File Nos. 333-29337, 811-08257
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As filed with the Securities and Exchange Commission on November 7, 1997
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /___/
Pre-Effective Amendment No. 2 / X /
Post-Effective Amendment No. ____ /___/
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /___/
Amendment No. 2 / X /
(Check appropriate box or boxes)
...................................................................
GE INSTITUTIONAL FUNDS
3003 Summer Street
Stamford, Connecticut 06905
(203) 326-4040
(Registrant's Exact Name, Address and Telephone Number)
...................................................................
Matthew J. Simpson, Esq.
Vice President, Associate General Counsel & Assistant Secretary
GE Investment Management Incorporated
3003 Summer Street
Stamford, Connecticut 06905
...................................................................
(Name and Address of Agent for Service)
Copies to:
Stephen E. Roth, Esq.
Sutherland, Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, DC 20004-2404
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
Title of Securities Being Registered: Shares of Beneficial Interest, $.001 par
value per share.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT BECOMES
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, MAY
DETERMINE.
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<PAGE>
GE INSTITUTIONAL FUNDS
FORM N-1A
CROSS REFERENCE SHEET
Pursuant to Rule 481(a) under the Securities Act of 1933
----------
Showing Location of Information Required by Form N-1A in Part A (Prospectus)
and Part B (Statement of Additional Information) of the Registration Statement
PART A
ITEM NO. PROSPECTUS HEADING
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1. Cover Page.......................................................Cover Page
2. Synopsis................................................Expense Information
3. Condensed Financial Information.........................................N/A
4. General Description of Registration.............................Cover Page;
Investment Objectives and
Management Policies;
Investments in Debt Securities;
Cash Management Policies -
Non-Money Market Funds;
Additional Permitted Investments;
Risk Factors and Special Considerations;
Investment Restrictions;
Additional Matters; Appendix -
Further Information:
Certain Investment
Techniques and Strategies
5. Management of the Funds................................Expense Information;
Investment Objectives and
Management Policies;
Management of the Trust
6. Capital Stock and Other Securities...............................Dividends,
Distributions and
Taxes; Additional Matters
7. Purchase of Securities Being Offered....................Purchase of Shares;
Net Asset Value;
Distributor
8. Redemption or Repurchase...............................Redemption of Shares
9. Legal Proceedings............................................Not applicable
<PAGE>
PART B HEADING IN STATEMENT OF
ITEM NO. ADDITIONAL INFORMATION
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10. Cover Page.......................................................Cover Page
11. Table of Contents..................................................Contents
12. General Information and History.....................The Funds' Performance;
Additional Information
13. Investment Objectives and Policies....................Investment Objectives
and Management Policies
14. Management of the Funds.............................Management of the Trust
15. Control Persons and Principal
Holders of Securities...............................Principal Stockholders;
Management of the Trust
See Prospectus -
Additional Matters
16. Investment Advisory and Other Services..............Management of the Trust
17. Brokerage Allocation and Other Practices...........Investment Restrictions;
Management of the Trust
18. Capital Stock and Other Securities............................Redemption of
Shares;
Additional Information
19. Purchase, Redemption and Pricing
of Securities Being Offered...........................Redemption of Shares;
Net Asset Value;
See Prospectus -
Purchase of Shares
20. Tax Status.........................................Dividends, Distributions
and Taxes
21. Underwriters.................................................Not Applicable
22. Calculation of Performance Data......................The Funds' Performance
23. Financial Statements...............................Independent Accountants;
Financial Statements
PART C
Information required to be included in Part C is set forth after the
appropriate item, so numbered, in Part C to this Registration Statement.
<PAGE>
GE Institutional Funds (the "Trust") is an open-end management investment
company that offers ten diversified managed investment funds (each, a "Fund" and
collectively, the "Funds"), each of which has two classes of shares - the
Service Class and the Investment Class. Each Fund has a discrete investment
objective that it seeks to achieve by following distinct investment policies.
This Prospectus describes the Service Class shares of the Funds.
The Service Class shares and the Investment Class shares are identical, except
as to the services offered, and the expenses borne, by each class. Investors may
obtain a copy of the prospectus describing the Investment Class shares free of
charge by calling the telephone number listed below or writing the Trust at the
address listed below.
o Emerging Markets Fund's investment objective is long-term growth of
capital. The Fund seeks to achieve this objective by investing primarily in
equity securities of issuers that are located in emerging markets
countries.
o Premier Growth Equity Fund's investment objective is long-term growth of
capital and future income rather than current income. The Fund seeks to
achieve this objective by investing primarily in growth-oriented equity
securities.
o Mid-Cap Growth Fund's investment objective is long-term growth of capital.
