,608
MCI WorldCom Inc.
6.40% 08/15/05 ............. 35,000 33,317
8.875% 01/15/06 ............. 35,000 36,290
Merrill Lynch & Co.
5.71% 01/15/02 ............. 100,000 97,601
Morgan Stanley, Dean Witter & Co.
7.125% 01/15/03 ............. 100,000 99,359
5.625% 01/20/04 ............. 50,000 47,151
8.00% 06/15/10 ............. 155,000 156,632
Nabisco Inc.
6.125% 02/01/33 ............. 30,000 28,314
National Rural Utilities Cooperative
6.046% 04/15/03 ............. 25,000 24,173
NB Capital Trust IV
8.25% 04/15/27 ............. 105,000 95,570
Newell Co.
6.35% 07/15/08 ............. 40,000 38,134
News America Holdings Inc.
7.625% 11/30/28 ............. 60,000 53,870
Noram Energy Corp.
6.375% 11/01/03 ............. 30,000 28,972
--------------
See Notes to Schedule of Investments and Notes to Financial Statements.
42
<PAGE>
TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
Northrop-Grumman Corp.
8.625% 10/15/04 ............. $ 30,000 $ 30,910
Occidental Petroleum Corp.
7.375% 11/15/08 ............. 30,000 29,001
8.45% 02/15/29 ............. 80,000 81,896
Ontario Province of Canada
7.375% 01/27/03 ............. 100,000 100,616
Pactiv Corp.
8.375% 04/15/27 ............. 70,000 64,693
Paramount Communications Inc.
7.50% 01/15/02 ............. 75,000 74,755
Petroleos Mexicanos
9.50% 09/15/27 ............. 60,000 60,617
Philip Morris Cos. Inc.
7.25% 09/15/01 ............. 25,000 24,592
7.65% 07/01/08 ............. 125,000 116,481
Phillips Petroleum Co.
8.50% 05/25/05 ............. 160,000 165,293
9.375% 02/15/11 ............. 150,000 164,788
Pitney Bowes Credit Corp.
9.25% 06/15/08 ............. 150,000 164,799
PP&L Capital Funding Inc.
7.75% 04/15/05 ............. 50,000 49,278
Procter & Gamble Co.
9.36% 01/01/21 ............. 55,000 63,392
Quebec Province of Canada
7.50% 09/15/29 ............. 100,000 98,241
Raytheon Co.
6.75% 08/15/07 ............. 100,000 93,953
Royal Bank of Scotland Group PLC
8.817% 03/31/49 ............. 35,000 36,055
Sprint Capital Corp.
5.70% 11/15/03 ............. 25,000 23,582
6.875% 11/15/28 ............. 160,000 139,083
Stop & Shop Cos. Inc.
9.75% 02/01/02 ............. 20,000 20,550
Suntrust Bank Inc.
6.00% 01/15/28 ............. 25,000 22,532
Tele-Communications Inc.
9.80% 02/01/12 ............. 30,000 34,084
7.875% 08/01/13 ............. 35,000 34,729
Textron Inc.
6.375% 07/15/04 ............. 85,000 81,066
Time Warner Inc.
7.57% 02/01/24 ............. 150,000 139,433
Tosco Corp.
7.625% 05/15/06 ............. 20,000 19,847
Turner Broadcasting Systems Inc.
8.375% 07/01/13 ............. 35,000 34,457
Tyco International Group S.A.
6.25% 06/15/03 ............. 20,000 19,096
7.00% 06/15/28 ............. 130,000 111,752
Union Carbide Corp.
6.79% 06/01/25 ............. 105,000 100,785
Union Oil Co.
7.35% 06/15/09 ............. 100,000 96,854
Union Pacific Co. (Series A)
8.02% 07/02/12 ............. 152,166 151,352
United Illuminating Co.
6.25% 12/15/02 ............. 10,000 9,638
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
US Airways Pass-Through Trust
8.36% 07/20/20 ............. $120,000 $ 116,483
US West Communications Inc.
5.625% 11/15/08 ............. 100,000 86,399
USA Networks Inc.
6.75% 11/15/05 ............. 55,000 52,261
USX Marathon Group
9.80% 07/01/01 ............. 25,000 25,524
Wal-Mart Stores Inc.
6.875% 08/10/09 ............. 430,000 420,054
Walt Disney Co.
5.62% 12/01/08 ............. 40,000 35,606
Williams Cos. Inc.
6.125% 02/15/12 ............. 50,000 48,867
TOTAL CORPORATE NOTES
(COST $10,188,439) ............. 9,821,896
NON-AGENCY MORTGAGE BACKED SECURITIES -- 0.3%
DLJ Commercial Mortgage Corp.
6.24% 11/12/31 ............. 205,000 189,149
First Union Lehman Brothers - Bank of America
6.28% 06/18/07 ............. 114,262 110,067
Nationslink Funding Corp.
6.001% 11/20/07 ............. 27,032 25,716
6.476% 07/20/08 ............. 89,000 83,775
TOTAL NON-AGENCY MORTGAGE BACKED SECURITIES
(COST $440,424) ................ 408,707
NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.9%
GMAC Commercial Mortgage Security Inc.
6.42% 08/15/08 ............. 107,000 100,308
Headlands Mortgage Securities Inc. (Class A)
6.65% 02/25/29 ............. 102,867 96,887
Lehman Large Loan
6.79% 06/12/04 26,213 25,946
Merrill Lynch Mortgage Investors Inc.
6.50% 05/01/30 ............. 40,000 35,100
Morgan Stanley Capital I
6.52% 01/15/08 ............. 21,000 19,917
6.54% 05/15/08 ............. 135,000 128,207
6.21% 09/15/08 ............. 159,000 147,449
7.11% 07/15/09 ............. 80,000 77,975
Norwest Integrated Structured Assets Inc. (Class A)
6.50% 04/25/29 ............. 61,383 57,701
7.50% 03/25/30 ............. 70,116 69,787
Prudential Securities Financial Asset Funding Corp.
6.83% 09/25/09 ............. 54,421 52,875
Residential Accredit Loans Inc.
7.75% 04/25/30 ............. 76,000 75,478
Residential Funding Mortgage Securities I (Class A)
6.50% 07/25/14 ............. 80,593 77,595
--------------
See Notes to Schedule of Investments and Notes to Financial Statements.
43
<PAGE>
TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
Salomon Brothers Mortgage Securities Inc.
7.00% 07/25/24 ............. $81,506 $ 73,143
TOTAL NON-AGENCY COLLATERALIZED
MORTGAGE OBLIGATIONS (COST $1,069,773) 1,038,368
TOTAL BONDS AND NOTES (COST $40,945,800) 40,392,035
NUMBER OF
SHARES VALUE
--------------------------------------------------------------------------------
PREFERRED STOCKS -- 0.1%
--------------------------------------------------------------------------------
INTERNATIONAL PREFERRED -- 0.1%
Henkel KGaA ...................... 1,586 90,547
Telecomunicacoes Brasileiras
S.A. ADR ....................... 395 38,364
128,911
DOMESTIC PREFERRED -- 0.0%
TCI Communications Inc., 10.00% . 1,200 30,525
TOTAL PREFERRED STOCKS (COST $163,038) 159,436
--------------------------------------------------------------------------------
WARRANTS -- 0.0%
--------------------------------------------------------------------------------
Muenchener Rueckversicherungs-
Gesellschaft AG (Regd.) ........ 11 919(a)
TOTAL INVESTMENTS IN SECURITIES
(COST $95,257,991) ............. 112,103,350
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 9.4%
--------------------------------------------------------------------------------
GEI Short Term Investment Fund
(COST $11,297,564) .............11,297,564 11,297,564
OTHER ASSETS AND LIABILITIES,
NET (2.9)% ..................... (3,477,536)
--------------------------------------------------------------------------------
NET ASSETS-- 100% ................ $119,923,378
================================================================================
------------
See Notes to Schedule of Investments and Notes to Financial Statements.
44
<PAGE>
INCOME FUND
--------------------------------------------------------------------------------
Q&A
ROBERT MACDOUGALL LEADS THE FIXED INCOME TEAM AT GE ASSET MANAGEMENT. BOB
MANAGES INDIVIDUAL, INSTITUTIONAL AND MUTUAL FUND PORTFOLIOS WITH TOTAL ASSETS
EXCEEDING $29 BILLION. HIS RESPONSIBILITIES INCLUDE MANAGING THE INCOME FUND AND
MONEY MARKET FUND. BOB JOINED GE ASSET MANAGEMENT IN 1986 AS MUTUAL FUND
PORTFOLIO MANAGER, BECAME SENIOR VICE PRESIDENT - TAXABLE FIXED INCOME IN 1992
AND WAS NAMED TO HIS PRESENT POSITION, RESPONSIBLE FOR BOTH TAXABLE AND
TAX-EXEMPT FIXED INCOME OPERATIONS, 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. BOB IS A TRUSTEE OF THE GE
PENSION TRUST AND GE'S EMPLOYEE SAVINGS PROGRAM. 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 PEERS FOR THE
SIX MONTHS ENDED JUNE 30, 2000?
A. The Income Fund posted a total return of 3.39%. The Lehman Brothers Aggregate
Bond Index returned 3.98% and the Lipper group of 19 Intermediate Investment
Grade Debt annuity funds returned 3.19%.
Q. WHY DID THE FUND UNDERPERFORM ITS BENCHMARK.
A. The primary difference in performance versus the benchmark resulted from fees
and expenses. Overweights to spread sectors were a slight drag on performance
due to widening yield spreads versus Treasuries during the period. The Fund
performed well within its peer group largely due to favorable security
selection.
Q. DESCRIBE WHAT OCCURRED IN THE FIXED INCOME MARKETS IN THE FIRST HALF OF 2000?
A. After suffering a negative return in 1999, the U.S. Fixed Income market moved
to the positive in the first six months of 2000, posting a total return of
3.99%. Although this figure does not seem impressive at first glance, within an
environment of Fed tightening, it was quite respectable relative to other asset
classes. The U.S. economy finished 1999 with a bang growing at its fastest
quarterly pace in nearly 16 years and showed no signs of slowing in the first
quarter of 2000. Y2K fears were quickly forgotten. Consumers, brimming with
confidence from employment and increased wealth from powering stock and housing
markets, kept up their brisk pace of spending. The Federal Reserve, having
raised interest rates 75 basis points in the prior year, remained vigilant
against the heightened risks of accelerating inflation. Reacting with an
expectation of further tightening, bond investors pushed interest rates up,
primarily at the short end creating an inverted yield curve. A forecasted
reduction in long maturity treasury issuance due to the budget surplus and the
Treasury's announcement of a buyback program of long bonds increased demand for
longer dated issues driving yields at the long end down, exacerbating the curve
inversion. By March 31, the Fed had raised the federal funds rate another 50
basis points to 6.00%, two-year yields had increased by 25 basis points to 6.48%
and 30-year bond yields had dropped 64 basis points to 5.84%.
Bond market participants remained defensive early in the second quarter.
Heightened inflationary fears in early May manifested themselves in higher
yields across the maturity spectrum and expectations for a 50 basis point rate
hike in mid May and more through year-end. Two, ten and thirty-year Treasury
yields rose 37, 55 and 41 basis points, respectively, prior to the Federal Open
Market Committee meeting on May 16, when the Fed Reserve Board met investors'
expectations by increasing the funds rate to 6.50% citing the threat of higher
inflation. After a series of economic data showing signs of slowing growth in
April and May, particularly an increase in the unemployment rate to 4.1% from
3.9%, prospects of a "soft landing" surfaced, reducing expectations of further
tightening. By quarter end, two, ten and thirty-year yields declined 49, 53 and
34 basis points to 6.36%, 6.02% and 5.89%, respectively. Again, the Fed matched
expectations by leaving rates unchanged in June; albeit maintaining a tightening
bias and reiterating the economy is still growing at a pace that threatens
accelerating inflation.
During this period, U.S. Treasuries outperformed all other domestic
"spread" sectors with a total return of 5.37%. Treasury securities with
maturities over 20 years returned 10.01% due to the aforementioned demand in
response to the Treasury buyback program. Debate in Congress and comments from
45
<PAGE>
INCOME FUND
--------------------------------------------------------------------------------
Treasury officials raising concern over the status of "Government Sponsored
Enterprises", coupled with increasing supply significantly widened yield spreads
on government agency debt. The agency sector returned 3.58% in the first half,
underperforming equal duration Treasuries by 113 basis points. A volatile stock
market, poor liquidity and a growing concern for credit deterioration from
leveraged buy-out activity combined with an inverted Treasury yield curve pushed
yield spreads on investment grade corporate securities above levels experienced
during the crisis of 1998. The corporate sector posted a total return of just
2.68% in the first half, giving up 265 basis points in negative excess return
versus treasuries. Not surprisingly, securities of lower credit quality
underperformed their higher quality counterparts. Structured securities backed
by residential mortgages, commercial mortgages and other securitized assets also
experienced significant spread widening on lack of demand and inversion of the
yield curve. Six-month returns for MBS, CMBS and ABS sectors were 4.12%, 3.65%
and 3.35%, respectively.
Q. WHAT IS YOUR OUTLOOK FOR THE BOND MARKET GOING FORWARD?
A. A major question to be answered by the bond market will be: is the recent
economic data a sign of a genuine slowdown keeping the Fed on hold or a short
respite in a still strong economy requiring more rate increases? Both the Fed
and bond investors will be diligently analyzing economic releases over the next
few months to determine the need for more monetary restriction. For a bit of
historical perspective, the second quarter in both 1998 and 1999 were slowdowns
off strong first quarters very similar to this year, however, both were followed
by a re-acceleration in the second half. This year is different due to the
dampening effect of higher energy prices and much tighter financial conditions
from 125 basis points of rate hikes. The fall elections likely will cloud the
issue by providing a short-term distraction from market fundamentals. In our
view, a ten-year yield at roughly 6.00% versus a funds rate at 6.50% seems
aggressively priced, however, the near term economic uncertainty keeps us on the
fence with respect to duration positioning of the portfolio. We believe the
corporate bond market will remain the most nervous, fearing, in a perverse way,
that signs of stronger growth will prompt more Fed tightening which will
increase the probability of a hard landing. From a historical yield spread
analysis, corporate securities look very attractive. However, as "no
tightening/tightening" speculation heats up around every piece of economic data,
these spreads likely will remain volatile. Our slight overweight to this sector
is concentrated in short to intermediate securities offering higher breakeven
levels should spreads widen. We will maintain our overweight to other
non-treasury sectors (i. e., mortgage backed, collateralized mortgage backed and
asset backed securities) for the yield advantage they provide that should
benefit risk-adjusted long-term performance.
46
<PAGE>
INCOME FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMPARISON OF CHANGES IN VALUE OF A $10,000 INVESTMENT
--------------------------------------------------------------------------------
[LINE GRAPH OMITTED, PLOT POINTS FOLLOW]
Income Fund LB Aggregate
1/3/95 $10000 $10000
3/95 10453 10504
6/95 11016 11144
9/95 11210 11363
12/95 11683 11847
3/96 11445 11636
6/96 11463 11702
9/96 11674 11918
12/96 12024 12275
3/97 11953 12207
6/97 12378 12657
9/97 12770 13079
12/97 13106 13464
3/98 13312 13672
6/98 13626 13991
9/98 14102 14583
12/98 14148 14632
3/99 14056 14558
6/99 13884 14429
9/99 13964 14528
12/99 13946 14511
3/00 14225 14831
6/00 14419 15088
Income Fund (ending value $14,419)
LB Aggregate (ending value $15,088)
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
SIX ONE THREE SINCE
MONTHS YEAR YEAR COMMENCEMENT
--------------------------------------------------------------------------------
Income Fund 3.39% 3.85% 5.22% 6.89%
--------------------------------------------------------------------------------
LB Aggregate 3.98% 4.56% 6.03% 7.78%
--------------------------------------------------------------------------------
Lipper peer group average* 3.19% 3.80% 5.17% N/A
--------------------------------------------------------------------------------
Commencement date 1/3/95
--------------------------------------------------------------------------------
INVESTMENT PROFILE
A fund designed for investors who seek maximum
income consistent with prudent investment
management and preservation of capital by
investing primarily in a variety of investment
grade debt securities.
--------------------------------------------------------------------------------
PORTFOLIO COMPOSITION AS OF JUNE 30, 2000
--------------------------------------------------------------------------------
NET ASSETS OF $72,296 (IN THOUSANDS)
[PIE CHART OMITTED]
MORTGAGE BACKED 36.5%
CORPORATE NOTES 25.3%
CASH & OTHER 16.3%
U.S. TREASURIES 11.2%
FEDERAL AGENCIES 10.7%
--------------------------------------------------------------------------------
QUALITY RATINGS AT JUNE 30, 2000
--------------------------------------------------------------------------------
MOODY'S / S&P PERCENTAGE OF
RATINGS+ NET ASSETS
--------------------------------------------------------------------------------
Aaa / AAA ............................. 69.46%
--------------------------------------------------------------------------------
Aa / AA ............................... 5.77%
--------------------------------------------------------------------------------
A / A ................................. 9.68%
--------------------------------------------------------------------------------
Baa / BBB ............................. 8.13%
--------------------------------------------------------------------------------
Ba / BB ............................... 0.36%
--------------------------------------------------------------------------------
Other ................................. 6.60%
--------------------------------------------------------------------------------
+MOODY'S INVESTORS SERVICES, INC./STANDARD & POOR'S ARE NATIONALLY RECOGNIZED
STATISTICAL RATING ORGANIZATIONS.
* LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE PERIODS INDICATED IN THE INTERMEDIATE U.S. BOND PEER GROUP CONSISTING OF 19,
19 AND 13 UNDERLYING ANNUITY FUNDS, RESPECTIVELY.
SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
47
<PAGE>
INCOME FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
INCOME FUND
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
BONDS AND NOTES -- 93.4%
--------------------------------------------------------------------------------
U.S. TREASURIES -- 11.2%
U.S. Treasury Bonds
8.125% 08/15/19 ........... $2,825,000 $ 3,415,171(h)
6.125% 08/15/29 ........... 1,255,000 1,267,550(h)
6.25% 05/15/30 ........... 1,127,000 1,182,471(h)
5,865,192
U.S. Treasury Notes
6.75% 05/15/05 ........... 1,459,000 1,492,965(h)
6.50% 02/15/10 ........... 204,000 210,981(h)
1,703,946
U.S. Treasury STRIPS
6.23% 02/15/19 ........... 1,750,000 558,950(d,h)
TOTAL U.S. TREASURIES
(COST $8,159,841) ............ 8,128,088
FEDERAL AGENCIES -- 10.7%
Federal Farm Credit Bank
9.15% 02/14/05 ........... 100,000 108,062
8.60% 05/30/06 ........... 400,000 401,876
509,938
Federal Home Loan Bank
6.75% 05/01/02 ........... 2,000,000 1,992,820
Federal Home Loan Mortgage Corp.
7.375% 05/15/03 ........... 1,205,000 1,216,532
6.22% 03/18/08 ........... 395,000 365,004
8.25% 06/01/26 ........... 60,000 66,047
1,647,583
Federal National Mortgage Assoc.
5.125% 02/13/04 ........... 1,525,000 1,431,350
5.78% 05/05/04 ........... 375,000 357,656
6.99% 07/09/07 ........... 50,000 48,164
5.64% 12/10/08 ........... 485,000 448,518
6.04% 02/25/09 ........... 905,000 829,487
7.25% 01/15/10 ........... 345,000 348,474
3,463,649
Tennessee Valley Authority
6.125% 07/15/03 ........... 133,000 126,661
TOTAL FEDERAL AGENCIES (COST $7,927,158) 7,740,651
AGENCY MORTGAGE BACKED -- 35.2%
Federal Home Loan Mortgage Corp.
6.75% 10/01/08 ........... 38,949 38,354
8.00% 09/01/09 ........... 86,862 87,223
7.50% 11/01/09 ........... 63,590 63,726
7.50% 06/01/10 ........... 25,072 25,126
8.50% 07/01/10 ........... 66,966 67,772
7.50% 09/01/12 ........... 140,010 139,835
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
9.00% 02/01/17 ........... $ 25,243 $ 25,850
8.00% 05/01/27 ........... 768,508 773,073
6.50% 02/01/29 - 07/01/29 1,207,878 1,140,366
6.00% 04/01/29 - 07/01/29 1,174,446 1,076,087
7.50% 10/01/29 ........... 194,146 191,513
8.00% 10/01/29 ........... 235,260 236,583
7.00% 12/01/29 ........... 252,982 244,444
7.00% 01/01/30 - 02/01/30 381,551 368,623
7.50% 01/01/30 ........... 337,759 333,143
8.00% 01/01/30 - 06/01/30 2,406,397 2,419,920
6.00% TBA ................ 1,150,000 1,053,503(c)
6.50% TBA ................ 1,447,000 1,365,722(c)
8.00% TBA ................ 3,160,000 3,177,791(c)
12,828,654
Federal National Mortgage Assoc.
7.50% 07/01/02 ........... 14,893 14,858
7.50% 12/01/09 ........... 542,476 543,175
7.00% 08/01/13 ........... 59,470 58,708
7.50% 02/01/14 ........... 342,478 342,584
6.50% 03/01/15 ........... 213,236 205,486
9.00% 04/01/16 ........... 84,269 86,512
8.00% 12/01/17 ........... 142,403 144,282
9.00% 12/01/17 ........... 107,068 110,279
8.028% 07/01/19 ........... 92,090 91,709
9.00% 12/01/22 ........... 124,159 127,883
7.50% 12/01/23 ........... 326,706 324,334
6.50% 01/01/29 - 09/01/29 2,995,619 2,826,889
6.00% 10/01/29 ........... 710,081 649,945
7.00% 01/01/30 ........... 639,505 617,320
7.50% 02/01/30 - 03/01/30 1,216,479 1,198,987
7,342,951
Government National Mortgage Assoc.
7.00% 03/15/12 ........... 388,043 384,282
9.00% 11/15/16 ........... 313,988 328,017
9.00% 01/15/17 - 11/15/17 230,048 240,328
8.50% 10/15/17 ........... 238,323 245,734
9.00% 12/15/21 ........... 22,942 23,831
7.125% 11/20/22 ........... 39,589 39,608
7.375% 02/20/23 ........... 107,440 107,595
6.50% 02/15/24 - 03/15/24 394,583 376,456
7.125% 12/20/24 ........... 51,790 52,033
7.375% 02/20/26 ........... 17,868 17,904
6.50% 04/15/28 ........... 828,342 786,403
7.00% 04/15/28 - 10/15/28 1,543,654 1,500,709
8.00% 12/15/29 ........... 254,455 257,158
8.00% 04/15/30 - 06/15/30 898,659 908,203
5,268,261
TOTAL AGENCY MORTGAGE BACKED
(COST $25,693,522) ........... 25,439,866
AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 3.4%
Federal Home Loan Mortgage Corp.
5.85% 02/15/08 ........... 110,000 108,075
6.50% 07/15/08 ........... 50,000 47,938
6.50% 02/15/21 ........... 42,913 41,505
7.00% 02/15/21 ........... 45,732 45,546
6.094% 02/15/22 ........... 75,000 68,028 (k)
7.75% 03/15/22 ........... 512,197 515,398
---------------------
See Notes to Schedule of Investments and Notes to Financial Statements.
48
<PAGE>
INCOME FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
8.00% 02/01/23 ........... $ 58,509 $ 17,205
5.75% 06/15/23 ........... 129,000 121,961
7.00% 01/15/28 ........... 46,000 19,104
6.50% 12/15/28 ........... 167,000 151,604
7.50% 06/15/29 - 07/15/29 337,877 77,570
1,213,934
Federal Home Loan Mortgage Corp. STRIPS
5.58% 08/01/27 ........... 141,199 98,927(d,f)
6.68% 04/01/29 ........... 172,581 106,111(d,f)
6.81% 06/01/29 ........... 971,686 589,995(d,f)
795,033
Federal National Mortgage Assoc.
8.00% 10/25/20 ........... 50,498 50,940
5.20% 12/25/22 ........... 5,032 3,772(d,f)
54,712
Federal National Mortgage Assoc. REMIC
6.00% 06/25/01 ........... 15,217 15,003
6.00% 03/25/19 ........... 67,187 66,431
7.00% 09/25/20 ........... 11,220 10,985
92,419
Federal National Mortgage Assoc. STRIPS
9.00% 05/25/22 ........... 5,133 1,356(g)
8.50% 07/25/22 ........... 8,367 2,137(g)
8.00% 02/01/23 - 08/01/23 330,754 100,430(g)
8.00% 07/01/24 ........... 217,405 66,510(g)
8.00% 11/01/26 ........... 142,898 42,512(g)
7.50% 07/01/27 ........... 125,126 39,531(g)
6.58% 05/01/28 ........... 59,449 37,267(d,f)
8.00% 11/01/29 ........... 141,438 39,161(g)
328,904
TOTAL AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS
(COST $2,492,270) ............. 2,485,002
ASSET BACKED -- 3.9%
Advanta Mortgage Loan Trust Corp.
6.30% 07/25/25 ........... 2,606 2,440
American Express Credit Account Master Trust
6.851% 03/15/05 ........... 55,000 55,137
American Express Master Trust
6.801% 08/15/04 ........... 641,000 642,199(k)
Citibank Credit Card Master Trust I
5.75% 01/15/03 ........... 18,000 17,843
Discover Card Master Trust I
6.761% 09/15/04 ........... 1,020,000 1,020,632
Ford Credit Auto Loan Master Trust
5.50% 02/15/03 ........... 45,000 44,547
Green Tree Financial Corp. Series 1993-1
6.90% 04/15/18 ........... 48,149 47,412
6.97% 04/01/31 ........... 81,000 79,531
MBNA Master Credit Card Trust
6.911% 10/15/03 ........... 540,000 541,350 (k)
6.881% 04/15/05 ........... 184,000 184,631 (k)
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
Mid State Trust
7.54% 07/01/35 ........... $ 5,842 $ 5,453
West Penn Funding LLC
6.81% 09/25/08 ........... 59,000 57,728
Yorkshire Power Pass-Through Asset Trust
8.25% 02/15/05 ........... 85,000 86,810(b)
TOTAL ASSET BACKED (COST $2,788,507) 2,785,713
CORPORATE NOTES -- 25.3%
Abbey National Capital Trust I
8.963% 12/29/49 ........... 75,000 74,480 (k)
Abbey National PLC
7.95% 10/26/29 ........... 95,000 93,898
6.70% 07/09/49 ........... 15,000 13,367
7.35% 10/29/49 ........... 131,000 122,151
Aetna Services Inc.
6.97% 08/15/36 ........... 135,000 128,454
AFLAC Inc.
6.50% 04/15/09 ........... 185,000 167,765
AIG SunAmerica GBL Finl I
7.40% 05/05/03 ........... 250,000 250,771(b)
AIG SunAmerica GBL Finl II
7.60% 06/15/05 ........... 250,000 252,230(b)
Allstate Corp.
7.20% 12/01/09 ........... 80,000 76,474
Amerada Hess Corp.
7.875% 10/01/29 ........... 125,000 122,226
American Airlines Inc.
6.855% 04/15/09 ........... 74,852 73,080
Armstrong World Industries Inc.
7.45% 05/15/29 ........... 100,000 67,625
Arvin Industries Inc.
7.125% 03/15/09 ........... 95,000 83,489
Associates Corp. of North America
6.375% 10/15/02 ........... 300,000 293,694
5.75% 11/01/03 ........... 55,000 52,258
Atlantic City Electric Co.
6.19% 01/17/06 ........... 160,000 152,654
Bank One Corp.
6.40% 08/01/02 ........... 130,000 127,291
BCI US Funding Trust I
8.01% 12/29/49 ........... 100,000 91,361(b,k)
Bear Stearns Cos. Inc.
7.625% 12/07/09 ........... 140,000 133,274
Beckman Instruments Inc.
7.10% 03/04/03 ........... 40,000 38,224
Bell Telephone Co. - Pennsylvania
8.35% 12/15/30 ........... 243,000 253,398
Bellsouth Capital Funding
7.875% 02/15/30 ........... 155,000 155,274
Bellsouth Telecomm Inc.
6.375% 06/01/28 ........... 75,000 62,289
Boston University
7.625% 07/15/97 ........... 100,000 90,343
Brascan Ltd.
7.375% 10/01/02 ........... 30,000 29,373
---------------------
See Notes to Schedule of Investments and Notes to Financial Statements.
49
<PAGE>
INCOME FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
Bristol-Myers Squibb Co.
6.875% 08/01/97 ........... $ 75,000 $ 67,827
CIT Group Inc.
7.125% 10/15/04 ........... 115,000 111,566
Citigroup Inc.
7.45% 06/06/02 ........... 140,000 140,384
Clear Channel Communications Inc.
7.875% 06/15/05 ........... 95,000 95,273
Coastal Corp.
7.75% 06/15/10 ........... 130,000 128,527
Conseco Inc.
8.70% 11/15/26 ........... 21,000 9,135
Continental Cablevision Inc.
8.50% 09/15/01 ........... 160,000 161,813
Corporacion Andina de Fomento
6.75% 03/15/05 ........... 130,000 122,538
CSC Holdings Inc.
8.125% 07/15/09 ........... 130,000 125,450
CSX Corp.
6.25% 10/15/08 ........... 145,000 126,096
DaimlerChrysler AG
7.40% 01/20/05 ........... 140,000 138,893
8.00% 06/15/10 ........... 180,000 183,994
Delphi Automotive Systems Corp.
6.125% 05/01/04 ........... 75,000 70,236
Deutsche Telekom AG
7.75% 06/15/05 ........... 235,000 236,604
8.25% 06/15/30 ........... 585,000 594,115
Dominion Resources Inc.
8.125% 06/15/10 ........... 70,000 70,473
Dresdner Funding Trust I
8.151% 06/30/31 ........... 225,000 194,157(b)
Du Pont de Nemours (E.I.) & Co.
6.75% 10/15/04 ........... 55,000 54,178
Duke Capital Corp.
7.25% 10/01/04 ........... 180,000 177,354
Duke Energy Corp.
5.375% 01/01/09 ........... 80,000 69,118
Electronic Data Systems Corp.
6.85% 10/15/04 ........... 75,000 73,345
EOP Operating LP
6.50% 01/15/04 ........... 30,000 28,632
Federated Department Stores Inc.
6.125% 09/01/00 ........... 80,000 78,681
8.50% 06/01/10 ........... 70,000 71,322
Ford Motor Co.
6.70% 07/16/04 ........... 40,000 38,755
7.50% 03/15/05 ........... 60,000 59,703
5.80% 01/12/09 ........... 80,000 69,599
7.375% 10/28/09 ........... 545,000 527,162
7.45% 07/16/31 ........... 100,000 94,573
Ford Motor Credit Co.
7.50% 06/15/03 ........... 85,000 84,801
7.875% 06/15/10 ........... 150,000 149,973
Fortune Brands Inc.
7.125% 11/01/04 ........... 100,000 97,862(b)
FPL Group Capital Inc.
7.375% 06/01/09 ........... 450,000 439,947
General Motors Acceptance Corp.
5.75% 11/10/03 ........... 50,000 47,343
6.125% 01/22/08 ........... 80,000 71,988
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
Georgia-Pacific Group
9.95% 06/15/02 ........... $ 50,000 $ 51,768
Goldman Sachs Group L.P.
6.65% 05/15/09 ........... 100,000 91,802
Guangdong International Trust
& Investment Corp.
8.75% 10/24/16 ........... 10,000 1,300(b,j)
Heritage Media Corp.
8.75% 02/15/06 ........... 95,000 94,525
Household Finance Corp.
6.125% 07/15/02 ........... 30,000 29,084
HSBC Capital Funding LP
9.547% 12/29/49 ........... 65,000 67,600
International Paper Co.
8.00% 07/08/03 ........... 115,000 115,138(b)
8.125% 07/08/05 ........... 90,000 90,331(b)
Israel Electric Corp. Ltd.
7.125% 07/15/05 ........... 40,000 38,441(b)
J.P. Morgan & Co.
6.00% 01/15/09 ........... 55,000 48,839
Korea Development Bank
6.625% 11/21/03 ........... 5,000 4,807
Kroger Co.
6.34% 06/01/01 ........... 149,000 147,529
7.375% 03/01/05 ........... 150,000 145,931
LCI International Inc.
7.25% 06/15/07 ........... 148,000 140,131
Lehman Brothers Holdings Inc.
7.75% 01/15/05 ........... 170,000 168,424
8.25% 06/15/07 ........... 260,000 260,114
7.50% 08/01/26 ........... 100,000 98,922
Lenfest Communications Inc.
8.375% 11/01/05 ........... 85,000 86,142
LG&E Capital Corp.
5.75% 11/01/01 ........... 95,000 93,188(b)
Liberty Property Ltd. Partnership
7.50% 01/15/18 ........... 65,000 56,480
Lockheed Martin Corp.
7.95% 12/01/05 ........... 175,000 175,997
8.20% 12/01/09 ........... 155,000 156,885
Lumbermens Mutual Casualty
8.30% 12/01/37 ........... 20,000 15,479(b)
MCI WorldCom Inc.
6.40% 08/15/05 ........... 75,000 71,394
8.875% 01/15/06 ........... 100,000 103,686
Merita Bank Ltd.
7.15% 12/29/49 ........... 250,000 244,568(b)
Merrill Lynch & Co.
5.71% 01/15/02 ........... 145,000 141,521
Morgan Stanley, Dean Witter & Co.
7.125% 01/15/03 ........... 165,000 163,942
5.625% 01/20/04 ........... 55,000 51,866
8.00% 06/15/10 ........... 200,000 202,106
Nabisco Inc.
6.125% 02/01/33 ........... 75,000 70,784
National Rural Utilities Cooperative
6.046% 04/15/03 ........... 100,000 96,692
NB Capital Trust IV
8.25% 04/15/27 ........... 110,000 100,121
Newell Co.
6.35% 07/15/08 ........... 55,000 52,434
---------------------
See Notes to Schedule of Investments and Notes to Financial Statements.
50
<PAGE>
INCOME FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
News America Holdings Inc.
7.625% 11/30/28 ........... $105,000 $ 94,273
Noram Energy Corp.
6.375% 11/01/03 ........... 65,000 62,772
Northrop-Grumman Corp.
8.625% 10/15/04 ........... 65,000 66,972
Occidental Petroleum Corp.
7.375% 11/15/08 ........... 90,000 87,003
8.45% 02/15/29 ........... 130,000 133,081
Ontario Province of Canada
7.375% 01/27/03 ........... 135,000 135,832
Pactiv Corp.
8.375% 04/15/27 ........... 110,000 101,660
Pepsi Bottling Holdings Inc.
5.375% 02/17/04 ........... 110,000 103,623(b)
5.625% 02/17/09 ........... 60,000 53,571(b)
Petroleos Mexicanos
9.50% 09/15/27 ........... 95,000 95,978
Pharmacia Corp.
5.75% 12/01/05 ........... 75,000 70,187
Philip Morris Cos. Inc.
7.25% 09/15/01 ........... 60,000 59,020
Phillips Petroleum Co.
8.50% 05/25/05 ........... 40,000 41,323
9.375% 02/15/11 ........... 185,000 203,239
Pitney Bowes Credit Corp.
9.25% 06/15/08 ........... 200,000 219,732
PP&L Capital Funding Inc.
7.75% 04/15/05 ........... 150,000 147,833
Principal Financial Group
8.20% 08/15/09 ........... 75,000 73,698(b)
Procter & Gamble Co.
9.36% 01/01/21 ........... 105,000 121,022
Quebec Province of Canada
7.50% 09/15/29 ........... 100,000 98,241
Raytheon Co.
