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Power Portfolio (sm)
Variable Annuity
SEMI-ANNUAL REPORT
---------------------------------
June 30, 1997
Dear Valued Customer:
I am pleased to present this semi-annual report for the investment portfolios
available through GNA's Power Portfolio variable annuity. This report includes
each portfolio manager's commentary regarding activity in the financial markets
during the past six months and each manager's current economic perspective and
outlook. The following pages also include financial statements and highlights
for each of your variable annuity investment portfolios. I encourage you to use
the information contained in this report as a part of your regular Power
Portfolio variable annuity account review to ensure your investment allocation
is satisfying your investment objectives.
Regarding a recent development that may impact your account, in May of this
year, GNA filed an application with the Securities and Exchange Commission
seeking an order approving the substitution of shares of certain investment
portfolios of GE Investments Funds, Inc. for shares of the GNA Variable Series
Trust and of the Variable Investment Trust. Such a share substitution would
replace the Growth, Value, Government, and Adjustable Rate Portfolios of the GNA
Variable Series Trust and the GE U.S. Equity, GE International Equity, GE Fixed
Income and GE Money Market Portfolios of the Variable Investment Trust with
similar GE Investment Funds Inc. portfolios as investment options.
If the proposed substitutions are approved and carried out, each contract owner
affected by the substitution should receive a written notice stating that the
substitutions were approved and carried out. The notice will also state that any
affected contract owners may transfer all amounts from the GNA portfolios to any
available GE Investment Funds Inc. portfolio. You will receive additional
information regarding this change in the mail in the coming months.
Please call the GNA Variable Annuity Service Center at 1-800-455-0870 with
questions and comments about this semi-annual report or your variable annuity
account.
Thank you for investing with GNA.
Sincerely,
/s/ Scott A. Curtis
- ------------------------
Scott A. Curtis
Vice President
The Power Portfolio Variable Annuity is offered by GNA Distributors, Inc.
<PAGE>
2 Power Portfolio Variable Annuity
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TABLE OF CONTENTS
PAGE
----
Letter from the Vice President....................................... 1
Table of Contents.................................................... 2
GNA VARIABLE SERIES TRUST
Listing of Trustees and Officers................................... 3
Adviser's Financial Market Review.................................. 5
Sub-Adviser Commentaries and Performance Graphs
GNA Growth Portfolio............................................ 6
GNA Value Portfolio............................................. 8
GNA Government Portfolio........................................ 11
GNA Adjustable Rate Portfolio................................... 14
Notes to Performance............................................... 16
Investment Portfolios.............................................. 18
Financial Statements............................................... 34
Financial Highlights............................................... 38
Notes to Financial Statements...................................... 40
VARIABLE INVESTMENT TRUST
Listing of Trustees and Officers................................... 48
Financial Market Review............................................ 49
Adviser Commentaries and Performance Graphs
GE U.S. Equity Portfolio........................................ 51
GE International Equity Portfolio............................... 54
GE Fixed Income Portfolio....................................... 57
GE Money Market Portfolio....................................... 59
Notes to Performance............................................... 61
Investment Portfolios.............................................. 62
Financial Statements............................................... 88
Financial Highlights............................................... 92
Notes to Financial Statements...................................... 94
This report is prepared for Certificate holders of the Power Portfolio and the
Paragon Power Portfolio Variable Annuities. It is not authorized for use as an
offer of sale or a solicitation of an offer to buy the Power Portfolio Variable
Annuity unless accompanied or preceded by the annuity's current prospectus and
the current prospectuses of the portfolios available for investment thereunder.
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<PAGE>
GNA Variable Series Trust 3
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GNA VARIABLE SERIES TRUST MUTUAL FUNDS
GROWTH PORTFOLIO * VALUE PORTFOLIO * GOVERNMENT PORTFOLIO
* ADJUSTABLE RATE PORTFOLIO
Semi-Annual Report
TRUSTEES AND OFFICERS
EDWARD R. MCMILLAN
Trustee, Chairman of the Board
PIERCE T. LINDBERG
Trustee
DOUGLAS H. PEDERSEN
Trustee
GEOFFREY S. STIFF
President and CEO
CHARLES A. KAMINSKI
Senior Vice President
VICTOR C. MOSES
Senior Vice President
THOMAS W. CASEY
Vice President and Treasurer
STEPHEN N. DEVOS
Vice President
and Controller
EDWARD J. WILES, JR.
Vice President
and Secretary
SCOTT A. CURTIS
Vice President
JEROME R. POWERS
Vice President
J. NEIL MCMURDIE
Assistant Vice President
KARRI J. HARRINGTON
Assistant Secretary
SUB-ADVISERS
ADJUSTABLE RATE PORTFOLIO
STANDISH, AYER & WOOD, INC.
Boston, Massachusetts
VALUE PORTFOLIO
DUFF & PHELPS INVESTMENT
MANAGEMENT CO.
Chicago, Illinois
GROWTH PORTFOLIO
VALUE LINE, INC.
New York, New York
ADVISER
GNA CAPITAL MANAGEMENT, INC.
Seattle, Washington
DISTRIBUTOR
GNA DISTRIBUTORS, INC.
Seattle, Washington
COUNSEL
GOODWIN, PROCTER & HOAR
Boston, Massachusetts
CUSTODIAN & TRANSFER AGENT
STATE STREET BANK AND
TRUST COMPANY
Boston, Massachusetts
INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND, L.L.P.
Boston, Massachusetts
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4 GNA Variable Series Trust
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(This Page Intentionally Left Blank)
<PAGE>
GNA Variable Series Trust 5
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FINANCIAL MARKET REVIEW
GNA CAPITAL MANAGEMENT, INC.
During the six month period ended June 30, 1997, financial market
participants were presented with conflicting economic signals. Annualized
quarterly GDP growth rates of +2.1%, +3.8%, and +5.9% for the third
quarter of 1996 through the first quarter of 1997 established a trend of
rapidly increasing economic growth. As often happens during such a
period, fears of future inflation increased, and this caused intermediate
and long-term interest rates to rise. In late March, the Federal Reserve
increased short-term interest rates by .25%, in what was viewed as a
preemptive strike against future inflation.
More recent economic statistics pointed to a slower rate of economic
growth during the second quarter of 1997, which reduced fears of future
inflation, causing a decline in intermediate and long-term interest
rates. Bond prices, which move in the opposite direction of yield
changes, declined and then increased during the six month period. The
5-year Treasury yield began the period at 6.21%, rose to 6.86% in
mid-April, and then declined to 6.38% on June 30th. In this environment,
the bond market, as measured by the Lehman Brothers Aggregate Bond Index,
had a total return of +3.1%.
Meanwhile, through it all, actual inflation, as measured by the change
in the Consumer Price Index, declined during the period, ending at a
year-over-year rate of +2.3%, down from a comparable level of +3.3% in
December 1996. With actual, backward-looking inflation seemingly under
control, market participants are left to ponder what, if any, monetary
policy actions the Federal Reserve will take during the remainder of
1997.
In the equity market, stock prices were propelled higher by increasing
corporate profits, declining interest rates during the second quarter of
1997, and a growing expectation that the Federal Reserve was not going to
raise short-term interest rates again for a while. Major market indexes
moved to record highs throughout the period, although interrupted by a
roughly 10% correction from mid-March through mid-April. In this
environment, the stock market, as measured by the S&P 500 Stock Index,
had a total return of +20.5%, well above the long-term average for a six
month period.
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<PAGE>
6 GNA Variable Series Trust-GNA Growth Portfolio
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FROM THE GROWTH PORTFOLIO SUB-ADVISER
VALUE LINE, INC.
PORTFOLIO MANAGER: ALAN N. HOFFMAN
Q. WHAT HAPPENED IN THE MARKET OVER THE PAST SIX MONTHS?
A. In terms of the large-capitalization "household-name" stocks that
comprise the major market indexes, the year began by continuing the
powerful bull run that's been in place since late 1994. After a period of
consolidation in March and April (during which the Dow Jones Industrial
Average dropped nearly 1,000 points), the buying pressure returned,
pushing the indexes to a series of record highs.
However, not all segments of the market performed in line with the
large-cap indexes: smaller-cap, secondary, and technology stocks
exhibited severe underperformance early in the year (continuing trends
established in 1996). Following the springtime consolidation mentioned
above, however, these stocks have recovered nicely and are now in the
process of closing the performance gap set up in the January-April span.
Q. WHAT HAPPENED IN THE PORTFOLIO OVER THE PAST SIX MONTHS?
A. With its concentration in technology and smaller-cap equities,
returns for the Growth Portfolio lagged the broad market over the first
four months of 1997. Given the inhospitable climate for growth investing
during that period, we engaged in some defensive strategies, including
broadening the Portfolio's diversification by selectively purchasing
index-type stocks. Again, performance has improved markedly since May.
Q. WHAT IS YOUR CURRENT MARKET OUTLOOK?
A. In an environment of reasonable economic and corporate-profit growth,
low inflation, and declining interest rates, we believe that the stock
market is poised for continued growth in the intermediate term. This
rising market, however, will exhibit lots of twists and turns along the
way, and market watchers should not be suprised by episodes of
consolidation which may involve drops of several hundred points in the
Dow Jones Industrial Average.
Q. HOW IS THE PORTFOLIO POSITIONED TO TAKE ADVANTAGE OF YOUR
MARKET OUTLOOK?
A. The Portfolio is almost fully invested and broadly diversified at
this point, with more than 80 individual stock positions. Our favorite
areas remain technology, health-care, and financial services, sectors
that should benefit from worldwide economic growth. And since the energy
sector is currently in a secular growth phase, we have also invested in
selected oilfield-services stocks.
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GNA Variable Series Trust-GNA Growth Portfolio 7
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Q. COULD YOU DISCUSS ONE CURRENT MARKET ISSUE AS IT RELATES TO
THE PORTFOLIO.
A. In addition to the standard determinants of stock price
trends--earnings, interest rates, economic growth, etc.--demographic
forces are becoming increasingly important. Everyone knows about the baby
boomers. This huge demographic cohort is marching inexorably toward
retirement amid concerns about the future viability of entitlements like
Social Security and Medicare. As a result, a large portion of the boomers
are saving as never before, a process aided by innovations over the last
several years like 401(k) plans, variable annuities, and other
tax-advantaged retirement vehicles. The result of the increased
popularity of these equities-for-growth oriented products is very
significant and a source of consistent new cash flow into the equity
markets.
[GRAPH]
S&P 500 GNA Growth Morningstar
Stock Portfolio Growth Fund
------- ---------- -----------
1/3/95 10,000 10,000 10,000
3/95 10,974 10,819 10,738
6/95 12,015 12,110 11,741
9/95 12,970 13,451 12,772
12/95 13,743 13,336 13,093
3/96 14,490 13,966 13,821
6/96 15,144 14,245 14,452
9/96 15,607 15,406 14,890
12/96 16,914 15,657 15,647
3/97 17,357 15,104 15,362
6/97 20,384 18,011 17,757
Average Annual Total Return %
for the period ended June 30, 1997
6 Mo 1 Yr Since Inception
------ ------ ---------------
15.02% 26.49% 26.69%
Performance of a $10,000 investment since inception of the GNA Growth
Portfolio--(1/3/95)
S&P 500 Stock Index (ending value $20,384)
GNA Growth Portfolio (ending value $18,011)
Morningstar Growth Fund Average (ending value $17,757)
Past performance is not indicative of future results. See Notes to Performance
(page 16).
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<PAGE>
8 GNA Variable Series Trust-GNA Value Portfolio
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FROM THE VALUE PORTFOLIO SUB-ADVISER
DUFF & PHELPS INVESTMENT MANAGEMENT, CO.
PORTFOLIO MANAGER: JEFFREY E. SIMMONS
Q. WHAT HAPPENED IN THE MARKET DURING THE PAST SIX MONTHS?
A. The stock market experienced a strong six months showing with the S&P
500 up 20.5%. Equities outperformed bonds by almost 14% for the first six
months of 1997. It is evident that the larger, high quality companies
continued to drive the market over the past six months, with the S&P 400
mid cap index returning 13.0% and the Russell 2000 small cap index
returning 10.1%. In the first quarter of 1997, the 50 biggest companies
in the S&P saw their per-share earnings jump by 23.9% from the
year-earlier period and the bottom 450 companies saw growth of just 8%,
according to the July 21st issue of FORTUNE magazine. This environment
has market participants continuing to focus on higher quality, larger
capitalization issues with solid fundamentals.
Q. WHAT HAPPENED IN THE PORTFOLIO DURING THE PAST SIX MONTH
PERIOD?
A. The Value Portfolio focus on large, high quality consistent companies
benefited performance over the past six months, as these companies
continued to perform well.
The best and worst performing stocks held throughout the six months
were:
Best Worst
- ------------------------------------ -------------------------
Microsoft Corp. +53.0% PPG Industries +3.6%
Eli Lilly & Co. +49.7% Kimberly Clark +4.5%
Bristol Myers Squibb Co. +48.6% AMR Corp. +5.0%
Pfizer Inc. +44.0% Cisco Sys Inc. +5.5%
Colgate Palmolive Co. +41.5% Intel Corp. +8.3%
Q. WHAT IS YOUR CURRENT MARKET OUTLOOK?
A. The current economic landscape will continue to exist for the
remainder of the year. This can be supported by the Federal Reserve's
decision to hold monetary policy steady at their early July meeting. The
closely monitored Consumer Price Index is up a mere 2.3% year-over-year,
which is the lowest in 31 years. Unemployment is at a 25 year low, and
inflation is being held down by global competition and lack of pricing
power by corporate America.
In our judgment, as this is written, the stock market is currently
fairly valued relative to the fixed income markets. We expect the
uncertainty surrounding interest rates and slowing corporate profit
growth will continue to favor high quality, liquid companies with
consistent earnings and dividends for the remainder of 1997.
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GNA Variable Series Trust-GNA Value Portfolio 9
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Q. HOW HAVE YOU POSITIONED THE PORTFOLIO TO BENEFIT FROM YOUR MARKET
OUTLOOK?
A. We have an overweighting in the defensive sector, emphasizing
consistent companies in the drug and household products industries. We
like the drug industry because with an aging population. We have a high
degree of confidence in the ability of these types of companies to
produce solid earnings growth in an uncertain environment (Eli Lilly,
Pfizer, Bristol Myers). Our overweighting in the household product
industry is an outgrowth of the international growth potential and strong
profit growth of these dominant name brand players (Avon, Gillette,
Colgate Palmolive). As these companies became more aggressive with
international volume growth, the result has been consistent double digit
earnings and dividend growth for shareholders.
We continue to be underweight in the interest-sensitive sector. This
is mainly due to our lack of representation in the electric and gas
utility industries. We have been under represented in these industries
for a long time, due to the uncertainty of future earnings surrounding
deregulation and other looming legislative concerns. However within the
interest-sensitive sector we remain attracted to American Express, Chase
Manhattan, Banc One, Nations Bank and National City. With compelling
valuations and improving business situations we feel these fundamentals
continue to warrant positions.
We are underweighted in the energy sector due to our concern over
oil prices. Within the technology sector we are underweighted relative to
the S&P 500, but we continue to hold significant positions in the high
quality market leaders such as Intel, Microsoft, and Compaq.
We anticipate the companies we own in the Value Portfolio will
benefit from the financial market's uncertainty surrounding future
interest rates and slowing corporate profits growth. This environment is
ideal, and we believe sustainable, for companies that are in the Value
Portfolio--high quality, blue-chip companies with consistent earnings and
dividend growth.
Q. COULD YOU DISCUSS ONE CURRENT MARKET ISSUE AS IT RELATES TO THE
PORTFOLIO?
A. Current valuation is an issue that relates to the Portfolio and all
market participants. With the S&P 500 up 20.5% for the first six months
of 1997 on top of 23.1% in 1996 (calendar) and 37.5% in 1995 (calendar),
the question of valuation becomes very pertinent. This current bull
market run is a result of several key factors: falling interest rates,
thus falling equity discount rates, strong corporate profit growth, and
moderate inflation. With consensus earnings growth slowing for corporate
America it is clear that participants are focusing on higher quality,
larger capitalization companies that have consistently provided earnings
growth in uncertain environments. As mentioned previously, the top 50
companies in the S&P 500 saw their per-share earnings jump 23.9%, for the
year-over-year period ending 3/31/97, versus 8% for the remaining 450
companies. We believe a low inflation,
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<PAGE>
10 GNA Variable Series Trust-GNA Value Portfolio
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modest growth environment can continue, thereby allowing for further
advances in the stock market. We therefore, are holding minimal cash
reserves, have chosen to remain fully invested in stocks in the Value
Portfolio.
[GRAPH]
Morningstar
S&P 500 GNA Value Equity Income
Stock Portfolio Fund
1/3/95 10,000 10,000 10,000
3/95 10,974 10,624 10,762
6/95 12,015 11,355 11,466
9/95 12,970 12,153 12,268
12/95 13,743 12,768 12,977
3/96 14,490 13,233 13,581
6/96 15,144 13,751 13,964
9/96 15,807 14,548 14,345
12/96 16,914 15,611 15,418
3/97 17,357 16,036 15,674
6/97 20,384 19,296 17,696
Average Annual Total Return %
for the period ended June 30, 1997
6 Mo 1 Yr Since Inception
------ ------ ---------------
23.59% 40.33% 30.21%
Performance of a $10,000 investment since inception of the GNA Value
Portfolio--(1/3/95)
S&P 500 Stock Index (ending value $20,384)
GNA Value Portfolio (ending value $19,296)
Morningstar Equity-Income Fund Average (ending value $17,696)
Past performance is not indicative of future results. See Notes to Performance
(page 16).
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GNA Variable Series Trust-GNA Government Portfolio 11
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FROM THE GOVERNMENT PORTFOLIO ADVISER
GNA CAPITAL MANAGEMENT, INC.
PORTFOLIO MANAGER: CHARLES A. KAMINSKI
Q. WHAT HAPPENED IN THE MARKET OVER THE PAST SIX MONTHS?
A. Treasury Bills continued to trade in a narrow band of 5.10-5.20% with
brief excursions on either side. This pattern goes back to January of
1996, when the trading range of 5.00-5.30% began. Treasury Bonds also
stayed in a band of 6.50-7.15% that was established in March of 1996. But
there were definite trends moving bond yields in deliberate fashion.
Bond yields touched 6.50% just before the Federal Reserve raised Fed
Funds by 25 basis points. From that point on fears of inflation,
accompanying an economy growing at nearly 6% during the first quarter,
backed rates up to 7.15%. In the second quarter, a slowdown quickly
became apparent. Slowing growth and a string of very low inflation
numbers rallied bonds to a 6.48% yield as of this writing. As hot as long
bonds have been, municipals have been even hotter.
Stocks, however, are the real story. After an early ten percent pull
back (technically a "correction"), as measured by the Dow Jones
Industrial Average, stocks gained more than twenty-five percent and
continue to amaze. Many international equity indices are also at all time
highs. The laggard has been gold. Since February of 1996 it has steadily
fallen from $430 per ounce to about $320 per ounce.
Q. WHAT HAPPENED IN THE PORTFOLIO OVER THE PAST SIX MONTHS?
A. The Portfolio's sensitivity to interest rates is tightly constrained
by the investment guidelines of the Portfolio (range of 4.0 to 4.5 years
duration). It performed as expected on both the upward and downward
marches in bond yields. Options strategies designed to benefit from bonds
remaining in a trading range benefited returns. We trimmed the duration
of the Portfolio to 4.0 years, down from 4.25, prior to the last spurt in
the market. As a result, capital appreciation was a little lower
(approximately 0.04%) than had we been at the neutral 4.25 years.
Q. WHAT IS YOUR CURRENT MARKET OUTLOOK?
A. Positive factors: 1) rapidly shrinking Federal deficit and strong
corporate cashflow creating a shortage of bonds, 2) tame inflation
(lowest Gross Domestic Product deflator in thirty years, 1.6%
year-over-year), 3) slowing economy, 4) bond yields elsewhere in the G7
below U.S. yields, and 5) bond managers skeptical of the market.
Negative factors: 1) tight employment, 2) real wages (+5.1% three
month average, year-over-year), 3) economy showing signs of picking up,
4) little fear, 5) no room for surprises.
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12 GNA Variable Series Trust-GNA Government Portfolio
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Some economists attribute the slowdown in the second quarter to a
vacuum that followed the first quarter's, early-tax-rebate spending
binge. After the pause, consumers are once again a force. The Treasury's
new inflation-index bonds suggest that inflation will be as follows: five
years out 2.45% per year, ten years out 2.55% per year. Recent months'
Consumer Price Index and Producer Price Index data suggest that these
estimates could be too high! But how much further can things progress
before the perfect world scenario is derailed?
Q. HOW IS THE PORTFOLIO POSITIONED TO TAKE ADVANTAGE OF YOUR MARKET
OUTLOOK?
A. Excellent inflation data has temporarily desensitized bond managers
to employment data. Job growth, low unemployment and the reaction to
another possible Federal Reserve rate hike sometime during the next few
months have caused us to position the Portfolio at 4.0 years duration in
anticipation of a temporary increase in yields. Should the long bond back
up to yield between 6.75 and 7.00%, we would extend the Portfolio's
duration to 4.5 years.
Q. COULD YOU DISCUSS ONE CURRENT MARKET ISSUE AS IT RELATES TO THE
PORTFOLIO.
A. The Federal Reserve has only recently revealed one interesting
dynamic that may be influencing their policy decisions. With low
unemployment and minimum-wage jobs paying more than minimum wage levels
in some areas, companies are being forced to expand their horizons in
search of personnel. This takes the form of retraining individuals so
that they have desired skills. It also makes more resources available so
that the otherwise unemployable enter the workforce. Given the new
thinking regarding welfare, such a process could not come at a better
time. With the Federal Reserve acknowledging this as being on their radar
screen, it would be reasonable to conclude that, on the margin, they will
be more inclined to let the economy run. The big unknown at this point is
just how productive the new employees will be.
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GNA Variable Series Trust-GNA Government Portfolio 13
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[GRAPH]
Lehman Government GNA Government Morningstar Government
Bond Index Portfolio Bond
1/3/95 10,000 10,000 10,000
3/95 10,471 10,487 10,406
6/95 11,120 10,984 10,907
9/95 11,316 11,198 11,081
12/95 11,833 11,597 11,492
3/96 11,566 11,396 11,291
6/96 11,620 11,463 11,318
9/96 11,816 11,688 11,490
12/96 12,161 11,990 11,779
3/97 12,062 11,927 11,710
6/97 12,480 12,340 12,060
Average Annual Total Return %
for the period ended June 30, 1997
6 Mo 1 Yr Since Inception
----- ----- ---------------
2.90% 7.63% 8.81%
Performance of a $10,000 investment since inception of the GNA Government
Portfolio--(1/3/95)
Lehman Government Bond Index (ending value $12,480)
GNA Government Portfolio (ending value $12,340)
Morningstar Government Bond--General Fund Average (ending value $12,060)
Past performance is not indicative of future results. See Notes to Performance
(page 16).
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<PAGE>
14 GNA Variable Series Trust-GNA Adjustable Rate Portfolio
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FROM THE ADJUSTABLE RATE PORTFOLIO SUB-ADVISER
STANDISH, AYER & WOOD, INC.
PORTFOLIO MANAGER: LORI DRISCOLL
Q. WHAT HAPPENED IN THE MARKET OVER THE PAST SIX MONTHS?
A. During the last six months, interest rates have fluctuated in a range
of approximately 75 basis points. Strong consumer spending and job growth
led up to March's 25 basis point hike in short term rates by the Federal
Reserve. As subsequent economic releases filtered into the market, there
were signs of moderating growth with inflation remaining subdued. As a
result, the market shifted from pricing securities in anticipation of
further rate hikes to expectations of no change in Federal Reserve policy
near term. As second quarter economic growth slowed from the pace earlier
in the year, and concerns of inflationary pressures diminished, interest
rates moved lower.
Q. WHAT HAPPENED IN THE PORTFOLIO OVER THE PAST SIX MONTHS?
A. As interest rates moved in a moderate range, securitized assets,
including adjustable and fixed rate pass-through and asset-backed
securities, benefited from a continued tightening of spreads. Without
much change in rates, prepayments remained "uneventful". Overall, the
first half was a very favorable environment for spread product as risk
premiums across most sectors fell. During this period, the Portfolio's
returns benefited considerably from narrower spreads in its mortgage
related holdings.
Q. WHAT IS YOUR CURRENT MARKET OUTLOOK?
A. While growth has moderated from the fast pace experienced in the
first quarter, the economic picture remains fairly positive. However,
despite tight labor markets and high capacity, inflation news remains
good. We believe the market will continue to trade in a moderate range;
supported by steady economic growth and favorable prospects for
inflation. The risk to this view is more likely to be that the economy's
momentum turns sharply upward, and the market must adjust levels for
stronger than expected growth. Until a clearer economic picture emerges
to support such an up-turn in the economy or inflation, we believe the
Federal Reserve will maintain a neutral stance.