The Fund seeks to achieve this objective by investing primarily in equity
securities of companies with medium-sized market capitalization that have
the potential for above-average growth.
o International Equity Fund's investment objective is long-term growth of
capital. The Fund seeks to achieve this objective by investing primarily in
foreign equity securities.
o Value Equity Fund's investment objective is long-term growth of capital and
future income rather than current income. The Fund seeks to achieve this
objective by investing primarily in equity securities of companies with
large-sized market capitalization that the Fund's management considers to
be undervalued by the market.
o U.S. Equity Fund's investment objective is long-term growth of capital. The
Fund seeks to achieve this objective by investing primarily in equity
securities of U.S. companies.
o S&P 500 Index Fund's investment objective is to provide growth of capital
and accumulation of income that corresponds to the investment return of the
Standard & Poor's 500 Composite Stock Price Index. The Fund seeks to
achieve this objective by investing in common stocks comprising that Index.
o Strategic Investment Fund's investment objective is to maximize total
return, consisting of capital appreciation and current income. The Fund
seeks to achieve this objective by following an asset allocation strategy
that provides diversification across a range of asset classes and
contemplates shifts among them from time to time.
o Income Fund's investment objective is to seek maximum income consistent
with prudent investment management and the preservation of capital. The
Fund seeks to achieve this objective by investing in fixed income
securities.
o Money Market Fund's investment objective is to seek a high level of current
income consistent with the preservation of capital and maintenance of
liquidity. The Fund seeks to achieve this objective by investing in U.S.
dollar denominated, short-term money market instruments.
This Prospectus briefly sets forth certain information about the Funds and the
Trust, including shareholder servicing and distribution fees, that prospective
investors will find helpful in making an investment decision. Investors are
encouraged to read this Prospectus carefully and retain it for future reference.
AN INVESTMENT IN THE MONEY MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THIS FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
SHARES OF THE FUNDS ARE NOT DEPOSITS WITH OR OBLIGATIONS OF ANY FINANCIAL
INSTITUTION, ARE NOT GUARANTEED OR ENDORSED BY ANY FINANCIAL INSTITUTION OR ITS
AFFILIATES, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. THERE CAN BE NO
ASSURANCE THAT A FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE.
Additional information about the Funds and the Trust, contained in a Statement
of Additional Information dated the same date as this Prospectus, has been filed
with the Securities and Exchange Commission (the "SEC") and is available upon
request and without charge by calling the Trust at the telephone number listed
below or by contacting the Trust at the address listed below. The SEC maintains
a Web site (http://www.sec.gov) that contains the Statement of Additional
Information, material incorporated by reference and other information regarding
the Funds and the Trust. The Statement of Additional Information is incorporated
in its entirety by reference into this Prospectus.
GE INVESTMENT MANAGEMENT INCORPORATED
Investment Adviser and Administrator
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
PROSPECTUS
November _____, 1997
TABLE OF CONTENTS
EXPENSE INFORMATION.......................................1
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES.............2
INVESTMENTS IN DEBT SECURITIES...........................11
CASH MANAGEMENT POLICIES - NON-MONEY MARKET FUNDS........11
ADDITIONAL PERMITTED INVESTMENTS.........................12
INVESTMENT RESTRICTIONS..................................17
RISK FACTORS AND SPECIAL CONSIDERATIONS..................17
MANAGEMENT OF THE TRUST..................................23
PURCHASE OF SHARES.......................................27
REDEMPTION OF SHARES.....................................29
INVESTMENT SWITCHES......................................31
NET ASSET VALUE..........................................31
DIVIDENDS, DISTRIBUTIONS AND TAXES.......................32
CUSTODIAN AND TRANSFER AGENT.............................33
DISTRIBUTOR..............................................33
ADDITIONAL MATTERS.......................................33
APPENDIX - FURTHER INFORMATION:
CERTAIN INVESTMENT TECHNIQUES AND STRATEGIES............i
3003 Summer Street
Stamford, Connecticut 06905
(800) 493-3042
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EXPENSE INFORMATION
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Expenses are one of several factors to consider when investing in the Funds. The
following fee table and example are designed to assist investors in
understanding the various costs and expenses that they will bear directly or
indirectly as investors in the Service Class shares of a Fund. Annual Fund
Operating Expenses are paid out of each Fund's assets and include fees for
portfolio management, maintenance of shareholder accounts, accounting and other
services.
SHAREHOLDER TRANSACTION EXPENSES
The Funds have no sales load on purchases or reinvested dividends, deferred
sales load, redemption fee or exchange fee.
FEE TABLE
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<TABLE>
<CAPTION>
PREMIER MID- INTERNA- S&P STRATEGIC
EMERGING GROWTH CAP TIONAL VALUE U.S. 500 INVEST- MONEY
MARKETS EQUITY GROWTH EQUITY EQUITY EQUITY INDEX MENT INCOME MARKET
FUND FUND FUND FUND FUND FUND FUND FUND FUND FUND
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ANNUAL FUND
OPERATING
EXPENSES (AS OF
PERCENTAGE OF
NET ASSETS):
Maximum
Advisory and
Administration 1.05%* .55%* .55%* .75%* .55%* .55%* .15% .45%* .35%* .25%*
Fees.....
Shareholder
Servicing and
Distribution
Fee** ...... 25% .25% .25% .25% .25% .25% .25% .25% .25% .25%
Other
Expenses .. None None None None None None None None None None
Total Operating
Expenses .. 1.30% .80% .80% 1.00% .80% .80% .40% .70% .60% .50%
</TABLE>
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* The advisory and administration fee shown is the maximum payable by the
Fund; this fee declines incrementally as the Fund's assets increase as
described under "Management of the Trust - Fee Structure."
** The .25% shareholder servicing and distribution fee is intended to
compensate GEIM, or enable GEIM to compensate other persons, for
expenditures made on behalf of each Fund, as discussed below under
"Investment Objectives and Management Policies."