7.90% 03/01/03 ........... 130,000 130,776(b)
6.75% 08/15/07 ........... 85,000 79,860
Rohm & Haas Co.
6.95% 07/15/04 ........... 55,000 54,135
Royal & Sun Alliance Insurance
Group PLC
8.95% 10/15/29 ........... 110,000 109,016(b)
Royal Bank of Scotland Group PLC
8.817% 03/31/05 ........... 65,000 66,960
9.118% 03/31/49 ........... 185,000 190,915
Sprint Capital Corp.
5.70% 11/15/03 ........... 60,000 56,597
6.875% 11/15/28 ........... 175,000 152,122
Stop & Shop Cos. Inc.
9.75% 02/01/02 ........... 40,000 41,100
SunAmerica Inc.
5.60% 07/31/97 ........... 295,000 202,671
Suntrust Bank Inc.
6.00% 01/15/28 ........... 60,000 54,077
Tele-Communications Inc.
9.80% 02/01/12 ........... 65,000 73,849
7.875% 08/01/13 ........... 70,000 69,458
Texas Utilities Co.
5.94% 10/15/01 ........... 225,000 220,154
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
Textron Inc.
6.375% 07/15/04 ........... $130,000 $123,984
Time Warner Inc.
10.15% 05/01/12 ........... 224,000 257,071
7.57% 02/01/24 ........... 145,000 134,785
Time Warner Pass-Through
Asset Trust
6.10% 12/30/01 ........... 95,000 93,186(b)
Tosco Corp.
7.625% 05/15/06 ........... 45,000 44,657
TRW Inc.
6.625% 06/01/04 ........... 100,000 94,793
Turner Broadcasting Systems Inc.
8.375% 07/01/13 ........... 80,000 78,759
TXU Eastern Funding Co.
6.45% 05/15/05 ........... 160,000 149,015
6.75% 05/15/09 ........... 80,000 71,735
Tyco International Group S.A.
6.875% 09/05/02 ........... 100,000 98,127(b)
6.25% 06/15/03 ........... 5,000 4,774
7.00% 06/15/28 ........... 95,000 81,665
Union Carbide Corp.
6.79% 06/01/25 ........... 180,000 172,775
Union Oil Co.
7.35% 06/15/09 ........... 60,000 58,112
Union Pacific Co. (Series A)
8.02% 07/02/12 ........... 142,349 141,587
United Illuminating Co.
6.25% 12/15/02 ........... 25,000 24,094
US Airways Pass-Through Trust
8.36% 07/20/20 ........... 155,000 150,457
US West Communications Inc.
7.625% 06/09/03 ........... 350,000 349,344(b)
5.625% 11/15/08 ........... 90,000 77,759
USA Networks Inc.
6.75% 11/15/05 ........... 70,000 66,514
USX Marathon Group
9.80% 07/01/01 ........... 60,000 61,258
Viacom Inc.
7.75% 06/01/05 ........... 218,000 218,739
Vodafone AirTouch PLC
7.625% 02/15/05 ........... 150,000 150,110(b)
Wal-Mart Stores Inc.
6.875% 08/10/09 ........... 435,000 424,938
Walt Disney Co.
5.62% 12/01/08 ........... 75,000 66,761
Williams Cos. Inc.
6.125% 02/15/02 ........... 120,000 117,281
Yale University
7.375% 04/15/96 ........... 215,000 203,517
TOTAL CORPORATE NOTES (COST $18,953,067) 18,281,378
NON-AGENCY MORTGAGE BACKED SECURITIES -- 1.3%
Chase Commercial Mortgage Securities Corp.
6.39% 11/18/08 ........... 148,000 138,325
DLJ Commercial Mortgage Corp.
6.24% 11/12/31 ........... 561,000 517,623
---------------------
See Notes to Schedule of Investments and Notes to Financial Statements.
51
<PAGE>
INCOME FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
GS Mortgage Securities Corp. (Class A)
6.86% 07/13/30 ........... $219,000 $214,060
Nationslink Funding Corp.
6.001% 11/20/07 ........... 67,579 64,289
TOTAL NON-AGENCY MORTGAGE BACKED SECURITIES
(COST $964,519) ............... 934,297
NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 2.4%
GMAC Commercial Mortgage Security Inc.
6.42% 08/15/08 ........... 65,000 60,935
Headlands Mortgage Securities Inc. (Class A)
6.65% 02/25/29 ........... 168,410 158,621
Lehman Large Loan
6.79% 06/12/04 ........... 9,362 9,266
Merrill Lynch Mortgage Investors Inc.
6.50% 05/01/30 ........... 66,000 57,915
Morgan Stanley Capital I
6.86% 05/15/06 ........... 180,376 177,948(b)
6.52% 01/15/08 ........... 21,000 19,917
6.21% 09/15/08 ........... 98,000 90,880
7.11% 07/15/09 ........... 155,000 151,077
Norwest Integrated Structured Assets Inc. (Class A)
6.50% 04/25/29 ........... 100,370 94,348
7.50% 03/25/30 ........... 114,299 113,763
Prudential Securities Financial Asset Funding Corp.
6.83% 09/25/09 ........... 89,052 86,523
Residential Accredit Loans Inc.
7.75% 04/25/30 ........... 125,000 124,141
Residential Funding Mortgage Securities I (Class A)
6.50% 07/25/14 ........... 134,321 129,326
Salomon Brothers Mortgage Securities Inc.
7.00% 07/25/24 ........... 515,882 459,459
TOTAL NON-AGENCY COLLATERALIZED
MORTGAGE OBLIGATIONS (COST $1,788,149) 1,734,119
TOTAL BONDS AND NOTES (COST $68,767,033) 67,529,114
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
PREFERRED STOCK -- 0.2%
--------------------------------------------------------------------------------
Centaur Funding Corp.
(Series B), 9.08% ............ 105 $ 103,495(b)
TCI Communications Inc., 10.00% 2,400 61,050
TOTAL PREFERRED STOCK (COST $170,250) 164,545
TOTAL INVESTMENTS IN SECURITIES
(COST $68,937,283) ............ 67,693,659
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 11.9%
--------------------------------------------------------------------------------
GEI Short-Term Investment Fund
(COST $8,585,189) ............ 8,585,189 8,585,189
OTHER ASSETS AND LIABILITIES,
NET (5.5)% ................... (3,983,257)
--------------------------------------------------------------------------------
NET ASSETS-- 100% .............. $72,295,591
================================================================================
---------------------
See Notes to Schedule of Investments and Notes to Financial Statements.
52
<PAGE>
GLOBAL INCOME FUND
--------------------------------------------------------------------------------
Q&A
ESTHER M. BAROUDY IS THE PORTFOLIO MANAGER OF THE GLOBAL INCOME FUND, A POSITION
SHE ASSUMED FROM WILLIAM R. WRIGHT DURING THE SIX MONTH PERIOD ENDED JUNE 30,
2000. THE FUND HAS CONTINUED TO BE MANAGED USING THE SAME INVESTMENT STRATEGY
EMPLOYED BY MR. WRIGHT. MS. BAROUDY JOINED GE ASSET MANAGEMENT LIMITED (GEAML),
FORMERLY GE INVESTMENTS (US) LIMITED, AS A SENIOR ANALYST, INTERNATIONAL FIXED
INCOME PORTFOLIOS IN 1996, AND ASSISTED IN THE MANAGING OF THE FUND PRIOR TO HER
APPOINTMENT AS PORTFOLIO MANAGER. GEAML HAS TOTAL ASSETS UNDER MANAGEMENT
EXCEEDING $ 492 MILLION.
FROM 1988 TO 1996, MS. BAROUDY WAS A SENIOR ECONOMIST WITH CREDIT LYONNAIS
CAPITAL MARKETS, LONDON AND PARIS.
Q. HOW DID THE GLOBAL INCOME FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER
PEER GROUP FOR THE SIX MONTHS ENDED JUNE 30, 2000?
A. The Global Income Fund had a return of negative 1.15% for the six-month
period ended June 30, 2000. The Salomon Brothers World Government Bond Index in
US Dollars returned 0.03% and the Lipper average returned 1.09% for the same
period.
Q. WHY DID THE FUND UNDERPERFORM ITS BENCHMARK?
A. Currency movements accounted for a good portion of the underperformance
against the benchmark. The Euro depreciated by 5% against the U.S. dollar in the
six month period ended June 30, 2000. The Japanese Yen also moved in a wide and
volatile range. However, the Fund was not positioned to take advantage of these
market conditions. In addition, towards the middle of the first half of the
year, swap spreads widened sharply. This also hurt performance given that there
were credit holdings in the Fund against none in the index.
Q. WHAT HAS YOUR INVESTMENT STRATEGY BEEN?
A. The key to the investment strategy has been to be short of the Japanese Yen
and Japanese bonds when compared to the index. Japanese bonds offer very low
returns, where the yield on a 10-year JGB has averaged 1.75% in the first half
of the year. In addition, breakeven spreads did not favor Japanese bonds in
unhedged terms.
Q. WHICH SECTORS HAVE YOU LIKED?
A. The Greek bond holding has performed well in local currency terms, putting in
a return of 6.4% in the six months ended June 30, 2000. This was due to the
continued convergence in Greek interest rates towards those in the European
Monetary Union (the "EMU") driven by the prospect of Greece being admitted to
join the EMU in January 2001. Favorable performance in the economic fundamentals
was a prerequisite to this and has also been reflected in Greek bond prices.
Q. WHAT DOMESTIC EVENT HAD A MAJOR IMPACT ON THE FINANCIAL MARKETS?
A. A key development in early March was the announcement by the U.S. Treasury
that it was reviewing the implicit guarantee given to Agency bonds. This was
coupled with a statement that the Treasury would be launching a huge buyback of
Treasuries and the combination prompted a dramatic widening in U.S. credit
spreads, with negative implications for credit products world-wide.
Q. WHAT IS THE OUTLOOK FOR THE FUND AND HOW HAVE YOU POSITIONED THE FUND GOING
FORWARD?
A. The Fund is slightly underweight in Japan balanced by a slight overweight in
the EMU. It is duration neutral as it is not yet clear that central banks have
finished tightening monetary policy. However, healthier budgetary positions in
the U.S. and Europe are supportive to bond prices in the longer end of those
markets.
53
<PAGE>
GLOBAL INCOME FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMPARISON OF CHANGES IN VALUE OF A $10,000 INVESTMENT
--------------------------------------------------------------------------------
[LINE CHART OMITTED, PLOT POINTS FOLLOW]
Global Income Fund JPM Global Bond Salomon World Bond
5/1/97 $10000 $10000 $10000
6/97 10190 10352 10392
9/97 10320 10427 10524
12/97 10341 10509 10543
3/98 10540 10613 10624
6/98 10729 10853 10835
9/98 11517 11767 11736
12/98 11720 12118 12152
3/99 11219 11646 11685
6/99 10874 11247 11283
9/99 11018 11689 11792
12/99 10841 11503 11634
3/00 10728 11655 11828
6/00 10717 11637 11834
Global Income Fund (ending value $10,717)
Salomon World Bond (ending value $11,637)
JPM Global Bond (ending value $11,834)
--------------------------------------------------------------------------------
ANNUAL AVERAGE TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
SIX ONE THREE SINCE
MONTHS YEAR YEAR COMMENCEMENT
--------------------------------------------------------------------------------
Global Income Fund (1.15%) (1.44%) 1.70% 2.21%
--------------------------------------------------------------------------------
Salomon World Bond 0.03% 3.13% 3.84% 4.90%
--------------------------------------------------------------------------------
JPM Global Bond 2.88% 5.20% 4.55% 5.46%
--------------------------------------------------------------------------------
Lipper peer group average* 1.09% 3.54% 2.67% N/A
--------------------------------------------------------------------------------
Commencement date 5/1/97
--------------------------------------------------------------------------------
INVESTMENT PROFILE
A fund designed for investors who seek high return, emphasizing current
income and, to a lesser extent, capital appreciation by investing
primarily in a combination of foreign and domestic debt securities, with
an emphasis in foreign debt securities.
--------------------------------------------------------------------------------
CURRENCY EXPOSURE AS OF JUNE 30, 2000
--------------------------------------------------------------------------------
[PIE CHART OMITTED]
EURO 35.2%
JAPANESE YEN 27.9%
CANADIAN DOLLARS 21.6%
AUSTRALIAN DOLLAR 13.9%
CASH & OTHERS 1.4%
--------------------------------------------------------------------------------
PORTFOLIO COMPOSITION AS OF JUNE 30, 2000
--------------------------------------------------------------------------------
NET ASSETS OF $8,592 (IN THOUSANDS)
[PIE CHART OMITTED]
EUROPE 52.7%
UNITED STATES 27.8%
JAPAN 11.9%
OTHER REGIONS 3.8%
CASH & OTHERS 2.4%
PACIFIC RIM 1.4%
*LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE PERIODS INDICATED IN THE GLOBAL INCOME PEER GROUP CONSISTING OF 37, 36 AND
29 UNDERLYING ANNUITY FUNDS, RESPECTIVELY.
SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
54
<PAGE>
GLOBAL INCOME FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
GLOBAL INCOME FUND
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
BONDS AND NOTES -- 97.6%
--------------------------------------------------------------------------------
AUSTRALIA -- 1.4%
Queensland Treasury Corp.
8.00% 05/14/03 ...... AUD $100,000 $ 62,454
6.00% 07/14/09 ...... AUD 100,000 57,747
120,201
AUSTRIA -- 1.8%
Republic of Austria
6.25% 10/16/03 ...... JPY 10,000,000 111,107
4.00% 07/15/09 ...... EUR 49,000 41,798
152,905
CANADA -- 3.8%
Government of Canada
5.50% 09/01/02 ...... CAD 30,000 20,063
5.00% 09/01/04 ...... CAD 110,000 71,686
6.00% 06/01/08 ...... CAD 200,000 135,816
1.90% 03/23/09 ...... JPY 10,000,000 96,565
324,130
FRANCE -- 8.0%
Government of France
5.50% 10/25/07 ...... EUR 255,000 246,370
5.50% 04/25/10 ...... EUR 460,000 443,027
689,397
GERMANY -- 11.6%
Bayerische Vereinsbank
4.50% 06/24/02 ...... EUR 209,629 197,281
Depfa Pfandbreifbank
4.75% 01/28/02 ...... EUR 98,000 92,906
Federal Republic of Germany
4.50% 05/19/03 ...... EUR 100,000 94,281
6.00% 01/04/07 ...... EUR 220,000 219,066
4.50% 07/04/09 ...... EUR 285,000 258,240
6.50% 07/04/27 ...... EUR 50,000 53,817
Hypothekenbank AG
4.25% 07/16/02 ...... EUR 90,000 84,299
999,890
GREECE -- 2.6%
Hellenic Republic
6.50% 01/11/14 ...... GRD 75,500,000 219,292
ITALY -- 14.0%
Republic of Italy
4.75% 05/01/03 ...... EUR 340,000 320,963
3.75% 06/08/05 ...... JPY 14,000,000 149,084
4.75% 07/01/05 ...... EUR 180,000 167,533
8.75% 07/01/06 ...... EUR 350,000 389,680
1.80% 02/23/10 ...... JPY 10,000,000 95,151
6.50% 11/01/27 ...... EUR 82,000 84,125
1,206,536
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------
JAPAN -- 11.9%
Government of Japan
3.40% 03/22/04 ...... JPY $23,000,000 $ 235,777
1.50% 09/22/08 ...... JPY 30,000,000 279,007
1.80% 09/21/09 ...... JPY 35,000,000 330,818
International Bank for
Reconstruction & Development
4.50% 03/20/03 ...... JPY 16,900,000 176,382
1,021,984
NETHERLANDS -- 4.0%
Kingdom of The Netherlands
7.75% 03/01/05 ...... EUR 325,000 342,547
SPAIN-- 4.9%
Government of Spain
10.00% 02/28/05 ...... EUR 105,000 118,737
Kingdom of Spain
4.50% 07/30/04 ...... EUR 160,000 148,344
3.10% 09/20/06 ...... JPY 15,000,000 157,210
424,291
UNITED KINGDOM -- 5.8%
European Investment Bank
7.625% 12/07/06 ...... GBP 99,000 158,657
5.50% 12/07/09 ...... GBP 70,000 100,150
Halifax PLC
6.50% 02/16/04 ...... GBP 24,000 36,202
Treasury
7.00% 06/07/02 ...... GBP 25,000 38,471
8.50% 12/07/05 ...... GBP 16,000 27,442
8.00% 06/07/21 ...... GBP 65,000 141,311
502,233
UNITED STATES -- 27.8%
Federal National Mortgage Assoc.
7.125% 02/15/05 ...... USD 400,000 401,624(h)
General Motors Acceptance Corp.
7.75% 01/19/10 ...... USD 400,000 397,660(h)
KFW International Finance
1.00% 12/20/04 ...... JPY 30,000,000 283,643
Merrill Lynch & Co.
7.25% 05/02/02 ...... USD 390,000 388,400
U.S. Treasury Bond
5.25% 02/15/29 ...... USD 400,000 355,000(h)
U.S. Treasury Notes
6.50% 03/31/02 ...... USD 325,000 325,201(h)
6.50% 02/15/10 ...... USD 225,000 232,700(h)
2,384,228
TOTAL INVESTMENTS IN SECURITIES
(COST $8,671,642) ........ 8,387,634
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 0.2%
--------------------------------------------------------------------------------
GEI Short Term Investment Fund
(COST $12,194) .......... 12,194 12,194
OTHER ASSETS AND LIABILITIES,
NET 2.2% ............... 192,640
--------------------------------------------------------------------------------
NET ASSETS-- 100% ......... $8,592,468
================================================================================
------------
See Notes to Schedule of Investments and Notes to Financial Statements.