Q. HOW IS THE PORTFOLIO POSITIONED TO TAKE ADVANTAGE OF YOUR MARKET
OUTLOOK?
A. In the near term, if Federal Reserve policy remains neutral, we
expect bond yields will continue to move in a moderate range. In general,
spread product should outperform Treasuries in a stable interest rate
environment. Consistent with this outlook, we have maintained our
positions in both the adjustable and fixed rate sectors which still offer
attractive incremental yield.
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<PAGE>
GNA Variable Series Trust-GNA Adjustable Rate Portfolio 15
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Q. COULD YOU DISCUSS ONE CURRENT MARKET ISSUE AS IT RELATES TO THE
PORTFOLIO?
A. An important concern today which relates to most fixed income
portfolios is the issue surrounding the level of yield spreads. Over the
past 12 to 18 months, the interest rate premium payable on mortgage
related assets, because of the possibility homeowners may sell or
refinance their mortgages (often referred to as the "call risk"), has
declined substantially. Additionally, as demand has outpaced supply,
yield spreads have narrowed further. While stable interest rates will
likely favor "yield spread" types of securities over Treasuries, the risk
of an increase in market volatility could very negatively impact spreads.
In the current tight spread environment, we are increasingly defensive in
our spread products, looking for ways to keep the incremental yield in
the Portfolio but reduce the Portfolio's call risk.
[GRAPH]
Lehman Brothers GNA Adjustable Morningstar
ARM Index Rate Portfolio Government Bond
1/3/95 10,000 10,000 10,000
3/95 10,420 10,429 10,168
6/95 10,745 10,761 10,311
9/95 10,927 10,919 10,381
12/95 11,172 11,149 10,452
3/96 11,295 11,199 10,531
6/96 11,423 11,321 10,652
9/96 11,637 11,516 10,815
12/96 11,921 11,769 11,000
3/97 12,080 11,923 11,140
6/97 12,330 12,159 11,344
Average Annual Total Return %
for the period ended June 30, 1997
6 Mo 1 Yr Since Inception
----- ----- ---------------
3.31% 7.43% 8.18%
Performance of a $10,000 investment since inception of the GNA Adjustable Rate
Portfolio--(1/3/95)
Lehman Brothers ARM Index (ending value $12,330)
GNA Adjustable Rate Portfolio (ending value $12,159)
Morningstar Government Bond--ARM Fund average (ending value $11,344)
Past performance is not indicative of future results. See Notes to Performance
(page 16).
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<PAGE>
16 GNA Variable Series Trust
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NOTES TO PERFORMANCE
Total returns assume changes in share price and reinvestment of dividends and
capital gains. Investment returns and principal values will fluctuate, so that
an investor's shares, when redeemed, may be worth more or less than the original
cost.
Total returns include the effect of deducting each Portfolio's expenses, but
do not include charges and expenses attributable to the Power Portfolio Variable
Annuity. If total returns included the effects of these charges and expenses,
the performance figures for each Portfolio would have been lower. Please review
the Power Portfolio Variable Annuity prospectus for information on the relevant
charges and expenses. Additionally, the Adviser has agreed to waive or limit
certain expenses as described in detail in each Portfolio's prospectus. Had the
Adviser not absorbed a portion of expenses, total returns would have been lower.
The Lehman Government Bond Index, S&P 500 Stock Index and the Lehman Brothers
ARM Index are unmanaged indices and do not reflect the actual cost of investing
in the instruments that comprise each index. The results shown for the foregoing
indices assume reinvestment of net dividends.
The views expressed in this report reflect those of the Adviser and
Sub-Advisers only through June 30, 1997, the end of the period of this report.
The Adviser's and Sub-Advisers' views are subject to change at any time based on
market and other conditions.
- --------------------------------------------------------------------------------
<PAGE>
GNA Variable Series Trust 17
- --------------------------------------------------------------------------------
(This Page Intentionally Left Blank)
<PAGE>
18 GNA Variable Series Trust-GNA Growth Portfolio
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
% OF NET NUMBER MARKET
ASSETS OF SHARES VALUE ($)
-------- ---------- -----------
<S> <C>
COMMON STOCKS 94.5
BASIC INDUSTRIES-3.2
CHEMICALS-2.2%
Monsanto Company................................................. 3,400 146,412
Praxair, Incorporated............................................ 3,000 168,000
-----------
314,412
-----------
CONTAINERS & GLASS-1.0%
Owens-Illinois, Incorporated (a)................................. 4,300 133,300
-----------
447,712
-----------
CAPITAL GOODS-2.5
AGRICULTURAL MACHINERY-1.1%
Deere & Company.................................................. 2,700 148,163
-----------
COMMERCIAL & INDUSTRIAL EQUIPMENT-1.4%
PACCAR, Incorporated............................................. 4,400 204,325
-----------
352,488
-----------
CONGLOMERATES-1.6
Danaher Corporation.............................................. 4,600 233,738
-----------
CONSUMER BASICS-18.4
DRUGS & HEALTH CARE-14.9%
Amgen, Incorporated (a).......................................... 2,600 151,125
Boston Scientific Corporation (a)................................ 2,100 129,019
Guidant Corporation.............................................. 1,900 161,500
HBO & Company.................................................... 1,600 110,200
Johnson & Johnson................................................ 2,200 141,625
Medtronic, Incorporated.......................................... 2,600 210,600
Merck & Company, Incorporated.................................... 1,600 165,600
Omnicare, Incorporated........................................... 3,600 112,950
Oxford Health Plans, Incorporated (a)............................ 5,400 387,450
Pfizer, Incorporated............................................. 2,000 239,000
Schering Plough Corporation...................................... 4,000 191,500
U.S. Surgical Corporation........................................ 3,000 111,750
-----------
2,112,319
-----------
</TABLE>
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
GNA Variable Series Trust-GNA Growth Portfolio 19
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
JUNE 30, 1997 (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
% OF NET NUMBER MARKET
ASSETS OF SHARES VALUE ($)
-------- ---------- -----------
FOOD & BEVERAGES-2.0%
<S> <C>
Coca-Cola Company................................................ 2,200 148,500
Coca-Cola Enterprises, Incorporated.............................. 6,300 144,900
-----------
293,400
-----------
HOUSEHOLD PRODUCTS-1.5%
Procter & Gamble Company......................................... 1,500 211,875
-----------
2,617,594
-----------
CONSUMER DURABLE GOODS-2.4
AUTOMOBILES-2.4%
Ford Motor Company............................................... 3,600 135,900
Harley Davidson, Incorporated.................................... 4,400 210,925
-----------
346,825
-----------
CONSUMER NON-DURABLE GOODS-10.2
APPAREL & TEXTILES-2.0%
Nike, Incorporated............................................... 2,000 116,750
Wolverine World Wide, Incorporated............................... 5,400 164,025
-----------
280,775
-----------
COSMETICS & TOILETRIES-1.3%
Gillette Company................................................. 2,000 189,500
-----------
RETAIL TRADE-6.9%
CompUSA, Incorporated (a)........................................ 6,000 129,000
Dollar General Corporation....................................... 4,803 180,113
Gap, Incorporated................................................ 3,600 139,950
Home Depot, Incorporated......................................... 2,300 158,556
Kohl's Corporation (a)........................................... 2,800 148,225
ShopKo Stores, Incorporated...................................... 3,300 84,150
Tiffany & Company................................................ 3,100 143,181
-----------
983,175
-----------
1,453,450
-----------
ENERGY-6.4
GAS EXPLORATION-1.0%
BJ Services Company (a).......................................... 2,800 150,150
-----------
</TABLE>
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
20 GNA Variable Series Trust-GNA Growth Portfolio
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
JUNE 30, 1997 (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
% OF NET NUMBER MARKET
ASSETS OF SHARES VALUE ($)
-------- ---------- -----------
PETROLEUM SERVICES-5.4%
<S> <C>
Smith International, Incorporated (a)............................ 4,100 249,075
Tidewater, Incorporated.......................................... 3,400 149,600
Transocean Offshore, Incorporated................................ 3,000 217,875
Western Atlas, Incorporated (a).................................. 2,000 146,500
-----------
763,050
-----------
913,200
-----------
FINANCE-16.5
BANKS-8.9%
BankBoston Corporation........................................... 2,100 151,331
Citicorp......................................................... 1,300 156,731
Fifth Third Bancorp.............................................. 3,000 246,188
Norwest Corporation.............................................. 2,900 163,125
Star Banc Corporation............................................ 6,000 253,500
Zions Bancorporation............................................. 8,000 301,000
-----------
1,271,875
-----------
FINANCIAL SERVICES-4.6%
American Express Company......................................... 2,100 156,450
Finova Group, Incorporated....................................... 2,600 198,900
Franklin Resources, Incorporated................................. 2,200 159,637
The Money Store, Incorporated.................................... 4,600 131,963
-----------
646,950
-----------
INSURANCE-3.0%
MGIC Investment Corporation...................................... 4,800 230,100
SunAmerica, Incorporated......................................... 4,000 195,000
-----------
425,100
-----------
2,343,925
-----------
GENERAL BUSINESS-6.1
BUSINESS SERVICES-5.0%
AccuStaff, Incorporated (a)...................................... 6,000 142,125
FIserv, Incorporated (a)......................................... 5,400 240,975
Omnicom Group.................................................... 2,800 172,550
Robert Half International, Incorporated (a)...................... 3,400 160,012
-----------
715,662
-----------
</TABLE>
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
GNA Variable Series Trust-GNA Growth Portfolio 21
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
JUNE 30, 1997 (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
% OF NET NUMBER MARKET
ASSETS OF SHARES VALUE ($)
-------- ---------- -----------
COMMUNICATION SERVICES-0.2%
<S> <C>
Loral Space & Communications (a)................................. 1,800 27,000
-----------
OFFICE FURNISHINGS & SUPPLIES-0.9%
Staples, Incorporated (a)........................................ 5,500 127,875
-----------
870,537
-----------
TECHNOLOGY-23.3
AEROSPACE-1.2%
McDonnell Douglas Corporation.................................... 2,400 164,400
-----------
COMPUTERS & BUSINESS EQUIPMENT-7.6%
Cisco Systems, Incorporated (a).................................. 2,000 134,250
Dell Computer Corporation (a).................................... 4,400 516,725
EMC Corporation Massachusetts (a)................................ 3,600 140,400
Gateway 2000, Incorporated (a)................................... 4,400 142,725
Sun Microsystems, Incorporated (a)............................... 4,000 148,875
-----------
1,082,975
-----------
ELECTRONICS-3.4%
Adaptec, Incorporated (a)........................................ 3,600 125,100
Intel Corporation................................................ 1,500 212,719
Newbridge Networks Corporation (a)............................... 3,400 147,900
-----------
485,719
-----------
SOFTWARE-7.0%
BMC Software, Incorporated (a)................................... 2,800 155,050
Computer Associates International, Incorporated.................. 2,400 133,650
McAfee Associates, Incorporated (a).............................. 3,000 189,375
Microsoft Corporation (a)........................................ 1,800 227,475
Oracle Systems Corporation (a)................................... 3,225 162,459
Parametric Technology Corporation (a)............................ 3,000 127,688
-----------
995,697
-----------
TELECOMMUNICATION EQUIPMENT-4.1%
ADC Telecommunications, Incorporated (a)......................... 5,600 186,900
Andrew Corporation (a)........................................... 3,600 101,250
Ascend Communications, Incorporated (a).......................... 1,600 63,000
Tellabs, Incorporated (a)........................................ 4,000 223,500
-----------
574,650
-----------
3,303,441
-----------
</TABLE>
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
22 GNA Variable Series Trust-GNA Growth Portfolio
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
JUNE 30, 1997 (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
% OF NET NUMBER MARKET
ASSETS OF SHARES VALUE ($)
-------- ---------- -----------
TRANSPORTATION-0.8
<S> <C>
RAILROADS & EQUIPMENT-0.8%
Wisconsin Central Transportation Corporation (a)................. 3,000 111,750
-----------
UTILITIES-3.1
ELECTRIC-1.2%
AES Corporation (a).............................................. 2,400 169,800
-----------
TELEPHONE-1.9%
Cincinnati Bell, Incorporated.................................... 4,000 126,000
WorldCom, Incorporated (a)....................................... 4,500 144,000
-----------
270,000
-----------
439,800
-----------
Total Common Stocks
(Cost $8,921,019)......................................... 13,434,460
-----------
MONEY MARKET MUTUAL FUNDS 4.1
SSgA Money Market Fund [Class A]................................. 360,758 360,758
SSgA US Government Money Market Fund............................. 214,488 214,488
-----------
Total Money Market Mutual Funds
(Cost $575,246)........................................... 575,246
-------- -----------
SUMMARY
Total investments
(Cost $9,496,265) (b)..................................... 98.6 14,009,706
Other assets and liabilities, net................................ 1.4 200,090
-------- -----------
NET ASSETS............................................................ 100.0 $14,209,796
-------- -----------
-------- -----------
</TABLE>
- ------------
NOTES:
(a) Non-income producing security.
(b) See Note 3 in the Notes to Financial Statements for cost for federal income
tax purposes and related gross unrealized appreciation (depreciation).
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
GNA Variable Series Trust-GNA Value Portfolio 23
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
% OF NET NUMBER MARKET
ASSETS OF SHARES VALUE ($)
-------- --------- -----------
<S> <C>
COMMON STOCKS 99.3
BASIC INDUSTRIES-7.1
DIVERSIFIED-1.2%
Corning, Incorporated............................................... 2,900 161,313
-----------
CHEMICALS-5.9%
DuPont (EI) deNemours & Company..................................... 9,200 578,450
PPG Industries, Incorporated........................................ 3,400 197,625
-----------
776,075
-----------
937,388
-----------
CAPITAL GOODS-8.1
ELECTRICAL EQUIPMENT-8.1%
Emerson Electric Company............................................ 8,800 484,550
General Electric Company............................................ 8,900 581,837
-----------
1,066,387
-----------
CONGLOMERATES-3.9
Minnesota Mining & Manufacturing Company............................ 5,000 510,000
-----------
CONSUMER BASICS-29.5
DRUGS & HEALTH CARE-15.2%
American Home Products Corporation.................................. 7,300 558,450
Bristol Myers Squibb Company........................................ 5,400 437,400
Eli Lilly & Company................................................. 5,600 612,150
Pfizer, Incorporated................................................ 3,300 394,350
-----------
2,002,350
-----------
FOOD & BEVERAGES-2.6%
Campbell Soup Company............................................... 2,400 120,000
PepsiCo, Incorporated............................................... 5,800 217,863
-----------
337,863
-----------
HOUSEHOLD PRODUCTS-8.9%
Colgate Palmolive Company........................................... 5,800 378,450
Kimberly Clark Corporation.......................................... 9,600 477,600
Procter & Gamble Company............................................ 2,300 324,875
-----------
1,180,925
-----------
TOBACCO-2.8%
Philip Morris Companies, Incorporated............................... 8,500 377,187
-----------
3,898,325
-----------
</TABLE>
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
24 GNA Variable Series Trust-GNA Value Portfolio
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
JUNE 30, 1997 (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
% OF NET NUMBER MARKET
ASSETS OF SHARES VALUE ($)
-------- --------- -----------
CONSUMER NON-DURABLE GOODS-8.6
<S> <C>
COSMETICS & TOILETRIES-5.7%
Avon Products, Incorporated......................................... 7,700 543,331
Gillette Company.................................................... 2,300 217,925
-----------
761,256
-----------
RETAIL TRADE-2.9%
Dayton Hudson Corporation........................................... 4,100 218,069
Walgreen Company.................................................... 3,000 160,875
-----------
378,944
-----------
1,140,200
-----------
CONSUMER SERVICES-0.6
AIR TRAVEL-0.6%
AMR Corporation (a)................................................. 900 83,250
-----------
ENERGY-6.9
INTERNATIONAL OIL-5.9%
Exxon Corporation................................................... 7,000 430,500
Mobil Corporation................................................... 5,000 349,375
-----------
779,875
-----------
PETROLEUM SERVICES-1.0%
Halliburton Company................................................. 1,700 134,725
-----------
914,600
-----------
FINANCE-12.8
BANKS-10.6%
Banc One Corporation................................................ 8,800 426,250
Chase Manhattan Corporation......................................... 3,100 300,894
National City Corporation........................................... 10,100 530,250
NationsBank Corporation............................................. 2,200 141,900
-----------
1,399,294
-----------
FINANCIAL SERVICES-1.2%
American Express Company............................................ 2,000 149,000
-----------
INSURANCE-1.0%
American International Group, Incorporated.......................... 900 134,437
-----------
1,682,731
-----------
</TABLE>
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
GNA Variable Series Trust-GNA Value Portfolio 25
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
JUNE 30, 1997 (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
% OF NET NUMBER MARKET
ASSETS OF SHARES VALUE ($)
-------- --------- -----------
GENERAL BUSINESS-0.9
<S> <C>
NEWSPAPERS-0.9%
Gannett Company, Incorporated....................................... 1,200 118,500
-----------
SHELTER-3.0
CONSTRUCTION MATERIALS-3.0%
Masco Corporation................................................... 9,400 392,450
-----------
TECHNOLOGY-12.5
COMPUTERS & BUSINESS EQUIPMENT-6.0%
Cisco Systems, Incorporated (a)..................................... 2,200 147,675
Compaq Computer Corporation (a)..................................... 1,600 158,800
Pitney Bowes, Incorporated.......................................... 7,000 486,500
-----------
792,975
-----------
ELECTRONICS-3.8%
Intel Corporation................................................... 3,500 496,344
-----------
SOFTWARE-2.7%
Microsoft Corporation (a)........................................... 2,800 353,850
-----------
1,643,169
-----------
UTILITIES-5.4
TELEPHONE-5.4%
Ameritech Corporation............................................... 6,300 428,006
Bell Atlantic Corporation........................................... 3,800 288,325
-----------
716,331
-----------
Total Common Stocks
(Cost $9,640,921)............................................ 13,103,331
-----------
</TABLE>
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
26 GNA Variable Series Trust-GNA Value Portfolio
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
JUNE 30, 1997 (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
% OF NET NUMBER MARKET
ASSETS OF SHARES VALUE ($)
-------- --------- -----------
MONEY MARKET MUTUAL FUNDS 0.8
<S> <C>
SSgA Money Market Fund [Class A].................................... 109,062 109,062
SSgA US Government Money Market Fund................................ 153 153
-----------
Total Money Market Mutual Funds
(Cost $109,215).............................................. 109,215
-------- -----------
SUMMARY
Total investments
(Cost $9,750,136) (b)........................................ 100.1 13,212,546
Other assets and liabilities, net................................... (0.1) (16,506)
-------- -----------
NET ASSETS............................................................... 100.0 $13,196,040
-------- -----------
-------- -----------
</TABLE>
- ------------
NOTES:
(a) Non-income producing security.
(b) See Note 3 in the Notes to Financial Statements for cost for federal income
tax purposes and related gross unrealized appreciation (depreciation).
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
GNA Variable Series Trust--GNA Government Portfolio 27
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
% OF NET PRINCIPAL MARKET
ASSETS AMOUNT ($) VALUE ($)
-------- ---------- ----------
<S> <C>
LONG-TERM GOVERNMENT AND AGENCY SECURITIES 89.7
FEDERAL HOME LOAN MORTGAGE CORPORATION (a)(b)-30.4
6.500%, with a maturity date of February 1, 2011.................. 58,528 57,467
7.000%, with various maturity dates to August 1, 2025............. 1,651,780 1,626,383
8.000%, with various maturity dates to April 1, 2017.............. 489,000 503,113
8.500%, with various maturity dates to July 1, 2010............... 289,601 297,579
----------
Total Federal Home Loan Mortgage Corporation
(Cost $2,441,707).......................................... 2,484,542
----------
FEDERAL HOME LOAN MORTGAGE CORPORATION
MULTICLASS PARTICIPATION CERTIFICATES (b)(c)-3.7
5.850%, with a maturity date of February 15, 2008
[Series 1678 Class PG].......................................... 110,000 106,287
6.500%, with a maturity date of July 15, 2008
[Series 1480 Class LE].......................................... 50,000 47,844
6.500%, with a maturity date of February 15, 2021
[Series 128 Class I]............................................ 100,000 97,187
7.000%, with a maturity date of February 15, 2021
[Series 1214 Class J]........................................... 50,000 49,359
----------
Total Federal Home Loan Mortgage Corporation
Multiclass Participation Certificates
(Cost $296,481)............................................ 300,677
----------
FEDERAL HOME LOAN MORTGAGE CORPORATION DEBENTURE-0.8
8.250%, with a maturity date of June 1, 2016
(Cost $72,192)............................................. 60,000 66,600
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (a)(b)-8.9
6.000%, with a maturity date of August 1, 2008.................... 89,539 87,289
6.500%, with various maturity dates to May 1, 2024................ 542,146 529,339
7.000%, with a maturity date of September 1, 1999................. 10,396 10,460
7.500%, with a maturity date of July 1, 2002...................... 50,579 51,268
8.000%, with various maturity dates to July 1, 1998............... 50,670 51,336
----------
Total Federal National Mortgage Association
(Cost $739,097)............................................ 729,692
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
REAL ESTATE MORTGAGE INVESTMENT CONDUITS [REMIC] (b)(c)-4.4
6.000%, with a maturity date of March 25, 2019
[Series 1993-136 Class PB]...................................... 86,400 84,051
</TABLE>
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
28 GNA Variable Series Trust--GNA Government Portfolio
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
JUNE 30, 1997 (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
% OF NET PRINCIPAL MARKET
ASSETS AMOUNT ($) VALUE ($)
-------- ---------- ----------
<S> <C>
6.500%, with a maturity date of September 25, 2018
[Series 1992-150 Class GA]...................................... 125,287 125,012
7.000%, with a maturity date of November 25, 2009
[Series 1992-14 Class D]........................................ 126,226 126,304
7.000%, with a maturity date of September 25, 2020
[Series 1990-109 Class J]....................................... 25,000 24,813
----------
Total Federal National Mortgage Association
Real Estate Mortgage Investment Conduits [REMIC]
(Cost $358,481)............................................ 360,180
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
ADJUSTABLE RATE MORTGAGE (b)(d)-2.4
8.423%, with a maturity date of July 1, 2019
(Cost $193,498)............................................ 194,105 198,472
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION DEBENTURE-1.3
7.700%, with a maturity date of August 10, 2004
(Cost $103,125)............................................ 100,000 101,422
----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (a)(b)-3.3
6.500%, with a maturity date of October 15, 2010.................. 87,792 86,639
7.500%, with a maturity date of April 15, 2001.................... 20,987 21,199
8.500%, with various maturity dates to May 15, 2003............... 159,120 162,926
----------
Total Government National Mortgage Association
(Cost $268,306)............................................ 270,764
----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
ADJUSTABLE RATE MORTGAGES (a)(b)(d)-7.7
6.000%, with a maturity date of February 20, 2026................. 70,144 71,843
6.500%, with a maturity date of February 20, 2023................. 253,401 259,247
7.000%, with various maturity dates to December 20, 2024.......... 288,857 295,810
----------
Total Government National Mortgage Association
Adjustable Rate Mortgages
(Cost $587,161)............................................ 626,900
----------
FEDERAL FARM CREDIT BANK NOTES-11.2
5.270%, with a maturity date of February 1, 1999.................. 500,000 494,140
8.600%, with a maturity date of May 30, 2006...................... 400,000 424,248
----------
Total Federal Farm Credit Bank Notes
(Cost $934,594)............................................ 918,388
----------
</TABLE>
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
GNA Variable Series Trust--GNA Government Portfolio 29
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
JUNE 30, 1997 (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
% OF NET PRINCIPAL MARKET
ASSETS AMOUNT ($) VALUE ($)
-------- ---------- ----------
FEDERAL HOME LOAN BANK BONDS-5.5
<S> <C>
5.720%, with a maturity date of November 22, 2000 (e)............. 360,000 351,673
7.640%, with a maturity date of May 8, 2002....................... 100,000 100,687
----------
Total Federal Home Loan Bank Bonds
(Cost $436,443)............................................ 452,360
----------
UNITED STATES TREASURY BOND-6.1
7.875%, with a maturity date of February 15, 2021
(Cost $476,234)............................................ 450,000 501,750
----------
UNITED STATES TREASURY STRIPS-1.1
Zero Coupon, with a maturity date of February 15, 2000
(Cost $84,946)............................................. 100,000 85,162
----------
TENNESSEE VALLEY AUTHORITY NOTE-1.6
6.125%, with a maturity date of July 15, 2003
(Cost $131,625)............................................ 133,000 128,844
----------
PRIVATE EXPORT FUNDING CORPORATION-1.3
9.100%, with a maturity date of October 30, 1998
(Cost $108,625)............................................ 100,000 103,734
----------
Total Long-Term Government and Agency Securities
(Cost $7,232,515).......................................... 7,329,487
----------
<CAPTION>
NUMBER OF
SHARES
----------
<S> <C>
MONEY MARKET MUTUAL FUNDS 9.7
SSgA US Government Money Market Fund.............................. 397,259 397,259
SSgA Money Market Fund [Class A].................................. 397,133 397,133
----------
Total Money Market Mutual Funds
(Cost $794,392)............................................ 794,392
-------- ----------
SUMMARY
Total investments
(Cost $8,026,907) (f)...................................... 99.4 8,123,879
Other assets and liabilities, net................................. 0.6 46,852
-------- ----------
NET ASSETS............................................................. 100.0 $8,170,731
-------- ----------
-------- ----------
</TABLE>
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
30 GNA Variable Series Trust--GNA Government Portfolio
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
JUNE 30, 1997 (UNAUDITED), CONTINUED
- ------------
NOTES:
(a) The investments in mortgage-backed securities are interests in separate
pools of mortgages. All such issues which have the same coupon rates, have
been aggregated for financial statement presentation purposes.