The nature of the services provided to, and the advisory and administration fee
paid by, each Fund are described under "Management of the Trust." A Fund's
advisory and administration fee is intended to be a "unitary" fee that includes
any other operating expenses payable by a Fund, except for fees paid to the
Trust's independent Trustees, shareholder servicing and distribution fees,
brokerage fees, and expenses that are not normal operating expenses of the Funds
(such
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as extraordinary expenses, interest and taxes). The amount shown as the advisory
and administration fee for a Fund reflects the highest fee payable, and does not
reflect that the fee decreases incrementally as Fund assets increase. Because
the Funds have only recently commenced operations, "Other Expenses" in the table
above are based on estimated amounts for the current fiscal year. "Other
Expenses" include only Trustees' fees payable to the Trust's independent
Trustees, brokerage fees, and expenses that are not normal operating expenses of
the Funds. This amount is expected to be de minimus (less than .01%); therefore
"Other Expenses" are reflected as "None."
EXAMPLE
The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over a one-year and three-year period
with respect to a hypothetical investment in each Fund. These amounts are based
upon (1) payment by the Fund of operating expenses at the levels set out in the
table above and (2) the specific assumptions stated below.
A SHAREHOLDER WOULD PAY THE FOLLOWING
EXPENSES ON A $1,000 INVESTMENT,
ASSUMING (1) A 5% ANNUAL RETURN, AND
(2) REDEMPTION AT THE END OF EACH TIME PERIOD:
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1 YEAR 3 YEARS
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Emerging Markets Fund $13 $41
Premier Growth Equity Fund $8 $26
Mid-Cap Growth Fund $8 $26
International Equity Fund $10 $32
Value Equity Fund $8 $26
U.S. Equity Fund $8 $26
S&P 500 Index Fund $4 $13
Strategic Investment Fund $7 $22
Income Fund $6 $19
Money Market Fund $5 $16
The above example is intended to assist investors in understanding various costs
and expenses that an investor in the Service Class shares of a Fund will bear
directly or indirectly. Although the table assumes a 5% annual return, a Fund's
actual performance will vary and may result in an actual return that is greater
or less than 5%. THE EXAMPLE SHOULD NOT BE CONSIDERED TO BE A REPRESENTATION OF
PAST OR FUTURE EXPENSES OF A FUND; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN.
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES
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The Trust is a diversified, open-end management investment company that consists
of ten separate investment portfolios, each of which has two classes of shares -
the Service Class and the Investment Class. The Service Class shares differ from
the Investment Class shares in that an additional .25% shareholder servicing and
distribution fee is charged to each Fund with respect to Service Class shares.
This .25% fee is intended to compensate GEIM, or enable GEIM to compensate other
persons, for expenditures made on behalf of each Fund to obtain certain
shareholder services, including third-party record-keeping, transfer agency, and
ongoing services related to the maintenance of
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Service Class shareholder accounts and to compensate GEIM, or enable GEIM to
compensate other persons, including GE Investment Services Inc. (the
"Distributor"), for providing certain services that are primarily intended to
result in the sale of Service Class shares of the Funds pursuant to a
shareholder servicing and distribution plan adopted in accordance with Rule
12b-1 under the Investment Company Act of 1940, as amended (the "1940 Act"). The
shareholder servicing and distribution fee paid by the Service Class shares will
cause such shares to have a higher expense ratio and lower return than the
Investment Class shares.
Investors should be aware that GE Funds, an investment company that is
affiliated with the Trust and also advised by GEIM, offers additional class
options for investors that may not meet the minimum investment requirements of
the Funds and/or require services not provided by the Funds, but that wish to
invest in portfolios (the "GE Funds") advised by GEIM with the same or similar
investment objectives and policies as those of certain of the Funds. Class A
shares of the GE Funds would be suitable for investors that require "full
service." Under the full service option, GEIM, in conjunction with the employee
retirement plan record-keeping capabilities of State Street Bank and Trust
Company ("State Street"), provides record-keeping and other shareholder services
(including shareholder communication services) to investors in the Class A
shares of the GE Funds. Class D shares of the GE Funds would be suitable for
investors that require only advisory and administration services (similar to
investors in the Investment Class shares of the Funds) but that are not able to
meet the minimum investment requirements of the Funds, as well as for
GE-affiliated employee retirement plans that require the full service option.
Because the GE Funds are marketed primarily to retail investors that generally
invest smaller amounts in such funds, the fees charged to investors in the GE
Funds are higher than those charged to investors in the corresponding Funds of
the Trust. INVESTORS SHOULD EVALUATE THE LEVELS AT WHICH THEY INTEND TO INVEST
AND THEIR INDIVIDUAL SHAREHOLDER SERVICES REQUIREMENTS TO DETERMINE THE CLASS OF
SHARES OF THE FUNDS OR THE GE FUNDS THAT BEST SUITS THEIR NEEDS AT THE LOWEST
LEVEL OF FEES.
Set forth below is a description of the investment objective and policies of
each Fund. The investment objective of a Fund may not be changed without the
approval of the holders of a majority of the Fund's outstanding voting
securities as defined in the 1940 Act. Such a majority is defined in the 1940
Act as the lesser of (1) 67% or more of the shares present at a Fund meeting, if
the holders of more than 50% of the outstanding shares of the Fund are present
or represented by proxy or (2) more than 50% of the outstanding shares of the
Fund. No assurance can be given that a Fund will be able to achieve its
investment objective.