55
<PAGE>
MONEY MARKET FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMPARISON OF CHANGES IN VALUE OF A $10,000 INVESTMENT
--------------------------------------------------------------------------------
[LINE GRAPH OMITTED, PLOT POINTS FOLLOW]
Money Market Fund 90-Day T-Bill
12/89 $10000 $10000
12/90 10714 10774
12/91 11281 11371
12/92 11622 11770
12/93 11895 12131
12/94 12339 12660
12/95 13067 13377
12/96 13774 14066
12/97 14519 14797
12/98 15282 15520
12/99 16047 16270
6/00 15922 16737
Money Market Fund (ending value $15,922)
90-Day T-Bill (ending value $16,737)
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
SIX ONE FIVE TEN
MONTHS YEAR YEAR YEAR
--------------------------------------------------------------------------------
Money Market Fund 2.93% 5.63% 5.39% 4.76%
--------------------------------------------------------------------------------
90-Day T-Bill 2.86% 5.43% 5.14% 4.88%
--------------------------------------------------------------------------------
Lipper peer group average* 2.80% 5.34% 5.14% 4.82%
--------------------------------------------------------------------------------
Commencement date 7/1/85
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FUND YIELD AT JUNE 30, 2000
--------------------------------------------------------------------------------
FUND IBC MONEY FUND
--------------------------------------------------------------------------------
7 day current 4.44%+ 5.91%
7 day effective 4.54% 6.08%
--------------------------------------------------------------------------------
CURRENT YIELD REPRESENTS INCOME EARNED ON AN INVESTMENT IN THE MONEY MARKET FUND
FOR A SEVEN DAY PERIOD AND THEN ANNUALIZED.
EFFECTIVE YIELD IS CALCULATED SIMILARLY BUT IS SLIGHTLY HIGHER BECAUSE IT
REFLECTS THE COMPOUNDING EFFECT OF EARNINGS ON REINVESTED DIVIDENDS.
AN INVESTMENT IN THE MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH
THE FUND SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT
IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND.
--------------------------------------------------------------------------------
INVESTMENT PROFILE
A fund designed for investors who seek a high level of current income
consistent with the preservation of capital and maintenance of
liquidity by investing primarily in short-term U.S.
dollar-denominated money market instruments.
--------------------------------------------------------------------------------
* LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE PERIODS INDICATED IN THE MONEY MARKET PEER GROUP CONSISTING OF 106, 106, 88
AND 52 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 JUNE 30, 2000.
Q&A
ROBERT MACDOUGALL LEADS A TEAM OF MANAGERS FOR THE MONEY MARKET FUND (PLEASE
REFER TO PAGE 45 FOR BOB'S BIOGRAPHICAL DETAILS AND A DISCUSSION OF THE FIXED
INCOME MARKETS.)
Q. HOW DID THE MONEY MARKET FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER
PEER GROUP FOR THE SIX MONTHS ENDED JUNE 30, 2000?
A. The Fund posted a return of 2.93% for the period. The 90-day Treasury Bill
returned 2.86% and the Lipper peer group of 106 Money Market annuity funds
returned 2.80%.
Q. WHAT WERE THE KEY DRIVERS OF PERFORMANCE?
A. In reaction to Fed tightening throughout the period, we maintained an
average maturity shorter than that of the benchmark. As short rates climbed
in this environment, we were able to take advantage of higher yields when
reinvesting.
SEE NOTES TO PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
56
<PAGE>
MONEY MARKET FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
MONEY MARKET FUND
NET ASSETS OF $447,842 (IN THOUSANDS)
[PIE CHART OMITTED]
COMMERCIAL PAPER 50.6%
CERTIFICATES OF DEPOSIT & OTHER 27.5%
U.S. GOVERNMENTS 21.9%
--------------------------------------------------------------------------------
PRINCIPAL AMORTIZED
AMOUNT COST
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 101.7%
--------------------------------------------------------------------------------
U.S. GOVERNMENTS -- 21.9%
U.S. AGENCIES (D)
Federal Farm Credit Bank
6.64% 09/01/00 ...........$ 5,070,000 $ 5,013,855
Federal Home Loan Bank
6.61% 11/01/00 ........... 21,000,000 20,537,212
Federal Home Loan Mortgage Corp.
6.46% 10/12/00 ........... 17,870,000 17,555,307
Federal National Mortgage Assoc.
6.18% 08/03/00 ........... 13,000,000 12,929,692
6.70% 08/10/00 ........... 7,000,000 6,949,833
6.73% 10/02/00 ........... 18,090,000 17,786,291
6.71% 10/26/00 ........... 17,790,000 17,420,546
55,086,362
TOTAL U.S. GOVERNMENTS (COST $98,192,736) 98,192,736
COMMERCIAL PAPER -- 50.6%
Abbey National PLC
6.085% 07/06/00 ........... 17,000,000 16,985,632
Bank of America
6.21% 07/21/00 ........... 17,870,000 17,870,000
Barclays US Funding Corp.
6.80% 07/06/00 ........... 19,200,000 19,181,867
Credit Suisse
6.18% 07/24/00 ........... 17,200,000 17,132,089
Goldman Sachs Group LP
6.64% 08/01/00 ........... 18,800,000 18,692,506
Halifax Building Society
6.61% 08/18/00 ........... 18,100,000 17,940,479
Merrill Lynch & Co. Inc.
6.35% 08/01/00 ........... 17,500,000 17,404,309
--------------------------------------------------------------------------------
PRINCIPAL AMORTIZED
AMOUNT COST
--------------------------------------------------------------------------------
Morgan (J.P.) & Co. Inc.
6.44% 07/05/00 ........... $18,240,000 $ 18,226,948
Morgan Stanley Group Inc.
6.615% 08/28/00 ........... 18,850,000 18,649,106
National Australia Bank
6.79% 07/06/00 ........... 17,000,000 16,983,968
Rabobank Nederland
6.55% 07/05/00 ........... 18,800,000 18,786,318
Royal Bank of Canada
6.15% 07/03/00 ........... 18,160,000 18,153,795
UBS Finance Delaware Inc.
6.96% 07/03/00 ........... 10,680,000 10,675,870
TOTAL COMMERCIAL PAPER (COST $226,682,887) 226,682,887
YANKEE CERTIFICATES OF DEPOSIT -- 24.5%
Bank of Montreal
6.79% 09/01/00 ........... 18,800,000 18,800,000
Bayerische Hypotheken Bank
6.75% 08/17/00 ........... 18,000,000 18,000,000
Canadian Imperial Bank of Commerce
6.31% 07/27/00 ........... 18,160,000 18,160,000
Deutsche Bank AG
6.23% 07/14/00 ........... 18,000,000 18,000,000
Dresdner Bank AG
6.85% 07/05/00 ........... 18,500,000 18,485,920
Toronto-Dominion Bank
6.72% 08/21/00 ........... 18,100,000 18,100,000
TOTAL YANKEE CERTIFICATES OF DEPOSIT
(COST $109,545,920) .......... 109,545,920
TIME DEPOSITS -- 4.7%
Bank One NA
7.00% 07/03/00 ........... 21,000,000 21,000,000
State Street Cayman Islands
6.75% 07/03/00 ........... 163,495 163,495
TOTAL TIME DEPOSITS (COST $21,163,495) 21,163,495
TOTAL SHORT-TERM INVESTMENTS
(COST $455,585,038) .......... 455,585,038
OTHER ASSETS AND LIABILITIES,
NET (1.7)% .................. (7,742,837)
--------------------------------------------------------------------------------
NET ASSETS-- 100% .............. $447,842,201
================================================================================
-------------
See Notes to Schedule of Investments and Notes to Financial Statements.
57
<PAGE>
REAL ESTATE SECURITIES FUND
--------------------------------------------------------------------------------
Q&A
DAVID A. SHAPIRO, OF SENECA CAPITAL MANAGEMENT (SENECA), THE FUND'S SUB-ADVISER,
WITH TOTAL ASSETS UNDER MANAGEMENT OF OVER $11.7 BILLION, IS THE PORTFOLIO
MANAGER OF THE REAL ESTATE SECURITIES FUND. DAVID JOINED SENECA 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 SIX MONTHS ENDED JUNE 30, 2000?
A. The Real Estate Securities Fund had a return of 16.28% for the six-month
period ended June 30, 2000. The Wilshire Real Estate Securities Index
returned 15.21% and the Lipper peer group of 26 Real Estate annuity funds
returned an average of 13.79% for the same period.
Q. WHY DID THE FUND OUTPERFORM ITS BENCHMARK?
A. The Fund continued to outperform its benchmark by concentrating its
holdings in high quality companies with an emphasis on the apartment and
office/ industrial sectors. Additionally, the Fund's position in real
estate finance related companies added to returns. The Fund continued to
have core holdings in Spieker Properties, Equity Office Properties and
Equity Residential Properties. New holdings include Freddie Mac,
Countrywide Credit and Radian Group.
Q. WHAT HAS YOUR INVESTMENT STRATEGY BEEN?
A. Our strategy continues to be to own the preeminent companies in the Real
Estate and Real Estate Finance sectors. Good management teams and strong
balance sheets are the characteristics we emphasize when selecting
companies for the portfolio. Additionally, we look for reasonable
valuations relative to the long term growth rates of the portfolio
companies.
Q. WHAT DOMESTIC EVENTS HAD A MAJOR IMPACT ON THE FINANCIAL MARKETS?
A. Rising interest rates in the second quarter produced a return to "value"
investing with the real estate sector a major beneficiary. Our philosophy
has been to continue to emphasize real estate investment in those parts of
the country with strong job growth (i.e. the Southeast, Southwest and West)
and constrained infrastructure development (i.e., city centers - Boston,
New York City, San Francisco, Los Angeles).
Q. WHAT IS THE OUTLOOK FOR THE FUND AND HOW HAVE YOU POSITIONED THE FUND GOING
FORWARD:
A. With short term interest rates unlikely in our view to continue to rise
through the presidential election, we are focusing our attention on
companies with interest rate sensitivity, including Freddie Mac and
Countrywide Credit.
58
<PAGE>
REAL ESTATE SECURITIES FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMPARISON OF CHANGES IN VALUE OF A $10,000 INVESTMENT
--------------------------------------------------------------------------------
[LINE GRAPH OMITTED, PLOT POINTS FOLLOW]
Real Estate Securities Fund Wilshire RES Index
5/1/95 $10000 $10000
6/95 10570 10511
9/95 11060 11009
12/95 11700 11404
3/96 12102 11886
6/96 12515 12450
9/96 13384 13185
12/96 15941 15609
3/97 16607 15896
6/97 17308 16626
9/97 19160 18727
12/97 19048 18699
3/98 18948 18558
6/98 18013 17707
9/98 16181 15589
12/98 15679 15441
3/99 15206 14906
6/99 17059 16488
9/99 15558 14914
12/99 15645 14948
3/00 16437 15368
6/00 18193 17223
Real Estate Securities Fund (ending value $18,193)
Wilshire RES Index (ending value $17,223)
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
SIX ONE FIVE SINCE
MONTHS YEAR YEAR COMMENCEMENT
--------------------------------------------------------------------------------
Real Estate Securities Fund 16.28% 6.65% 11.47% 12.28%
--------------------------------------------------------------------------------
Wilshire RES 15.21% 4.45% 10.37% 11.09%
--------------------------------------------------------------------------------
Lipper peer group average* 13.79% 3.95% 10.37% N/A
--------------------------------------------------------------------------------
Commencement date 5/1/95
--------------------------------------------------------------------------------
INVESTMENT PROFILE
A fund designed for investors who seek maximum total return 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.
--------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS AT JUNE 30, 2000
--------------------------------------------------------------------------------
Equity Office Properties Trust .................... 4.57%
--------------------------------------------------------------------------------
Essex Property Trust Inc. ......................... 4.53%
--------------------------------------------------------------------------------
Equity Residential Properties Trust ............... 4.46%
--------------------------------------------------------------------------------
iStar Financial Inc. .............................. 4.32%
--------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. .................. 3.69%
--------------------------------------------------------------------------------
Glenborough Realty Trust Inc. (Series A) 7.75% .... 3.57%
--------------------------------------------------------------------------------
Avalon Bay Communities Inc. ....................... 3.50%
--------------------------------------------------------------------------------
Urban Shopping Centers Inc. ....................... 3.35%
--------------------------------------------------------------------------------
Manufactured Home Communities Inc. ................ 3.30%
--------------------------------------------------------------------------------
Simon Property Group Inc. ......................... 3.30%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO COMPOSITION AS OF JUNE 30, 2000
--------------------------------------------------------------------------------
NET ASSETS OF $53,238 (IN THOUSANDS)
[PIE CHART OMITTED]
CASH & OTHER 30.2%
OFFICE/INDUSTRIAL 19.6%
APARTMENTS 15.7%
FINANCIAL 12.7%
REGIONAL MALLS 9.9%
MANUFACTURED HOME 6.1%
HOTEL 3.0%
DIVERSIFIED 2.8%
* LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE PERIODS INDICATED IN THE REAL ESTATE PEER GROUP CONSISTING OF 26, 25 AND 7
UNDERLYING ANNUITY FUNDS, RESPECTIVELY.
SEE NOTES TO PERFORMANCE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
59
<PAGE>
REAL ESTATE SECURITIES FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
REAL ESTATE SECURITIES FUND
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
COMMON STOCK -- 69.8%
--------------------------------------------------------------------------------
APARTMENTS -- 15.7%
Archstone Communities Trust ......... 80,597 $ 1,697,574
Avalon Bay Communities Inc. ......... 44,660 1,864,555
Equity Residential Properties Trust . 51,600 2,373,600
Essex Property Trust Inc. ........... 57,450 2,412,900
8,348,629
DIVERSIFIED -- 2.8%
Northstar Capital Investment Corp. ..105,000 1,483,125(a,b)
FINANCIAL -- 12.7%
Countrywide Credit Industries Inc. . 49,400 1,497,437
Federal Home Loan Mortgage Corp. ... 48,500 1,964,250
iStar Financial Inc. ................109,810 2,299,147
Radian Group Inc. ................... 19,700 1,019,475
6,780,309
HOTEL -- 3.0%
Starwood Hotels & Resorts ........... 49,200 1,602,075
MANUFACTURED HOME -- 6.1%
Chateau Communities Inc. ............ 53,500 1,511,375
Manufactured Home Communities Inc. .. 73,500 1,759,406
3,270,781
OFFICE/INDUSTRIAL -- 19.6%
Arden Realty Inc. ................... 56,000 1,316,000
Bedford Property Investors Inc. ..... 63,600 1,180,575
Duke Realty Investments Inc. ........ 70,000 1,566,250
Equity Office Properties Trust ...... 88,200 2,431,013
First Industrial Realty Trust Inc. .. 35,300 1,041,350
Mack-Cali Realty Corp. .............. 62,400 1,602,900
Prentiss Properties Trust ........... 29,000 696,000
Spieker Properties Inc. ............. 12,500 575,000
10,409,088
REGIONAL MALLS -- 9.9%
General Growth Properties Inc. ...... 10,000 317,500
Macerich Co. ........................ 63,500 1,400,969
Simon Property Group Inc. ........... 79,100 1,755,031
Urban Shopping Centers Inc. ......... 52,900 1,782,069
5,255,569
TOTAL COMMON STOCK (COST $37,493,339) 37,149,576
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
PREFERRED STOCK -- 5.3%
--------------------------------------------------------------------------------
Glenborough Realty Trust
Inc. (Series A) 7.75% .............110,050 $ 1,898,362
Reckson Associates Realty
Corp. (Series A) 7.625% ........... 41,000 909,688
TOTAL PREFERRED STOCK (COST $3,122,724) 2,808,050
TOTAL INVESTMENTS IN SECURITIES
(COST $40,616,063) ................ 39,957,626
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 22.4%
--------------------------------------------------------------------------------
GEI Short Term Investment Fund
(COST $11,963,887) ............ 11,963,887 11,963,887
OTHER ASSETS AND LIABILITIES,
NET 2.5% ..................... 1,316,684
--------------------------------------------------------------------------------
NET ASSETS-- 100% ............... $53,238,197
================================================================================
----------------
See Notes to Schedule of Investments and Notes to Financial Statements.
60
<PAGE>
NOTES TO PERFORMANCE JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
Information on the preceding performance pages is unaudited.
Total returns take into account changes in share price and assume reinvestment
of dividends and capital gains, if any. Investment returns and net asset value
on an investment will fluctuate and you may have a gain or loss when you sell
your shares. Periods less than one year are not annualized.
The performance data related to the shares of the U.S. Equity Fund and the
Income Fund, for the periods through December 12, 1997, 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. GE Asset Management currently waives certain fees for the
Money Market Fund and Premier Growth Equity Fund. Had these fees and expenses
not been waived, the returns (and/or yields) would have been lower.
The Standard & Poor's ("S&P") 500 Composite Price Index of stocks (S&P 500
Index), S&P Mid-Cap 400 Composite Price Index of stocks (S&P Mid-Cap 400 Index),
Russell 1000 Value Index (Russell 1000 Value Index), Russell 2000 Index (Russell
2000 Index), Lehman Brothers Aggregate Bond Index (LB Aggregate), Morgan Stanley
Capital International EAFE Index (MSCI EAFE), Wilshire Real Estate Securities
Index (Wilshire RES), and Salomon Brothers World Government Bond Index (Salomon
World Bond Index) are unmanaged indices and do not reflect the actual cost of
investing in the instruments that comprise each index.
The S&P 500 Index is a capitalization-weighted index of 500 widely held stocks
recognized by investors to be representative of the stock market in general. The
S&P MidCap 400 Index is a capitalization-weighted index of 400 U.S. stocks with
a median market capitalization. The Russell 2000 Index and Russell 1000 Index
are market capitalization-weighted composites of common stocks domiciled in the
United States and its territories. All Russell indices are subsets of the
Russell 3000 Index, which represents approximately 98% of the investable U.S.
equity market. The Russell 1000 Index measures the performance of the 1,000
largest companies in the Russell 3000 Index, and the Russell 1000 Value Index
measures the performance of those Russell 1000 companies with lower than average
price-to-book ratios and forecasted growth values. The Russell 2000 Index
measures the performance of the 2,000 smallest companies in the Russell 3000
Index and represents approximately 8% of the total market capitalization of the
Russell 3000 Index. 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 is a composite of 967 stocks of companies from
20 countries representing stock markets of Europe, Australasia, New Zealand and
the Far East. The Wilshire RES is a market capitalization-weighted index
comprised of publicly traded real estate investment trusts (REITs), real estate
operating companies (REOCs) and partnerships. The Salomon World Bond Index is an
unhedged index comprised of government bonds from several countries including
the U.S. The 90-Day T-Bill is the average return on three month U.S. Treasury
Bills. The IBC Money Fund Report yields represent the average yields of 951
taxable money market funds. The results shown for the foregoing indices assume
the reinvestment of net dividends or interest.