(b) Effective maturities for all securities may be shorter than indicated due
to prepayments.
(c) Risks associated with Collateralized Mortgage Obligations ("CMOs")--The
net asset value of the Fund is sensitive to interest rate fluctuations.
CMOs are obligations collateralized by a portfolio of mortgages or
mortgage-related securities. Payments of principal and interest on the
mortgages are passed through to the holder of the CMOs as they are
received, but certain classes of CMOs have priority over others with
respect to the receipt of prepayments on the mortgages. Therefore, an
investment in a CMO may be subject to a greater or lesser risk of
prepayment than other types of mortgage-related securities and this
uncertainty results in greater price volatility.
(d) Risks associated with Adjustable Rate Mortgage securities ("ARMs")--Most
ARMs are subject to limits on coupon changes ("caps" and "floors"). Coupon
caps/floors limit the amount the coupon can adjust on coupon reset dates,
or over the life of the loan. If interest rates change quickly, an
adjustable rate mortgage's coupon adjustment may be constrained by its
periodic or lifetime limit. For example, if rates rise quickly, since the
coupon rate cannot reset to equal the market rates, or at least cannot do
so immediately, an investment in an ARM may be subject to a decline in
price, despite the fact that ARM securities are often represented to have
less price risk than fixed rate securities. Until, and if, the ARM's
coupon rate can adjust to equal current market rates, it will be subject
to price variations, despite being an "adjustable rate" security. This
exposure is called "cap risk". Conversely, an ARM may benefit from the
floor on its rate adjustments if market rates drop below the minimum rate
the ARM may pay.
(e) Collateral for open futures and options contracts (Note 3).
(f) See Note 3 in the Notes to Financial Statements for cost for federal
income tax purposes and related gross unrealized appreciation
(depreciation).
(g) At June 30, 1997, open futures contracts purchased were as follows:
CONTRACTS EXPIRATION MARKET UNREALIZED
PURCHASED DESCRIPTION DATE VALUE DEPRECIATION
- ---------- -------------------------- ----------- ---------- ------------
3 U.S. Treasury Bond Future August 97 $ 333,188 $ (2,743)
9 U.S. Treasury Note Future August 97 1,854,141 (1,619)
---------- ------------
$2,187,329 $ (4,362)
---------- ------------
---------- ------------
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
GNA Variable Series Trust-GNA Adjustable Rate Portfolio 31
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
% OF NET PRINCIPAL MARKET
ASSETS AMOUNT ($) VALUE ($)
-------- ---------- ----------
<S> <C>
LONG-TERM GOVERNMENT AGENCY SECURITIES 69.6
FEDERAL HOME LOAN MORTGAGE CORPORATION
ADJUSTABLE RATE MORTGAGES (b)(d)-15.8
5.695%, with a maturity date of November 1, 2026................ 141,724 144,846
6.912%, with a maturity date of April 1, 2026................... 244,711 248,573
7.666%, with a maturity date of January 1, 2025................. 306,155 314,718
7.801%, with a maturity date of February 1, 2025................ 46,802 47,336
7.986%, with a maturity date of January 1, 2016................. 263,463 273,467
----------
Total Federal Home Loan Mortgage Corporation
Adjustable Rate Mortgages
(Cost $1,013,283)........................................ 1,028,940
----------
FEDERAL HOME LOAN MORTGAGE CORPORATION
REAL ESTATE MORTGAGE INVESTMENT CONDUITS [REMIC] (b)(c)-3.0
6.250%, with a maturity date of September 15, 2018
[Series 1714 Class E]
(Cost $198,414).......................................... 200,000 198,750
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
ADJUSTABLE RATE MORTGAGES (b)(d)-9.7
6.155%, with a maturity date of April 1, 2026................... 155,984 158,349
7.788%, with a maturity date of November 1, 2024................ 127,762 130,416
7.908%, with a maturity date of July 1, 2024.................... 128,740 133,306
8.140%, with a maturity date of November 1, 2024................ 201,135 208,143
----------
Total Federal National Mortgage Association
Adjustable Rate Mortgages
(Cost $603,356).......................................... 630,214
----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
ADJUSTABLE RATE MORTGAGES (a)(b)(d)-39.6
5.000%, with a maturity date of May 20, 2026.................... 246,719 247,492
6.500%, with various maturity dates to March 20, 2026........... 521,180 532,073
6.875%, with a maturity date of October 20, 2024................ 42,918 43,877
7.000%, with various maturity dates to April 20, 2024........... 1,484,011 1,513,795
7.125%, with various maturity dates to September 20, 2024....... 229,481 236,450
----------
Total Government National Mortgage Association
Adjustable Rate Mortgages
(Cost $2,405,655)........................................ 2,573,687
----------
</TABLE>
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
32 GNA Variable Series Trust-GNA Adjustable Rate Portfolio
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
JUNE 30, 1997 (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
% OF NET PRINCIPAL MARKET
ASSETS AMOUNT ($) VALUE ($)
-------- ---------- ----------
FEDERAL HOME LOAN BANK BOND (b)-1.5
<S> <C>
6.500%, with a maturity date of August 19, 1999
(Cost $99,844)........................................... 100,000 99,906
----------
Total Long-Term Government Agency Securities
(Cost $4,320,552)........................................ 4,531,497
----------
NON-AGENCY MORTGAGES 2.0
RESOLUTION TRUST CORPORATION MORTGAGE PASS-THROUGHS (b)(c)-2.0
9.000%, with a maturity date of September 25, 2028
(Cost $128,092).......................................... 125,812 129,114
----------
ASSET-BACKED SECURITIES 26.4
ACC Automobile Receivables Trust, 6.700%, December 17, 2003
[Series 97-B Class A] (e)...................................... 124,256 124,488
Advanta Home Equity Loan Trust, 6.300%, July 25, 2025
[Series 94-1 Class A2]........................................ 112,580 110,152
AFC Home Equity Loan Trust, 8.000%, December 25, 2024
[Series 94-3 Class 1A]........................................ 224,403 229,485
AFG Receivables Trust, 6.350%, October 15, 2002
[Series 97-A Class A]......................................... 75,000 74,765
Aircraft Lease Portfolio Securitization Limited, 8.200%,
September 15, 2004 [Series 94-1 Class B2]..................... 99,746 101,523
Citibank Credit Card Master Trust, Zero Coupon,
February 7, 2003 [Series 96-1 Class A]........................ 175,000 138,250
EQCC Home Equity Loan Trust, 5.725%, December 15, 2008
[Series 93-4 Class A]......................................... 106,130 102,979
Equicon Loan Trust, 6.500%, July 18, 2010
[Series 95-2 Class A2]........................................ 150,000 148,688
Household Finance Corporation, 6.010%, May 20, 2008
[Series 93-1 Class A2]........................................ 76,301 76,492
Summit Acceptance Auto Investment, 6.565%, July 15, 2003
[Series 97-B Class A] (e)..................................... 125,000 124,844
The Money Store Home Equity Trust, 6.850%, June 15, 2019
[Series 96-A Class A5] (b) (c)................................ 110,000 110,309
UCFC Loan Trust, 8.250%, April 10, 2016
[Series 95-A Class A4]........................................ 250,000 256,052
World Omni Automobile Lease Securitization Trust, 6.300%, June
25, 2002 [Series 96-A Class A1]............................... 121,303 121,606
----------
Total Asset-Backed Securities
(Cost $1,725,141)........................................ 1,719,633
----------
</TABLE>
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
GNA Variable Series Trust-GNA Adjustable Rate Portfolio 33
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
JUNE 30, 1997 (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
% OF NET PRINCIPAL MARKET
ASSETS AMOUNT ($) VALUE ($)
-------- ---------- ----------
MONEY MARKET MUTUAL FUNDS 1.5
<S> <C>
SSgA Money Market Fund [Class A]................................ 94,949 94,949
SSgA US Government Money Market Fund............................ 131 131
----------
Total Money Market Mutual Funds
(Cost $95,080)........................................... 95,080
-------- ----------
SUMMARY
Total investments
(Cost $6,268,865) (f)...................................... 99.5 6,475,324
Other assets and liabilities, net.................................. 0.5 30,641
-------- ----------
NET ASSETS........................................................... 100.0 $6,505,965
-------- ----------
-------- ----------
</TABLE>
- ------------
NOTES:
(a) The investments in mortgage-backed securities are interests in separate
pools of mortgages. All such issues which have the same coupon rates have
been aggregated for financial statement presentation purposes.
(b) Effective maturities for all securities may be shorter than indicated due
to prepayments.
(c) Risks associated with Collateralized Mortgage Obligations ("CMOs")--The
net asset value of the Fund is sensitive to interest rate fluctuations.
CMOs are obligations collateralized by a portfolio of mortgages or
mortgage-related securities. Payments of principal and interest on the
mortgages are passed through to the holder of the CMOs as they are
received, but certain classes of CMOs have priority over others with
respect to the receipt of prepayments on the mortgages. Therefore, an
investment in a CMO may be subject to a greater or lesser risk of
prepayment than other types of mortgage-related securities and this
uncertainty results in greater price volatility.
(d) Risks associated with Adjustable Rate Mortgage securities ("ARMs")--Most
ARMs are subject to limits on coupon changes ("caps" and "floors"). Coupon
caps/floors limit the amount the coupon can adjust on coupon reset dates,
or over the life of the loan. If interest rates change quickly, an
adjustable rate mortgage's coupon adjustment may be constrained by its
periodic or lifetime limit. For example, if rates rise quickly, since the
coupon rate cannot reset to equal the market rates, or at least cannot do
so immediately, an investment in an ARM may be subject to a decline in
price, despite the fact that ARM securities are often represented to have
less price risk than fixed rate securities. Until, and if, the ARM's
coupon rate can adjust to equal current market rates, it will be subject
to price variations, despite being an "adjustable rate" security. This
exposure is called "cap risk". Conversely, an ARM may benefit from the
floor on its rate adjustments if market rates drop below the minimum rate
the ARM may pay.
(e) 144A Securities-These securities are private placement securities and can
be considered restricted since resale of such securities are only allowed
to certain qualified institutional buyers. Because the disposition of
these securities are restricted, such securities could possibly become
illiquid in particular circumstances.
(f) See Note 3 in the Notes to Financial Statements for cost for federal
income tax purposes and related gross unrealized appreciation
(depreciation).
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
34 GNA Variable Series Trust
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
GNA
GNA GNA GNA ADJUSTABLE
GROWTH VALUE GOVERNMENT RATE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ---------- ----------
<S> <C>
ASSETS
Investments at market value (identified cost $9,496,265,
$9,750,136, $8,026,907 and $6,268,865 respectively)
(Notes 2 and 3).......................................... $14,009,706 $13,212,546 $8,123,879 $6,475,324
Cash....................................................... 75 19 101 100
Receivables:
Fund shares sold....................................... 15,122 10,777 10,161 506
Dividends.............................................. 10,706 10,150 3,069 363
Interest............................................... -- -- 79,538 41,307
Investments sold....................................... 287,758 -- -- --
Adviser (Note 4)....................................... 3,615 3,065 5,079 4,895
Deferred organization costs (Note 2)....................... 5,840 5,840 5,840 5,840
Prepaid expenses (Note 2).................................. 12 10 8 6
----------- ----------- ---------- ----------
Total assets............................................... 14,332,834 13,242,407 8,227,675 6,528,341
----------- ----------- ---------- ----------
LIABILITIES
Payables:
Fund shares redeemed................................... 15,943 23,045 17,781 506
Investments purchased.................................. 82,500 -- -- --
Dividends.............................................. -- -- 12,358 9,758
Options written outstanding at market value
(premium received $7,809)............................ -- -- 7,188 --
Daily variation margin on open futures
contracts (Notes 2 and 3)............................ -- -- 3,656 --
Accrued management fee (Note 4)........................ 9,213 8,569 3,511 2,104
Other accrued expenses................................. 15,382 14,753 12,450 10,008
----------- ----------- ---------- ----------
Total liabilities.......................................... 123,038 46,367 56,944 22,376
----------- ----------- ---------- ----------
NET ASSETS................................................. $14,209,796 $13,196,040 $8,170,731 $6,505,965
----------- ----------- ---------- ----------
----------- ----------- ---------- ----------
NET ASSETS
Net assets consist of (Note 2):
Undistributed (distributions in excess of)
net investment income................................ $ 2,800 $ (671) $ 5,438 $ (2,855)
Accumulated net realized gains (losses)................ (19,684) 586,283 (20,941) (2,411)
Unrealized appreciation (depreciation) on:
Investments (Note 3)................................. 4,513,441 3,462,410 96,972 206,459
Option contracts (Note 3)............................ -- -- 621 --
Futures contracts (Note 3)........................... -- -- (4,362) --
Shares of beneficial interest.......................... 9,713,239 9,148,018 8,093,003 6,304,772
----------- ----------- ---------- ----------
NET ASSETS................................................. $14,209,796 $13,196,040 $8,170,731 $6,505,965
----------- ----------- ---------- ----------
Outstanding shares of beneficial interest (No par value)... 319,457 300,944 316,285 250,036
----------- ----------- ---------- ----------
----------- ----------- ---------- ----------
Net asset value, offering and redemption price per share... $ 44.48 $ 43.85 $ 25.83 $ 26.02
----------- ----------- ---------- ----------
----------- ----------- ---------- ----------
</TABLE>
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
GNA Variable Series Trust 35
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
GNA
GNA GNA GNA ADJUSTABLE
GROWTH VALUE GOVERNMENT RATE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------- ---------- ----------
<S> <C>
INVESTMENT INCOME:
Interest................................................ $ 535 $ -- $ 271,434 $ 218,097
Dividends............................................... 55,577 112,406 11,996 2,464
---------- ---------- ---------- ----------
Total income............................................ 56,112 112,406 283,430 220,561
---------- ---------- ---------- ----------
EXPENSES:
Management fee (Note 4)............................ 51,337 46,551 24,023 12,787
Transfer agent fee................................. 4,959 4,959 4,959 4,959
Custodian fee...................................... 24,363 23,551 26,813 24,323
Amortization of organization costs (Note 2)........ 1,153 1,153 1,153 1,153
Professional fees.................................. 9,779 8,074 6,877 5,336
Trustees' fees and expenses........................ 1,457 1,208 1,012 787
Other.............................................. 134 93 249 189
---------- ---------- ---------- ----------
Total expenses before reimbursement from Adviser........ 93,182 85,589 65,086 49,534
Reimbursement of expenses from Adviser (Note 4)......... (22,591) (21,544) (29,051) (27,154)
---------- ---------- ---------- ----------
Expenses, net........................................... 70,591 64,045 36,035 22,380
---------- ---------- ---------- ----------
Net investment income (loss)............................ (14,479) 48,361 247,395 198,181
---------- ---------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from:
Investment transactions (Notes 2 and 3)............ 323,696 514,329 503 8,536
Option contracts................................... -- -- 16,668 --
Futures contracts.................................. -- -- (18,202) --
---------- ---------- ---------- ----------
Net increase (decrease) in unrealized
appreciation (depreciation) from:
Investment transactions............................ 1,547,810 1,937,164 (30,078) 4,421
Option contracts................................... -- -- 621 --
Futures contracts.................................. -- -- 17,390 --
---------- ---------- ---------- ----------
Net realized and unrealized gain (loss) on
investments........................................... 1,871,506 2,451,493 (13,098) 12,957
---------- ---------- ---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.... $1,857,027 $2,499,854 $ 234,297 $ 211,138
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
36
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GNA GROWTH PORTFOLIO
-------------------------------------
SIX MONTH
PERIOD ENDED
JUNE 30, 1997 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1996
------------- ---------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income........................................................... $ (14,479) $ 21,761
Net realized gain (loss) from:
Investment transactions....................................................... 323,696 (343,380)
Options contracts............................................................. -- --
Futures contracts............................................................. -- --
Net increase (decrease) in unrealized appreciation (depreciation) from:
Investment transactions....................................................... 1,547,810 2,032,735
Option contracts.............................................................. -- --
Futures contracts............................................................. -- --
------------- ---------------------
Net increase in net assets resulting from operations............................. 1,857,027 1,711,116
------------- ---------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income........................................................... -- (8,346)
Net realized gains.............................................................. -- (114,376)
------------- ---------------------
Total distributions to shareholders.............................................. -- (122,722)
------------- ---------------------
SHARE TRANSACTIONS:
Proceeds from sales of shares................................................... 315,759 4,134,849
Reinvestment of distributions................................................... -- 122,722
Cost of shares redeemed......................................................... (404,655) (330,729)
------------- ---------------------
Increase in net assets resulting from share transactions......................... (88,896) 3,926,842
------------- ---------------------
INCREASE IN NET ASSETS........................................................... 1,768,131 5,515,236
Net assets at the beginning of period............................................ 12,441,665 6,926,429
------------- ---------------------
NET ASSETS AT END OF PERIOD...................................................... $14,209,796 $12,441,665
------------- ---------------------
------------- ---------------------
Undistributed (distributions in excess of) net investment income at end of
period......................................................................... $ 2,800 $ 17,279
------------- ---------------------
------------- ---------------------
PORTFOLIO SHARE INFORMATION:
Shares sold..................................................................... 7,813 119,100
Shares issued upon reinvestment of distributions................................ -- 3,142
Shares redeemed................................................................. (10,100) (8,885)
------------- ---------------------
Increase in Portfolio shares outstanding........................................ (2,287) 113,357
------------- ---------------------
------------- ---------------------
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
GNA Variable Series Trust 37
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GNA VALUE PORTFOLIO
-----------------------------------------
SIX MONTH
PERIOD ENDED
JUNE 30, 1997 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1996
----------------- ---------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income........................................................... $ 48,361 $ 100,478
Net realized gain (loss) from:
Investment transactions....................................................... 514,329 605,843
Options contracts............................................................. -- --
Futures contracts......................................................... -- --
Net increase (decrease) in unrealized appreciation (depreciation) from:
Investment transactions....................................................... 1,937,164 1,044,887
Option contracts.............................................................. -- --
Futures contracts............................................................. -- --
-------------- ---------------------
Net increase in net assets resulting from operations............................. 2,499,854 1,751,208
-------------- ---------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income........................................................... (49,032) (104,429)
Net realized gains.............................................................. -- (619,978)
-------------- ---------------------
Total distributions to shareholders.............................................. (49,032) (724,407)
-------------- ---------------------
SHARE TRANSACTIONS:
Proceeds from sales of shares................................................... 518,413 4,431,471
Reinvestment of distributions................................................... 49,031 724,407
Cost of shares redeemed......................................................... (316,414) (237,236)
-------------- ---------------------
Increase in net assets resulting from share transactions......................... 251,030 4,918,642
-------------- ---------------------
INCREASE IN NET ASSETS........................................................... 2,701,852 5,945,443
Net assets at the beginning of period............................................ 10,494,188 4,548,745
-------------- ---------------------
NET ASSETS AT END OF PERIOD...................................................... $13,196,040 $10,494,188
-------------- ---------------------
-------------- ---------------------
Undistributed (distributions in excess of) net investment income at end of $ (671) $ --
period......................................................................... -------------- ---------------------
-------------- ---------------------
PORTFOLIO SHARE INFORMATION:
Shares sold..................................................................... 13,259 135,933
Shares issued upon reinvestment of distributions................................ 1,194 20,329
Shares redeemed................................................................. (8,158) (6,828)
-------------- ---------------------
Increase in Portfolio shares outstanding........................................ 6,295 149,434
-------------- ---------------------
-------------- ---------------------
</TABLE>
<TABLE>
<CAPTION>
GNA GOVERNMENT PORTFOLIO
-----------------------------------------
SIX MONTH
PERIOD ENDED
JUNE 30, 1997 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1996
----------------- ---------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income........................................................... $ 247,395 $ 500,189
Net realized gain (loss) from:
Investment transactions....................................................... 503 (18,427)
Options contracts............................................................. 16,668 31,937
Futures contracts......................................................... (18,202) (28,944)
Net increase (decrease) in unrealized appreciation (depreciation) from:
Investment transactions....................................................... (30,078) (193,239)
Option contracts.............................................................. 621 --
Futures contracts............................................................. 17,390 (25,634)
------------- ---------------------
Net increase in net assets resulting from operations............................. 234,297 265,882
------------- ---------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income........................................................... (247,395) (500,387)
Net realized gains.............................................................. -- (155,115)
-------------- ---------------------
Total distributions to shareholders.............................................. (247,395) (655,502)
-------------- ---------------------
SHARE TRANSACTIONS:
Proceeds from sales of shares................................................... 33,144 1,297,060
Reinvestment of distributions................................................... 248,422 653,972
Cost of shares redeemed......................................................... (187,322) (648,394)
-------------- ---------------------
Increase in net assets resulting from share transactions......................... 94,244 1,302,638
-------------- ---------------------
INCREASE IN NET ASSETS........................................................... 81,146 913,018
Net assets at the beginning of period............................................ 8,089,585 7,176,567
-------------- ---------------------
NET ASSETS AT END OF PERIOD...................................................... $ 8,170,731 $ 8,089,585
-------------- ---------------------
-------------- ---------------------
Undistributed (distributions in excess of) net investment income at end of $ 5,438 $ 5,438
period......................................................................... -------------- ---------------------
-------------- ---------------------
PORTFOLIO SHARE INFORMATION:
Shares sold..................................................................... 1,291 48,499
Shares issued upon reinvestment of distributions................................ 9,658 25,147
Shares redeemed................................................................. (7,285) (24,953)
----------------- ---------------------
Increase in Portfolio shares outstanding........................................ 3,664 48,693
----------------- ---------------------
----------------- ---------------------
</TABLE>
<TABLE>
<CAPTION>
GNA ADJUSTABLE
RATE PORTFOLIO
------------------
SIX MONTH
PERIOD ENDED
JUNE 30, 1997 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1996
------------------ --------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income........................................................... $ 198,181 $ 374,034
Net realized gain (loss) from: (14,389)
Investment transactions....................................................... 8,536 --
Options contracts............................................................. -- --
Futures contracts......................................................... -- (25,781)
Net increase (decrease) in unrealized appreciation (depreciation) from:
Investment transactions....................................................... 4,421 --
Option contracts.............................................................. -- --
Futures contracts............................................................. --
---------------- --------------------
Net increase in net assets resulting from operations............................. 211,138 333,864
---------------- --------------------
(375,605)
DISTRIBUTIONS TO SHAREHOLDERS FROM: (63,800)
Net investment income........................................................... (198,181)
Net realized gains.............................................................. --
----------------- --------------------
Total distributions to shareholders.............................................. (198,181) (439,405)
----------------- --------------------
SHARE TRANSACTIONS:
Proceeds from sales of shares................................................... 14,407 527,348
Reinvestment of distributions................................................... 199,209 438,576
Cost of shares redeemed......................................................... (96,032) (132,937)
----------------- --------------------
Increase in net assets resulting from share transactions......................... 117,584 832,987
----------------- --------------------
INCREASE IN NET ASSETS........................................................... 130,541 727,446
Net assets at the beginning of period............................................ 6,375,424 5,647,978
----------------- --------------------
NET ASSETS AT END OF PERIOD...................................................... $ 6,505,965 $ 6,375,424
----------------- --------------------
----------------- --------------------
Undistributed (distributions in excess of) net investment income at end of $ (2,855) $ (2,855)
period......................................................................... ----------------- --------------------
----------------- --------------------
PORTFOLIO SHARE INFORMATION:
Shares sold..................................................................... 555 20,153
Shares issued upon reinvestment of distributions................................ 7,661 16,853
Shares redeemed................................................................. (3,696) (5,101)
----------------- --------------------
Increase in Portfolio shares outstanding........................................ 4,520 31,905
----------------- -------------------
----------------- -------------------
</TABLE>
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
38
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The Financial Highlights set forth below include selected data for a share
outstanding thoughout each period and other performance information derived from
the financial statements.