EMERGING MARKETS FUND
The investment objective of the Emerging Markets Fund is long-term growth of
capital. The Fund seeks to achieve this objective by investing, under normal
conditions, at least 65% of its total assets in equity securities of issuers
that are located in emerging markets countries. The determination of where an
issuer is located will be made by reference to the country in which the issuer:
(a) is organized; (b) derives at least 50% of its revenues or profits from goods
produced or sold, investments made or services performed; (c) has at least 50%
of its assets situated; or (d) has the principal trading market for its
securities (the "Country Identification Test").
GEIM allocates the Fund's assets among the selected emerging markets of newly
industrializing countries in Asia, Latin America, the Middle East, Southern
Europe, Eastern Europe (including the former republics of the Soviet Union and
the Eastern Bloc) and Africa. An emerging markets country is any country having
an economy and market that are or would be considered by the World Bank to be
emerging or developing, or emerging countries that are listed on the Morgan
Stanley Capital International Emerging Markets Index.
The Fund, from time to time, may invest all of its assets in a single country.
If the Fund invests all or a significant portion of its assets at any time in a
single country, events in that country are more likely to affect the Fund's
investments. GEIM bases its selection on certain relevant factors, including the
investment restrictions and tax barriers of a given country, the outlook for
economic growth, currency exchange rates, commodity prices, interest rates,
political factors and the stage of the local market cycle in the emerging
markets country.
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<PAGE>
Equity securities of emerging markets companies may include common stocks,
preferred stocks, convertible bonds, convertible debentures, convertible notes,
convertible preferred stocks and warrants or rights issued by foreign companies,
equity interests in foreign investment funds or trusts and foreign real estate
investment trust securities. The Fund may invest in American Depositary Receipts
("ADRs") (sometimes referred to as Continental Depositary Receipts, or "CDRs"),
European Depositary Receipts ("EDRs") and Global Depositary Receipts ("GDRs").
The Emerging Markets Fund, under normal market conditions, may invest up to 35%
of its assets in debt securities, including notes, bonds and debentures issued
by corporate or governmental entities when GEIM determines that investing in
those kinds of debt securities is consistent with the Fund's investment
objective of long-term growth of capital. GEIM believes that such a
determination could be made, for example, upon the Emerging Markets Fund's
investing in the debt securities of a company whose securities GEIM anticipates
will increase in value as a result of a development particularly or uniquely
applicable to the company. GEIM also believes such a determination could be made
with respect to an investment by the Emerging Markets Fund in debt instruments
issued by a governmental entity if GEIM concludes that the value of the
instruments will increase as a result of improvements or changes in public
finances, monetary policies, external accounts, financial markets, exchange rate
policies or labor conditions of the country in which the governmental entity is
located.
In addition, the Emerging Markets Fund may sell securities short against the box
and may engage in certain investments discussed below under "Additional
Permitted Investments." (See "Risk Factors and Special Considerations" for a
discussion of risks associated with investing in emerging markets countries.)
PREMIER GROWTH EQUITY FUND
The investment objective of the Premier Growth Equity Fund (the "Premier Growth
Fund") is long-term growth of capital and future income rather than current
income. The Fund seeks to achieve this objective by investing primarily in
growth-oriented equity securities which, under normal market conditions, will
represent at least 65% of the Fund's assets. In pursuing its objective, the
Premier Growth Fund, under normal conditions, may invest in common stocks,
preferred stocks, convertible bonds, convertible debentures, convertible notes,
convertible preferred stocks and warrants or rights issued by U.S. and foreign
companies.
The Premier Growth Fund will seek to identify and invest in companies it
believes will offer potential for long-term growth of capital. These companies
typically would possess one or more of a variety of characteristics, including
high quality products and/or services, strong balance sheets, sustainable
internal growth, superior financial returns, competitive position in the
issuer's economic sector and shareholder-oriented management. While the Premier
Growth Fund may invest in companies of varying sizes as measured by assets,
sales or capitalization, a majority of its assets, under normal market
conditions, will be comprised of companies with relatively large capitalization.
In addition, the Premier Growth Fund normally will be invested in companies that
have above-average growth prospects and which are typically leaders in their
fields. The Fund generally will be diversified over a cross section of
industries.
Up to 25% of the Premier Growth Fund's total assets may be invested in foreign
securities, excluding, for purposes of this limitation, ADRs and securities of a
foreign issuer with a class of securities registered with the SEC and listed on
a U.S. national securities exchange ("U.S. Listed Securities") or traded on the
Nasdaq National Market or the Nasdaq SmallCap Market (collectively, "Nasdaq
Traded Securities"). The equity securities in which the Premier Growth Fund
invests in most cases will be traded on domestic or foreign securities
exchanges, or traded in the domestic or foreign over-the-counter markets. The
Premier Growth Fund may invest up to 35% of its assets in bonds, notes and
debentures. For temporary defensive purposes, the Fund may invest in fixed
income securities without limitation. To the extent that the Fund invests in
fixed income securities, it may not achieve its investment objective. The
Premier Growth Fund also may engage in certain investments discussed below under
"Additional Permitted Investments."