The Global Income Fund changed its benchmark index during the fiscal year-end
December 31, 1999 from the JP Morgan Global Government Bond Index (JPM Global
Bond) which is an unhedged index comprised of government bonds from several
countries including the U.S. to the Salomon World Bond Index. With the
establishment of the Euro, the JPM Global Bond Index was modified to become more
significantly weighted in emerging markets, and as a result, is less suitable as
a benchmark for the Global Income Fund as the Fund is not managed with such a
significant weighting to emerging markets. The Salomon World Bond Index, with a
less significant weighting to emerging markets, is a more appropriate benchmark.
The peer universe of the underlying annuity funds 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
descriptions of investment objectives, policies, risks and permissible
investments.
Standard & Poor's, S&P, S&P 500, Standard & Poor's 500 and 500 are trademarks of
The McGraw-Hill Companies, Inc. and have been licensed for use. The S&P 500
Index Fund is not sponsored, endorsed, sold or promoted by Standard & Poor's,
and Standard & Poor's makes no representation or warranty, express or implied,
to the investors of the Fund or any member of the public regarding the
advisability of investing in the securities generally or in this Fund
particularly or the ability of the S&P 500 Index Fund to track general stock
market performance.
61
<PAGE>
NOTES TO SCHEDULES OF INVESTMENTS
--------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Pursuant to Rule 144A under the Securities Act of 1933, these securities may
be resold in transactions exempt from registration, normally to qualified
institutional buyers. At June 30, 2000, these securities amounted to
$1,156,649; $3,014,530; and $1,483,125 or 2.0%, 4.2% and 2.8% of net assets
for the International Equity, Income and Real Estate Securities Funds,
respectively. These securities have been determined to be liquid using
procedures established by the Board of Trustees.
(c) Settlement is on a delayed delivery or when-issued basis with final maturity
to be announced (TBA) in the future.
(d) Coupon amount represents effective yield.
(e) Non-convertible saving shares with no voting rights.
(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 June 30, 2000, all or a portion of this security was pledged to cover
collateral requirements for futures, options or TBAs.
(i) State Street Corp. is the parent company of State Street Bank & Trust Co.,
the fund's custodian.
(j) At June 30, 2000, the security is in default. GEAM has determined that the
security is illiquid as it may be difficult to resell within seven days in
the ordinary course of business at approximately the price it is valued.
(k) Variable or floating rate security. The stated rate represents the rate at
June 30, 2000.
--------------------------------------------------------------------------------
ABBREVIATIONS:
ADR -- American Depositary Receipt
FDR -- Finnish Depositary Receipt
GDR -- Global Depositary Receipt
Regd. -- Registered
REMIC -- Real Estate Mortgage Investment Conduit
SDR -- Swedish Depositary Receipt
STRIPS -- Separate Trading of Registered
Interest and Principal of Securities
CURRENCY TERMS:
AUD -- Australian Dollar
CAD -- Canadian Dollar
EUR -- European Currency Unit (ECU)
GBP -- Pound Sterling
GRD -- Greek Drachma
JPY -- Japanese Yen
USD -- United States Dollar
62
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA BASED ON A SHARE OUTSTANDING THROUGHOUT THE PERIOD(S) INDICATED
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. EQUITY FUND
6/30/00+ 12/31/99 12/31/98 12/31/97(C) 12/31/96 12/31/95(H)
------------------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE -- -- -- -- -- 1/3/95
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............... $37.90 $33.50 $27.88 $21.11 $19.27 $15.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ........................... 0.14 0.22 0.28 0.24 0.34 0.46
Net realized and unrealized
gains (losses) on investments ................ (0.05) 6.30 6.23 6.54 3.90 4.87
------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS ..... 0.09 6.52 6.51 6.78 4.24 5.33
------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ........................... -- 0.22 0.28 0.00 0.35 0.47
Net realized gains .............................. -- 1.90 0.61 0.01 2.05 0.59
------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................ -- 2.12 0.89 0.01 2.40 1.06
------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ..................... $37.99 $37.90 $33.50 $27.88 $21.11 $19.27
------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (A) ................................... 0.24% 19.61% 23.41% 32.13% 21.72% 35.58%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ........ $87,694 $72,794 $31,160 $23,917 $18,027 $9,071
Ratios to average net assets:
Net investment income* ....................... 0.81% 0.86% 0.95% 0.94% 1.80% 2.10%
Net expenses* ................................ 0.59% 0.61% 0.69% 0.80% 0.80% 0.80%
Gross expenses* .............................. 0.59% 0.61% 0.69% 0.86% 0.88% 1.03%
Portfolio turnover rate ......................... 19% 35% 41% 33% 35% 71%
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
S&P 500 INDEX FUND
6/30/00+ 12/31/99 12/31/98 12/31/97(B,C) 12/31/96 12/31/95
------------------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE -- -- -- -- -- 4/15/85
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............... $28.10 $23.71 $19.23 $15.14 $20.99 $15.72
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ........................... 0.11 0.20 0.21 0.23 0.78 0.27
Net realized and unrealized
gains (losses) on investments ................ (0.28) 4.68 5.20 4.36 4.36 5.41
------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS ..... (0.17) 4.88 5.41 4.59 5.14 5.68
------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ........................... -- 0.21 0.21 0.23 0.77 0.27
Net realized gains .............................. -- 0.28 0.72 0.27 10.22 0.14
------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................ -- 0.49 0.93 0.50 10.99 0.41
------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ..................... $27.93 $28.10 $23.71 $19.23 $15.14 $20.99
------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (A) ................................... (0.60)% 20.61% 28.24% 30.33% 24.51% 36.14%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ........ $734,082 $652,144 $326,961 $164,294 $35,522 $66,017
Ratios to average net assets:
Net investment income*. ...................... 0.85% 1.00% 1.20% 1.70% 1.91% 1.98%
Net expenses* ................................ 0.39% 0.39% 0.45% 0.46% 0.48% 0.66%
Gross expenses* .............................. 0.39% 0.39% 0.45% 0.46% 0.48% 0.66%
Portfolio turnover rate ......................... 2% 3% 13% 6% 63% 15%
</TABLE>
-------------
SEE NOTES TO FINANCIAL HIGHLIGHTS AND NOTES TO FINANCIAL STATEMENTS.
63
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA BASED ON A SHARE OUTSTANDING THROUGHOUT THE PERIOD(S) INDICATED
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PREMIER GROWTH EQUITY FUND
6/30/00+ 12/31/99 12/31/98 12/31/97(D)
----------------------------------------------------------------------------------------------------
INCEPTION DATE -- -- -- 12/12/97
<S> <C> <C> <C> <C>
Net asset value, beginning of period ............... $88.65 $67.22 $51.48 $49.79
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........................... 0.06 0.08 0.25 0.03
Net realized and unrealized
gains (losses) on investments ................ (0.53) 24.18 18.43 1.69
----------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS ..... (0.47) 24.26 18.68 1.72
----------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ........................... -- 0.08 0.24 0.03
Net realized gains .............................. -- 2.75 2.70 --
----------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................ -- 2.83 2.94 0.03
----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ..................... $88.18 $88.65 $67.22 $51.48
----------------------------------------------------------------------------------------------------
TOTAL RETURN (A) ................................... (0.53)% 36.26% 36.53% 3.46%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ........$82,717 $53,720 $19,879 $16,237
Ratios to average net assets:
Net investment income* ....................... 0.16% 0.18% 0.41% 1.04%
Net expenses* ................................ 0.65% 0.68% 0.82% 0.69%
Gross expenses* .............................. 0.68% 0.72% 0.82% 0.69%
Portfolio turnover rate ............................ 12% 27% 34% 3%
----------------------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
VALUE EQUITY FUND
6/30/00+(I)
--------------------------------------------------------------------------------
INCEPTION DATE 4/28/00
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 ................ (0.05)
--------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS ..... (0.03)
--------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ........................... --
Net realized gains .............................. --
--------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................ --
--------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ..................... $9.97
--------------------------------------------------------------------------------
TOTAL RETURN (A) ................................... (0.30)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ........ $9,976
Ratios to average net assets:
Net investment income* ....................... 1.08%
Net expenses* ................................ 0.80%
Gross expenses* .............................. 0.80%
Portfolio turnover rate ......................... 7%
----------------
SEE NOTES TO FINANCIAL HIGHLIGHTS AND NOTES TO FINANCIAL STATEMENTS.
64
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA BASED ON A SHARE OUTSTANDING THROUGHOUT THE PERIOD(S) INDICATED
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MID-CAP VALUE EQUITY FUND
6/30/00+ (J) 12/31/99 12/31/98 12/31/97(G)
----------------------------------------------------------------------------------------------------
INCEPTION DATE -- -- -- 5/1/97
<S> <C> <C> <C> <C>
Net asset value, beginning of period .............. $15.78 $13.57 $13.11 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .......................... 0.08 0.12 0.07 0.02
Net realized and unrealized
gains (losses) on investments ............... (0.75) 2.21 0.79 3.23
----------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS .... (0.67) 2.33 0.86 3.25
----------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income .......................... -- 0.12 0.07 0.02
Net realized gains ............................. -- -- 0.33 0.12
----------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ............................... -- 0.12 0.40 0.14
----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD .................... $15.11 $15.78 $13.57 $13.11
----------------------------------------------------------------------------------------------------
TOTAL RETURN (A) .................................. (4.31)% 17.26% 6.69% 32.56%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ....... $99,878 $90,561 $53,643 $30,856
Ratios to average net assets:
Net investment income* ...................... 1.09% 0.94% 0.59% 0.38%
Net expenses* ............................... 0.70% 0.71% 0.75% 0.69%
Gross expenses* ............................. 0.70% 0.71% 0.75% 0.69%
Portfolio turnover rate ........................... 17% 30% 14% 18%
----------------------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
SMALL-CAP VALUE EQUITY FUND
6/30/00+ (I)
--------------------------------------------------------------------------------
INCEPTION DATE 4/28/00
Net asset value, beginning of period .............. $10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income .......................... 0.03
Net realized and unrealized
gains on investments ........................ (0.14)
--------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS .... (0.11)
--------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income .......................... --
Net realized gains ............................. --
--------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ............................... --
--------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD .................... $9.89
--------------------------------------------------------------------------------
TOTAL RETURN (A) .................................. (1.10)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ....... $9,892
Ratios to average net assets:
Net investment income* ...................... 1.65%
Net expenses* ............................... 0.95%
Gross expenses* ............................. 0.95%
Portfolio turnover rate ........................ 15%
------------
SEE NOTES TO FINANCIAL HIGHLIGHTS AND NOTES TO FINANCIAL STATEMENTS.
65
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA BASED ON A SHARE OUTSTANDING THROUGHOUT THE PERIOD(S) INDICATED
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
6/30/00+ 12/31/99 12/31/98 12/31/97(C) 12/31/96 12/31/95(F)
------------------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE -- -- -- -- -- 5/1/95
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................. $14.47 $11.89 $10.68 $10.83 $10.47 $10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ............................. 0.08 0.06 0.08 0.02 0.03 0.20
Net realized and unrealized
gains (losses) on investments .................. 0.25 3.50 1.77 1.10 1.01 0.47
------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS ....... 0.33 3.56 1.85 1.12 1.04 0.67
------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ............................. -- 0.04 0.07 0.08 0.03 0.20
Net realized gains ................................ -- 0.94 0.57 1.19 0.65 --
------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS .................................. -- 0.98 0.64 1.27 0.68 0.20
------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ....................... $14.80 $14.47 $11.89 $10.68 $10.83 $10.47
------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (A) ..................................... 2.28% 30.33% 17.45% 10.17% 9.91% 6.70%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) .......... $58,656 $52,540 $36,952 $31,931 $17,644 $15,348
Ratios to average net assets:
Net investment income* ......................... 1.19% 0.51% 0.65% 0.14% 0.23% 0.44%
Net expenses* .................................. 1.06% 1.08% 1.15% 1.34% 1.50% 1.54%
Gross expenses* ................................ 1.06% 1.08% 1.15% 1.43% 1.56% 2.17%
Portfolio turnover rate ........................... 29% 51% 60% 166% 150% 58%
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL RETURN FUND
6/30/00+ 12/31/99 12/31/98 12/31/97(C) 12/31/96 12/31/95
------------------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE -- -- -- -- -- 7/1/85
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................. $15.86 $14.66 $13.21 $12.73 $15.93 $13.40
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ............................. 0.22 0.34 0.34 0.34 1.02 0.41
Net realized and unrealized
gains (losses) on investments .................. 0.28 1.59 1.90 1.95 0.67 3.34
------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS ....... 0.50 1.93 2.24 2.29 1.69 3.75
------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ............................. -- 0.33 0.34 0.34 1.02 0.42
Net realized gains ................................ -- 0.40 0.45 1.47 3.87 0.80
------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS .................................. -- 0.73 0.79 1.81 4.89 1.22
------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ....................... $16.36 $15.86 $14.66 $13.21 $12.73 $15.93
------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (A) ..................................... 3.15% 13.25% 17.10% 17.99% 10.60% 28.07%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ..........$119,923 $109,913 $72,632 $50,007 $27,814 $70,507
Ratios to average net assets:
Net investment income* ......................... 2.89% 2.50% 2.69% 2.56% 2.73% 3.42%
Net expenses* .................................. 0.54% 0.56% 0.63% 0.65% 0.60% 0.65%
Gross expenses* ................................ 0.54% 0.56% 0.63% 0.65% 0.60% 0.65%
Portfolio turnover rate ........................... 64% 105% 124% 135% 144% 106%
</TABLE>
------------
SEE NOTES TO FINANCIAL HIGHLIGHTS AND NOTES TO FINANCIAL STATEMENTS.
66
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA BASED ON A SHARE OUTSTANDING THROUGHOUT THE PERIOD(S) INDICATED
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FUND
6/30/00+ 12/31/99 12/31/98 12/31/97(C) 12/31/96 12/31/95(H)
------------------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE -- -- -- -- -- 1/3/95
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................. $11.51 $12.34 $12.11 $11.84 $12.53 $12.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ............................. 0.37 0.64 0.62 0.76 0.76 0.82
Net realized and unrealized
gains (losses) on investments .................. 0.02 (0.81) 0.34 0.27 (0.43) 1.13
------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS ....... 0.39 (0.17) 0.96 1.03 0.33 1.95
------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ............................. -- 0.64 0.62 0.76 0.76 0.84
Net realized gains ................................ -- 0.02 0.11 -- 0.26 0.58
------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS .................................. -- 0.66 0.73 0.76 1.02 1.42
------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ....................... $11.90 $11.51 $12.34 $12.11 $11.84 $12.53
------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (A) ..................................... 3.39% (1.43)% 7.95% 9.00% 2.92% 16.83%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) .......... $72,296 $68,434 $59,077 $45,555 $5,388 $3,271
Ratios to average net assets:
Net investment income* ......................... 6.45% 5.74% 5.54% 5.11% 6.37% 6.52%
Net expenses* .................................. 0.56% 0.57% 0.64% 0.59% 0.75% 0.75%
Gross expenses* ................................ 0.56% 0.57% 0.64% 0.77% 1.03% 1.15%
Portfolio turnover rate ........................... 123% 230% 217% 356% 222% 253%
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
GLOBAL INCOME FUND
6/30/00+ 12/31/99 12/31/98 12/31/97(C,G)
----------------------------------------------------------------------------------------------------------------------
INCEPTION DATE -- -- -- 5/1/97
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................. $9.59 $10.53 $9.85 $10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ............................. 0.22 0.45 0.44 0.35
Net realized and unrealized
gains (losses) on investments .................. (0.33) (1.24) 0.87 (0.01)
----------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS ....... (0.11) (0.79) 1.31 0.34
----------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ............................. -- 0.14 0.61 0.45
Net realized gains ................................ -- 0.01 0.02 0.04
----------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS .................................. -- 0.15 0.63 0.49
----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ....................... $9.48 $9.59 $10.53 $9.85
----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (A) ..................................... (1.15)% (7.49)% 13.33% 3.41%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) .......... $8,592 $9,175 $9,739 $5,851
Ratios to average net assets:
Net investment income* ......................... 4.68% 4.20% 4.73% 5.54%
Net expenses* .................................. 0.72% 0.74% 0.82% 0.84%
Gross expenses* ................................ 0.72% 0.74% 0.82% 0.84%
Portfolio turnover rate ........................... 82% 130% 64% 119%
</TABLE>
------------
SEE NOTES TO FINANCIAL HIGHLIGHTS AND NOTES TO FINANCIAL STATEMENTS.