<TABLE>
<CAPTION>
GNA GROWTH PORTFOLIO
------------------------------------------
SIX MONTH
PERIOD ENDED YEAR ENDED PERIOD ENDED
JUNE 30, DECEMBER 31, DECEMBER 31,
1997 (b) 1996 1995 (a)
------------ ------------ ------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.................................... $38.67 $33.24 $25.00
Income from Investment Operations
Net investment income+................................................. (0.04) 0.08 0.10
Net realized and unrealized gains (losses) on investments.............. 5.85 5.74 8.24
------------ ------------ ------------
Total from investment operations....................................... 5.81 5.82 8.34
------------ ------------ ------------
LESS DISTRIBUTIONS FROM
Net investment income.................................................. 0.00 (0.03) (0.10)
Net realized gains..................................................... 0.00 (0.36) 0.00
------------ ------------ ------------
Total distributions.................................................... 0.00 (0.39) (0.10)
------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD.......................................... $44.48 $38.67 $33.24
------------ ------------ ------------
------------ ------------ ------------
TOTAL RETURN (%) (c).................................................... 15.02 17.48 33.37
RATIOS/SUPPLEMENTAL DATA
Ratios to average daily net assets (%)
Net expenses+........................................................ 1.10(d) 1.10 1.10(d)
Gross expenses....................................................... 1.45(d) 1.64 2.89(d)
Net investment income+............................................... (0.23)(d) 0.21 0.47(d)
Portfolio turnover (%)................................................. 32.92 42.57 65.88
Net Assets, end of period (millions)................................... $ 14.2 $ 12.4 $ 6.9
+Reimbursement of expenses from Adviser................................. $ 0.07 $ 0.21 $ 0.38
Average commission rate (e)............................................. $0.050 $0.050 N/A
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
GNA Variable Series Trust 39
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GNA VALUE PORTFOLIO
------------------------------------------
SIX MONTH
PERIOD ENDED YEAR ENDED PERIOD ENDED
JUNE 30, DECEMBER 31, DECEMBER 31,
1997 (b) 1996 1995 (a)
------------ ------------ ------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.................................... $35.62 $31.32 $25.00
Income from Investment Operations
Net investment income+................................................. 0.16 0.40 0.55
Net realized and unrealized gains (losses) on investments.............. 8.23 6.54 6.31
--------- ------------ ------------
8.39 6.94 6.86
Total from investment operations....................................... --------- ------------ ------------
LESS DISTRIBUTIONS FROM
Net investment income.................................................. (0.16) (0.41) (0.54)
Net realized gains..................................................... 0.00 (2.23) 0.00
--------- ------------ ------------
Total distributions.................................................... (0.16) (2.64) (0.54)
--------- ------------ ------------
NET ASSET VALUE, END OF PERIOD.......................................... $43.85 $35.62 $31.32
-------- ------------ ------------
-------- ------------ ------------
TOTAL RETURN (%) (c).................................................... 23.59 22.29 27.68
RATIOS/SUPPLEMENTAL DATA
Ratios to average daily net assets (%)
Net expenses+........................................................ 1.10 (d) 1.10 1.10(d)
Gross expenses....................................................... 1.47 (d) 1.82 3.87(d)
Net investment income+............................................... 0.83 (d) 1.22 2.03(d)
Portfolio turnover (%)................................................. 24.19 98.53 41.67
Net Assets, end of period (millions)................................... $ 13.2 $ 10.5 $ 4.5
+Reimbursement of expenses from Adviser................................. $ 0.07 $ 0.24 $ 0.75
Average commission rate (e)............................................. $0.050 $0.050 N/A
</TABLE>
<TABLE>
<CAPTION>
GNA GOVERNMENT PORTFOLIO
------------------------------------------
SIX MONTH
PERIOD ENDED YEAR ENDED PERIOD ENDED
JUNE 30, DECEMBER 31, DECEMBER 31,
1997 (b) 1996 1995 (a)
------------ ------------ ------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.................................... $25.88 $27.19 $25.00
Income from Investment Operations
Net investment income+................................................. 0.79 1.64 1.70
Net realized and unrealized gains (losses) on investments.............. (0.05) (0.79) 2.19
------------ ------------ ------------
0.74 0.85 3.89
Total from investment operations....................................... ------------ ------------ ------------
LESS DISTRIBUTIONS FROM
Net investment income.................................................. (0.79) (1.66) (1.70)
Net realized gains..................................................... 0.00 (0.50) 0.00
------------ ------------ ------------
Total distributions.................................................... (0.79) (2.16) (1.70)
------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD.......................................... $25.83 $25.88 $27.19
------------ ------------ ------------
------------ ------------ ------------
TOTAL RETURN (%) (c).................................................... 2.90 3.38 15.99
RATIOS/SUPPLEMENTAL DATA
Ratios to average daily net assets (%)
Net expenses+........................................................ 0.90(d) 0.90 0.90(d)
Gross expenses....................................................... 1.63(d) 1.68 2.09(d)
Net investment income+............................................... 6.18(d) 6.34 6.51(d)
Portfolio turnover (%)................................................. 0.00 1.65 129.71
Net Assets, end of period (millions)................................... $ 8.2 $ 8.1 $ 7.2
+Reimbursement of expenses from Adviser................................. $ 0.09 $ 0.20 $ 0.31
Average commission rate (e)............................................. N/A N/A N/A
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GNA ADJUSTABLE RATE PORTFOLIO
------------------------------------------
SIX MONTH
PERIOD ENDED YEAR ENDED PERIOD ENDED
JUNE 30, DECEMBER 31, DECEMBER 31,
1997 (b) 1996 1995 (a)
------------ ------------ ------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.................................... $25.97 $26.44 $25.00
Income from Investment Operations
Net investment income+................................................. 0.80 1.54 1.38
Net realized and unrealized gains (losses) on investments.............. 0.05 (0.12) 1.44
------------ ------------ ------------
0.85 1.42 2.82
Total from investment operations....................................... ------------ ------------ ------------
LESS DISTRIBUTIONS FROM
Net investment income.................................................. (0.80) (1.62) (1.38)
Net realized gains..................................................... 0.00 (0.27) 0.00
------------ ------------ ------------
Total distributions.................................................... (0.80) (1.89) (1.38)
------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD.......................................... $$26.02 $25.97 $26.44
------------ ------------ ------------
------------ ------------ ------------
TOTAL RETURN (%) (c).................................................... 3.31 5.60 11.50
RATIOS/SUPPLEMENTAL DATA
Ratios to average daily net assets (%)
Net expenses+........................................................ 0.70(d) 0.70 0.70(d)
Gross expenses....................................................... 1.55(d) 1.63 2.05(d)
Net investment income+............................................... 6.20(d) 6.19 5.38(d)
Portfolio turnover (%)................................................. 27.83 36.59 36.47
Net Assets, end of period (millions)................................... $ 6.5 $ 6.4 $ 5.6
+Reimbursement of expenses from Adviser................................. $ 0.11 $ 0.23 $ 0.35
Average commission rate (e)............................................. N/A N/A N/A
</TABLE>
(a) For the period January 3, 1995 (commencement of operations) through
December 31, 1995.
(b) Unaudited.
(c) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains. Had the adviser not absorbed
a portion of expenses, total return would have been lower. Periods less
than one year are not annualized.
(d) Annualized.
(e) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share of security
trades on which commissions are charged.
- --------------------------------------------------------------------------------
<PAGE>
40 GNA Variable Series Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION OF THE PORTFOLIOS. GNA Variable Series Trust (the "Trust") is
organized as a Delaware Business Trust under a Declaration of Trust dated March
25, 1994, amended and restated August 22, 1994 and is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Trust is a series of funds, currently
comprised of four investment portfolios (the "Portfolios"), the GNA Growth
Portfolio, the GNA Value Portfolio, the GNA Government Portfolio and the GNA
Adjustable Rate Portfolio (each referred to as a "Portfolio"), which commenced
operations on January 3, 1995. Shares of the Trust are offered only to the GNA
Variable Investment Account (the "Account"); separate account of Great Northern
Insured Annuity Corporation ("GNA"), an affiliated insurance company which funds
certain variable annuity contracts. As of June 30, 1997, GNA controlled the
Portfolios by virtue of ownership of all of the Portfolios' shares of beneficial
interest.
On or about May 16, 1997, GNA and several other applicants filed an
application with the Securities and Exchange Commission ("SEC") seeking an order
approving the substitution of shares of certain investment portfolios of GE
Investments Funds, Inc. ("GEIF") for shares of the Portfolios currently held by
the Account. The effect of such a share substitution would be to replace the
Portfolios of GNA Variable Series Trust with those of GEIF as investment options
under the variable annuity contracts.
If the proposed substitutions are approved and carried out, each contract
owner affected by the substitution will be sent a written notice informing them
that the substitutions were approved and carried out and that they may make one
transfer of all amounts under their contract from the affected Portfolios on the
date of the notice to any GEIF portfolio.
2. SIGNIFICANT ACCOUNTING POLICIES. The preparation of the Portfolios'
financial statements in accordance with generally accepted accounting
principles, requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. The following is a summary of significant accounting policies
followed consistently by the Portfolios.
SECURITIES VALUATION. Securities (including options) listed or traded on an
exchange or quoted on NASDAQ are valued at their last sale prices prior to the
time when assets are valued. Lacking any sales on that day, securities are
valued at the mean between the current closing bid and asked prices. Other
securities for which market quotations are readily available are valued at the
mean of the bid and asked quotations quoted prior to the time when assets are
valued ("market value"). Certain securities are valued primarily utilizing such
pricing services as may be deemed appropriate. The pricing services utilize
information with respect to market transactions, quotations from dealers and
various relationships among securities in determining value and may provide
prices determined as of times prior to the close of the New York Stock Exchange.
Investments in certain long-term debt securities not traded in an organized
market are valued primarily based on market quotations provided by recognized
dealers of such securities. Other securities for which market quotations are not
readily available, such as restricted securities, or where pricing occurs during
periods of market disruption, are valued in
- --------------------------------------------------------------------------------
<PAGE>
GNA Variable Series Trust 41
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
good faith by or under the authority of the Trustees of the Trust. Short-term
investments maturing within 60 days are valued at original cost plus accreted
discount or accrued interest which approximates market value.
SECURITIES TRANSACTIONS AND RELATED INVESTMENT INCOME. Sales and purchases
are accounted for as of trade date. Realized securities gains or losses are
determined using the identified cost method for both financial and tax reporting
purposes. Dividend income is recorded on the ex-dividend date. Interest income
is accrued pro rata to maturity. Original issue discount is accreted for
financial and tax accounting purposes.
FUTURES CONTRACTS. Each of the Portfolios may purchase and sell futures
contracts, subject to certain limitations. The GNA Government Portfolio uses
interest rate futures contracts as a hedge against changes in interest rates.
Upon entering into a futures contract, each Portfolio is required to deposit
with a broker an amount ("initial margin") equal to a certain percentage of the
face amount of the futures contract. Subsequent payments ("variation margin")
are made or received by the Portfolio each day, dependent on the daily
fluctuations in the value of the unrealized gains and losses by the Portfolio.
If the futures contract expires or the Portfolio enters into a closing
transaction, the Portfolio will realize, for book purposes, a gain or loss equal
to the difference between the value of the futures contract to sell and the
futures contract to buy. The Portfolio may be subject to risk upon entering into
futures contracts resulting from the imperfect correlation of prices between the
futures and securities markets.
OPTIONS ON FUTURES CONTRACTS. Each Portfolio may purchase and sell listed
call and put options on futures contracts. The GNA Government Portfolio uses
options on interest rate futures contracts as a hedge against changes in
interest rates. Options are valued in accordance with the security valuations
policies described above. Transactions in options on futures contracts involve
similar risks to those on futures contracts.
When a Portfolio writes a call or put option, an amount equal to the premium
received by the Portfolio is included in the Portfolio's Statement of Assets and
Liabilities as an asset and as an equivalent liability. The amount of the
liability is subsequently marked to market to reflect the current market value
of the options written.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS. Each Portfolio may enter into
firm commitment agreements ("TBA" or "when-issued" purchases) for the purchase
of securities at an agreed-upon price on a specified future date. A Portfolio
will not enter into such agreements for the purpose of investment leverage.
Liability for the purchase price and all the rights and risks of ownership of
the securities accrue to a Portfolio at the time it becomes obligated to
purchase the securities, although delivery and payment occur at a later date,
generally within 45 days (but not to exceed 120 days) of the date of the
commitment to purchase. Accordingly, if the market price of the security should
decline, the effect of the agreement would be to obligate the Portfolio to
purchase the security at the price above the current market price on the date of
delivery and payment. During the time the Portfolio is obligated to purchase
such securities, it will segregate with the Custodian U.S. government
securities, cash or cash equivalents (or a receivable for investment sold in
connection therewith) of an aggregate current value sufficient to make payment
for the securities.
- --------------------------------------------------------------------------------
<PAGE>
42 GNA Variable Series Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
REPURCHASE AGREEMENTS. Each Portfolio may enter into repurchase agreements in
order to generate additional income. Each repurchase agreement entered into by a
Portfolio will provide that the value of the collateral underlying the
repurchase agreement will always be at least 102% of the repurchase price,
including accrued interest, except for repurchase agreements entered into with a
broker/dealer or bank whose unsecured debt is rated AAA or whose commercial
paper is rated A-1 by Standard and Poor's or P-1 by Moody's, in which case the
value of the collateral will always be at least 100% of the repurchase price,
including accrued interest. A Portfolio will not enter into a repurchase
agreement having more than seven days remaining to maturity if, as a result,
such agreements, together with any other securities which are not readily
marketable, would exceed 10% of the net assets of the Portfolio. In addition,
not more than one-third of the current market value of the Portfolio's total
assets shall constitute secured "loans" by the Portfolio under repurchase
agreements.
FEDERAL INCOME TAXES. As a Delaware Business Trust, each Portfolio is a
separate taxpayer and determines its net investment income and capital gains (or
losses) and the amounts to be distributed to the Portfolio's shareholders
without regard to the income and capital gains (or losses) of the other
Portfolios. It is the intent of the Portfolios to comply with the requirements
of the Internal Revenue Code which are applicable to regulated investment
companies and to distribute substantially all of their taxable income and
realized gains to their shareholders. Accordingly, the Portfolios paid no
federal income taxes and no federal income tax provisions were required. For
Federal income tax purposes, any futures contracts or options on futures
contracts which remain open at year-end are marked-to-market and the resultant
net gain or loss is included in Federal taxable income. As of December 31, 1996,
the Portfolios had net tax basis capital loss carryforwards which may be applied
against taxable gains until their expiration date as follows:
EXPIRATION
DATES
PORTFOLIO AMOUNT DECEMBER 31,
- ------------------------------------------------ -------- ------------
GNA Growth Portfolio............................ $136,024 2004
GNA Government Portfolio........................ 25,224 2004
GNA Adjustable Rate Portfolio................... 10,947 2004
DISTRIBUTION OF INCOME AND GAINS. Net investment income for the GNA Growth
Portfolio is declared and paid annually. Net investment income for the GNA Value
Portfolio is declared and paid quarterly. Net investment income for the GNA
Government and GNA Adjustable Rate Portfolios are declared as dividends to
shareholders of record as of the close of business each day and are paid to
shareholders monthly. During any particular year, net realized gains from
investment transactions in excess of any available capital loss carryforwards,
would be taxable to the Portfolios if not distributed and, therefore, will be
declared and paid to their shareholders annually.
CAPITAL ACCOUNTS. The Portfolios report the undistributed net investment
income (accumulated net investment loss) and accumulated net realized gain
(loss) accounts on a basis approximating amounts available for future tax
distributions (or to offset future taxable realized gains when a capital loss
carryforward is
- --------------------------------------------------------------------------------
<PAGE>
GNA Variable Series Trust 43
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
available). Accordingly, the Portfolios may periodically make reclassifications
among certain capital accounts without impacting the net asset value of the
Portfolios.
PREPAID INSURANCE. Insurance costs are amortized on a straight-line basis
over the duration of the insurance period.
DEFERRED ORGANIZATIONAL COSTS. Costs incurred by the Trust in connection with
its organization have been deferred ratably and are being amortized on a
straight-line basis over a period of 60 months from commencement of operations
of the Portfolios.
EXPENSES. Expenses such as management fees, custodian fees, transfer agent
fees, and registration fees are charged directly to the Portfolios, while
indirect expenses, such as audit fees, legal fees, trustee fees and expenses,
and insurance are allocated among the Portfolios principally based on their
relative average net assets.
3. PURCHASES AND SALES OF SECURITIES. The cost of purchases and the proceeds
from sales and paydowns of investments other than U.S. Government and agency
securities, short term investments and options, for the six months ended June
30, 1997, were as follows:
PORTFOLIO PURCHASES SALES PAYDOWNS
- -------------------------------------- ---------- ---------- --------
GNA Growth Portfolio.................. $3,980,986 $4,081,596 $ --
GNA Value Portfolio................... 2,987,512 2,798,993 --
GNA Adjustable Rate Portfolio......... 1,325,199 776,655 131,715
The cost of purchases and the proceeds from sales and paydowns of long-term
U.S. Government and agency securities, for the six months ended June 30, 1997,
were as follows:
PORTFOLIO PURCHASES SALES PAYDOWNS
- -------------------------------------- ---------- -------- --------
GNA Government Portfolio.............. $ -- $ -- $465,156
GNA Adjustable Rate Portfolio......... 1,067,732 986,373 446,568
At June 30, 1997, the security pledged to cover margin requirements for open
futures contracts on United States Treasury Notes and Bonds for the GNA
Government Portfolio was as follows:
DESCRIPTION FACE VALUE MARKET VALUE
- ------------------------------------------------- ---------- ------------
Federal Home Loan Bank Bonds, 5.720%, 11/22/00... $100,000 $ 97,687
- --------------------------------------------------------------------------------
<PAGE>
44 GNA Variable Series Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
Transactions in options written on United States Treasury Bond Futures for the
GNA Government Portfolio were as follows:
NUMBER OF NET
CONTRACTS OF PREMIUMS
WRITTEN OPTIONS RECEIVED
--------------- --------
Outstanding at December 31,1996.............. -- $ --
Written...................................... 95 26,428
Closed and Expired........................... (65) (17,388)
Exercised.................................... (10) (1,951)
--- --------
Outstanding at June 30, 1997................. 20 $ 7,089
--- --------
--- --------
Aggregate gross unrealized appreciation (depreciation) of investments for each
Portfolio at June 30, 1997 was as follows:
<TABLE>
<CAPTION>
NET
GROSS GROSS UNREALIZED
IDENTIFIED UNREALIZED UNREALIZED APPRECIATION
PORTFOLIO COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
- ----------------------------------------- ---------- ------------ -------------- --------------
<S> <C>
GNA Growth Portfolio..................... $9,496,265 $4,598,010 $(84,569) $4,513,441
GNA Value Portfolio...................... 9,750,136 3,464,489 (2,079) 3,462,410
GNA Government Portfolio................. 8,026,907 158,792 (61,820) 96,972
GNA Adjustable Rate Portfolio............ 6,268,865 215,914 (9,455) 206,459
</TABLE>
4. MANAGEMENT, DISTRIBUTION AND TRUSTEES' FEES. Under Advisory agreements
between the Portfolios and GNA Capital Management, Inc. (the "Adviser"), each
Portfolio agrees to pay the Adviser a fee based on its average daily net assets
as follows:
GNA GROWTH PORTFOLIO. The Adviser's fee is calculated based upon the
Portfolio's average daily net assets, equal to an annual rate of .80% of the
first $100 million and .70% of average daily net assets in excess of $100
million.
GNA VALUE PORTFOLIO. The Adviser's fee is calculated at an annual rate of
0.80% of the average daily net assets of the Portfolio if the average daily net
assets of the Portfolio and the Investors Trust Value Fund, a series of another
affiliated registered investment company, ("Combined Average Daily Net Assets")
equals to $100 million or less, and 0.70% of the Portfolio's average daily net
assets if the Combined Average Daily Net Assets exceeds $100 million. For the
six months ended June 30, 1997, the Adviser's fee was equivalent to an annual
effective rate of 0.80%.
GNA GOVERNMENT PORTFOLIO. The Adviser's fee is calculated at an annual rate
of 0.65% of the average daily net assets of the Portfolio if the average daily
net assets of the Portfolio and the Investors Trust Government
- --------------------------------------------------------------------------------
<PAGE>
GNA Variable Series Trust 45
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
Fund, a series of another affiliated registered investment company, ("Combined
Average Daily Net Assets") equals to $500 million or less, 0.60% of the
Portfolio's average daily net assets if the Combined Average Daily Net Assets is
greater than $500 million and is equal to or less than $750 million, 0.55% of
the Portfolio's average daily net assets if the Combined Average Daily Net
Assets is greater than $750 million and is equal to or less than $1.25 billion,
0.50% of the Portfolio's average daily net assets if the Combined Average Daily
Net Assets is equal to or less than $1.5 billion and 0.45% of the Portfolio's
average daily net assets if the Combined Average Daily Net Assets exceed $1.5
billion. For the six months ended June 30, 1997, the Adviser's fee was
equivalent to an annual effective rate of 0.60%.
GNA ADJUSTABLE RATE PORTFOLIO. The Adviser's fee is calculated at an annual
rate of .40% of the Portfolio's average daily net assets.
The Adviser has agreed to reimburse the Portfolios, for expenses incurred by
the Portfolios to the extent that such expenses exceed the following percentages
of each Portfolio's average daily net assets during the six months ended June
30, 1997:
PORTFOLIO PERCENTAGES
- --------------------------------------------------------- -----------
GNA Growth Portfolio..................................... 1.10%
GNA Value Portfolio...................................... 1.10%
GNA Government Portfolio................................. 0.90%
GNA Adjustable Rate Portfolio............................ 0.70%
The expense reimbursement may be extended or modified by the Adviser. The
reimbursement for expenses by the Adviser is being offset by the payables to the
Adviser monthly. Any amount due from the Adviser in excess of the amounts due to
the Adviser is settled in cash within 15 days following month end.
The Portfolios' Advisory agreements also provide that if, in any year, the
total of certain specified expenses of any of the Portfolios exceed the expense
limitations applicable to the Portfolios imposed by the securities regulations
of any state in which they are then registered to sell shares, the Adviser will
waive all or a portion of its management fee equal to such excess. The Adviser
is only required to reimburse the Portfolios for any expenses which exceed state
expense limitations up to the amount of management fees paid or payable by the
Portfolios during such year.
The Adviser has retained the following portfolio managers (the "Sub-Advisers")
for the Portfolios. These Sub-Advisers are responsible for the actual investment
management of the Portfolio's assets (including the placement of brokerage
orders), under the general supervision of the Adviser and the Board of Trustees.
PORTFOLIO SUB-ADVISERS
- ------------------------------------ -----------------------------------------
GNA Growth Portfolio................ Value Line, Inc.
GNA Value Portfolio................. Duff & Phelps Investment Management, Co.
GNA Adjustable Rate Portfolio....... Standish, Ayer & Wood, Inc.
- --------------------------------------------------------------------------------
<PAGE>
46 GNA Variable Series Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
The Adviser has not retained a Sub-Adviser for the GNA Government Portfolio.
The Trust pays each Trustee not affiliated with the Adviser its proportionate
share of a fee of: (1) an annual fee of $2,000; and (2) a fee of $250 for each
meeting of the Board of Trustees attended plus all reasonable expenses
associated with attendance at such meetings. The proportionate rate is allocated
among the Portfolios principally based on their relative average net assets. No
remuneration is paid by the Trust to any Trustee or officer of the Portfolio who
is affiliated with the Adviser.
5. SUBSEQUENT EVENTS. On July 29, 1997, Investors Trust, an affiliated
registered investment company, filed a Plan of Reorganization with the
Securities and Exchange Commission. The Plan of Reorganization relates to the
proposed combination of each series of Investors Trust (each an "Investors Trust
Fund") with a series of GE Funds (each a "GE Fund"). It is currently anticipated
that this matter will be submitted for a vote at a meeting of shareholders of
Investors Trust to be held in mid-September 1997.
In the event the shareholders of Investors Trust approve the transaction, the
Investors Trust Funds will be merged into the GE Funds, which are managed by GE
Investment Management Incorporated, an indirect wholly-owned subsidiary of
General Electric Company, and subject to new advisory agreements. As a result,
the calculations of the advisory fees for the Value Portfolio and the Government
Portfolio will be based solely upon the respective Portfolios' average daily net
assets (instead of based on the Combined Daily Average Net Assets of the
Portfolios and the corresponding Investors Trust Fund). This change in the basis
of calculation may increase the annualized effective rate of the Adviser's fee
for the Government Portfolio but should have no effect on the Adviser's fee for
the Value Portfolio.