MID-CAP GROWTH FUND
The investment objective of the Mid-Cap Growth Fund (the "Mid-Cap Fund") is
long-term growth of capital. The Mid- Cap Fund seeks to achieve this objective
by investing primarily in the equity securities of companies with medium-sized
market capitalization ("mid-cap") that have the potential for above-average
growth. The Fund, under normal market
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<PAGE>
conditions, will invest at least 65% of its total assets in a portfolio of
equity securities of mid-cap companies traded on U.S. securities exchanges or in
the U.S. over-the-counter market, including common stocks, preferred stocks,
convertible preferred stocks, convertible bonds, convertible debentures,
convertible notes, ADRs and warrants or rights issued by foreign and U.S.
companies. The Fund defines a mid-cap company as one whose securities are within
the market capitalization range of stocks listed on the S&P MidCap 400 Index
(the "S&P 400 Index").
Mid-cap growth companies are often still in the early phase of their life
cycles. Accordingly, investing in mid-cap companies generally entails greater
risk exposure and volatility (meaning upward or downward price swings) than
investing in large, well-established companies. However, GEIM believes that
mid-cap companies may offer the potential for more rapid growth. See "Risk
Factors and Special Considerations - Smaller Companies."
GEIM will rely on its proprietary research to identify mid-cap companies with
potentially attractive growth prospects. These companies typically have one or
more of a variety of characteristics, including attractive products or services,
above average earnings growth potential, superior financial returns, strong
competitive position, shareholder focused management and sound balance sheets.
There is, of course, no guarantee that GEIM will be able to identify such
companies or that the Fund's investment in them will be successful.
The Mid-Cap Fund may invest up to 35% of its assets in: (i) securities of
companies outside the capitalization range of the S&P 400 Index; (ii) foreign
securities, excluding, for purposes of this limitation, ADRs, U.S. Listed
Securities and Nasdaq Traded Securities; and (iii) bonds, notes and debentures.
The Mid-Cap Fund may sell securities short against the box and engage in certain
investments discussed below under "Additional Permitted Investments."
INTERNATIONAL EQUITY FUND
The investment objective of the International Equity Fund (the "International
Fund") is long-term growth of capital. The Fund seeks to achieve this objective
by investing primarily in foreign equity securities. The International Fund may
invest in securities of companies and governments located in developed and
developing countries outside the United States, and also may invest in
securities of foreign issuers in the form of depositary receipts. Investing in
securities issued by foreign companies and governments involves considerations
and potential risks not typically associated with investing in securities issued
by the U.S. Government and U.S. corporations. (See "Risk Factors and Special
Considerations" for a discussion of the risks associated with investing in
foreign equity securities.) The International Fund intends to position itself
broadly among countries and, under normal circumstances, at least 65% of the
Fund's total assets will be invested in securities of issuers collectively in no
fewer than three different countries other than the United States. The
percentage of the International Fund's assets invested in particular countries
or regions of the world will vary depending on political and economic
conditions. The determination of where an issuer is located will be made by
reference to the Country Identification Test, as set forth above in "Investment
Objectives and Management Policies Emerging Markets Fund."
In selecting investments on behalf of the International Fund, GEIM seeks
companies that are expected to grow faster than relevant markets and whose
securities are available at a price that does not fully reflect the potential
growth of those companies. GEIM typically focuses on companies that possess one
or more of a variety of characteristics, including strong earnings growth
relative to price-to-earnings and price-to-cash earnings ratios, low
price-to-book value, strong cash flow, presence in an industry experiencing
strong growth and high quality management.
The International Fund, under normal conditions, invests at least 65% of its
assets in common stocks, preferred stocks, convertible debentures, convertible
notes, convertible preferred stocks and warrants or rights, issued by companies
believed by GEIM to have a potential for superior growth in sales and earnings.
In most cases, these securities are traded on foreign or U.S. exchanges or in
the U.S. or foreign over-the-counter markets. The International Fund will
emphasize established companies, although it may invest in companies of varying
sizes as measured by assets, sales or capitalization.
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The International Fund, under normal market conditions, may invest up to 35% of
its assets in notes, bonds and debentures issued by corporate or governmental
entities when GEIM determines that investing in those kinds of debt securities
is consistent with the Fund's investment objective of long-term growth of
capital. GEIM believes that such a determination could be made, for example,
upon the International Fund's investing in the debt securities of a company
whose securities GEIM anticipates will increase in value as a result of a
development particularly or uniquely applicable to the company, such as a
liquidation, reorganization, recapitalization or merger, material litigation,
technological breakthrough or new management or management policies. In
addition, GEIM believes such a determination could be made with respect to an
investment by the International Fund in debt instruments issued by a
governmental entity upon GEIM's concluding that the value of the instruments
will increase as a result of improvements or changes in public finances,
monetary policies, external accounts, financial markets, exchange rate policies
or labor conditions of the country in which the governmental entity is located.
When GEIM believes there are unstable market, economic, political or currency
conditions abroad, the Fund may assume a temporary defensive posture and
restrict its investments to certain securities markets and/or invest all or a
significant portion of its assets in securities of the types described above
issued by companies incorporated in and/or having their principal activities in
the United States. In addition, the International Fund may sell securities short
against the box and may engage in certain investments discussed below under
"Additional Permitted Investments."
VALUE EQUITY FUND
The investment objective of the Value Equity Fund (the "Value Fund") is
long-term growth of capital and future income rather than current income. The
Fund seeks to achieve this objective by investing primarily in equity securities
of companies with large-sized market capitalization that the Fund's management
considers to be undervalued by the market. Undervalued securities are those
selling for low prices given the fundamental characteristics of their issuers.