67
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA BASED ON A SHARE OUTSTANDING THROUGHOUT THE PERIOD(S) INDICATED
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY MARKET FUND
6/30/00+ 12/31/99 12/31/98 12/31/97(C, E)12/31/96 12/31/95
------------------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE -- -- -- -- -- 7/1/85
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................. $1.00 $1.00 $1.00 $1.00 $1.00 $0.98
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ............................. 0.03 0.05 0.05 0.05 0.05 0.06
Net realized and unrealized
gains (losses) on investments .................. 0.00 0.00 0.00 0.00 0.00 0.00
------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS ....... 0.03 0.05 0.05 0.05 0.05 0.06
------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ............................. 0.03 0.05 0.05 0.05 0.05 0.04
Net realized gains ................................ -- -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS .................................. 0.03 0.05 0.05 0.05 0.05 0.04
------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ....................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (A) ..................................... 2.93% 5.00% 5.26% 5.41% 5.41% 5.90%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ..........$447,842 $473,538 $239,547 $144,815 $113,263 $63,083
Ratios to average net assets:
Net investment income* ......................... 5.82% 4.96% 5.14% 5.17% 5.29% 5.74%
Net expenses* .................................. 0.31% 0.30% 0.37% 0.32% 0.15% 0.23%
Gross expenses* ................................ 0.45% 0.49% 0.59% 0.48% 0.55% 0.63%
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
REAL ESTATE SECURITIES FUND
6/30/00+ 12/31/99 12/31/98 12/31/97(C) 12/31/96 12/31/95(F)
------------------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE -- -- -- -- -- 5/1/95
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................. $10.87 $11.59 $15.28 $14.11 $11.05 $10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ............................. 0.27 0.77 0.73 0.74 0.64 0.46
Net realized and unrealized
gains (losses) on investments .................. 1.50 (0.82) (3.46) 2.01 3.36 1.23
------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS ....... 1.77 (0.05) (2.73) 2.75 4.00 1.69
------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ............................. -- 0.64 0.50 0.53 0.65 0.46
Net realized gains ................................ -- 0.03 0.46 1.05 0.29 0.18
------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS .................................. -- 0.67 0.96 1.58 0.94 0.64
------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ....................... $12.64 $10.87 $11.59 $15.28 $14.11 $11.05
------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (A) ..................................... 16.28% (0.22)% (17.68)% 19.49% 36.24% 17.00%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) .......... $53,238 $41,842 $47,756 $48,887 $24,533 $13,429
Ratios to average net assets:
Net investment income* ......................... 5.33% 6.21% 5.43% 4.83% 5.90% 6.85%
Net expenses* .................................. 0.92% 0.94% 0.99% 0.95% 1.07% 1.31%
Gross expenses* ................................ 0.92% 0.94% 0.99% 0.95% 1.07% 1.61%
Portfolio turnover rate ........................... 19% 16% 29% 58% 30% 54%
</TABLE>
-----------
SEE NOTES TO FINANCIAL HIGHLIGHTS AND NOTES TO FINANCIAL STATEMENTS.
68
<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 waived a
portion of expenses on certain funds, the total returns of those funds for
these periods would have been lower. Periods less than one year are not
annualized.
(b) As of May 1, 1997, the fund's name was changed to S&P 500 Index Fund from
Common Stock Index Portfolio.
(c) GE Asset Management assumed management responsibilities for the Funds
effective May 1, 1997. See Note 5 in the Notes to Financial Statements for
further information.
(d) Information is for the period December 12, 1997, commencement of investment
operations, through December 31, 1997.
(e) Effective May 5, 1997, the Fund began maintaining a constant net asset value
per share of $1.00. Per share information prior to January 1, 1997 has been
restated to reflect the 10.41 to 1 stock split.
(f) Information is for the period May 1, 1995, commencement of investment
operations, through December 31, 1995.
(g) Information is for the period May 1, 1997, commencement of investment
operations, through December 31, 1997.
(h) Information is for the period January 3, 1995, commencement of investment
operations, through December 31, 1995.
(i) Information is for the period April 28, 2000, commencement of investment
operations, through June 30, 2000.
(j) As of April 28, 2000, the Fund's name was changed to Mid-Cap Value Equity
Fund from Value Equity Fund.
* Annualized for periods less than one year.
+ Unaudited
69
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PREMIER
U.S. S&P 500 GROWTH VALUE
EQUITY INDEX EQUITY EQUITY
FUND FUND FUND FUND
-----------------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C> <C> <C>
Investments in securities, at market
(cost $77,688,818; $575,974,803; $68,062,670;
$9,888,659; $86,727,448; $9,088,596; $48,244,635;
$95,257,991;$68,937,283; $8,671,642; $0;
and $40,616,063, respectively) .......................... $84,931,588 $721,386,316 $78,869,897 $9,868,605
Short-term investments (at amortized cost) ................. 2,769,148 12,902,761 5,612,966 113,959
Cash ....................................................... 278 11 -- 40
Foreign currency (cost $0; $0; $0; $0; $0; $0; $93,210;
$52,222; $0; $46,218; $0; and $0, respectively) ......... -- -- -- --
Receivable for investments sold ............................ 112,953 2,206,909 -- 18,777
Income receivables ......................................... 83,728 618,957 52,765 10,243
Receivable for fund shares sold ............................ 67,553 207,500 152,971 --
Variation margin receivable ................................ 10,100 80,800 7,575 --
Unrealized appreciation on forward foreign
currency contracts ...................................... -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS ............................................ 87,975,348 737,403,254 84,696,174 10,011,624
-----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Distributions payable to shareholders ...................... 1,288 -- -- --
Payable for investments purchased .......................... 149,919 3,064,397 1,913,532 28,605
Payable for fund shares redeemed ........................... 87,223 21,189 22,115 --
Payable to GEAM ............................................ 42,980 235,667 43,555 6,963
Unrealized depreciation on forward foreign
currency contracts ...................................... -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ....................................... 281,410 3,321,253 1,979,202 35,568
-----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS .................................................... $87,693,938 $734,082,001 $82,716,972 $9,976,056
-----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital paid in ............................................ 76,818,610 576,943,427 68,635,408 10,000,000
Undistributed (distributions in excess of)
net investment income ................................... 323,411 2,977,681 58,191 18,914
Accumulated net realized gain (loss) ....................... 3,323,186 8,878,980 3,217,896 (22,804)
Net unrealized appreciation / (depreciation) on:
Investments ............................................. 7,242,770 145,411,513 10,807,227 (20,054)
Futures ................................................. (14,025) (129,600) (1,750) --
Foreign currency related transactions ................... (14) -- -- --
-----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS .................................................... $87,693,938 $734,082,001 $82,716,972 $9,976,056
-----------------------------------------------------------------------------------------------------------------------------------
Shares outstanding ($.01 par value) ........................... 2,308,284 26,285,877 938,086 1,000,120
Net asset value, offering and redemption price per share ...... $ 37.99 $ 27.93 $ 88.18 $ 9.97
<CAPTION>
MID-CAP SMALL-CAP INTERNATIONAL TOTAL
VALUE EQUITY VALUE EQUITY EQUITY RETURN
FUND FUND FUND FUND
-----------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market
(cost $77,688,818; $575,974,803; $68,062,670;
$9,888,659; $86,727,448; $9,088,596; $48,244,635;
$95,257,991;$68,937,283; $8,671,642; $0;
and $40,616,063, respectively) .......................... $93,457,137 $9,121,684 $55,680,220 $112,103,350
Short-term investments (at amortized cost) ................. 6,554,893 836,210 2,948,717 11,297,564
Cash ....................................................... -- -- -- --
Foreign currency (cost $0; $0; $0; $0; $0; $0; $93,210;
$52,222; $0; $46,218; $0; and $0, respectively) ......... -- -- 93,739 52,338
Receivable for investments sold ............................ -- 122,123 118,414 2,864,060
Income receivables ......................................... 177,668 13,111 118,847 611,264
Receivable for fund shares sold ............................ 108,811 -- 28,438 366
Variation margin receivable ................................ -- -- -- --
Unrealized appreciation on forward foreign
currency contracts ...................................... -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS ............................................ 100,298,509 10,093,128 58,988,375 126,928,942
-----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Distributions payable to shareholders ...................... -- -- -- --
Payable for investments purchased .......................... 347,937 193,450 171,580 6,890,294
Payable for fund shares redeemed ........................... 13,499 -- 20,579 51,805
Payable to GEAM ............................................ 59,113 8,014 140,611 63,465
Unrealized depreciation on forward foreign
currency contracts ...................................... -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ....................................... 420,549 201,464 332,770 7,005,564
-----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS .................................................... $99,877,960 $9,891,664 $58,655,605 $119,923,378
-----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital paid in ............................................ 92,425,438 10,000,000 43,335,973 97,787,574
Undistributed (distributions in excess of)
net investment income ................................... 519,162 28,223 295,836 1,623,128
Accumulated net realized gain (loss) ....................... 203,671 (169,647) 7,588,011 3,667,277
Net unrealized appreciation / (depreciation) on:
Investments ............................................. 6,729,689 33,088 7,435,585 16,845,359
Futures ................................................. -- -- -- --
Foreign currency related transactions ................... -- -- 200 40
-----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS .................................................... $99,877,960 $9,891,664 $58,655,605 $119,923,378
-----------------------------------------------------------------------------------------------------------------------------------
Shares outstanding ($.01 par value) ........................... 6,608,443 1,000,000 3,963,087 7,329,588
Net asset value, offering and redemption price per share ...... $ 15.11 $ 9.89 $ 14.80 $ 16.36
<CAPTION>
GLOBAL MONEY REAL ESTATE
INCOME INCOME MARKET SECURITIES
FUND FUND FUND FUND
--------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market
(cost $77,688,818; $575,974,803; $68,062,670;
$9,888,659; $86,727,448; $9,088,596; $48,244,635;
$95,257,991;$68,937,283; $8,671,642; $0;
and $40,616,063, respectively) .......................... $67,693,659 $8,387,634 $ -- $39,957,626
Short-term investments (at amortized cost) ................. 8,585,189 12,194 455,585,038 11,963,887
Cash ....................................................... -- -- -- --
Foreign currency (cost $0; $0; $0; $0; $0; $0; $93,210;
$52,222; $0; $46,218; $0; and $0, respectively) ......... -- 46,337 -- --
Receivable for investments sold ............................ 2,750,647 37,321 -- 368,818
Income receivables ......................................... 882,706 169,343 1,126,028 411,612
Receivable for fund shares sold ............................ 14,006 202 -- 575,297
Variation margin receivable ................................ -- -- -- --
Unrealized appreciation on forward foreign
currency contracts ...................................... -- 7,561 -- --
--------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS ............................................ 79,926,207 8,660,592 456,711,066 53,277,240
--------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Distributions payable to shareholders ...................... -- -- 387,290 --
Payable for investments purchased .......................... 7,555,663 37,265 -- --
Payable for fund shares redeemed ........................... 17,534 -- 8,349,831 --
Payable to GEAM ............................................ 57,419 2,760 131,744 39,043
Unrealized depreciation on forward foreign
currency contracts ...................................... -- 28,099 -- --
--------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ....................................... 7,630,616 68,124 8,868,865 39,043
--------------------------------------------------------------------------------------------------------------------------------
NET ASSETS .................................................... $72,295,591 $8,592,468 $447,842,201 $53,238,197
--------------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital paid in ............................................ 73,974,983 9,475,976 447,842,459 54,860,822
Undistributed (distributions in excess of)
net investment income ................................... 2,276,414 93,315 -- 1,925,725
Accumulated net realized gain (loss) ....................... (2,712,182) (671,832) (258) (2,889,913)
Net unrealized appreciation / (depreciation) on:
Investments ............................................. (1,243,624) (284,008) -- (658,437)
Futures ................................................. -- -- -- --
Foreign currency related transactions ................... -- (20,983) -- --
--------------------------------------------------------------------------------------------------------------------------------
NET ASSETS .................................................... $72,295,591 $8,592,468 $447,842,201 $53,238,197
--------------------------------------------------------------------------------------------------------------------------------
Shares outstanding ($.01 par value) ........................... 6,073,267 906,672 447,841,476 4,211,162
Net asset value, offering and redemption price per share ...... $ 11.90 $ 9.48 $ 1.00 $ 12.64
</TABLE>
----------
See Notes to Financial Statements.
70 & 71
<PAGE>
STATEMENTS OF OPERATIONS FOR THE PERIOD ENDED JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PREMIER
U.S. S&P 500 GROWTH VALUE
EQUITY INDEX EQUITY EQUITY
FUND FUND FUND FUND
-----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
<S> <C> <C> <C> <C>
Dividends ................................................ $ 445,418 $ 3,839,641 $ 142,806 $ 23,513
Interest ................................................. 111,274 384,744 136,153 9,649
Less: Foreign taxes withheld ............................. (2,231) (20,961) (558) (235)
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ................................................ 554,461 4,203,424 278,401 32,927
-----------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administration fees ......................... 217,725 1,186,923 222,912 10,867
Transfer agent ........................................... 4,113 5,440 2,366 1,992
Trustees' fees ........................................... 661 6,773 399 49
Custody and accounting expenses .......................... 5,892 60,349 3,542 659
Professional fees ........................................ 5,128 52,731 3,106 422
Other expenses ........................................... 327 4,183 196 24
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER ................................ 233,846 1,316,399 232,521 14,013
Less: Expenses waived or borne by
the adviser ........................................... -- -- (9,609) --
-----------------------------------------------------------------------------------------------------------------------------------
Net expenses ............................................. 233,846 1,316,399 222,912 14,013
-----------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME ....................................... 320,615 2,887,025 55,489 18,914
-----------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ........................................... 2,838,347 5,369,344 2,842,381 (22,804)
Futures ............................................... (180,716) 7,648 (300,663) --
Written options ....................................... -- -- -- --
Foreign currency transactions ......................... 16 -- -- --
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
DEPRECIATION ON:
Investments ........................................... (2,400,570) (9,626,425) (2,636,846) (20,054)
Futures ............................................... (102,455) (439,388) (8,488) --
Foreign currency translations ......................... (20) -- -- --
-----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments ................................. 154,602 (4,688,821) (103,616) (42,858)
-----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ................................ $ 475,217 $(1,801,796) $ (48,127) $(23,944)
-----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
MID-CAP SMALL-CAP INTERNATIONAL TOTAL
VALUE EQUITY VALUE EQUITY EQUITY RETURN
FUND FUND FUND FUND
----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividends ................................................ $ 637,463 $ 13,561 $ 614,144 $ 467,026
Interest ................................................. 217,833 30,838 85,374 1,512,471
Less: Foreign taxes withheld ............................. (8,110) -- (93,771) (45,156)
----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ................................................ 847,186 44,399 605,747 1,934,341
----------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administration fees ......................... 307,313 13,029 269,932 278,028
Transfer agent ........................................... 4,167 1,992 4,062 4,192
Trustees' fees ........................................... 1,043 49 619 1,317
Custody and accounting expenses .......................... 9,218 659 5,324 11,517
Professional fees ........................................ 8,160 422 4,946 10,384
Other expenses ........................................... 514 25 305 649
----------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER ................................ 330,415 16,176 285,188 306,087
Less: Expenses waived or borne by
the adviser ........................................... -- -- -- --
----------------------------------------------------------------------------------------------------------------------------------
Net expenses ............................................. 330,415 16,176 285,188 306,087
----------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME ....................................... 516,771 28,223 320,559 1,628,254
----------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ........................................... 3,076,637 (169,647) 7,197,280 3,531,576
Futures ............................................... -- -- -- (7,267)
Written options ....................................... -- -- -- --
Foreign currency transactions ......................... -- -- (37,828) (11,816)
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
DEPRECIATION ON:
Investments ........................................... (7,454,727) 33,088 (5,880,296) (1,487,869)
Futures ............................................... -- -- -- --
Foreign currency translations ......................... -- -- 1,707 307
----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments ................................. (4,378,090) (136,559) 1,280,863 2,024,931
----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ................................ $ (3,861,319) $(108,336) $ 1,601,422 $ 3,653,185
----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
GLOBAL MONEY REAL ESTATE
INCOME INCOME MARKET SECURITIES
FUND FUND FUND FUND
-----------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividends ................................................$ 114,511 $ -- $ -- $ 1,254,623
Interest ................................................. 2,333,562 236,294 13,732,430 167,364
Less: Foreign taxes withheld ............................. (20,256) (51) -- --
-----------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ................................................ 2,427,817 236,243 13,732,430 1,421,987
-----------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administration fees ......................... 173,060 26,273 920,905 193,194
Transfer agent ........................................... 4,154 2,390 5,053 4,139
Trustees' fees ........................................... 958 155 4,853 690
Custody and accounting expenses .......................... 8,172 1,312 42,862 5,780
Professional fees ........................................ 7,675 1,244 37,991 5,589
Other expenses ........................................... 470 77 3,232 336
-----------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER ................................ 194,489 31,451 1,014,896 209,728
Less: Expenses waived or borne by
the adviser ........................................... -- -- (322,650) --
-----------------------------------------------------------------------------------------------------------------------------
Net expenses ............................................. 194,489 31,451 692,246 209,728
-----------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME ....................................... 2,233,328 204,792 13,040,184 1,212,259
-----------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ........................................... (1,270,633) (550,159) (258) 1,387,358
Futures ............................................... (12,944) -- -- --
Written options ....................................... -- -- -- --
Foreign currency transactions ......................... -- (30,715) -- --
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
DEPRECIATION ON:
Investments ........................................... 1,414,414 267,148 -- 4,324,406
Futures ............................................... -- -- -- --
Foreign currency translations ......................... -- (17,205) -- --
-----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments ................................. 130,837 (330,931) (258) 5,711,764
-----------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ................................ $2,364,165 $ (126,139) $13,039,926 $ 6,924,023
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
------------
See Notes to Financial Statements.