- --------------------------------------------------------------------------------
<PAGE>
Variable Investment Trust 47
- --------------------------------------------------------------------------------
(This Page Intentionally Left Blank)
<PAGE>
48 Variable Investment Trust
- --------------------------------------------------------------------------------
VARIABLE INVESTMENT TRUST MUTUAL FUNDS
GE U.S. EQUITY PORTFOLIO * GE INTERNATIONAL EQUITY PORTFOLIO * GE FIXED INCOME
PORTFOLIO * GE MONEY MARKET PORTFOLIO
Semi-Annual Report
OFFICERS OF THE INVESTMENT ADVISER
JOHN H. MYERS
Chairman of the Board and
President
EUGENE K. BOLTON
EVP, Domestic Equities
MICHAEL J. COSGROVE
EVP, Mutual Funds
RALPH R. LAYMAN
EVP, International Equities
ALAN M. LEWIS
EVP, General Counsel and
Secretary
ROBERT A. MACDOUGALL
EVP, Fixed Income
GEOFFREY R. NORMAN
EVP, Institutional Marketing
TOM SZKUTAK
EVP, Chief Financial Officer
DON W. TOREY
EVP, Alternative Investments
and Real Estate
TRUSTEES
MICHAEL J. COSGROVE
JOHN R. COSTANTINO
ALAN M. LEWIS
WILLIAM J. LUCAS
ROBERT P. QUINN
TREASURER
JEFFREY A. GROH
SECRETARY
MATTHEW J. SIMPSON
ADVISER
GE INVESTMENT MANAGEMENT
INCORPORATED
COUNSEL
WILLKIE FARR & GALLAGHER
CUSTODIAN & TRANSFER AGENT
STATE STREET BANK AND
TRUST COMPANY
<PAGE>
Variable Investment Trust 49
- --------------------------------------------------------------------------------
FINANCIAL MARKET REVIEW
BY GE INVESTMENT MANAGEMENT INCORPORATED
In the second quarter, the U.S. stock market rose to record levels,
following a brief downturn early in the period due to concerns over
higher inflation. Since many major non-U.S. markets have followed the
lead of U.S. equities in recent years, most major global markets recorded
generally good performance, as well.
A slow growth economy, low inflation, good corporate earnings and
continuing strong cash flows into mutual funds helped fuel the rise in
domestic equity prices. A slow growth scenario was bullish for stocks at
that stage of the business cycle because it was viewed as enabling the
economy to expand without inflation becoming a problem. Signs of a slow
economy included weakness in retail sales and new home sales,
stronger-than-expected jobless claims and a slowdown in manufacturing.
Given this backdrop, the Federal Reserve opted not to raise short-term
interest rates at its two Federal Open Market Committee (FOMC) meetings
during the period.
The U.S. bond market fared well in this environment. Bond prices also
rallied when President Clinton and the Republicans agreed on a framework
to balance the budget by 2002.
European markets recorded impressive results, as many countries
benefited from having adopted the U.S. model of cost restructuring and
industry consolidation--albeit at a slower pace. France lagged other
European markets due to high unemployment, a generally sluggish economy
and uncertainty over political elections. The United Kingdom showed
strength at the end of the period as investors responded favorably to the
election of the Labor Party's Tony Blair.
For the first six months of 1997, all markets except the United Kingdom
outperformed the U.S. year-to-date in local currency terms; however, the
dollar strengthened against all European currencies reducing their
returns in U.S. dollars. Switzerland was Europe's best performer,
followed by the Netherlands and Spain.
Japan continued to struggle, though its economy showed signs of
strength. Japan has been plagued by a banking crisis fueled by depressed
real estate prices and related bad loans, anemic economic growth, and
financial scandals. While exporters, such as the auto companies, have
benefited from the weak Yen, domestic demand-related sectors such as Real
Estate, Telecommunications and Software have begun attracting investors.
- --------------------------------------------------------------------------------
<PAGE>
50 Variable Investment Trust
- --------------------------------------------------------------------------------
Other Asian markets were volatile. As Hong Kong nervously awaited the
July transition from a British colony to China rule, property stocks
tried to fight off claims that they were overvalued. Political concerns
in Indonesia intensified as the gap between the wealthy and poor
continued to widen rapidly, and Thailand experienced the world's worst
performing market. Overall, Asian markets, excluding Japan, have
underperformed world markets in 1997 due to a slowdown in earnings growth
and high valuations. Funds have been shifting out of this region and into
Latin America, where markets have been more attractive.
LOOKING AHEAD
Our outlook for the global financial market remains favorable for the
rest of 1997. Inflation appears to be under control, the Federal Reserve
is likely to maintain a neutral interest-rate policy, assuming interest
rates hover near their current levels. Specifically, we believe the
restructuring in Europe should create investment opportunities on the
Continent. And despite the sharp rise in U.S. equity prices we believe
good values can still be found.
- --------------------------------------------------------------------------------
<PAGE>
Variable Investment Trust-GE U.S. Equity Portfolio 51
- --------------------------------------------------------------------------------
FROM THE GE U.S. EQUITY PORTFOLIO ADVISER
GE INVESTMENT MANAGEMENT INCORPORATED
PORTFOLIO MANAGER: EUGENE K. BOLTON,
HEAD OF THE PORTFOLIO'S MANAGEMENT TEAM
Q. HOW DID THE GE U.S. EQUITY PORTFOLIO PERFORM COMPARED TO ITS
BENCHMARKS FOR THE SIX MONTHS ENDED JUNE 30, 1997?
A. The GE U.S. Equity Portfolio returned 18.76% for the six months ended
June 30, 1997. The S&P 500 returned 20.54% and our Lipper peer group of
101 Growth and Income Annuity funds had an average return of 15.81% for
the same period.
Q. WHAT HAPPENED TO THE PORTFOLIO OVER THE PAST SIX MONTHS?
A. The GE U.S. Equity Portfolio lagged the S&P 500 slightly for the six
months ended June 30, 1997 but was in the first quartile among its Lipper
peer Growth & Income Annuity Funds. Our relatively strong performance
resulted from an overweighting in Financial, Capital Goods and selected
Consumer-Stable stocks, and an underweighting in the Utilities,
Consumer-Cyclical and Basic Material sectors. In the Financial sector,
Travelers Group Inc., State Street Corporation, Marsh & McLennan
Companies and American Express Co. were leaders while Bristol-Myers
Squibb Co., Smithkline Beecham, Abbott Laboratories and American Home
Products Corp. were leaders in the Healthcare industry. In the Technology
sector our concern with valuations has kept us underweighted in the
strongly performing stock of Microsoft Corp., which now has the third
largest capitalization in the S&P 500 and sells at twice the market
multiple and about 15 times sales.
Q. WHAT IS YOUR MARKET OUTLOOK?
A. Despite the current optimism, the key question mark going forward
continues to be valuation. Valuation levels have been at the very high
end of the historic range for the last several years, and yet the stock
market continues to rise. The bullish case is that price to earnings
ratios over 20 times earnings and dividend yields well below 2% are
appropriate in this current very favorable environment of low inflation
and strong profit growth. There is not a lot of margin for error, however
and any pick up in inflation or slowdown in earnings could leave the
market vulnerable to a major correction. We believe that the market will
continue to be fixated on economic releases and earnings reports,
reacting quickly to signs of either inflation or recession. Currently
there appears little likelihood of Federal Reserve action for the rest of
the summer, but the situation is less clear in the fall. What is clear is
that market volatility has picked up substantially in 1997, and we expect
it to continue for the rest of the year. Long term, we remain confident
that large U.S. multinational companies
- --------------------------------------------------------------------------------
<PAGE>
52 Variable Investment Trust-GE U.S. Equity Portfolio
- --------------------------------------------------------------------------------
will continue to do well in a growing world economy where they remain
very competitive and are able to gain market share.
Q. HOW IS THE PORTFOLIO POSITIONED TO TAKE ADVANTAGE OF YOUR MARKET
OUTLOOK?
A. We continue to believe that our focus on careful, fundamental
analysis and bottom-up stock selection will add value over the long-term.
We believe that our approach, with its emphasis on high quality companies
with good relative value, leaves the Portfolio well positioned for what
could be a very volatile period during the remainder of the year.
Q. COULD YOU DISCUSS ONE CURRENT MARKET ISSUE AS IT RELATES TO THE
PORTFOLIO?
A. During the second quarter, while it appeared that a larger number of
stocks participated in the rally, market performance continued to be
driven by the very large capitalization companies. This can be seen by
comparing the S&P 500 return to the Russell 1000 performance. In the
second quarter the S&P 500 was ahead of the Russell 1000 by 80 basis
points (.80%) and led by over 200 basis points (2.00%) for the first six
months of 1997. Also, looking at a broad universe of stocks, only 40%
outperformed the S&P 500 in the quarter, the lowest percent since 1990.
When market leadership is this narrow, it is very difficult for active
managers to outperform, as evidenced by the fact that only about 5% of
large capitalization general equity mutual funds beat the S&P 500 during
the first half of 1997.
- --------------------------------------------------------------------------------
<PAGE>
Variable Investment Trust-GE U.S. Equity Portfolio 53
- --------------------------------------------------------------------------------
[GRAPH]
GE U.S. Equity S&P 500 Index
-------------- -------------
1/3/95 10,000 10,000
3/95 10,940 10,974
6/95 11,973 12,019
9/95 12,873 12,977
12/95 13,558 13,749
3/96 14,353 14,497
6/96 14,888 15,151
9/96 15,218 15,616
12/96 16,502 16,927
3/97 16,854 17,368
6/97 19,598 20,405
Average Annual Total Return %
for the period ended June 30, 1997
Since
6 Mo 1 Yr Inception
------ ------ ---------
18.76% 31.64% 31.03%
Performance of a $10,000 investment since inception of the GE U.S. Equity
Portfolio - (1/3/95)
GE U.S. Equity Portfolio (ending value $19,598)
S&P 500 Index (ending value $20,405)
See page 61 for Notes to Performance. Past performance is no guarantee of future
results.
- --------------------------------------------------------------------------------
<PAGE>
54 Variable Investment Trust-GE International Equity Portfolio
- --------------------------------------------------------------------------------
FROM THE GE INTERNATIONAL EQUITY PORTFOLIO ADVISER
GE INVESTMENT MANAGEMENT INCORPORATED
PORTFOLIO MANAGER: RALPH R. LAYMAN
Q. WHAT HAPPENED IN THE PORTFOLIO OVER THE PAST SIX MONTHS?
A. The GE International Equity Portfolio had a return of 11.61% for the
six months ended June 30, 1997. The Morgan Stanley Capital International
EAFE Index returned 11.20% and our Lipper peer group of 79 International
Equity Annuity funds had an average return of 12.13% for the same period.
The Portfolio outperformed the MSCI EAFE Index by .41% for the first
half of 1997. This outperformance was driven by positive stock selection
in Japan and market allocation in Latin America and Continental Europe.
The Portfolio's globally competitive Japanese stocks, such as Rohm Co.,
Canon Inc., and Sony Corp., had a strong first half whereas the financial
stocks, largely avoided by the Portfolio, have been plagued with large
non-performing loans and questionable management oversight.
The Portfolio's weight of 4.4% in Latin America had a positive
impact on performance given the region was up 40.8% through June 30. In
addition, the Portfolio's overweight in Continental Europe, 49.6% versus
the benchmark weight of 38.5%, contributed favorably in a region that was
up 16.8% for that period.
Q. WHAT IS YOUR MARKET OUTLOOK?
A. Europe remains one of the most attractive areas of the world for us
to invest in. We believe corporate restructuring will continue with a
focus on shareholder value, corporate clarity, and globalization. Share
prices are benefiting from investors re-rating European listed companies
to global valuation levels.
At a macro level, European economic growth remains subdued as
European Union members struggle to meet the European Monetary Union's
stringent fiscal criteria. Over the near term interest rates are expected
to remain stable, with the exception of the United Kingdom. GDP growth in
Europe is expected to be in the 2%-4% range depending on the country,
with the highest growth likely to be in the United Kingdom and
Scandinavia.
We are still cautious on Japan's outlook. The private side of the
economy is being negatively impacted by the tax hike during the first
three months of fiscal year 1997. On the public side, the Japanese
government's fiscal standing is the worst among the developed countries,
and the government is starting to restrain public spending. The recent
resurgence of Japan's trade surplus, despite suggesting that exporters
are doing well, is another concern. On top of all these issues, the Tokyo
market as a whole remains expensive and has very low growth potential.
- --------------------------------------------------------------------------------
<PAGE>
Variable Investment Trust-GE International Equity Portfolio 55
- --------------------------------------------------------------------------------
Q. HOW IS THE PORTFOLIO POSITIONED TO TAKE ADVANTAGE OF YOUR MARKET
OUTLOOK?
A. Geographic weightings are driven by our bottom-up stock selection
process based on growth at a reasonable price. Currently, we anticipate
no major changes in our regional weightings.
We continue to find attractive companies in Continental Europe and
will maintain our overweight in anticipation of further restructuring.
Although it is difficult to find value in Japan, the Portfolio has
some Japanese global companies with leading products and competitive
costs. We will continue to look for reasonably priced, domestic companies
with strong growth prospects and competitive positions. Until we find
them, we expect to remain significantly underweight in Japan.
Q. COULD YOU DISCUSS ONE CURRENT MARKET ISSUE AS IT RELATES TO THE
PORTFOLIO?
A. The Portfolio's overweight position in Continental Europe is driven
by the value identified in the companies profiting from restructuring
efforts. Over the past six months, the Portfolio has benefited from its
holdings in Novartis AG, which was formulated as a result of a merger
between two Swiss pharmaceutical companies, Sandoz and Ciba-Geigy.
Novartis AG epitomizes two trends we are seeing in Europe: corporate
restructuring and strong exports. The company's profits have been aided
by cost savings and synergies related to the merger, while its revenues
have been boosted by a stronger U.S. dollar.
- --------------------------------------------------------------------------------
<PAGE>
56 Variable Investment Trust-GE International Equity Portfolio
- --------------------------------------------------------------------------------
[GRAPH]
GE International MSCI EAFE Index
1/3/95 10,000 10,000
3/95 10,280 10,186
6/95 11,027 10,260
9/95 11,413 10,688
12/95 11,774 11,121
3/96 12,405 11,442
6/96 13,056 11,623
9/96 13,198 11,609
12/96 13,671 11,794
3/97 13,812 11,609
6/97 15,258 13,116
Average Annual Total Return %
for the period ended June 30, 1997
Since
6 Mo 1 Yr Inception
------ ------ ---------
11.61% 16.87% 18.49%
Performance of a $10,000 investment since inception of the GE International
Equity Portfolio - (1/3/95)
GE International Equity Portfolio (ending value $15,258)
MSCI EAFE Index (ending value $13,116)
See page 61 for Notes to Performance. Past performance is no guarantee of future
results.
- --------------------------------------------------------------------------------
<PAGE>
Variable Investment Trust-GE Fixed Income Portfolio 57
- --------------------------------------------------------------------------------
FROM THE GE FIXED INCOME PORTFOLIO ADVISER
GE INVESTMENT MANAGEMENT INCORPORATED
PORTFOLIO MANAGER: ROBERT A. MACDOUGALL
Q. WHAT HAPPENED IN THE BOND MARKET OVER THE PAST SIX MONTHS?
A. Data released at the end of 1996 indicated that the economy was
growing moderately while inflation remained low. Investors were concerned
with how fast the economy could grow without seeing signs of rising
inflation. Volatility increased during February as a result of Federal
Reserve Chairman Greenspan's semi-annual monetary policy testimony before
the Senate. He expressed concerns about an overvalued stock market and
warned that rates could be increased in a preemptive inflation strike.
The Federal Reserve raised interest rates in March as above trend growth
continued. In April, rumor of a balanced budget deal and additional
non-inflationary economic data reduced the negative tone in the market.
Growth began to slow down as consumers increased their debt levels from
above-average spending. Yields continued to fall at the end of the second
quarter as investors started to perceive that the economy might be
moderating to a level that would keep inflation low reducing the need for
the Federal Reserve to raise interest rates in the near term. Although
the market changed frequently during the six month period, the yield on
long Treasuries rose only slightly from 6.64% on December 31, 1996 to
6.78% at the end of June.
Q. WHAT HAPPENED IN THE PORTFOLIO OVER THE PAST SIX MONTHS?
A. The GE Fixed Income Portfolio had a total return of 2.94% for the
first six months of 1997. This compares with a 3.09% return for the
Lehman Brothers Aggregate Bond Index and an average return of 2.73% for
the 10 mutual funds included in our Lipper Intermediate U.S. Bond Annuity
fund peer group. We entered 1997 neutral to the market and overweighted
in the corporate and mortgage-backed sectors. While we maintained our
overweight in corporate securities throughout the period, we reduced our
exposure in mortgage-backed issues to an underweighted position and
reduced the duration of the Portfolio towards the end of the second
quarter. Although we increased performance from our sector allocations
for the period, the shortening of our average maturity within the
Portfolio hurt performance as interest rates fell in June.
Q. WHAT IS YOUR CURRENT MARKET OUTLOOK AND HOW IS THE PORTFOLIO
POSITIONED TO TAKE ADVANTAGE OF YOUR MARKET OUTLOOK?
A. We are slightly defensive on the market and maintain a yield
advantage versus the index. We expect interest rates to rise during the
fall as the second quarter slowdown will be temporary and not severe
enough to ease the extremely tight labor markets. We expect the Federal
Reserve to tighten before year end, and since market yields do not
reflect this view,
- --------------------------------------------------------------------------------
<PAGE>
58 Variable Investment Trust-GE Fixed Income Portfolio
- --------------------------------------------------------------------------------
we will stay defensive. We believe that any additional tightening of
monetary policy will be a relatively small 25-50 basis points (.25%-.50%)
over the next six months, and as a result, we would view any rise in
rates as an opportunity to extend the average maturity of the Portfolio.
[GRAPH]
GE Fixed Income LB Aggregate Index
1/3/95 10,000 10,000
3/95 10,453 10,504
6/95 11,016 11,144
9/95 11,210 11,364
12/95 11,683 11,848
3/96 11,445 11,636
6/96 11,463 11,703
9/96 11,674 11,918
12/96 12,024 12,276
3/97 11,953 12,208
6/97 12,377 12,657
Average Annual Total Return %
for the period ended June 30, 1997
Since
6 Mo 1 Yr Inception
----- ----- ---------
2.94% 7.98% 8.94%
Performance of a $10,000 investment since inception of the GE Fixed Income
Portfolio - (1/3/95)
GE Fixed Income Portfolio (ending value $12,377)
Lehman Brothers Aggregate Bond Index (ending value $12,657)
See page 61 for Notes to Performance. Past performance is no guarantee of future
results.
- --------------------------------------------------------------------------------
<PAGE>
Variable Investment Trust-GE Money Market Portfolio 59
- --------------------------------------------------------------------------------
FROM THE GE MONEY MARKET PORTFOLIO ADVISER
GE INVESTMENT MANAGEMENT INCORPORATED
PORTFOLIO MANAGER: ROBERT A. MACDOUGALL
Q. WHAT HAPPENED IN THE MARKET OVER THE PAST SIX MONTHS?
A. At the close of 1996, the Federal Funds Rate was 5.25% with the
1-Year Treasury Bill yield of 5.48%. With the economy starting to show
signs of growth early in the first quarter, interest rates rose in
anticipation of a Federal Reserve interest rate hike. This increase
officially occurred at the March Federal Open Market Committee (FOMC)
meeting. Fed Funds were raised 25 basis points (.25%) to 5.50% and the
yield on the 1-Year T-Bill reached 6.00%. As GDP continued to show signs
of above trend growth, we remained cautious and looked for the Federal
Reserve to raise short-term rates further to slow economic growth.
Q. HOW DID THE GE MONEY MARKET PORTFOLIO PERFORM COMPARED TO ITS
BENCHMARK IN 1997?
A. The GE Money Market Portfolio had a total return of 2.47% for the
first six months of 1997. This compares with 2.56% for 90-Day Treasury
Bills and a 2.47% average return for the 107 Money Market Annuity funds
in our Lipper peer group.
Q. WHAT IS YOUR INVESTMENT STRATEGY?
A. Our top priority in this Portfolio is to ensure that we have
sufficient liquidity to meet investors needs and to maintain a high
quality portfolio. Along this end, we are changing the composition of the
Portfolio from 100% Bank and Corporate securities to at least 35% U.S.
Government debt and the balance in the highest quality rated securities
(Moody's P-1/S&P A-1). This allocation will be completed at the start of
the third quarter and will improve the credit worthiness of the Portfolio
without adversely affecting the yield. We do not buy exotic derivatives
in order to reach for yield. We do adjust our average portfolio maturity
depending upon our outlook for the direction of short-term interest
rates.
Q. WHAT IS YOUR CURRENT MARKET OUTLOOK AND HOW WILL THIS IMPACT THE
PORTFOLIO?
A. With low unemployment and inflation as a backdrop, the probability of
an immediate interest rate hike by the Federal Reserve is minimal. The
second quarter GDP slowdown, which we view as temporary, will not be
sufficient to ease the shortages of qualified labor experienced by many
U.S. companies. We expect the Federal Reserve to tighten before year-end
(25-50 basis points (.25% to .50%) over the next six months), and as a
result, we are waiting for yields to rise before extending the average
maturity of the Portfolio.
- --------------------------------------------------------------------------------
<PAGE>
60 Variable Investment Trust-GE Money Market Portfolio
- --------------------------------------------------------------------------------
AN INVESTMENT IN THE GE MONEY MARKET PORTFOLIO IS NEITHER INSURED,
NOR GUARANTEED BY THE U.S. GOVERNMENT, AND NO ASSURANCE CAN BE GIVEN THAT
THE GE MONEY MARKET PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET
VALUE OF $1.00 PER SHARE.
[GRAPH]
GE Money Market 90-Day T-Bill Index
1/31/95 10,000 10,000
3/95 10,132 10,145
6/95 10,275 10,287
9/95 10,414 10,426
12/95 10,572 10,564
3/96 10,701 10,696
6/96 10,829 10,831
9/96 10,957 10,970
12/96 11,086 11,108
3/97 11,219 11,250
6/97 11,360 11,392
Average Annual Total Return %
for the period ended June 30, 1997
Since
6 Mo 1 Yr Inception
------ ----- ---------
2.47% 4.90% 5.25%
Performance of a $10,000 investment since inception of the GE Money Market
Portfolio - (1/3/95)
GE Money Market Portfolio (ending value $11,360)
90-Day T-Bill Index (ending value $11,392)
The GE Money Market Portfolio's
7 day current yield was 5.06% and effective
yield was 5.19% as of 6/30/97.
See page 61 for Notes to Performance. Past
performance is no guarantee of future results.
- --------------------------------------------------------------------------------
<PAGE>
Variable Investment Trust 61
- --------------------------------------------------------------------------------
NOTES TO PERFORMANCE
Average annual total returns take into account changes in share price and
assume reinvestment of dividends and capital gains. Investment returns and net
asset value on an investment will fluctuate and you may have a loss or gain when
you sell your shares. The performance data shown does not reflect charges made
by the separate account. Inclusion of these charges would reduce the performance
quoted.
GE Investment Management Incorporated ("GEIM") has voluntarily agreed to waive
and/or bear certain fees and Portfolio expenses. Without these provisions, the
returns (and/or yields) would have been lower. These provisions may be
terminated in the future.
The Standard & Poor's Composite Index of 500 Stocks (S&P 500), Morgan Stanley
Capital International Europe Australia Far East Index (MSCI EAFE), Lehman
Brothers Aggregate Bond Index (LB Aggregate), and the 90-Day U.S. Treasury Index
(90-Day T-Bill) are unmanaged indices and do not reflect the actual cost of
investing in the instruments that comprise each index. The S&P 500 Index is a
composite of the prices of 500 widely held U.S. stocks recognized by investors
to be representative of the stock market in general. The MSCI EAFE is a
composite of 1,093 stocks of companies in 20 countries located in Europe,
Australasia, New Zealand and the Far East. The LB Aggregate Bond Index 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. The 90-Day U.S. T-Bill
is the average return on three-month U.S. Treasury Bills. The results shown for
the foregoing indices assume reinvestment of net dividends or interest. Broad
market index returns are calculated from the month-end nearest to the
Portfolios' inception date. The majority of the broad market returns are not
available from the Portfolios' commencement of investment operations through
June 30, 1997.
The views expressed in this document reflect our judgment as of the
publication date and are subject to change at any time without notice. The
securities cited may not represent future holdings and should not be considered
as a recommendation to purchase or sell a particular security. See the
prospectus for complete descriptions of investment objectives, policies, risks
and permissible investments.