During normal market conditions, the Fund will invest at least 65% of its assets
in common stocks, preferred stocks, convertible bonds, convertible debentures,
convertible notes, convertible preferred stocks, and warrants or rights issued
by foreign and U.S. companies.
The Value Fund's investment philosophy is that the market tends to overreact to
both good and bad news about issuers. Companies experiencing faster than
expected growth tend to be overvalued as the market extrapolates current good
news well beyond a sustainable time-frame and correspondingly over-forecasts the
period and magnitude of decline of companies experiencing near term
difficulties. These difficulties can be driven by factors both internal and
external to the company. Internal factors may include operational mismanagement
or strategic mistakes. External factors may include a change in the economic
environment or a shift in the competitive dynamics of an industry. The Fund
attempts to identify firms that are out of favor for a variety of reasons and
select those which Fund management believes to be undervalued relative to their
true business prospects.
In accordance with this premise, GEIM will identify and select securities that
it believes are undervalued, using factors it considers indicative of
fundamental investment value including: (i) a low price/earnings ratio relative
to a normalized growth rate and/or Standard & Poor's 500 Composite Stock Price
Index (the "S&P 500 Index"); (ii) the potential for free cash flow generation
and prospects for dividend growth; (iii) a strong balance sheet with low
financial leverage; (iv) sustainable competitive advantages such as a franchise
brand name or dominant market position; (v) an experienced and capable
management team; (vi) improving returns on invested capital; and (vii) net asset
values in a restructuring/breakup analysis framework.
GEIM believes that such investments will position the Fund to benefit from a
positive change in business prospects from an issuing company that adopts a
turnaround strategy to increase/restore the earning power of the company.
The Value Fund, under normal market conditions, may invest (i) up to 35% of its
assets in bonds, notes and debentures, and (ii) up to 25% of its assets in
foreign securities, excluding, for purposes of this limitation, ADRs, U.S.
Listed Securities and Nasdaq Traded Securities. The Fund may sell securities
short against the box and engage in certain investments discussed below under
"Additional Permitted Investments."
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<PAGE>
U.S. EQUITY FUND
The investment objective of the U.S. Equity Fund is long-term growth of capital.
The Fund seeks to achieve this objective by investing primarily in equity
securities of U.S. companies and, under normal conditions, it will invest at
least 65% of its assets in common stocks, preferred stocks, securities
convertible into common stocks, including convertible bonds, convertible
debentures, convertible notes, convertible preferred stocks, and warrants or
rights issued by U.S. companies. The U.S. Equity Fund typically will invest in
equity securities that are issued by U.S. companies and traded on U.S.
securities exchanges or in the U.S. over-the-counter market. Up to 15% of the
U.S. Equity Fund's assets may be invested in foreign securities. ADRs, U.S.
Listed Securities and Nasdaq Traded Securities will be included for purposes of
the Fund's 65% minimum described above, and excluded for purposes of the Fund's
15% maximum investments in foreign securities.
In managing the assets of the U.S. Equity Fund, GEIM uses a combination of
"value-oriented" and "growth-oriented" investing. Value-oriented investing
involves seeking securities that may have low price-to-earnings ratios, or high
yields, or that sell for less than intrinsic value as determined by GEIM, or
that appear attractive on a dividend discount model. The U.S. Equity Fund would
sell these securities when their prices approach targeted levels.
Growth-oriented investing generally involves buying securities with above
average earnings growth rates at reasonable prices. The U.S. Equity Fund holds
these securities until GEIM determines that their growth prospects diminish or
that they have become overvalued when compared with alternative investments.
In investing on behalf of the U.S. Equity Fund, GEIM seeks to produce a
portfolio that GEIM believes will have characteristics similar to the S&P 500
Index, by virtue of blending investments in both "value" and "growth"
securities. Since the U.S. Equity Fund's strategy seeks to combine these basic
elements, but is designed to select investments deemed to be the most attractive
within each category, GEIM believes that the strategy should be capable of
outperforming the U.S. equity market as reflected by the S&P 500 Index on a
total return basis.
The U.S. Equity Fund, under normal market conditions, may invest up to 35% of
its assets in notes, bonds and debentures issued by corporate or governmental
entities when GEIM determines that investing in these kinds of debt securities
is consistent with the Fund's investment objective of long-term growth of
capital. GEIM believes that such a determination could be made, for example,
upon the U.S. Equity Fund's investing in the debt securities of a company whose
securities GEIM anticipates will increase in value as a result of a development
particularly or uniquely applicable to the company, such as a liquidation,
reorganization, recapitalization or merger, material litigation, technological
breakthrough or new management or management policies. The U.S. Equity Fund also
may engage in certain investments discussed below under "Additional Permitted
Investments."
S&P 500 INDEX FUND
The investment objective of the S&P 500 Index Fund is to provide growth of
capital and accumulation of income that corresponds to the investment return of
the S&P 500 Index. The Fund seeks to achieve this objective by investing in
common stocks comprising that Index. Standard & Poor's (also referred to herein
as "S&P") 1 chooses the 500 common stocks comprising the S&P 500 Index on the
basis of market values, industry diversification and other factors. Most of the
common stocks in the S&P 500 Index are issued by 500 of the largest companies,
in terms of the aggregate market value of their outstanding stock, and such
companies generally are listed on the New York Stock Exchange. Additional common
stocks that are not among the 500 largest market value stocks are included in
the S&P 500 Index for
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1 S&P,(R) and S&P 500 (R) are trademarks of The McGraw-Hill Companies, Inc.
and have been licensed for use. The S&P 500 Index Fund is not sponsored,
endorsed, sold or promoted by S&P, and S&P makes no representation or
warranty, express or implied, to the investors of the Fund or any member of
the public regarding the advisability of investing in securities generally
or in this Fund particularly or the ability of the S&P 500 Index to track
general stock market performance.