72 & 73
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
U.S. S&P 500
EQUITY INDEX
FUND FUND
-----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
2000+ 1999 2000+ 1999
-----------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income ................................... $ 320,615 $ 388,738 $ 2,887,025 $ 4,643,245
Net realized gain (loss) on investments, futures, written
options, and foreign currency transactions ............ 2,657,647 3,901,263 5,376,992 7,351,566
Net increase (decrease) in unrealized
appreciation/depreciation on investments,
futures, written options and
foreign currency translations ......................... (2,503,045) 4,420,467 (10,065,813) 80,081,969
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations ................. 475,217 8,710,468 (1,801,796) 92,076,780
-----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ................................... -- (386,970) -- (4,651,139)
Net realized gains ...................................... -- (3,387,932) -- (6,315,161)
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ....................................... -- (3,774,902) -- (10,966,300)
Increase (decrease) in net assets from
operations and distributions ............................ 475,217 4,935,566 (1,801,796) 81,110,480
-----------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares ............................ 54,863,723 69,442,665 99,645,352 256,122,069
Value of distributions reinvested -- 3,774,914 -- 10,966,268
Cost of shares redeemed ................................. (40,439,408) (36,518,796) (15,905,964) (23,015,645)
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions ......... 14,424,315 36,698,783 83,739,388 244,072,692
TOTAL INCREASE (DECREASE) IN NET ASSETS ................... 14,899,532 41,634,349 81,937,592 325,183,172
NET ASSETS
Beginning of period ....................................... 72,794,406 31,160,057 652,144,409 326,961,237
-----------------------------------------------------------------------------------------------------------------------------------
End of period ............................................. $ 87,693,938 $72,794,406 $734,082,001 $652,144,409
-----------------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF)
NET INVESTMENT INCOME, END OF PERIOD ...................... $ 323,411 $ 2,796 $ 2,977,681 $ 90,656
-----------------------------------------------------------------------------------------------------------------------------------
CHANGES IN PORTFOLIO SHARES:
Shares sold by subscription ............................. 1,442,025 1,887,297 3,644,716 9,903,580
Shares issued for distributions reinvested .............. -- 102,246 -- 399,355
Shares redeemed ......................................... (1,054,187) (999,235) (568,537) (884,811)
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares .................. 387,838 990,308 3,076,179 9,418,124
-----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
PREMIER
GROWTH VALUE
EQUITY EQUITY
FUND FUND
----------------------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED PERIOD ENDED
JUNE 30, DECEMBER 31, JUNE 30,
2000+ 1999 2000+
----------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income ................................... $ 55,489 $ 48,011 $ 18,914
Net realized gain (loss) on investments, futures, written
options, and foreign currency transactions ............ 2,541,718 1,851,640 (22,804)
Net increase (decrease) in unrealized
appreciation/depreciation on investments,
futures, written options and
foreign currency translations ......................... (2,645,334) 8,595,884 (20,054)
----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations ................. (48,127) 10,495,535 (23,944)
----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ................................... -- (45,451) --
Net realized gains ...................................... -- (1,563,524) --
----------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ....................................... -- (1,608,975) --
Increase (decrease) in net assets from
operations and distributions ............................ (48,127) 8,886,560 (23,944)
----------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares ............................ 58,242,664 57,605,631 20,350,010
Value of distributions reinvested ....................... -- 1,608,975 --
Cost of shares redeemed ................................. (29,197,286) (34,260,818) (10,350,010)
----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions ......... 29,045,378 24,953,788 10,000,000
TOTAL INCREASE (DECREASE) IN NET ASSETS ................... 28,997,251 33,840,348 9,976,056
NET ASSETS
Beginning of period ....................................... 53,719,721 19,879,373 --
----------------------------------------------------------------------------------------------------------------------------
End of period ............................................. $82,716,972 $53,719,721 $ 9,976,056
----------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF)
NET INVESTMENT INCOME, END OF PERIOD ...................... $ 58,191 $ 2,702 $ 18,914
----------------------------------------------------------------------------------------------------------------------------
CHANGES IN PORTFOLIO SHARES:
Shares sold by subscription ............................. 659,456 724,088 2,000,121
Shares issued for distributions reinvested .............. -- 18,918 --
Shares redeemed ......................................... (327,371) (432,720) (1,000,001)
----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares .................. 332,085 310,286 1,000,120
----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
MID-CAP SMALL-CAP
VALUE EQUITY VALUE EQUITY
FUND FUND
-----------------------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED PERIOD ENDED
JUNE 30, DECEMBER 31, JUNE 30,
2000+ 1999 2000+
-----------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income ................................... $ 516,771 $ 667,962 $ 28,223
Net realized gain (loss) on investments, futures, written
options, and foreign currency transactions ............ 3,076,637 78,589 (169,647)
Net increase (decrease) in unrealized
appreciation/depreciation on investments,
futures, written options and
foreign currency translations ......................... (7,454,727) 8,765,537 33,088
-----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations ................. (3,861,319) 9,512,088 (108,336)
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ................................... -- (671,000) --
Net realized gains ...................................... -- -- --
-----------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ....................................... -- (671,000) --
Increase (decrease) in net assets from
operations and distributions ............................ (3,861,319) 8,841,088 (108,336)
-----------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares ............................ 19,692,352 45,973,145 10,000,010
Value of distributions reinvested ....................... -- 671,028 --
Cost of shares redeemed ................................. (6,514,126) (18,566,825) (10)
-----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions ......... 13,178,226 28,077,348 10,000,000
TOTAL INCREASE (DECREASE) IN NET ASSETS ................... 9,316,907 36,918,436 9,891,664
NET ASSETS
Beginning of period ....................................... 90,561,053 53,642,617 --
-----------------------------------------------------------------------------------------------------------------------------
End of period ............................................. $99,877,960 $90,561,053 $9,891,664
-----------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF)
NET INVESTMENT INCOME, END OF PERIOD ...................... $ 519,162 $ 2,391 $ 28,223
-----------------------------------------------------------------------------------------------------------------------------
CHANGES IN PORTFOLIO SHARES:
Shares sold by subscription ............................. 1,289,986 2,935,544 1,000,001
Shares issued for distributions reinvested .............. -- 43,944 --
Shares redeemed ......................................... (418,824) (1,195,638) (1)
-----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares .................. 871,162 1,783,850 1,000,000
-----------------------------------------------------------------------------------------------------------------------------
<FN>
+Unaudited
</FN>
</TABLE>
-----------
See Notes to Financial Statements.
74 & 75
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INTERNATIONAL TOTAL
EQUITY RETURN
FUND FUND
-----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
2000+ 1999 2000+ 1999
-----------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income ................................... $ 320,559 $ 208,711 $ 1,628,254 $ 2,219,978
Net realized gain (loss) on investments, futures, written
options, and foreign currency transactions ............ 7,159,452 3,196,692 3,512,493 2,348,357
Net increase (decrease) in unrealized
appreciation/depreciation on investments,
futures, written options, and
foreign currency translations ......................... (5,878,589) 8,678,363 (1,487,562) 7,060,838
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations ................. 1,601,422 12,083,766 3,653,185 11,629,173
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ................................... -- (115,235) -- (2,180,949)
Net realized gains ...................................... -- (3,101,702) -- (2,611,543)
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ....................................... -- (3,216,937) -- (4,792,492)
Increase (decrease) in net assets
from operations and distributions ....................... 1,601,422 8,866,829 3,653,185 6,836,681
SHARE TRANSACTIONS:
Proceeds from sale of shares ............................ 67,441,355 127,926,320 9,244,683 29,111,710
Value of distributions reinvested ....................... -- 3,216,971 -- 4,792,547
Cost of shares redeemed ................................. (62,927,596) (124,421,937) (2,887,784) (3,459,594)
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions ......... 4,513,759 6,721,354 6,356,899 30,444,663
TOTAL INCREASE (DECREASE) IN NET ASSETS ................... 6,115,181 15,588,183 10,010,084 37,281,344
NET ASSETS
Beginning of period ....................................... 52,540,424 36,952,241 109,913,294 72,631,950
-----------------------------------------------------------------------------------------------------------------------------------
End of period ............................................. $58,655,605 $ 52,540,424 $119,923,378 $109,913,294
-----------------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF)
NET INVESTMENT INCOME, END OF PERIOD ...................... $ 295,836 $ (24,723) $ 1,623,128 $ (5,126)
-----------------------------------------------------------------------------------------------------------------------------------
CHANGES IN PORTFOLIO SHARES:
Shares sold by subscription ............................. 4,634,489 9,842,144 580,469 1,891,840
Shares issued for distributions reinvested .............. -- 232,777 -- 308,798
Shares redeemed ......................................... (4,302,744) (9,552,582) (181,496) (225,801)
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares .................. 331,745 522,339 398,973 1,974,837
-----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
GLOBAL
INCOME INCOME
FUND FUND
-----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
2000+ 1999 2000+ 1999
-----------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income ................................... $ 2,233,328 $ 3,622,668 $ 204,792 $ 430,171
Net realized gain (loss) on investments, futures, written
options, and foreign currency transactions ............ (1,283,577) (1,414,453) (580,874) (418,011)
Net increase (decrease) in unrealized
appreciation/depreciation on investments,
futures, written options, and
foreign currency translations ......................... 1,414,414 (3,073,801) 249,943 (951,089)
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations ................. 2,364,165 (865,586) (126,139) (938,929)
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ................................... -- (3,580,000) -- (135,500)
Net realized gains ...................................... -- (95,615) -- (10,406)
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ....................................... -- (3,675,615) -- (145,906)
Increase (decrease) in net assets
from operations and distributions ....................... 2,364,165 (4,541,201) (126,139) (1,084,835)
SHARE TRANSACTIONS:
Proceeds from sale of shares ............................ 6,888,132 17,529,047 2,468,974 13,298,990
Value of distributions reinvested ....................... -- 3,675,610 46 145,917
Cost of shares redeemed ................................. (5,390,267) (7,306,440) (2,925,592) (12,923,621)
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions ......... 1,497,865 13,898,217 (456,572) 521,286
TOTAL INCREASE (DECREASE) IN NET ASSETS ................... 3,862,030 9,357,016 (582,711) (563,549)
NET ASSETS
Beginning of period ....................................... 68,433,561 59,076,545 9,175,179 9,738,728
-----------------------------------------------------------------------------------------------------------------------------------
End of period ............................................. $ 72,295,591 $68,433,561 $ 8,592,468 $ 9,175,179
-----------------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF)
NET INVESTMENT INCOME, END OF PERIOD ...................... $ 2,276,414 $ 43,086 $ 93,315 $ (111,477)
-----------------------------------------------------------------------------------------------------------------------------------
CHANGES IN PORTFOLIO SHARES:
Shares sold by subscription ............................. 592,226 1,438,618 260,653 1,323,083
Shares issued for distributions reinvested .............. -- 319,619 5 15,216
Shares redeemed ......................................... (464,172) (600,378) (311,047) (1,306,508)
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares .................. 128,054 1,157,859 (50,389) 31,791
-----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
MONEY REAL ESTATE
MARKET SECURITIES
FUND FUND
------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
2000+ 1999 2000+ 1999
------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income ................................... $ 13,040,184 $ 16,520,953 $ 1,212,259 $ 2,772,549
Net realized gain (loss) on investments, futures, written
options, and foreign currency transactions ............ (258) 802 1,387,358 (4,590,447)
Net increase (decrease) in unrealized
appreciation/depreciation on investments,
futures, written options, and
foreign currency translations ......................... -- -- 4,324,406 1,644,238
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations ................. 13,039,926 16,521,755 6,924,023 (173,660)
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ................................... (13,040,184) (16,522,500) -- (2,301,797)
Net realized gains ...................................... -- -- -- (123,947)
------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ....................................... (13,040,184) (16,522,500) -- (2,425,744)
Increase (decrease) in net assets
from operations and distributions ....................... (258) (745) 6,924,023 (2,599,404)
SHARE TRANSACTIONS:
Proceeds from sale of shares ............................ 714,256,191 1,453,542,485 9,661,649 20,186,725
Value of distributions reinvested ....................... 13,010,417 16,284,251 -- 2,425,738
Cost of shares redeemed ................................. (752,962,350) (1,235,834,659) (5,189,559) (25,926,947)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions ......... (25,695,742) 233,992,077 4,472,090 (3,314,484)
TOTAL INCREASE (DECREASE) IN NET ASSETS ................... (25,696,000) 233,991,332 11,396,113 (5,913,888)
NET ASSETS
Beginning of period ....................................... 473,538,201 239,546,869 41,842,084 47,755,972
------------------------------------------------------------------------------------------------------------------------------------
End of period ............................................. $ 447,842,201 $ 473,538,201 $53,238,197 $ 41,842,084
------------------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF)
NET INVESTMENT INCOME, END OF PERIOD ...................... $ -- $ -- $ 1,925,725 $ 713,466
------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN PORTFOLIO SHARES:
Shares sold by subscription ............................. 714,256,191 1,453,542,485 796,331 1,607,251
Shares issued for distributions reinvested .............. 13,010,417 16,284,251 -- 231,243
Shares redeemed ......................................... (752,962,350) (1,235,834,659) (434,357) (2,108,849)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares .................. (25,695,742) 233,992,077 361,974 (270,355)
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-----------
See Notes to Financial Statements.
76 & 77
<PAGE>
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
1. ORGANIZATION OF THE FUNDS
GE Investments Funds, Inc. (the "Company") 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 fourteen investment
portfolios (each a "Fund" and collectively the "Funds"), although only the
following twelve are currently being offered: U.S. Equity Fund, S&P 500 Index
Fund, Premier Growth Equity Fund, Value Equity Fund, Mid-Cap Value Equity Fund
(formerly named Value Equity Fund), Small-Cap Value Equity Fund, International
Equity Fund, Total Return Fund, Income Fund, Global Income Fund, Money Market
Fund and Real Estate Securities Fund.
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 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.
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 Asset Management Incorporated ("GEAM") (formerly, GE Investment
Management Incorporated), the investment adviser and administrator of each Fund.
As of June 30, 2000, GE Life and Annuity Assurance Company ("GE Life") and
General Electric Capital Assurance Company, each an affiliated insurance
company, controlled the Funds by ownership, through separate accounts, of
virtually all of the Funds' shares of beneficial interest.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions at
the date of the financial statements. Actual results may differ from those
estimates.
The following summarizes the significant accounting policies of the Company:
SECURITY VALUATION AND TRANSACTIONS
Securities for which exchange (or NASDAQ) quotations are readily available are
valued at the last sale price, or if no sales occurred on that day, at the last
quoted bid price. Certain fixed income securities are valued by a dealer or by a
pricing service based upon a matrix system, which considers market transactions
as well as dealer supplied valuations. Short-term investments maturing within 60
days are valued at amortized cost or original cost plus accrued interest, both
of which approximate current value. Fund positions that cannot be valued as set
forth above are valued at fair value determined in good faith under procedures
approved by the Board of Directors of the Funds.
In accordance with Rule 2a-7 under the 1940 Act, the Money Market Fund values
its securities initially at cost and, thereafter, securities are assumed to have
a constant amortization to maturity of any discount or premium. Amortized cost
approximates fair value.
Security transactions are accounted for as of 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.
REPURCHASE AGREEMENTS
Each of the Funds may enter into repurchase agreements. The Funds' custodian
takes possession of the collateral pledged for investments in repurchase
agreements on behalf of the Funds. The Funds value the underlying collateral
daily on a mark-to-market basis to determine that the value, including accrued
interest, is at least equal to 102% of the repurchase price. In the event the
seller defaults and the value of the security declines, or if the seller enters
an insolvency proceeding, realization of the collateral by the Funds may be
delayed or limited.
SECURITY LENDING
The Funds may loan securities to brokers, dealers, and financial institutions
determined by GEAM to be creditworthy, subject to certain limitations. The Funds
receive compensation in the form of fees in addition to the interest and
dividends on the loaned securities during the term of the loan net of any
rebates. The loans of securities are secured by collateral in the form of cash
or other liquid assets, which are segregated and maintained with the custodian
in an amount at least equal to 102% of the current market value of the loaned
securities. During the term of the loan, the Funds will receive any gain or loss
in the market value of its loaned securities and of securities in which cash
collateral is invested. In the event the counterparty (borrower) does not meet
its contracted obligation to return the securities, the Funds may be exposed to
the risk of loss of reacquiring the loaned securities at prevailing market
prices using the proceeds of the sale of the collateral.
FOREIGN CURRENCY
Accounting records of the Funds are maintained in U.S. dollars. Investment
securities and other assets and liabilities denominated in a foreign currency
are translated to U.S. dollars at the prevailing rates of exchange at period
end. Purchases and sales of securities, income receipts and expense payments
denominated in foreign currencies are translated into 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 from the fluctuations arising from changes in
the market prices of securities during the period. Such fluctuations are
included in the net realized and unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding
78
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NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
taxes accrued and the U.S. dollar amount actually received and paid, and gains
or losses between the trade and settlement date on purchases and sales of
securities. Net unrealized foreign exchange gains and losses arising from
changes in the value of other assets and liabilities as a result of changes in
foreign exchange rates are included as increases or decreases in unrealized
appreciation/depreciation on foreign currency related transactions.
FINANCIAL FUTURES CONTRACTS AND OPTIONS
Each of the Funds, other than the Money Market Fund, may invest in financial
future contracts and purchase and write options, subject to certain limitations.
The Funds may invest in futures and options contracts to manage their exposure
to the stock and bond markets and fluctuations in currency values. Buying
futures, writing puts and buying calls tend to increase a Fund's exposure to the
underlying instrument. Selling futures, buying puts and writing calls tend to
decrease a Fund's exposure to the underlying instrument, or hedge other Fund
investments. A Fund will not enter into a transaction involving futures and
options on futures for speculative purposes. The Fund's risks in using these
contracts include changes in the value of the underlying instruments,
non-performance of the counterparties under the contracts' terms and changes in
the liquidity of secondary market for the contracts. Futures contracts are
valued at the settlement price established each day by the board of trade or
exchange on which they principally trade. Options are valued at the last sale
price, or if no sales occurred on that day, at the last quoted bid price.
Upon entering into a financial futures contract, the Funds are required to
pledge to the broker an amount of cash and/or other assets equal to a certain
percentage of the contract amount, known as initial margin deposit. Subsequent
payments, known as variation margins, are made or received by the Funds each
day, depending on the daily fluctuation in the fair value of the underlying
security. The Funds record an unrealized gain or loss equal to the daily
variation margin. Should market conditions move unexpectedly, the Fund may not
achieve the anticipated benefits of the financial futures contracts and may
incur a loss. The Funds recognize a realized gain or loss on the expiration or
closing of a futures contract.
When a Fund writes an option, the amount of the premium received is recorded as
a liability and is subsequently adjusted to the current fair value of the option
written. Premiums received from writing options that expire unexercised are
treated by the Funds on the expiration date as realized gains from investments.