- --------------------------------------------------------------------------------
<PAGE>
62 Variable Investment Trust-GE U.S. Equity Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE ($)
---------- -----------
<S> <C>
COMMON STOCK-96.8%
BASIC MATERIALS-4.3%
Air Products & Chemicals Inc............................................... 780 63,375
Airgas Inc................................................................. 1,433 28,391(a)
Barrick Gold Corp.......................................................... 943 20,746
Du Pont de Nemours (E.I.) & Co............................................. 5,762 362,286
Eastman Chemical Co........................................................ 337 21,400
FMC Corp................................................................... 333 26,453(a)
IMC Global Inc............................................................. 708 24,780
Mead Corp.................................................................. 930 57,892
Morton International Inc................................................... 2,930 88,449
Newmont Mining Corp........................................................ 2,643 103,077
Potash Corp. of Saskatchewan Inc........................................... 200 15,013
PPG Industries Inc......................................................... 184 10,695
Rayonier Inc............................................................... 800 33,650
Weyerhaeuser Co............................................................ 1,606 83,512
-----------
939,719
-----------
CAPITAL GOODS-11.9%
AlliedSignal Inc........................................................... 4,502 378,168
AMP Inc.................................................................... 950 39,663
Armstrong World Industries Inc............................................. 590 43,291
Avery Dennison Corp........................................................ 467 18,738
Boeing Co.................................................................. 566 30,033
Bombardier Inc. (Class B).................................................. 200 4,540
Browning-Ferris Industries Inc............................................. 1,560 51,870
Corning Inc................................................................ 500 27,813
Deere & Co................................................................. 2,478 135,980
Dover Corp................................................................. 4,895 301,042
Emerson Electric Co........................................................ 5,663 311,819
General Signal Corp........................................................ 649 28,313
Harnischfeger Industries Inc............................................... 333 13,820
Hubbell Inc. (Class B)..................................................... 5,068 222,992
Laidlaw Inc................................................................ 832 11,492
Lockheed Martin Corp....................................................... 939 97,245
Mannesmann AG.............................................................. 28 12,474
Martin Marietta Materials Inc.............................................. 1,332 43,123
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO SCHEDULE OF INVESTMENTS AND FINANCIAL STATEMENTS.
<PAGE>
Variable Investment Trust-GE U.S. Equity Portfolio 63
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE ($)
---------- -----------
<S> <C>
Masco Corp................................................................. 233 9,728
McDonnell Douglas Corp..................................................... 515 35,278
Minnesota Mining & Manufacturing Co........................................ 433 44,166
Molex Inc. (Class A)....................................................... 1,061 37,002
National Service Industries Inc............................................ 591 28,774
Parker Hannifin Corp....................................................... 334 20,270
Sherwin Williams Co........................................................ 1,208 37,297
Textron Inc................................................................ 4,437 294,506
Timken Co.................................................................. 831 29,552
Tyco International Ltd..................................................... 359 24,973
United Technologies Corp................................................... 2,011 166,913
United Waste Systems Inc................................................... 333 13,653(a)
US Filter Corp............................................................. 334 9,102(a)
Waste Management Inc....................................................... 1,832 58,853
Wheelabrator Technologies Inc.............................................. 562 8,676
-----------
2,591,159
-----------
CONSUMER--CYCLICAL-7.3%
ACNielsen Corp............................................................. 2,034 39,917(a)
Autoliv AB................................................................. 581 22,732(a)
Automatic Data Processing Inc.............................................. 2,814 132,258
Carnival Corp. (Class A)................................................... 783 32,299
Catalina Marketing Corp.................................................... 433 20,838(a)
Circus Circus Enterprises Inc.............................................. 2,111 51,983(a)
Comcast Corp. (Class A).................................................... 3,166 67,673
Comcast UK Cable Partners Ltd. (Class A)................................... 866 10,392(a)
CUC International Inc...................................................... 1,283 33,117(a)
Disney (Walt) Co........................................................... 2,635 211,459
Dun & Bradstreet Corp...................................................... 400 10,500
Eastman Kodak Co........................................................... 1,138 87,342
Federal-Mogul Corp......................................................... 384 13,440
Ford Motor Co.............................................................. 2,291 86,485
Gannett Inc................................................................ 1,621 160,074
General Motors Corp........................................................ 730 40,652
Goodyear Tire & Rubber Co.................................................. 482 30,517
Harman International Industries Inc........................................ 633 26,665
Interpublic Group Cos. Inc................................................. 1,822 111,711
</TABLE>
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SEE NOTES TO SCHEDULE OF INVESTMENTS AND FINANCIAL STATEMENTS.
<PAGE>
64 Variable Investment Trust-GE U.S. Equity Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE ($)
---------- -----------
<S> <C>
ITT Industries Inc......................................................... 309 7,957
Knight Ridder Inc.......................................................... 433 21,244
McDonalds Corp............................................................. 2,037 98,413
Metromedia International Group Inc......................................... 449 5,697(a)
Nine West Group Inc........................................................ 333 12,716(a)
Scholastic Corp............................................................ 457 15,995(a)
Tele-Communications Inc. (Series A)........................................ 3,738 55,603
Tele-Communications Inc. Liberty Media Group (Series A).................... 2,981 70,799(a)
Time Warner Inc............................................................ 893 43,087
Viad Corp.................................................................. 749 14,418
Xerox Corp................................................................. 766 60,418
-----------
1,596,401
-----------
CONSUMER--STABLE-9.6%
Anheuser Busch Cos. Inc.................................................... 4,725 198,155
Archer-Daniels Midland Co.................................................. 1,668 39,198
Avon Products Inc.......................................................... 1,119 78,959
Coca Cola Co............................................................... 165 11,138
Colgate Palmolive Co....................................................... 1,911 124,693
Conagra Inc................................................................ 1,110 71,179
CPC International Inc...................................................... 1,176 108,559
General Mills Inc.......................................................... 882 57,440
Gillette Co................................................................ 400 37,900
International Flavours..................................................... 471 23,786
International Multifoods Corp.............................................. 233 5,854
Kellogg Co................................................................. 266 22,776
Kimberly Clark Corp........................................................ 4,380 217,905
Nestle S.A. (Regd.)........................................................ 30 39,575
Pepsico Inc................................................................ 8,545 320,972
Philip Morris Cos. Inc..................................................... 6,364 282,402(g)
Procter & Gamble Co........................................................ 1,903 268,799
Ralston Purina Co.......................................................... 741 60,901
Sara Lee Corp.............................................................. 1,789 74,467
Sysco Corp................................................................. 534 19,491
Unilever N.V............................................................... 150 32,700
-----------
2,096,849
-----------
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO SCHEDULE OF INVESTMENTS AND FINANCIAL STATEMENTS.
<PAGE>
Variable Investment Trust-GE U.S. Equity Portfolio 65
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE ($)
---------- -----------
<S> <C>
ENERGY-10.8%
Amoco Corp................................................................. 2,295 199,522
Anadarko Petroleum Corp.................................................... 652 39,120
Atlantic Richfield Co...................................................... 1,880 132,540
Baker Hughes Inc........................................................... 2,457 95,055
British Petroleum PLC ADR.................................................. 756 56,605
Burlington Resources Inc................................................... 2,156 95,133
Diamond Offshore Drilling Inc.............................................. 150 11,719(a)
Elf Aquitaine S.A.......................................................... 283 15,406
Exxon Corp................................................................. 6,832 420,168
Halliburton Co............................................................. 520 41,210
Louisiana Land & Exploration Co............................................ 333 19,023
Mobil Corp................................................................. 2,898 202,498
Nabors Industries Inc...................................................... 1,206 30,150(a)
Royal Dutch Petroleum Co. ADR.............................................. 5,404 293,842
Schlumberger Ltd........................................................... 2,630 328,750
Texaco Inc................................................................. 1,504 163,560
Tosco Corp................................................................. 738 22,094
Total S.A. (Class B)....................................................... 498 25,211
Union Pacific Resources Group Inc.......................................... 1,419 35,298
Unocal Corp................................................................ 2,894 112,323
Valero Energy Corp......................................................... 533 19,321
-----------
2,358,548
-----------
FINANCIAL-12.0%
American Express Co........................................................ 2,938 218,881
Bank of New York Inc....................................................... 1,322 57,507
BankAmerica Corp........................................................... 1,442 93,099
BankBoston Corp............................................................ 1,123 80,926
Bankers Trust New York Corp................................................ 226 19,662
Barnett Banks Inc.......................................................... 300 15,750
Beneficial Corp............................................................ 400 28,425
Chase Manhattan Corp....................................................... 1,226 118,999
Citicorp................................................................... 2,984 359,758
CMAC Investment Corp....................................................... 569 27,170
Countrywide Credit Industries.............................................. 1,063 33,152
Edwards A.G. Inc........................................................... 506 21,632
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO SCHEDULE OF INVESTMENTS AND FINANCIAL STATEMENTS.
<PAGE>
66 Variable Investment Trust-GE U.S. Equity Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE ($)
---------- -----------
<S> <C>
Federal National Mortgage Assoc............................................ 8,856 386,343
ING Groep N.V.............................................................. 834 38,547
Mellon Bank Corp........................................................... 1,572 70,937
Merrill Lynch & Co. Inc.................................................... 600 35,775
Morgan (J.P.) & Co. Inc.................................................... 739 77,133
Morgan Stanley, Dean Witter, Discover & Co................................. 3,996 172,078
Norwest Corp............................................................... 200 11,250
Providian Financial Corp................................................... 443 14,231(a)
Salomon Inc................................................................ 434 24,141
State Street Corp.......................................................... 1,400 64,750
T. Rowe Price & Associates................................................. 316 16,314
Travelers Group Inc........................................................ 7,203 454,239
Trizec Hahn Corp........................................................... 450 9,619
United States Bancorp...................................................... 583 37,385
Wells Fargo & Co........................................................... 514 138,523
-----------
2,626,226
-----------
FINANCIAL--INSURANCE-5.9%
Aegon N.V.................................................................. 192 13,483
American International Group Inc........................................... 2,432 363,280
Chubb Corp................................................................. 1,715 114,691
Equitable Cos. Inc. (Series B)............................................. 267 8,878
Everest Reinsurance Holdings............................................... 200 7,925
General Reinsurance Corp................................................... 480 87,360
Lincoln National Corp...................................................... 1,233 79,374
Loews Corp................................................................. 2,062 206,458
Marsh & McLennan Cos. Inc.................................................. 1,916 136,754
Provident Cos. Inc......................................................... 1,865 99,778
Reliastar Financial Corp................................................... 484 35,393
The Hartford Financial Services Group Inc.................................. 399 33,017
TIG Holdings Inc........................................................... 1,869 58,406
UNUM Corp.................................................................. 726 30,492
-----------
1,275,289
-----------
HEALTHCARE-12.4%
Abbott Laboratories........................................................ 4,426 295,435
Allergan Inc............................................................... 1,865 59,330
American Home Products Corp................................................ 3,395 259,717
</TABLE>
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<PAGE>
Variable Investment Trust-GE U.S. Equity Portfolio 67
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SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE ($)
---------- -----------
<S> <C>
Arrow International Inc.................................................... 179 5,236
Baxter International Inc................................................... 936 48,906
Bristol-Myers Squibb Co.................................................... 5,393 436,833
Cardinal Health Inc........................................................ 963 55,132
Columbia/HCA Healthcare Corp............................................... 100 3,931
Dentsply International Inc................................................. 269 13,181
Eli Lilly & Co............................................................. 799 87,341
Forest Labs Inc............................................................ 108 4,496(a)
Johnson & Johnson.......................................................... 4,619 297,348
Lincare Holdings Inc....................................................... 748 32,164(a)
Merck & Co. Inc............................................................ 2,931 303,358
Pfizer Inc................................................................. 2,171 259,435
Scherer (R.P.) Corp. Delaware.............................................. 1,237 63,860(a)
Schering Plough Corp....................................................... 3,216 153,966
Smithkline Beecham PLC ADR................................................. 2,251 206,248
St. Jude Medical Inc....................................................... 142 5,538(a)
Sun Healthcare Group Inc................................................... 217 4,516(a)
Tenet Healthcare Corp...................................................... 450 13,303(a)
Warner-Lambert Co.......................................................... 100 12,425
Watson Pharmaceuticals Inc................................................. 2,131 90,035(a)
-----------
2,711,734
-----------
RETAIL TRADE-4.5%
American Stores Co......................................................... 843 41,623
Arbor Drugs Inc............................................................ 1,959 39,425
Costco Cos. Inc............................................................ 1,398 45,959(a)
Dayton Hudson Corp......................................................... 1,532 81,483
Federated Department Stores Inc............................................ 1,598 55,530(a)
Home Depot Inc............................................................. 1,972 135,945
Lowes Cos. Inc............................................................. 927 34,415
Office Max Inc............................................................. 412 5,948(a)
Penney J.C. Inc............................................................ 366 19,101
Sears Roebuck & Co......................................................... 3,092 166,195
Toys 'R Us Inc............................................................. 2,427 84,945(a)
Wal Mart Stores Inc........................................................ 7,905 267,288
-----------
977,857
-----------
</TABLE>
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<PAGE>
68 Variable Investment Trust-GE U.S. Equity Portfolio
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SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE ($)
---------- -----------
<S> <C>
TECHNOLOGY--ELECTRONICS AND EQUIPMENT-6.4%
3Com Corp.................................................................. 283 12,735(a)
Applied Materials Inc...................................................... 911 64,510(a)
Cisco Systems Inc.......................................................... 1,149 77,127(a)
DSC Communications Corp.................................................... 482 10,724(a)
Hewlett Packard Co......................................................... 4,437 248,472
Intel Corp................................................................. 3,058 433,663
International Business Machines............................................ 3,588 323,593
Lucent Technologies Inc.................................................... 568 40,931
Northern Telecom Ltd....................................................... 400 36,400
Pitney Bowes Inc........................................................... 1,194 82,983
Storage Technology Corp.................................................... 241 10,725(a)
Varian Associates Inc...................................................... 902 48,933
-----------
1,390,796
-----------
TECHNOLOGY--SOFTWARE & SERVICES-4.0%
Computer Associates International Inc...................................... 1,580 87,986
Electronic Data Systems Corp............................................... 582 23,862
Equifax Inc................................................................ 6,246 232,273
First Data Corp............................................................ 7,425 326,236
Intuit Inc................................................................. 331 7,592(a)
Microsoft Corp............................................................. 433 54,721(a)
Reuters Holdings PLC ADR (Class B)......................................... 2,376 149,688
-----------
882,358
-----------
TRANSPORTATION-1.6%
Burlington Northern Santa Fe............................................... 1,383 124,297
Canadian Pacific Ltd....................................................... 2,423 68,904
Continental Airlines Inc. (Class B)........................................ 1,226 42,834(a)
Delta Air Lines Inc........................................................ 281 23,042
Pittston Brinks Group...................................................... 566 16,980
Union Pacific Corp. N.V.................................................... 882 62,181
-----------
338,238
-----------
UTILITIES-6.1%
360 Communications Co...................................................... 217 3,716(a)
Airtouch Communications Inc................................................ 7,904 216,372(a)
American Electric Power Inc................................................ 1,317 55,314
American Telephone & Telegraph Corp........................................ 2,293 80,398
</TABLE>
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<PAGE>
Variable Investment Trust-GE U.S. Equity Portfolio 69
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SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE ($)
---------- -----------
<S> <C>
Bellsouth Corp............................................................. 2,127 98,639
CMS Energy Corp............................................................ 500 17,625
Duke Power Co.............................................................. 1,398 67,017
El Paso Natural Gas Co..................................................... 399 21,945
Florida Progress Corp...................................................... 999 31,281
FPL Group Inc.............................................................. 895 41,226
GTE Corp................................................................... 2,946 129,256
MCI Communications Corp.................................................... 1,229 47,048
NTL Inc.................................................................... 3,978 98,953(a)
NYNEX Corp................................................................. 1,240 71,455
Pacificorp................................................................. 1,831 40,282(g)
Pinnacle West Capital Corp................................................. 400 12,025
Public Service Co. Colorado................................................ 618 25,647
SBC Communications Inc..................................................... 2,208 136,620
Sonat Inc.................................................................. 966 49,507
Southern Co................................................................ 833 18,222
Sprint Corp................................................................ 333 17,524
Vanguard Cellular Systems Inc. (Class A)................................... 598 8,148(a)
Worldcom Inc............................................................... 1,499 47,968(a)
-----------
1,336,188
-----------
Total Common Stock
(Cost $15,604,371).................................................. 21,121,362
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ($) VALUE
---------- -----------
<S> <C>
CONVERTIBLE BONDS-0.1%
Berkshire Hathaway Inc. Delaware
1.00% 12/02/01.......................................................... 8,000 8,420
Continental Airlines Inc.
6.75% 04/15/06.......................................................... 2,000 2,530
6.75% 04/15/06.......................................................... 11,000 14,424(b)
-----------
Total Convertible Bonds
(Cost $20,974)...................................................... 25,374
-----------
</TABLE>
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<PAGE>
70 Variable Investment Trust-GE U.S. Equity Portfolio
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SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE ($)
---------- -----------
<S> <C>
PREFERRED STOCK-0.4%
Airtouch Communications Inc. (Class B), 6.00%.............................. 307 8,749
Microsoft Corp. (Series A), $2.20.......................................... 1,045 90,915
-----------
Total Preferred Stock
(Cost $93,157)...................................................... 99,664
-----------
Total Investments in Securities
(Cost $15,718,502).................................................. 21,246,400
-----------
SHORT-TERM INVESTMENTS-2.7%
GEI Short-Term Investment Fund
(Cost $578,019)..................................................... 578,019 578,019
Other Assets and Liabilities, net 0.0%..................................... 4,352
-----------
NET ASSETS-100%................................................................. $21,828,771
-----------
-----------
</TABLE>
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<PAGE>
Variable Investment Trust-GE International Equity Portfolio 71
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SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE ($)
--------- ----------
<S> <C>
COMMON STOCK-98.3%
AUSTRALIA-3.9%
Brambles Industries Ltd........................................................ 7,512 148,691
Burns, Philp & Co. Ltd......................................................... 63,963 118,917
Coca Cola Amatil Ltd........................................................... 5,142 66,840
Colonial Ltd................................................................... 3,214 8,210(a)
F.H. Faulding & Co. Ltd........................................................ 3,037 17,444
----------
360,102
----------
AUSTRIA-2.3%
OMV AG......................................................................... 369 47,267
VA Technologie AG.............................................................. 923 168,911
----------
216,178
----------
BRAZIL-1.3%
Telecomunicacoes de Sao Paulo S.A. (Pfd. receipts)............................. 15,553 5,085(a)
Telecomunicacoes de Sao Paulo S.A. (Pfd. shares)............................... 356,907 116,698
----------
121,783
----------
CANADA-0.9%
Bombardier Inc. (Class B)...................................................... 3,788 85,994
----------
DENMARK-1.5%
Den Danske Bank................................................................ 1,342 130,564
Tele Danmark AS (Series B)..................................................... 97 5,040
----------
135,604
----------
FINLAND-1.3%
Merita Ltd..................................................................... 9,645 32,133
Metra AB....................................................................... 192 5,787
Pohjola Insurance Group........................................................ 660 19,573
Sampo Insurance Co. Ltd........................................................ 236 22,951
Valmet Corp.................................................................... 2,332 40,328
----------
120,772
----------
FRANCE-11.1%
Alcatel Alsthom................................................................ 832 104,200
AXA-UAP........................................................................ 1,006 62,568
Cap Gemini S.A................................................................. 403 21,259
Carrefour S.A.................................................................. 252 183,017
Coflexip S.A. ADR.............................................................. 2,023 60,943
</TABLE>
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<PAGE>
72 Variable Investment Trust-GE International Equity Portfolio
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SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE ($)
--------- ----------
<S> <C>
Lyonnaise Des Eaux S.A......................................................... 861 86,734
Michelin CGDE.................................................................. 1,071 64,314
Schneider S.A.................................................................. 835 44,445
Total S.A. (Class B)........................................................... 2,333 235,813
Usinor Sacilor................................................................. 2,467 44,498
Valeo S.A...................................................................... 1,895 117,698
----------
1,025,489
----------
GERMANY-8.4%
BASF AG........................................................................ 2,051 75,791
Dresdner Bank AG............................................................... 935 32,326
Fresenius Medical Care Inc. AG................................................. 435 38,410
Fresenius Medical Care Inc. AG (Pfd. shares)................................... 628 45,081
Gehe AG........................................................................ 1,548 105,620
Mannesmann AG.................................................................. 329 146,570
SGL Carbon AG.................................................................. 981 134,317
Siemens AG..................................................................... 2,117 125,690
Veba AG........................................................................ 1,329 74,676
----------
778,481
----------
GREECE-0.3%
Alpha Credit Bank.............................................................. 455 30,961
----------
HONG KONG-5.0%
Cheung Kong (Holdings) Ltd..................................................... 8,500 83,932
China Resources Enterprise Ltd................................................. 8,000 39,240
Giordano International Ltd..................................................... 64,000 43,783
HSBC Holdings PLC.............................................................. 5,760 173,232
Johnson Electric Holdings...................................................... 8,500 25,344
Lai Sun Development Co. Ltd.................................................... 26,000 29,197
New World Development Co. Ltd.................................................. 5,000 29,817
Television Broadcasts Ltd...................................................... 8,000 35,935
----------
460,480
----------
INDIA-0.4%
BSES Ltd. GDR.................................................................. 774 20,511
Tata Engineering & Locomotive Co. Ltd. GDR..................................... 1,320 19,602
----------
40,113
----------
</TABLE>
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<PAGE>
Variable Investment Trust-GE International Equity Portfolio 73
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SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE ($)
--------- ----------
<S> <C>
INDONESIA-1.8%
PT Astra International Inc..................................................... 32,500 133,635
PT Mulia Industrindo........................................................... 44,500 23,329
PT Tambang Timah GDR........................................................... 881 12,995(b)
----------
169,959
----------
ISRAEL-1.5%
ECI Telecommunications Ltd..................................................... 4,697 139,736
----------
ITALY-2.8%
Edison Spa..................................................................... 7,988 39,738
ENI Spa (Regd.)................................................................ 5,566 31,521
Gucci Group N.V. ADR........................................................... 181 11,652
Industrie Natuzzi Spa ADR...................................................... 539 13,812
Telecom Italia Mobilaire....................................................... 50,242 162,589
----------
259,312
----------
JAPAN-15.5%
Canon Inc...................................................................... 8,000 217,763
Credit Saison Co. Ltd.......................................................... 6,465 157,931
DDI Corp....................................................................... 18 132,857
Honda Motor Co................................................................. 4,000 120,398
Murata Manufacturing Co. Ltd................................................... 2,000 79,567
NEC Corp....................................................................... 7,000 97,714
NTT Data Corp.................................................................. 3 115,948
Rohm Co........................................................................ 2,000 205,898
Sony Corp...................................................................... 2,000 174,315
Sumitomo Realty & Development.................................................. 4,000 35,247
Suzuki Motor Corp.............................................................. 6,000 75,903
Tokyo Steel Manufacturing...................................................... 1,400 15,634
----------
1,429,175
----------
MALAYSIA-0.2%
AMMB Holdings Berhad........................................................... 1,200 7,464
Telekom Malaysia Berhad........................................................ 3,000 14,026
----------
21,490
----------
</TABLE>
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<PAGE>
74 Variable Investment Trust-GE International Equity Portfolio
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SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE ($)
--------- ----------
<S> <C>
MEXICO-1.2%
Gruma S.A. de C.V.............................................................. 6,462 29,760
Grupo Carso S.A. de C.V. ADR................................................... 4,235 58,654
Grupo Financiero Bancomer S.A. ADR (Series C).................................. 2,118 20,386(a,b)
----------
108,800
----------
NETHERLANDS-4.4%
IHC Caland N.V................................................................. 2,079 113,646
ING Groep N.V.................................................................. 3,152 145,324
PolyGram N.V................................................................... 2,077 108,987
Wolters Kluwer N.V............................................................. 291 35,432
----------
403,389
----------
NORWAY-0.2%
Saga Petroleum ASA............................................................. 695 13,181
----------
PANAMA-0.7%
Panamerican Beverages Inc. (Class A)........................................... 1,929 63,416
----------
PERU-1.2%
Telefonica del Peru S.A. ADR (Class B)......................................... 4,065 106,452
----------
PHILIPPINES-1.1%
Metro Bank & Trust Co.......................................................... 2,275 48,302
San Miguel Corp................................................................ 19,880 52,383
----------
100,685
----------
PORTUGAL-1.4%
Banco Comercial Portugues...................................................... 5,664 106,966
Banco Comercial Portugues (Pfd. shares)........................................ 52 3,562
Banco Comercial Portugues ADR.................................................. 577 10,747
Electricidade de Portugal S.A.................................................. 572 10,497
----------
131,772
----------
SINGAPORE-0.2%
DBS Land Ltd................................................................... 7,000 22,130
----------
SOUTH AFRICA-1.3%
Dimension Data Holdings Ltd.................................................... 11,664 46,276
South African Iron & Steel..................................................... 103,479 68,423
----------
114,699
----------
</TABLE>
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<PAGE>
Variable Investment Trust-GE International Equity Portfolio 75
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JUNE 30, 1997 (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE ($)
--------- ----------
<S> <C>
SOUTH KOREA-1.0%
Kookmin Bank................................................................... 560 10,652
Kookmin Bank GDR............................................................... 165 3,506(b)
Korea Electric Power Corp...................................................... 2,500 74,606
----------
88,764
----------
SPAIN-2.1%
Banco Santander S.A............................................................ 2,640 81,341
Repsol S.A..................................................................... 2,696 113,988
----------
195,329
----------
SWEDEN-3.9%
Astra AB (Series B)............................................................ 226 3,988
Autoliv SDR.................................................................... 4,617 177,566(a)
Electrolux AB (Series B)....................................................... 1,079 77,834
Investor AB (Series B)......................................................... 342 18,016
Kinnevik AB (Series B)......................................................... 995 27,719
NetCom Systems AB (Series B)................................................... 1,941 27,601(a)
Telefonaktiebolaget LM Ericson (Series B)...................................... 722 28,421
----------
361,145
----------
SWITZERLAND-9.7%
ABB AG......................................................................... 130 196,781
Holderbank Financiere Glarus AG................................................ 63 59,505
Nestle S.A. (Regd.)............................................................ 82 108,172
Novartis AG (Regd.)............................................................ 177 282,957
Roche Holdings AG.............................................................. 10 90,445
Schw Rueckversicher (Regd.).................................................... 49 69,305
Zurich Versicherungsgesellschaft (Regd.)....................................... 222 88,344
----------
895,509
----------
THAILAND-0.3%
Banpu PLC...................................................................... 1,200 17,510
Siam Cement PLC................................................................ 200 3,459
Thai Farmers Bank PLC.......................................................... 1,700 7,219
----------
28,188
----------
</TABLE>
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<PAGE>
76 Variable Investment Trust-GE International Equity Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE ($)
--------- ----------
<S> <C>
UNITED KINGDOM-11.4%
Airtours PLC................................................................... 9,450 182,865
Cordiant PLC................................................................... 32,807 68,292
Granada Group PLC.............................................................. 9,620 126,560
Lucas Varity PLC............................................................... 22,472 77,839
Medeva PLC..................................................................... 32,622 139,616
Railtrack Group PLC............................................................ 12,749 132,269
Reed International PLC......................................................... 13,078 126,318
Siebe PLC...................................................................... 10,638 180,343
Thorn PLC...................................................................... 7,623 21,581
----------
1,055,683
----------
Total Investments in Securities
(Cost $7,131,428)....................................................... 9,084,771
----------
SHORT-TERM INVESTMENTS-0.3%
GEI Short-Term Investment Fund
(Cost $30,588).......................................................... 30,588 30,588
Other Assets and Liabilities, net 1.4%......................................... 129,569
----------
NET ASSETS-100%..................................................................... $9,244,928
----------
----------
</TABLE>
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<PAGE>
Variable Investment Trust-GE Fixed Income Portfolio 77
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JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ($) VALUE ($)
---------- ----------
<S> <C>
BONDS AND NOTES-94.9%
U.S. TREASURIES-38.1%
U.S. Treasury Bonds
6.50% 11/15/26.......................................................... 157,000 150,572(g)
6.625% 02/15/27.......................................................... 89,000 87,081(g)
8.125% 08/15/19.......................................................... 54,000 61,602(g)
10.625% 08/15/15.......................................................... 89,000 123,794(g)
12.00% 05/15/05.......................................................... 14,000 18,642(g)
12.50% 08/15/14.......................................................... 100,000 147,047(g)
13.75% 08/15/04.......................................................... 94,000 132,290(g)
----------
721,028
----------
U.S. Treasury Notes
5.875% 01/31/99-02/15/00................................................. 559,000 555,495(g)
6.00% 06/30/99.......................................................... 50,000 49,930
6.00% 09/30/98.......................................................... 78,000 78,085(g)
6.25% 06/30/02.......................................................... 100,000 99,406
6.375% 05/15/00.......................................................... 242,000 242,869(g)
6.625% 07/31/01-05/15/07................................................. 201,000 202,826(g)
7.75% 12/31/99.......................................................... 44,000 45,574(g)
----------
1,274,185
----------
Total U.S. Treasuries
(Cost $1,988,077).................................................... 1,995,213
----------
ASSET BACKED-0.9%
Advanta Mortgage Loan Trust Corp.