-7-
<PAGE>
diversification purposes. S&P may, from time to time, delete common stocks from,
and add common stocks to, the S&P 500 Index.
The S&P 500 Index Fund will attempt to achieve its objective by replicating the
total return of the S&P 500 Index. To the extent that it can do so consistent
with the pursuit of its investment objective, it will attempt to keep
transaction costs low and minimize portfolio turnover. To achieve its investment
objective, the S&P 500 Index Fund will purchase equity securities that reflect,
as a group, the total investment return of the S&P 500 Index. Like the S&P 500
Index, the S&P 500 Index Fund will hold both dividend paying and non-dividend
paying common stocks comprising the S&P 500 Index.
Active portfolio management strategies are not used in making investment
decisions for the S&P 500 Index Fund. Rather, State Street Global Advisors
("SSGA"), the sub-adviser to the S&P 500 Index Fund, utilizes a passive
investment management approach. From time to time SSGA also may supplement this
passive approach by using statistical selection techniques to determine which
securities to purchase or sell for the Fund in order to replicate the investment
return of the S&P 500 Index over a period of time.
The S&P 500 Index Fund may choose not to invest in all the securities that
comprise the S&P 500 Index, and its holdings may differ by industry segment from
the S&P 500 Index. The Fund may compensate for the omission from its portfolio
of stocks that are included in the S&P 500 Index, or for purchasing securities
included in the Index in proportions that are different from their weightings in
the Index, by purchasing securities that may or may not be included in the S&P
500 Index but which have characteristics similar to the omitted securities (such
as stocks from the same or similar industry groups having a similar market
capitalization and other investment characteristics). In addition, from time to
time adjustments may be made in the S&P 500 Index Fund's holdings due to changes
in the composition or weighting of issues comprising the S&P 500 Index.
The S&P 500 Index Fund will attempt to achieve a correlation between its total
return and that of the S&P 500 Index of at least 0.95, without taking expenses
into account. A correlation of 1.00 would indicate perfect correlation, which
would be achieved when the S&P 500 Index Fund's net asset value, including the
value of its dividends and capital gain distributions, increases or decreases in
exact proportion to changes in the S&P 500 Index. SSGA will monitor the S&P 500
Index Fund's correlation to the S&P 500 Index and attempt to minimize any
"tracking error" (i.e., the statistical measure of the difference between the
investment results of the S&P 500 Index Fund and that of the S&P 500 Index).
However, brokerage and other transaction costs, as well as other Fund expenses,
in addition to potential tracking error, will tend to cause the S&P 500 Index
Fund's return to be lower than the return of the S&P 500 Index. There can be no
assurance as to how closely the S&P 500 Index Fund's performance will correspond
to the performance of the S&P 500 Index.
The S&P 500 Index Fund will not invest more than 35% of its total assets in (i)
stocks and other securities not included in the S&P 500 Index and (ii) foreign
securities, excluding, for purposes of this limitation, ADRs, U.S. Listed
Securities and Nasdaq Traded Securities. In this regard, the S&P 500 Index Fund
may temporarily invest cash balances, pending withdrawals or investments, in
high quality money market instruments. Nevertheless, the S&P 500 Index Fund will
not adopt a temporary defensive investment posture in times of generally
declining stock prices, and, therefore, investors will bear the risk of such
general stock market declines. The Fund also may engage in certain investments
discussed below under "Additional Permitted Investments."
STRATEGIC INVESTMENT FUND
The investment objective of the Strategic Investment Fund (the "Strategic Fund")
is to maximize total return, consisting of capital appreciation and current
income. The Fund seeks to achieve this objective by following an asset
allocation strategy that provides diversification across a range of asset
classes and contemplates shifts among them from time to time. This strategy may
result in the Strategic Fund's experiencing a high portfolio turnover rate. See
"Risk Factors and Special Considerations - Portfolio Transactions and Turnover"
below.
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<PAGE>
The Strategic Fund invests in the following classes of investments: common
stocks, preferred stocks, convertible securities and warrants or rights issued
by U.S. and foreign companies; bonds, debentures and notes issued by U.S. and
foreign companies; securities issued or guaranteed by the U.S. Government or one
of its agencies or instrumentalities ("U.S. Government Obligations"); debt
obligations issued by, or on behalf of, states, territories and possessions of
the United States and the District of Columbia and their political subdivisions,
agencies and instrumentalities or multi-state agencies or authorities, the
interest on which is, in the opinion of issuers' counsel, excluded from gross
income for Federal income tax purposes ("Municipal Obligations"); obligations of
foreign governments or their agencies or instrumentalities; mortgage related
securities, adjustable rate mortgage related securities ("ARMs"), collateralized
mortgage related securities ("CMOs") and government stripped mortgage related
securities; asset-backed and receivable-backed securities; and domestic and
foreign money market instruments. The U.S. equity and debt instruments in which
the Strategic Fund invests are traded on U.S. securities exchanges or in the
U.S. over-the-counter market, except that the Fund may invest up to 10% of its
assets in non-publicly traded securities. In addition, up to 30% of the
Strategic Fund's total assets may be invested in foreign securities, excluding,
for purposes of this limitation, ADRs, U.S. Listed Securities and Nasdaq Traded
Securities. The Strategic Fund also may invest in structured and indexed
securities, the value of which is linked to currencies, interest rates,
commodities, indexes or other financial indicators. Mortgage related securities,
ARMs, CMOs, government stripped mortgage related securities and asset- backed
and receivable-backed securities are subject to several risks, including the
prepayment of principal.