The difference between the premium and the amount paid on effecting a closing
purchase transaction, including brokerage commissions, is also treated as a
realized gain, or if the premium is less than the amount paid for the closing
purchase, as a realized loss. When an option is exercised, the proceeds from the
sale of the underlying security or the cost basis of the securities purchased is
adjusted by the original premium received or paid.
SWAP CONTRACTS
Certain of the Funds may engage in swap transactions, specifically interest
rate, currency, equity, index and total return swaps as part of their investment
strategies. Swaps involve the exchange by the Funds with another party of their
respective commitments to pay or receive interest, effective return or total
return throughout the lives of the agreements. The interest, effective return or
total return to be paid or received on swaps is recognized as net interest
expense or net interest income on the Statement of Operations over the life of
the agreement, while related payables and receivables are recorded gross on the
Statement of Assets and Liabilities. Unrealized gains are reported as assets and
unrealized losses are reported as liabilities on the Statement of Assets and
Liabilities. A realized gain or loss is recorded upon termination of the swap
agreement. Swap agreements are stated at fair value. Notional principal amounts
are used to express the extent of involvement in these transactions, but the
amounts potentially subject to credit risk are much smaller.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
The Funds may purchase or sell securities on a when-issued or forward commitment
basis. These transactions are arrangements in which the Funds purchase and sell
securities with payment and delivery scheduled a month or more after entering
into the transaction. The price of the underlying securities and the date when
these securities will be delivered and paid for are fixed at the time the
transaction is negotiated. Losses may arise due to changes in the market value
of the underlying securities or if the counterparty does not perform under the
contract. In connection with such purchases, the Funds maintain cash or liquid
assets in an amount equal to purchase commitments for such underlying securities
until settlement date and for sales commitments the Funds maintain equivalent
deliverable securities as "cover" for the transaction. Unsettled commitments are
valued at current market value of the underlying security. Daily fluctuations in
the value of such contracts are recorded as unrealized gains or losses. The
Funds will not enter into such agreements for the purpose of investment
leverage.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Certain Funds may enter into forward foreign currency exchange contracts to
facilitate transactions in foreign denominated securities and to manage the
Fund's currency exposure. Forward foreign currency exchange contracts are valued
at the mean between the bid and the offered forward rates as last quoted by a
recognized dealer. Fluctuations in the value of the contracts are recorded in
the Statement of Assets and Liabilities as an asset (or liability) and in the
Statement of Operations as unrealized appreciation (depreciation) until the
contracts are closed, when they are recorded as realized foreign currency
related transactions gains or losses. The Fund's risks in using these contracts
include changes in the value of foreign currency or the possibility that the
counterparties do not perform under the contracts' terms. Certain Funds may
utilize forward currency exchange contracts for speculative purposes. When a
Fund enters into a forward foreign currency exchange contract, it is required to
segregate cash or liquid securities with its custodian in an amount equal to the
value of the Fund's total assets committed to the consummation of the forward
contract. If the value of the segregated securities declines, additional cash or
securities is segregated so that the value of the account will equal the amount
of the Fund's commitment with respect to the contract.
79
<PAGE>
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
INVESTMENTS IN FOREIGN MARKETS
Investments in foreign markets may involve special risks and considerations not
typically associated with investing in the United States. These risks include
revaluation of currencies, high rates of inflation, repatriation on income and
capital, and adverse political and economic developments. Moreover, securities
issued in these markets may be less liquid, subject to government ownership
controls, tariffs and taxes, subject to delays in settlements, and their prices
may be more volatile.
The Funds may be subject to capital gains and repatriation taxes imposed by
certain countries in which they invest. Such taxes are generally based on income
and/or capital gains earned or repatriated. Taxes are accrued based upon net
investment income, net realized gains and net unrealized appreciation as income
and/or capital gains are earned.
INCOME TAXES
The Funds intend to comply with all sections of the Internal Revenue Code
applicable to regulated investment companies including the distribution of
substantially all of their taxable net investment income and net realized
capital gains to their shareholders. Therefore, no provision for federal income
tax has been made. Each Fund is treated as a separate taxpayer for federal
income tax purposes.
As of December 31, 1999, the following Funds have capital loss carryovers as
indicted below. The capital loss carryover is available to offset future
realized capital gains to the extent provided in the Internal Revenue Code and
regulations thereunder. To the extent that these carryover losses are used to
offset future capital gains, it is probable that the gains so offset will not be
distributed to shareholders because they would be taxable as ordinary income.
FUND AMOUNT EXPIRES
--------------------------------------------------------------------------------
Mid-Cap Value Equity Fund $ 107,183 2007
Income Fund 1,081,086 2007
Global Income Fund 63,605 2007
Real Estate Securities Fund 1,020,550 2007
Any net capital and currency losses incurred after October 31, within each
Fund's tax year, are deemed to arise on the first day of the Fund's next tax
year if the Fund so elects to defer such losses.
The Funds incurred and elected to defer losses after October 31, 1999 as
follows:
FUND CURRENCY CAPITAL
--------------------------------------------------------------------------------
S&P 500 Index Fund $ 3 $ --
Mid-Cap Value Equity Fund -- 2,765,783
International Equity Fund 28,407 --
Total Return Fund 8,238 --
Income Fund -- 334,791
Global Income Fund -- 27,356
Real Estate Securities Fund -- 3,249,242
DISTRIBUTIONS TO SHAREHOLDERS
The Money Market Fund declares net investment income dividends daily and pays
them monthly. All other Funds declare and pay dividends from net investment
income annually. All Funds declare and pay net realized capital gains in excess
of capital loss carryforwards distributions annually. The character of income
and gains to be distributed is determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences include treatment of realized and unrealized gains and losses
on forward foreign currency contracts, paydown gains and losses on
mortgage-backed securities, and losses deferred due to wash sale transactions.
Reclassifications are made to the Funds' capital accounts to reflect income and
gains available for distribution (or available capital loss carryovers) under
income tax regulations. These reclassifications have no impact on net investment
income, net realized gains or losses, or net asset value of the Funds. The
calculation of net investment income per share in the Financial Highlights table
excludes these adjustments.
INVESTMENT INCOME
Corporate actions (including cash dividends) are recorded on ex-dividend date,
net of applicable withholding taxes, except for certain foreign corporate
actions, which are recorded as soon after ex-dividend date as such information
becomes available. Interest income is recorded on the accrual basis. All
discounts on taxable bonds are accreted to call or maturity date, whichever is
shorter, using the effective yield method. Premiums on taxable bonds are not
amortized.
EXPENSES
Expenses of the Company which are directly identifiable to a specific Fund are
allocated to that Fund. Expenses, which are not directly 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 GEAM and reimbursed by the Funds.
GEAM voluntarily limited expenses for the Premier Growth Equity Fund for the
period May 1, 1999 through April 30, 2000. This limitation was discontinued
effective May 1, 2000.
3. SECURITY LENDING
At June 30, 2000, none of the Funds participated in securities lending.
4. LINE OF CREDIT
Effective December 1999, the Company shares a revolving credit facility of up to
$188,000,000 with a number of its affiliates. The credit facility is with its
custodian bank, State Street Bank and Trust Company. The revolving credit
facility requires the payment of a commitment fee equal to 0.08% per annum on
the daily unused portion of the credit facility, payable quarterly. The portion
borne by the Funds generally is borne proportionally based upon net assets.
Generally, borrowings under the credit facility would accrue interest at the
Federal Funds Rate plus 50
80
<PAGE>
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
basis points and is borne by the borrowing Fund. The maximum amount allowed to
be borrowed by any one Fund is the lesser of its prospectus limitation, 20% of
its net assets, or $75 million. The credit facility was not utilized by the
company during the period ended June 30, 2000.
5. FEES AND COMPENSATION PAID TO AFFILIATES
ADVISORY AND ADMINISTRATION FEES
GEAM, a registered investment adviser, was retained by the Company's Board of
Directors effective May 1, 1997 to act as investment and administrator of the
Funds. Compensation of GEAM for investment advisory and administrative services
is paid monthly based on the average daily net assets of each Fund. The advisory
and administrative fee is stated in the following schedule:
ANNUALIZED BASED ON AVERAGE DAILY NET ASSETS
AVERAGE DAILY ADVISORY AND
NET ASSETS OF FUND ADMINISTRATION FEES
--------------------------------------------------------------------------------
U.S Equity Fund All net assets .55%
S&P 500 Index Fund All net assets .35%
Premier Growth Equity Fund All net assets .65%
Value Equity Fund All net assets .65%
Mid-Cap Value Equity Fund All net assets .65%
Small-Cap Value Equity Fund All net assets .80%
International Equity Fund First $100 million 1.00%
Next $100 million .95%
Over $200 million .90%
Total Return Fund First $100 million .50%
Next $100 million .45%
Next $100 million .40%
Next $100 million .35%
Over $400 million .30%
Income Fund All net assets .50%
Global Income Fund All net assets .60%
Money Market Fund* First $100 million .50%
Next $100 million .45%
Next $100 million .40%
Next $100 million .35%
Over $400 million .30%
Real Estate Securities Fund First $100 million .85%
Next $100 million .80%
Over $200 million .75%
* GEAM HAS VOLUNTARILY AGREED TO WAIVE A PORTION OF THE FEE PAYABLE BY THE MONEY
MARKET FUND SO THAT THE FEE PAID BY THE MONEY MARKET FUND WAS EQUAL TO 0.25%
THROUGH APRIL 30, 2000, AND EFFECTIVE MAY 1, 2000, IS EQUAL TO 0.30%. GEAM
RESERVES THE RIGHT TO DISCONTINUE THE WAIVER AT ANY TIME.
DIRECTORS' COMPENSATION
The Funds pay no compensation to their Directors who are officers or employees
of GEAM or its affiliates. Directors who are not officers or employees receive
an annual fee of $6,000 and an additional fee of $500 per Directors' meeting
attended in person and an additional fee of $250 for each Directors' conference
call meeting attended. These fees are allocated proportionally among the Funds
based upon the relative net assets of each Fund.
6. SUB-ADVISORY FEES
Pursuant to investment sub-advisory agreements with GEAM, Seneca Capital
Management, L.L.C. ("Seneca") is the sub-adviser to the Real Estate Securities
Fund; GE Asset Management Limited ("GEAML"), formerly GE Investments (US)
Limited, is the sub-adviser to the Global Income Fund; NWQ Investment Management
Company ("NWQ") is the sub-adviser to the Mid-Cap Value Equity Fund; Palisade
Capital Management, LLC ("Palisade") is the sub-advisor to the Small-Cap Value
Equity Fund, and State Street Global Advisors ("SSgA"), a division of State
Street Bank and Trust Company, is the sub-adviser to the S&P 500 Index Fund.
Seneca, GEAML, NWQ, Palisade and SSgA are responsible for the day-to-day
portfolio management of the assets of the Real Estate Securities Fund, Global
Income Fund, Mid-Cap Value Equity Fund, Small-Cap Value Equity Fund and S&P 500
Index Fund, respectively, including the responsibility for making decisions to
buy, sell or hold a particular security, under the general supervision of GEAM
and the Board.
For their services, GEAM pays Seneca, GEAML, NWQ, Palisade and SSgA monthly
sub-advisory fees which are calculated as a percentage of the average daily net
assets of the respective Funds.
7. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION
Aggregate gross unrealized appreciation/(depreciation) of investments for each
Fund at June 30, 2000, were as follows:
NET
GROSS GROSS UNREALIZED
UNREALIZED UNREALIZED APPRECIATION/
APPRECIATION DEPRECIATION (DEPRECIATION)
--------------------------------------------------------------------------------
U.S. Equity Fund $ 12,494,973 $ 5,252,203 $ 7,242,770
S&P 500 Index Fund 192,761,984 47,350,471 145,411,513
Premier Growth
Equity Fund 12,585,886 1,778,659 10,807,227
Value Equity Fund 507,355 527,409 (20,054)
Mid-Cap Value
Equity Fund 17,491,155 10,761,466 6,729,689
Small-Cap Value
Equity Fund 614,771 581,683 33,088
International
Equity Fund 11,256,591 3,821,006 7,435,585
Total Return
Fund 21,050,733 4,205,374 16,845,359
Income Fund 279,158 1,522,782 (1,243,624)
Global Income
Fund 102,923 386,931 (284,008)
Real Estate
Securities Fund 2,466,599 3,125,036 (658,437)
The aggregate cost of each Fund's investments was substantially the same for
book and federal income tax purposes at June 30, 2000.
81
<PAGE>
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
8. OPTIONS
During the period ended June 30, 2000, there were no option contracts written.
9. INVESTMENT TRANSACTIONS
The cost of purchases and the proceeds from sales of investments, other than
short-term securities and options, for the period ended June 30, 2000, were as
follows:
PURCHASES SALES
--------------------------------------------------------------------------------
U.S. Equity Fund $32,102,504 $14,809,424
S&P 500 Index Fund 101,592,879 14,842,513
Premier Growth Equity Fund 36,252,024 8,055,556
Value Equity Fund 10,626,522 714,793
Mid-Cap Value Equity Fund 29,622,348 14,694,722
Small-Cap Equity Fund 10,589,180 1,330,937
International Equity Fund 20,433,117 15,089,714
Total Return Fund 75,656,020 68,112,711
Income Fund 83,972,959 79,708,973
Global Income Fund 6,992,814 6,869,151
Real Estate Securities Fund 7,511,472 11,705,555
FORWARD FOREIGN CURRENCY CONTRACTS
At June 30, 2000, the outstanding Forward Foreign Currency Contracts, which
obligate the GEI Global Income Fund to deliver currencies at a specified date,
were as follows:
U.S. $ UNREALIZED
EXCHANGED EXCHANGED SETTLEMENT CURRENT APPRECIATION/
FROM TO DATE VALUE (DEPRECIATION)
----------- ----------- ---------- ------- --------------
PURCHASES
---------
JPY 50,500,000 USD $496,534 07/07/00 $476,577 $(19,957)
JPY 50,500,000 USD $484,719 07/07/00 $476,577 $ (8,142)
-------- --------
$953,154 $(28,099)
-------- --------
SALES
-----
JPY 101,000,000 USD $960,715 07/07/00 $953,154 $ 7,561
-------- --------
$953,154 $ 7,561
-------- --------
NET UNREALIZED APPRECIATION / (DEPRECIATION) ......... $(20,538)
-------------------------------------------- ========
Open swap transactions held by the Funds consisted of the following as of June
30, 2000:
NOTIONAL AMOUNT
--------------------------------------------------------------------------------
INCOME FUND
Total Return Swap with Morgan Stanley Capital Services Inc.
on the Lehman Brothers Asset Backed Securities Index. Fund
receives/pays the positive/negative return on the Index and
pays one month LIBOR minus 35 basis points, expires January
31, 2001. $ 1,020,000
Total Return Swap with Morgan Stanley Capital Services Inc.
on the investment grade component of the Lehman Brothers
CMBS Index. Fund receives/pays the positive/negative return
on the Index and pays one month LIBOR minus 35 basis points,
expires June 29, 2001. 1,420,000
TOTAL RETURN FUND
Total Return Swap with Morgan Stanley Capital Services Inc.
on the Lehman Brothers Asset Backed Securities Index. Fund
receives/pays the positive/negative return on the Index and
pays one month LIBOR minus 35 basis points, expires January
31, 2001. 410,000
Total Return Swap with Morgan Stanley Capital Services Inc.
on the investment grade component of the Lehman Brothers
CMBS Index. Fund receives/pays the positive/negative return
on the Index and pays one month LIBOR minus 35 basis points,
expires June 29, 2001. 830,000
82
<PAGE>
GE INVESTMENTS FUNDS' INVESTMENT TEAM
--------------------------------------------------------------------------------
PORTFOLIO MANAGERS
U.S. EQUITY FUND
Team led by
Eugene K. Bolton, GE Asset Management
S&P 500 INDEX FUND
Team led by
James B. May, State Street Global Advisors
PREMIER GROWTH EQUITY FUND
David B. Carlson, GE Asset Management
VALUE EQUITY FUND
Peter J. Hathaway, GE Asset Management
MID-CAP VALUE EQUITY FUND
Jon D. Bosse, NWQ Investment Management Company
SMALL-CAP VALUE EQUITY FUND
Investment Committee
Jack Feiler
Martin L. Berman
Steven E. Berman
Richard Meisenberg - Palisade Capital Management, LLC
INTERNATIONAL EQUITY FUND
Team led by Ralph R. Layman, GE Asset Management
TOTAL RETURN FUND
David B. Carlson, GE Asset Management
Ralph R. Layman, GE Asset Management
Robert A. MacDougall, GE Asset Management
INCOME FUND MONEY MARKET FUND
Team led by Robert A. MacDougall, GE Asset Management
GLOBAL INCOME FUND
Esther M. Baroudy, GE Asset Management Limited
(formerly GE Investments (US) Limited)
REAL ESTATE SECURITIES FUND
David A. Shapiro, Seneca Capital Management
INVESTMENT ADVISER AND ADMINISTRATOR
GE Asset Management Incorporated
(formerly GEInvestment Management Incorporated)
BOARD OF DIRECTORS
Michael J.Cosgrove, CHAIRMAN
John R. Costantino
William J. Lucas
Robert P. Martin, Jr.
J. Clifford Miller, III
Lee A. Putney
Robert P. Quinn
SECRETARY
Matthew J. Simpson
TREASURER
Michael J. Tansley
ASSISTANT TREASURER
Michael M. D'Ambrosio
DISTRIBUTOR
GE Investment Distributors, Inc.
Member NASD and SIPC
COUNSEL
Sutherland, Asbill & Brennan, L.L.P.
CUSTODIAN
State Street Bank & Trust Company
INDEPENDENT AUDITORS
KPMG 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, MARKETING
Don W. Torey, EVP, PRIVATE EQUITIES AND REAL ESTATE
John J. Walker, EVP, CHIEF FINANCIAL OFFICER
<PAGE>
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