6.30% 07/25/25.......................................................... 5,731 5,575
First Plus Home Improvement Loan Trust
7.80% 03/20/16.......................................................... 10,000 10,300
First USA Credit Card Trust
5.80% 02/17/05.......................................................... 17,000 16,992(h)
Green Tree Recreational, Equipment & Consumer Trust
6.55% 07/15/28.......................................................... 10,000 9,978
The Money Store Home Equity Trust
7.90% 10/15/22.......................................................... 6,000 6,162
----------
Total Asset Backed
(Cost $48,483)....................................................... 49,007
----------
</TABLE>
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78 Variable Investment Trust-GE Fixed Income Portfolio
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SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ($) VALUE ($)
---------- ----------
<S> <C>
CORPORATE NOTES-23.6%
Abbey National PLC
7.35% 10/29/49.......................................................... 6,000 6,008
Bancomer S.A.
9.00% 06/01/00.......................................................... 7,000 7,070(b)
Bangkok Bank PLC
7.25% 09/15/05.......................................................... 15,000 14,297(b)
Bell Telephone Co.-Canada
9.50% 10/15/10.......................................................... 10,000 11,984
BT Preferred Capital Trust
7.875% 02/25/27......................................................... 15,000 14,508
Capital One Bank
6.43% 06/29/98.......................................................... 50,000 50,058
Carter Holt Harvey Ltd.
8.875% 12/01/04.......................................................... 50,000 54,910
China International Trust & Investment Corp.
9.00% 10/15/06.......................................................... 10,000 11,053
Circus Circus Enterprises Inc.
6.70% 11/15/2096........................................................ 10,000 9,672
Cleveland Electric Co.-Toledo Edison
7.19% 07/01/00.......................................................... 5,000 5,014(b)
Conseco Inc.
8.70% 11/15/26.......................................................... 10,000 10,235
Continental Cablevision Inc.
8.50% 09/15/01.......................................................... 10,000 10,562
CSX Corp.
7.05% 05/01/02.......................................................... 10,000 10,088
DDR Pass-Through Asset Trust
7.125% 03/15/02.......................................................... 65,000 64,805
Deutsche Bank Financial Inc.
6.70% 12/13/06.......................................................... 20,000 19,500
Dresser Industries Inc.
7.60% 08/15/2096........................................................ 23,000 23,428
Empresa Nacional De Electricid
7.875% 02/01/27.......................................................... 5,000 4,997
Farmers Insurance Exchange
8.625% 05/01/24.......................................................... 5,000 5,111(b)
</TABLE>
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<PAGE>
Variable Investment Trust-GE Fixed Income Portfolio 79
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ($) VALUE ($)
---------- ----------
<S> <C>
FBOP Capital Trust
10.20% 02/06/27......................................................... 5,000 5,263(b)
Federated Department Stores Inc.
10.00% 02/15/01......................................................... 50,000 54,698
First American Capital Trust
8.50% 04/15/12.......................................................... 5,000 5,144(b)
First Security Capital
8.41% 12/15/26.......................................................... 7,000 7,141
First USA Capital Trust
9.33% 01/15/27.......................................................... 11,000 12,898
Guangdong International Trust & Investment Corp.
8.75% 10/24/16.......................................................... 10,000 10,415(b)
Hydro-Quebec
8.05% 07/07/24.......................................................... 60,000 65,039
Korea Electric Power Corp.
7.75% 04/01/13.......................................................... 10,000 10,026
Landeskreditbank Baden
7.875% 04/15/04.......................................................... 25,000 26,492
Lehman Brothers Holdings Inc.
6.84% 09/25/98.......................................................... 25,000 25,181
6.90% 03/30/01.......................................................... 15,000 15,011
Loewen Group International Inc.
7.50% 04/15/01.......................................................... 55,000 55,493
MIC Financing Trust
8.375% 02/01/27.......................................................... 15,000 15,131(b)
Morgan Stanley Finance PLC
8.03% 02/28/17.......................................................... 5,000 5,070
National Bank of Hungary
8.875% 11/01/13.......................................................... 30,000 32,535
National Westminster Bank PLC
7.75% 04/29/49.......................................................... 5,000 5,140
New York State Dormitory Authority Revenues
6.32% 04/01/99.......................................................... 15,000 14,969
News America Holdings Inc.
8.15% 10/17/36.......................................................... 35,000 34,505
Norfolk Southern Corp.
7.90% 05/15/2097........................................................ 21,000 21,686
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO SCHEDULE OF INVESTMENTS AND FINANCIAL STATEMENTS.
<PAGE>
80 Variable Investment Trust-GE Fixed Income Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ($) VALUE ($)
---------- ----------
<S> <C>
North Atlantic Energy Corp.
9.05% 06/01/02.......................................................... 13,000 13,152
NRG Energy Inc.
7.50% 06/15/07.......................................................... 15,000 15,038(b)
NWCG Holding Corp.
6.75% 06/15/99.......................................................... 15,000 13,189
Oryx Energy Co.
10.00% 06/15/99......................................................... 50,000 52,570
Paramount Communications Inc.
5.875% 07/15/00.......................................................... 50,000 48,401
Petroleos Mexicanos
7.75% 10/29/99.......................................................... 15,000 15,075(b)
Provident Capital Trust
8.60% 12/01/26.......................................................... 5,000 4,900
Reliance Industries Ltd.
10.375% 06/24/16......................................................... 5,000 5,459(b)
10.50% 08/06/46......................................................... 5,000 5,693(b)
Republic of Philippines
8.60% 06/15/27.......................................................... 5,000 4,950
Republic of Poland
3.75% 10/27/14.......................................................... 10,000 8,688
Riggs Capital Trust
8.625% 12/31/26.......................................................... 10,000 9,886(b)
RJR Nabisco Inc.
8.00% 07/15/01.......................................................... 50,000 50,487
Sun Life Canada Capital Trust
8.526% 05/29/49.......................................................... 15,000 15,561(b)
Tele-Communications Inc.
8.25% 01/15/03.......................................................... 35,000 36,219
Tenet Healthcare Corp.
8.00% 01/15/05.......................................................... 10,000 10,025
Time Warner Entertainment Co. L.P.
10.15% 05/01/12......................................................... 50,000 60,664
Time Warner Pass-Through Asset Trust
6.10% 12/30/01.......................................................... 25,000 23,947
Triton Energy Ltd.
8.75% 04/15/02.......................................................... 7,000 7,280
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO SCHEDULE OF INVESTMENTS AND FINANCIAL STATEMENTS.
<PAGE>
Variable Investment Trust-GE Fixed Income Portfolio 81
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ($) VALUE ($)
---------- ----------
<S> <C>
United Co. Financial Corp.
7.00% 07/15/98.......................................................... 50,000 50,195
Washington Mutual Capital
8.375% 06/01/27.......................................................... 12,000 12,193
WorldCom Inc.
7.55% 04/01/04.......................................................... 15,000 15,281
----------
Total Corporate Notes
(Cost $1,211,089).................................................... 1,233,990
----------
MORTGAGE-BACKED-32.3%
Federal Home Loan Mortgage Corp.
7.50% TBA............................................................... 90,000 90,253(c)
9.00% 02/01/17-12/01/25................................................. 413,850 438,151
----------
528,404
----------
Federal National Mortgage Assoc.
6.50% 01/01/04.......................................................... 2,165 2,146
7.50% TBA............................................................... 45,000 45,056(c)
8.00% TBA............................................................... 40,000 40,887(c)
8.50% 12/01/24.......................................................... 40,860 42,616
----------
130,705
----------
Government National Mortgage Assoc.
6.50% 05/15/24.......................................................... 39,951 38,465
7.00% 08/20/26.......................................................... 64,908 66,348(h)
7.50% 12/15/23.......................................................... 107,980 108,790
8.00% 03/15/23-12/15/23................................................. 116,699 120,016
8.50% 10/15/17.......................................................... 172,802 182,413
----------
516,032
----------
Mid State Trust
7.54% 07/01/35.......................................................... 10,000 10,061
----------
COLLATERALIZED MORTGAGE OBLIGATIONS
Aetna Commercial Mortgage Trust
6.42% 12/26/30.......................................................... 15,714 15,697
Asset Securitization Corp.
7.41% 01/13/30.......................................................... 50,000 51,375
BHN Mortgage Trust
7.916% 07/25/09.......................................................... 9,840 9,987
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO SCHEDULE OF INVESTMENTS AND FINANCIAL STATEMENTS.
<PAGE>
82 Variable Investment Trust-GE Fixed Income Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ($) VALUE ($)
---------- ----------
<S> <C>
DLJ Mortgage Acceptance Corp.
6.85% 12/17/27.......................................................... 40,000 39,575(b)
Federal National Mortgage Assoc.
5.44% 07/01/26.......................................................... 2,876 1,956(d,e)
7.00% 06/18/20.......................................................... 29,489 29,609
7.00% 09/01/23-10/01/23................................................. 136,426 45,727(f)
7.148% 10/17/09.......................................................... 14,000 14,092
7.17% 01/17/13.......................................................... 6,000 6,047
7.41% 03/25/21.......................................................... 18,000 18,630
8.50% 07/25/22.......................................................... 20,776 6,776(f)
9.00% 05/25/22.......................................................... 13,585 4,551(f)
Federal National Mortgage Assoc. REMIC
6.856% 06/17/11.......................................................... 11,000 10,886
6.95% 07/25/20.......................................................... 19,000 16,465(d,e)
6.96% 12/25/22.......................................................... 24 24
6.96% 12/25/22.......................................................... 13,436 9,809(d,e)
7.23% 09/17/09.......................................................... 7,000 7,079
7.62% 12/17/04.......................................................... 15,000 15,469
7.82% 09/25/23.......................................................... 34,748 21,240(d,e)
8.62% 09/25/23.......................................................... 35,000 21,579(d,e)
9.51% 10/25/23.......................................................... 13,979 10,659(d,e)
Morgan Stanley Capital Inc.
6.477% 10/15/10.......................................................... 153,224 151,309(b)
----------
508,541
----------
Total Mortgage-Backed
(Cost $1,686,051).................................................... 1,693,743
----------
Total Bonds and Notes
(Cost $4,933,700).................................................... 4,971,953
----------
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO SCHEDULE OF INVESTMENTS AND FINANCIAL STATEMENTS.
<PAGE>
Variable Investment Trust-GE Fixed Income Portfolio 83
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE ($)
---------- ----------
<S> <C>
PREFERRED STOCK-1.4%
Beacon Properties Corp., 8.98%.............................................. 765 19,268
Entergy Gulf States Inc., $1.75............................................. 380 9,500
First Industrial Reality Trust Inc., 8.625%................................. 665 16,625
News Corp. Exchange Trust, 5.00%............................................ 150 9,720(b)
UDS Capital, 8.32%.......................................................... 715 17,696
----------
Total Preferred Stock
(Cost $72,111)....................................................... 72,809
----------
Total Investments in Securities
(Cost $5,005,811).................................................... 5,044,762
----------
SHORT-TERM INVESTMENTS-10.5%
GEI Short-Term Investment Fund
(Cost $549,529)...................................................... 549,529 549,529
Other Assets and Liabilities, net (6.8%).................................... (354,139)
----------
NET ASSETS-100%.................................................................. $5,240,152
----------
----------
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO SCHEDULE OF INVESTMENTS AND FINANCIAL STATEMENTS.
<PAGE>
84 Variable Investment Trust-GE Money Market Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT ($) COST ($)
---------- ----------
<S> <C>
SHORT-TERM INVESTMENTS-98.8%
U.S. GOVERNMENTS(d)-48.9%
Federal Home Loan Mortgage Corp.
5.66% 07/03/97........................................................ 190,000 189,942
5.52% 07/07/97........................................................ 180,000 179,837
5.53% 07/08/97........................................................ 100,000 99,894
5.53% 07/10/97........................................................ 180,000 179,756
5.74% 08/08/97........................................................ 240,000 238,598
5.64% 09/15/97........................................................ 200,000 197,703
----------
1,085,730
----------
Federal National Mortgage Assoc.
5.60% 07/01/97........................................................ 150,000 150,000
5.72% 07/09/97........................................................ 100,000 99,877
5.53% 07/14/97........................................................ 200,000 199,608
5.64% 07/18/97........................................................ 150,000 149,610
5.51% 09/12/97........................................................ 180,000 178,015
5.64% 09/15/97........................................................ 180,000 177,933
5.88% 11/06/97........................................................ 120,000 117,617
----------
1,072,660
----------
Total U.S. Governments
(Cost $2,158,390).................................................. 2,158,390
----------
COMMERCIAL PAPER(d)-25.9%
Abbey National PLC
5.64% 09/25/97........................................................ 180,000 177,611
Associates Corp. of North America
6.20% 07/01/97........................................................ 100,000 100,000
Koch Industries
5.54% 07/03/97........................................................ 200,000 199,939
Merrill Lynch & Co. Inc.
5.69% 08/27/97........................................................ 180,000 178,401
Norwest Corp.
5.61% 09/24/97........................................................ 170,000 167,780
Toronto Dominion Bank
5.65% 08/22/97........................................................ 180,000 178,552
UBS Finance Delaware Inc.
5.79% 07/01/97........................................................ 140,000 140,000
----------
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO SCHEDULE OF INVESTMENTS AND FINANCIAL STATEMENTS.
<PAGE>
Variable Investment Trust-GE Money Market Portfolio 85
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED), CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT ($) COST ($)
---------- ----------
<S> <C>
Total Commercial Paper
(Cost $1,142,283).................................................. 1,142,283
----------
CERTIFICATES OF DEPOSIT-24.0%
Algemene Bank Nederland N.V.
5.59% 07/30/97........................................................ 180,000 180,000
Bank of Nova Scotia
5.69% 07/22/97........................................................ 170,000 170,000
Bayerische Hypotheken Bank
5.65% 09/09/97........................................................ 150,000 150,000
Bayerische Vereinsbank AG
5.68% 07/16/97........................................................ 180,000 180,000
Societe Generale
5.59% 08/18/97........................................................ 180,000 180,000
Swiss Bank Corp.
5.67% 07/03/97........................................................ 200,000 200,000
----------
Total Certificates of Deposit
(Cost $1,060,000).................................................. 1,060,000
----------
Total Short Term Investments
(Cost $4,360,673).................................................. 4,360,673
Other Assets and Liabilities, net 1.2%.................................... 54,275
----------
NET ASSETS-100%................................................................ $4,414,948
----------
----------
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO SCHEDULE OF INVESTMENTS AND FINANCIAL STATEMENTS.
<PAGE>
86 Variable Investment Trust
- --------------------------------------------------------------------------------
NOTES TO SCHEDULES OF INVESTMENTS
(a) Non-income producing security.
(b) Pursuant to Rule 144A of Securities Act of 1933, these securities may only
be resold in transactions exempt from registration, normally to qualified
institutional buyers. At June 30, 1997, these securities amounted to
$14,424, $36,887 and $334,761 or 0.1%, 0.4% and 6.4% of net assets for the
GE U.S. Equity, GE International Equity and GE Fixed Income Portfolios,
respectively.
(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) 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.
(f) 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.
(g) At June 30, 1997, all or a portion of this security was pledged to cover
collateral requirements for futures and TBAs.
(h) Adjustable rate mortgage coupon. The stated rate represents the rate at
June 30, 1997.
ABBREVIATIONS:
ADR--American Depositary Receipt
GDR--Global Depositary Receipt
Pfd.--Preferred
Regd.--Registered
REMIC--Real Estate Mortgage Investment Conduit
SDR--Special Drawing Rights
- --------------------------------------------------------------------------------
<PAGE>
Variable Investment Trust 87
- --------------------------------------------------------------------------------
(This Page Intentionally Left Blank)
<PAGE>
88 Variable Investment Trust
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
GE U.S. GE INTERNATIONAL GE FIXED GE MONEY
EQUITY EQUITY INCOME MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ---------------- ---------- ----------
<S> <C>
ASSETS
Investments in securities, at market (cost
$15,718,502, $7,131,428, $5,005,811
and $0, respectively)............................ $21,246,400 $9,084,771 $5,044,762 $ --
Short-term investments (at amortized cost)......... 578,019 30,588 549,529 4,360,673
Cash............................................... 77 17,709 793 50,261
Foreign currency (cost $648, $104,373, $0, and $0,
respectively).................................... 640 103,829 -- --
Receivable for investments sold.................... 199,334 63,384 679,538 --
Income receivables................................. 27,354 33,525 75,550 8,903
Receivable for fund shares sold.................... 8,491 7,009 3,806 2,051
Deferred organizational costs...................... 7,910 7,910 7,910 7,910
----------- ---------------- ---------- ----------
Total assets....................................... 22,068,225 9,348,725 6,361,888 4,429,798
----------- ---------------- ---------- ----------
LIABILITIES
Distributions payable to shareholders.............. -- -- 4,593 3,065
Payable for investments purchased.................. 217,399 86,951 1,102,408 --
Payable for fund shares repurchased................ 14 -- 3,585 2,051
Payable to GEIM.................................... 22,041 16,846 11,150 9,734
----------- ---------------- ---------- ----------
Total liabilities.................................. 239,454 103,797 1,121,736 14,850
----------- ---------------- ---------- ----------
NET ASSETS......................................... $21,828,771 $9,244,928 $5,240,152 $4,414,948
----------- ---------------- ---------- ----------
----------- ---------------- ---------- ----------
NET ASSETS CONSIST OF:
Capital paid in............................... $14,862,007 $6,567,323 $5,232,179 $4,414,967
Undistributed (overdistributed) net investment
income...................................... 109,789 52,565 325 --
Accumulated net realized gain (loss).......... 1,329,137 673,678 (31,303) (19)
Net unrealized appreciation/(depreciation) on:
Investments................................. 5,527,898 1,953,343 38,951 --
Foreign currency transactions............... (60) (1,981) -- --
----------- ---------------- ---------- ----------
NET ASSETS......................................... $21,828,771 $9,244,928 $5,240,152 $4,414,948
----------- ---------------- ---------- ----------
----------- ---------------- ---------- ----------
Shares outstanding ($.001 par value)............... 870,592 451,614 444,021 4,414,967
Net asset value, offering and redemption price per
share............................................ $ 25.07 $ 20.47 $ 11.80 $ 1.00
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
Variable Investment Trust 89
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
GE U.S. GE INTERNATIONAL GE FIXED GE MONEY
EQUITY EQUITY INCOME MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------------- --------- --------
<S> <C>
INVESTMENT INCOME
Income:
Dividends.......................................... $ 167,024 $ 104,437 $ 1,496 $ --
Interest........................................... 24,747 5,264 187,385 120,236
Less: Foreign taxes withheld....................... (1,654) (12,592) -- --
---------- ---------------- --------- --------
Total income........................................... 190,117 97,109 188,881 120,236
---------- ---------------- --------- --------
EXPENSES:
Advisory and administration fees................... 53,750 35,567 12,982 6,654
Transfer agent..................................... 4,215 4,215 4,215 4,215
Trustees' fees..................................... 4,322 1,729 1,298 1,081
Custody and accounting............................. 1,271 509 382 319
Legal.............................................. 10,172 4,069 3,052 2,543
Audit.............................................. 12,715 5,086 3,814 3,178
Amortization of deferred organization expense...... 1,566 1,566 1,566 1,566
Other expenses..................................... 509 203 152 126
---------- ---------------- --------- --------
Total expenses before waiver........................... 88,520 52,944 27,461 19,682
Less: Expenses waived or borne by the advisor.......... (10,338) (2,731) (7,987) (8,593)
---------- ---------------- --------- --------
Net expenses........................................... 78,182 50,213 19,474 11,089
---------- ---------------- --------- --------
Net investment income.................................. 111,935 46,896 169,407 109,147
---------- ---------------- --------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) on:
Investments........................................ 718,034 635,311 (11,383) (1)
Futures............................................ 162,325 -- 198 --
Written options.................................... -- -- 377 --
Foreign currency transactions...................... (60) (7,078) -- --
Increase (decrease) in unrealized
appreciation/(depreciation) on:
Investments........................................ 2,413,755 288,642 (3,745) --
Futures............................................ 8,850 -- -- --
Foreign currency transactions...................... (309) (1,841) -- --
---------- ---------------- --------- --------
Net realized and unrealized gain (loss) on
investments.......................................... 3,302,595 915,034 (14,553) (1)
---------- ---------------- --------- --------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS... $3,414,530 $ 961,930 $ 154,854 $109,146
---------- ---------------- --------- --------
---------- ---------------- --------- --------
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
90
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GE U.S. EQUITY PORTFOLIO
-------------------------------------
SIX MONTHS ENDED
JUNE 30, 1997 YEAR ENDED
(a) DECEMBER 31, 1996
---------------- -----------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income................................................ $ 111,935 $ 263,127
Net realized gain (loss) on investments, futures, written options,
and foreign currency transactions................................. 880,299 1,083,526
Net increase (decrease) in unrealized appreciation/(depreciation).... 2,422,296 1,564,581
---------------- -----------------
Net increase from operations......................................... 3,414,530 2,911,234
---------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income................................................ -- (266,657)
Net realized gains................................................... -- (1,569,398)
---------------- -----------------
Total distributions.................................................... -- (1,836,055)
---------------- -----------------
Increase (decrease) in net assets from operations and distributions.... 3,414,530 1,075,179
---------------- -----------------
SHARE TRANSACTIONS:
Proceeds from sale of shares......................................... 715,294 6,384,529
Value of distributions reinvested.................................... -- 1,836,055
Cost of shares redeemed.............................................. (327,594) (340,318)
---------------- -----------------
Net increase (decrease) from share transactions........................ 387,700 7,880,266
---------------- -----------------
TOTAL INCREASE (DECREASE) IN NET ASSETS................................ 3,802,230 8,955,445
NET ASSETS
Beginning of period.................................................... 18,026,541 9,071,096
---------------- -----------------
End of period.......................................................... $ 21,828,771 $18,026,541
---------------- -----------------
---------------- -----------------
Undistributed (overdistributed) net investment income, end of period... $ 109,789 $ 267
---------------- -----------------
---------------- -----------------
CHANGES IN PORTFOLIO SHARES:
Shares sold by subscription............................................ 31,286 313,305
Issued for distributions reinvested.................................... -- 85,239
Shares redeemed........................................................ (14,493) (15,566)
---------------- -----------------
Net increase (decrease) in Portfolio shares............................ 16,793 382,978
---------------- -----------------
---------------- -----------------
</TABLE>
- -----------------------
(a) Unaudited.
<PAGE>
- --------------------------------------------------------------------------------
Variable Investment Trust 91
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GE INTERNATIONAL EQUITY PORTFOLIO GE FIXED INCOME PORTFOLIO
----------------------------------- -------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1997 YEAR ENDED JUNE 30, 1997 YEAR ENDED
(a) DECEMBER 31, 1996 (a) DECEMBER 31, 1996
-------------- ----------------- ---------------- -----------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income................................. $ 46,896 $ 34,224 $ 169,407 $ 296,905
Net realized gain (loss) on investments, futures,
written options, and foreign currency transactions.. 628,233 334,449 (10,808) (20,781)
Net increase (decrease) in unrealized
appreciation/(depreciation)......................... 286,801 735,117 (3,745) (101,681)
-------- ------------- -------------- -------------
Net increase from operations.......................... 961,930 1,103,790 154,854 174,443
-------- ------------- -------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income................................. -- (32,331) (169,407) (296,905)
Net realized gains.................................... -- (702,363) -- (114,424)
--------- ------------- -------------- -------------
Total distributions..................................... (734,694) (169,407) (411,329)
--------- -------------- ------------- -------------
Increase (decrease) in net assets from operations
and distributions..................................... 961,930 369,096 (14,553) (236,886)
-------- ------------- -------------- -------------
SHARE TRANSACTIONS:
Proceeds from sale of shares.......................... 152,067 941,134 67,801 2,351,196
Value of distributions reinvested..................... 734,691 170,345 405,749
Cost of shares redeemed............................... (74,098) (203,915) (371,136) (403,559)
-------- ------------- -------------- -------------
Net increase (decrease) from share transactions......... 77,969 1,471,910 (132,990) 2,353,386
-------- ------------- -------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS................. 1,039,899 1,841,006 (147,543) 2,116,500
NET ASSETS
Beginning of period..................................... 8,205,029 6,364,023 5,387,695 3,271,195
---------- -------------- ------------- --------------
End of period........................................... 9,244,928 $ 8,205,029 $5,240,152 $ 5,387,695
---------- -------------- ------------- -------------
---------- -------------- ------------- -------------
Undistributed (overdistributed) net investment income,
end of period......................................... $ 52,565 $ (320) $ 325 $ (3,063)
----------- -------------- ------------- -------------
----------- -------------- ------------- -------------
CHANGES IN PORTFOLIO SHARES:
Shares sold by subscription............................. 8,134 51,543 5,790 193,912
Issued for distributions reinvested..................... -- 40,501 14,531 34,209
Shares redeemed......................................... (3,948) (10,953) (31,530) (33,870)
-------- ------------- -------------- -------------
Net increase (decrease) in Portfolio shares............. 4,186 81,091 (11,209) 194,251
-------- ------------- -------------- -------------
-------- ------------- -------------- -------------
</TABLE>
<TABLE>
<CAPTION>
GE MONEY MARKET PORTFOLIO
--------------------------------------
SIX MONTHS ENDED
JUNE 30, 1997 YEAR ENDED
(a) DECEMBER 31, 1996
---------------- -----------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income............................................... $ 109,147 $ 251,469
Net realized gain (loss) on investments, futures, written options,
and foreign currency transactions................................ (1) (18)
Net increase (decrease) in unrealized appreciation/(depreciation)... -- --
---------------- -----------------
Net increase from operations........................................ 109,146 251,451
---------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................... (109,147) (245,602)
Net realized gains.................................................. -- --
---------------- -----------------
Total distributions................................................... (109,147) (245,602)
--------------- -----------------
Increase (decrease) in net assets from operations and distributions... (1) 5,849
---------------- -----------------
SHARE TRANSACTIONS:
Proceeds from sale of shares........................................ 941,661 6,445,298
Value of distributions reinvested................................... 109,500 242,158
Cost of shares redeemed............................................. (1,026,686) (7,413,133)
---------------- -----------------
Net increase (decrease) from share transactions....................... 24,475 (725,677)
----------------- -----------------
TOTAL INCREASE (DECREASE) IN NET ASSETS............................... 24,474 (719,828)
NET ASSETS
Beginning of period................................................... 4,390,474 5,110,302
-------------- -----------------
End of period......................................................... $ 4,414,948 $ 4,390,474
--------------- -----------------
--------------- -----------------
Undistributed (overdistributed) net investment income, end of period.. $ -- $ 6,590
--------------- -----------------
--------------- -----------------
CHANGES IN PORTFOLIO SHARES:
Shares sold by subscription........................................... 941,661 6,445,298
Issued for distributions reinvested................................... 109,500 242,158
Shares redeemed....................................................... (1,026,686) (7,413,133)
---------------- -----------------
Net increase (decrease) in Portfolio shares........................... 24,475 (725,677)
---------------- -----------------
---------------- -----------------
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
92
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected data based on a share outstanding throughout the periods indicated
(June 30, 1997 data is unaudited)
GE U.S. EQUITY
PORTFOLIO
--------------------------------
6/30/97 12/31/96 12/31/95 (c)
------- -------- ------------
Net asset value, beginning
of period.................................... $ 21.11 $ 19.27 $15.00
INCOME (LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income........................ 0.13 0.34 0.46
Net realized and unrealized
gains (losses) on
investments................................ 3.83 3.90 4.87
------- -------- ------------
TOTAL INCOME (LOSS) FROM
INVESTMENT OPERATIONS........................ 3.96 4.24 5.33
------- -------- ------------
LESS DISTRIBUTIONS FROM:
Net investment income........................ 0.00 0.35 0.47
Net realized gains........................... 0.00 2.05 0.59
------- -------- ------------
TOTAL DISTRIBUTIONS............................ 0.00 2.40 1.06
------- -------- ------------
NET ASSET VALUE, END
OF PERIOD.................................... $ 25.07 $ 21.11 $19.27
------- -------- ------------
------- -------- ------------
TOTAL RETURN (a)............................... 18.76% 21.72 % 35.58%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands)............................. $21,829 $18,027 $9,071
Ratios to average
net assets:
Net investment income*.................... 1.14% 1.80 % 2.10%
Expenses*................................. 0.80% 0.80 % 0.80%
Gross Expenses*........................... 0.90% 0.88 % 1.03%
Portfolio turnover rate...................... 14% 35 % 71%
Average brokerage
commissions (b)............................ $ .053 $ .071 N/A
- --------------------------------------------------------------------------------
<PAGE>
Variable Investment Trust 93
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GE INTERNATIONAL EQUITY GE FIXED INCOME GE MONEY MARKET
PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------- -------------------------------- --------------------------------
6/30/97 12/31/96 12/31/95 (c) 6/30/97 12/31/96 12/31/95 (c) 6/30/97 12/31/96 12/31/95 (c)
------- -------- ------------ ------- -------- ------------ ------- -------- ------------
<S> <C>
Net asset value, beginning
of period................... $18.34 $17.37 $15.00 $11.84 $12.53 $12.00 $ 1.00 $ 1.00 $ 1.00
INCOME (LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income....... 0.12 0.08 0.21 0.39 0.76 0.82 0.02 0.05 0.05
Net realized and unrealized
gains (losses) on
investments............... 2.01 2.70 2.45 (0.05 ) (0.43) 1.13 0.00 0.00 0.01
------- ------- ------------ ------- -------- ------------ ------- -------- ----------
TOTAL INCOME (LOSS) FROM
INVESTMENT OPERATIONS....... 2.13 2.78 2.66 0.34 0.33 1.95 0.02 0.05 0.06
------- ------- ------------ ------- -------- ------------ ------- -------- ----------
LESS DISTRIBUTIONS FROM:
Net investment income....... 0.00 0.08 0.14 0.38 0.76 0.84 0.02 0.05 0.06
Net realized gains.......... 0.00 1.73 0.15 0.00 0.26 0.58 0.00 0.00 0.00
------- ------- ------------ ------- -------- ------------ ------- -------- ----------
TOTAL DISTRIBUTIONS........... 0.00 1.81 0.29 0.38 1.02 1.42 0.02 0.05 0.06
------- ------- ------------ ------- -------- ------------ ------- -------- ----------
NET ASSET VALUE, END
OF PERIOD................... $20.47 $18.34 $17.37 $11.80 $11.84 $12.53 $ 1.00 $ 1.00 $ 1.00
------- ------- ------------ ------- -------- ------------ ------- -------- ----------
------- ------- ------------ ------- -------- ------------ ------- -------- ----------
TOTAL RETURN (a).............. 11.61 % 16.10% 17.74% 2.94 % 2.92% 16.83% 2.47 % 4.87% 5.72%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands)............ $9,245 $8,205 $6,364 $5,240 $5,388 $3,271 $4,415 $4,390 $5,110
Ratios to average
net assets:
Net investment income*... 1.12 % 0.46% 0.88% 6.49 % 6.37% 6.52% 4.90 % 4.88% 5.41%
Expenses*................ 1.20 % 1.20% 1.20% 0.75 % 0.75% 0.75% 0.50 % 0.50% 0.50%
Gross Expenses*.......... 1.26 % 1.36% 1.35% 1.05 % 1.03% 1.15% 0.88 % 0.93% 0.87%
Portfolio turnover rate..... 49 % 26% 60% 153 % 222% 253% N/A N/A N/A
Average brokerage
commissions (b)........... $ .015 $ .048 N/A N/A N/A N/A N/A N/A N/A
</TABLE>
- ------------
NOTES TO FINANCIAL HIGHLIGHTS
(a) Total returns assume changes in share price, reinvestment of dividends and
capital gains, and assume no sales charge. Had the adviser not absorbed a
portion of expenses, total returns would have been lower. Periods less than
one year are not annualized.
(b) For the fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged. Mark-ups, mark-downs and spreads on shares
traded on a principal basis are not included unless they are disclosed on
confirmations prepared in accordance with rule 10b-10 under the Securities
Exchange Act of 1934.
(c) Information is for the period January 3, 1995, commencement of investment
operations, through December 31, 1995.
* Annualized for periods less than one year.
- --------------------------------------------------------------------------------
<PAGE>
94 Variable Investment Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION OF THE PORTFOLIOS. Variable Investment Trust (the "Trust") is
registered under the Investment Company Act of 1940 (as amended) as a
diversified, open-end management investment company. The Trust was formed as a
Massachusetts business trust pursuant to a Declaration of Trust (as amended) on
February 25, 1994. The Declaration authorizes the Trust's Trustees to create
separate series, each with an unlimited number of shares of beneficial interest.
The Trust is comprised of five investment portfolios (the "Portfolios") only
four of which are currently being offered through the Power Portfolio Variable
Annuity, as follows: GE U.S. Equity Portfolio, GE International Equity
Portfolio, GE Fixed Income Portfolio and GE Money Market Portfolio.
Shares of the Trust are offered only to insurance company separate accounts
that fund certain variable contracts. These insurance companies may include
insurance companies affiliated with GEIM, the investment adviser and
administrator of each Portfolio. As of June 30, 1997, Great Northern Insured
Annuity Corporation, an affiliated insurance company, controlled the Portfolios
by ownership, through separate accounts (the "Accounts", of virtually all of the
Portfolios' shares of beneficial interest. The Trust may in the future offer
shares of some or all of the Portfolios to variable life insurance separate
accounts.
On or about May 16, 1997, GNA and several other applicants filed an
application with the Securities and Exchange Commission ("SEC") seeking an order
approving the substitution of shares of certain investment portfolios of GE
Investments Funds, Inc. ("GEIF") for shares of the Portfolios currently held by
the Accounts. The effect of such a share substitution would be to replace the
Portfolios of Variable Investment Trust with those of GEIF as investment options
under the variable annuity contracts.
If the proposed substitutions are approved and carried out, each contract
owner affected by the substitution will be sent a written notice informing them
that the substitutions were approved and carried out and that they may make one
transfer of all amounts under their contract from the affected Portfolios on the
date of the notice to any GEIF portfolio.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. The following summarizes the
significant accounting policies of the Trust:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results may differ from those estimates.
SECURITY VALUATION AND TRANSACTIONS. Securities for which exchange quotations
are readily available are valued at the last sale price, or if no sales occurred
on that day, at the last quoted bid price. Certain fixed income securities are
valued by a dealer or by a pricing service based upon a computerized matrix
system, which considers market transactions and dealer supplied valuations.
Futures contracts are valued at the settlement price established each day by the
board of trade or exchange on which they are principally traded. Options are
valued at the last sale price, or if no sales occurred on that day, at the last
quoted bid price. Forward foreign
- --------------------------------------------------------------------------------
<PAGE>
Variable Investment Trust 95
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
currency contracts are valued at the mean between the bid and the offered
forward rates as last quoted by a recognized dealer. Short term investments
maturing within 60 days are valued at amortized cost. Fund positions which
cannot be valued as set forth above are valued at fair value determined under
procedures approved by the Board of Directors of the Portfolios.
GE Money Market Portfolio values its securities using the amortized cost
method, which values securities initially at cost and thereafter assumes a
constant amortization to maturity of any discount or premium. Amortized cost
approximates fair value.
Transactions are accounted for as of the trade date. Cost is determined and
gains and losses are based upon the specific identification method for both
financial statement and federal tax purposes.
FOREIGN CURRENCY. Accounting records of the Portfolios are maintained in U.S.
dollars. Investment securities and other assets and liabilities and purchases
and sales of investment securities denominated in a foreign currency are
translated to U.S. dollars at the prevailing exchange rate on the respective
dates of such transactions.
The Portfolios do not isolate the portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in their market prices. Such fluctuations are
included in net realized and unrealized gain or loss from investments. Reported
net realized exchange gains or losses from foreign currency transactions
represent sale of foreign currencies, currency gains or losses between the trade
date and the settlement date on securities transactions, realized gains and
losses on forward foreign currency contracts, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Portfolios' books, and the U.S. dollar equivalent of the amounts actually
received or paid. Net unrealized foreign exchange gains and losses arise from
changes in the value of assets and liabilities, other than investments in
securities as a result of changes in exchange rates.
INCOME TAXES. It is each Portfolio's policy to comply with all sections of
the Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income and gains to its shareholders and,
therefore, no provision for federal income tax has been made. Each Portfolio is
treated as a separate taxpayer for federal income tax purposes. Capital loss
carryovers are available to offset future realized capital gains. 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. At June 30, 1997, the GE Fixed
Income Portfolio had a capital loss carryover of $15,499 which expires December
31, 2004. Any net capital and currency losses incurred after October 31, within
the Portfolio's tax year, are deemed to arise on the first day of the
Portfolio's next tax year if the Portfolio so elects to defer such losses.
INVESTMENT INCOME. Corporate actions (including cash dividends) are recorded
net of nonreclaimable tax withholdings on the ex-dividend date, except for
certain foreign securities for which corporate actions are recorded as soon
after ex-dividend date as such information is available. Interest income is
recorded on the
- --------------------------------------------------------------------------------
<PAGE>
96 Variable Investment Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
accrual basis. All discounts and premiums on taxable bonds are amortized to call
or maturity date, whichever is shorter using the effective yield method.
EXPENSES. Expenses of the Trust which are directly identifiable to a specific
Portfolio are allocated to that Portfolio. Expenses which are not readily
identifiable to a specific Portfolio are allocated in such a manner as deemed
equitable, taking into consideration the nature and type of expense and the
relative sizes of the Portfolios. All expenses of the Portfolios are paid by the
Investment Adviser and reimbursed by the Portfolios up to the voluntary expense
limitations.
DISTRIBUTIONS TO SHAREHOLDERS. GE Fixed Income Portfolio and GE Money Market
Portfolio declare investment income dividends daily and pay them monthly. GE
U.S. Equity Portfolio and GE International Equity Portfolio declare and pay
dividends of net investment income annually. All Portfolios declare and pay net
realized capital gain distributions annually. The character of income and gains
to be distributed are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These differences
include treatment of realized and unrealized gains and losses on forward foreign
currency contracts, paydown gains and losses on mortgage-backed securities,
losses on wash sale transactions, and deferred organization expenses.
Reclassifications are made to the Portfolios' capital accounts to reflect income
and gains available for distribution (or available capital loss carryovers)
under income tax regulations. The calculation of net investment income per share
in the Financial Highlights table excludes these adjustments.
DEFERRED ORGANIZATIONAL COSTS. Organizational expenses applicable to the
Portfolios have been deferred and are being amortized on a straight-line basis
over a period of five years from commencement of investment operations.
WHEN-ISSUED SECURITIES. The Portfolios may purchase or sell securities on a
when-issued or forward commitment basis. Payment and delivery may take place a
month or more after the date of the transaction. The price of the underlying
securities and the date when the securities will be delivered and paid for are
fixed at the time the transaction is negotiated. This may increase the risk if
the other party involved in the transaction fails to deliver and causes the
Portfolio to subsequently invest at less advantageous yields. In connection with
such purchases, the Portfolio is required to hold liquid assets as collateral
with the Portfolios' custodian sufficient to cover the purchase price, unless
they enter into an offsetting contract for the sale of equal securities and
value.
REPURCHASE AGREEMENTS. The Portfolios' custodian takes possession of the
collateral pledged for investments in repurchase agreements on behalf of the
Portfolios. It is the policy of the Portfolios to value the underlying
collateral daily on a mark-to-market basis to determine that the value,
including accrued interest, is at least equal to the repurchase price. In the
event of default of the obligation to repurchase, the Portfolios have the right
to liquidate the collateral and apply the proceeds in satisfaction of the
obligation.
FUTURES AND OPTIONS. The Portfolios, other than the GE Money Market
Portfolio, may invest in futures contracts and purchase and write options. These
investments involve, to varying degrees, elements of market
- --------------------------------------------------------------------------------
<PAGE>
Variable Investment Trust 97
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
risk and risks in excess of the amount recognized in the Statements of Assets
and Liabilities. The face or contract amounts reflect the extent of the
involvement the Portfolios have in the particular classes of these instruments.
Risks may be caused by an imperfect correlation between movements in the price
of the instruments and the price of the underlying securities and interest
rates. Risks also may arise if there is an illiquid secondary market for the
instruments, or an inability of counterparties to perform. The Portfolios may
invest in futures contracts for the following reasons: (1) for the purpose of
hedging against the effects of changes in the value of portfolio securities or
other investments due to anticipated changes in interest rates, stock market
conditions and currency market conditions, (2) to gain stock, bond, or currency
market exposure for accumulating and residual cash positions, (3) for duration
management, (4) when such transactions are an economically appropriate way to
reduce risks inherent in the management of a Portfolio, and (5) for non-hedging
purposes such as seeking additional income or otherwise seeking to increase
total return.
Upon entering into a futures contract, the Portfolio is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Portfolio each day. The variation margin payments are
equal to the daily change in the contract value and are recorded as unrealized
gains and losses. The Portfolio recognizes a realized gain or loss when the
futures contract is closed. The Portfolio will realize a gain or loss upon the
expiration or closing of an option transaction. When an option is exercised, the
proceeds on sales for a written call option, the purchase cost for a written put
option, or the proceeds on the sale of the security for a purchased put or cost
of the security for a call option is adjusted by the amount of premium received
or paid.
OTHER. There are certain additional risks involved when investing in foreign
securities that are not inherent in domestic securities. These risks may involve
foreign currency exchange rate fluctuations, adverse political and economic
developments and the imposition of unfavorable foreign governmental laws and
restrictions.
3. FEES AND COMPENSATION PAID TO AFFILIATES.
ADVISORY AND ADMINISTRATION FEES. Compensation of GEIM, the Portfolio's
Investment Adviser and Administrator, a wholly-owned subsidiary of General
Electric Company, for investment advisory and administrative services is paid
monthly based on the average daily net assets of each Portfolio. Such advisory
and administration fees are based on the annual rates listed in the table below.
Until further notice, GEIM has agreed to reduce other operating expenses
(exclusive of advisory and administration fees) for each Portfolio as indicated
in the following table:
<TABLE>
<CAPTION>
ANNUALIZED BASED ON AVERAGE DAILY NET ASSETS
ADVISORY AND LIMITATION OF OTHER
ADMINISTRATION FEES OPERATING EXPENSES
------------------- -------------------
<S> <C>
GE U.S Equity Portfolio................................. .55% .25%
GE International Equity Portfolio....................... .85% .35%
GE Fixed Income Portfolio............................... .50% .25%
GE Money Market Portfolio............................... .30% .20%
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
98 Variable Investment Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
TRUSTEES' FEES. The Portfolios pay no compensation to their Trustees who are
employees of GEIM. Trustees who are not GEIM employees receive an annual fee of
$5,000 and an additional fee of $500 for each Trustees' meeting attended.
4. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION. Aggregate gross
unrealized appreciation/ (depreciation) of investments for each Portfolio at
June 30, 1997, were as follows:
<TABLE>
<CAPTION>
GROSS GROSS NET
UNREALIZED UNREALIZED UNREALIZED
APPRECIATION DEPRECIATION APPRECIATION
------------ ------------ ------------
<S> <C>
GE U.S. Equity Portfolio..................................... $5,600,631 $ 72,733 $5,527,898
GE International Equity Portfolio............................ 2,085,827 132,484 1,953,343
GE Fixed Income Portfolio.................................... 46,597 7,646 38,951
</TABLE>
The aggregate cost of each Portfolio's investments was substantially the same
for book and federal income tax purposes at June 30, 1997.
5. OPTIONS. During the period ended June 30, 1997, the following option
contracts were written:
<TABLE>
<CAPTION>
GE FIXED INCOME PORTFOLIO
-------------------------
NUMBER
OF CONTRACTS PREMIUM
------------ -------
<S> <C>
Balance as of December 31, 1996............................................ -- $--
Written.................................................................... 142 388
Closed and Expired......................................................... (142) (388)
Exercised.................................................................. -- --
------------ -------
Balance as of June 30, 1997................................................ -- $--
------------ -------
------------ -------
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
Variable Investment Trust 99
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
6. INVESTMENT TRANSACTIONS. The cost of purchases and the proceeds from sales
of investments, other than U.S. Government securities, short-term securities and
options, for the period ended June 30, 1997, were as follows:
PURCHASES SALES
----------- -----------
GE U.S. Equity Portfolio........................ $ 4,678,898 $ 2,522,192
GE International Equity Portfolio............... 4,186,465 4,009,666
GE Fixed Income Portfolio....................... 1,979,467 1,248,539
The cost of purchases and the proceeds from sales of long-term U.S. Government
securities for the period ended June 30, 1997, were as follows:
PURCHASES SALES
----------- -----------
GE U.S. Equity Portfolio........................... $ 45,651 $ 20,012
GE Fixed Income Portfolio......................... 5,723,244 6,588,392
- --------------------------------------------------------------------------------
<PAGE>
[LOGO]
GREAT NORTHERN INSURED ANNUITY CORPORATION*
*DOING BUSINESS IN TEXAS AS GNA INSURANCE COMPANY
Two Union Square o Suite 900 o P.O. Box 490
Seattle, Washington 98111-0490
------------
BULK RATE
U.S. POSTAGE
PAID
PERMIT #1193
RICHMOND, VA
------------
[LOGO]
POWER PORTFOLIO(sm)
VARIABLE ANNUITY
SEMI-ANNUAL REPORT
------------------
June 30, 1997
GNA VARIABLE SERIES TRUST
VARIABLE INVESTMENT TRUST
-------------------------
GREAT NORTHERN INSURED ANNUITY CORPORATION
Corporate Office: Two Union Square
P.O. Box 490 o Seattle, Washington
98111-0490
(206) 625-1755
VARIABLE ANNUITY SERVICE CENTER:
300 Berwyn Park o Berwyn, PA
19312-0031
(800) 455-0870
THE POWER PORTFOLIO VARIABLE ANNUITY
IS OFFERED BY GNA DISTRIBUTORS, INC.