The Strategic Fund generally seeks to invest in equity and debt securities that
GEIM has determined offer above average potential for total return. In making
this determination, GEIM will take into account factors including earnings
growth, industry attractiveness, company management, price-to-earnings ratios,
yield, price-to-book ratios and valuation of assets.
GEIM has broad latitude in selecting the classes of investments to which the
Strategic Fund's assets are committed. Although the Strategic Fund has the
authority to invest solely in equity securities, solely in debt securities,
solely in money market instruments or in any combination of these classes of
investments, GEIM anticipates that at most times the Fund will be invested in a
combination of equity and debt instruments.
The Strategic Fund's investments are designed to achieve favorable performance
with lower volatility than a fund that invests solely in equity or debt
securities. GEIM will determine the weightings of equity and debt holdings for
the Strategic Fund at any given time in light of its assessment of the
attractiveness of each market. Although GEIM cannot predict the mix of the
Strategic Fund's investments at any one time, GEIM can delineate certain
situations that can lead to a shift in the mix of the Strategic Fund's
investments. If, for example, the prices of U.S. equity securities decline due
to falling economic activity and profits, and GEIM determines that the condition
is transitory, GEIM could allocate a major portion of the Strategic Fund's
assets to the equity market. If, on the other hand, the prices of debt
instruments are depressed by rising economic activity combined with restrictive
monetary or fiscal policies, and GEIM concludes that this condition is
temporary, GEIM could allocate a major portion of the Strategic Fund's assets to
debt securities.
The Strategic Fund typically purchases a debt security if GEIM believes that the
yield and potential for capital appreciation of the security are sufficiently
attractive in light of the risks of ownership of the security. In determining
whether the Strategic Fund should invest in particular debt instruments, GEIM
considers factors such as: the price, coupon and yield to maturity; GEIM's
assessment of the credit quality of the issuer; the issuer's available cash flow
and the related coverage ratios; the property, if any, securing the obligation;
and the terms of the debt securities, including the subordination, default,
sinking fund and early redemption provisions.
GEIM's decision that the Strategic Fund invest in foreign securities would be
predicated on the outlook for the foreign securities markets of selected
countries, the underlying economies of those countries and the availability of
attractively priced individual securities.
In addition to investing as described above, the Fund may invest in municipal
leases, floating and variable rate instruments, participation interests in
certain Municipal Obligations, Municipal Obligation components, custody receipts
and zero coupon obligations and may enter into mortgage dollar rolls. The Fund
also may engage in certain investments discussed below under "Additional
Permitted Investments."
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<PAGE>
INCOME FUND
The investment objective of the Income Fund is to seek maximum income consistent
with prudent investment management and the preservation of capital. Capital
appreciation with respect to the Income Fund's portfolio securities may occur
but is not an objective of the Fund. In seeking to achieve its investment
objective, the Income Fund invests in the following types of fixed income
instruments: U.S. Government Obligations; obligations of foreign governments or
their agencies or instrumentalities; bonds, debentures, notes and
non-convertible preferred stocks issued by U.S. and foreign companies; mortgage
related securities, ARMs, CMOs and government stripped mortgage related
securities; asset-backed and receivable-backed securities; zero coupon
obligations; floating and variable rate instruments and money market
instruments. The Income Fund also may invest in depository receipts and
structured and indexed securities, the value of which is linked to currencies,
interest rates, commodities, indexes or other financial indicators. Mortgage
related securities, ARMs, CMOs, government stripped mortgage related securities
and asset-backed and receivable-backed securities are subject to several risks,
including the prepayment of principal.
The Income Fund is subject to no limitation with respect to the maturities of
the instruments in which it may invest; the weighted average maturity of the
Fund's portfolio securities is anticipated to be approximately five to 10 years.
Up to 35% of the Income Fund's total assets may be invested in foreign
securities, excluding, for purposes of this limitation, ADRs, U.S. Listed
Securities and Nasdaq Traded Securities. The Income Fund also may enter into
mortgage dollar rolls, and may engage in certain investments discussed below
under "Additional Permitted Investments." The Income Fund typically invests not
more than 35% of its assets in money market instruments if GEIM deems such
investments to be consistent with the Fund's investment objective. See "Cash
Management Policies - Non-Money Market Funds," below.
MONEY MARKET FUND
The investment objective of the Money Market Fund is to seek a high level of
current income consistent with the preservation of capital and the maintenance
of liquidity. The Money Market Fund seeks to achieve this objective by investing
in the following U.S. dollar denominated, short-term money market instruments:
(1) U.S. Government Obligations; (2) debt obligations of banks, savings and loan
institutions, insurance companies and mortgage bankers; (3) commercial paper and
notes, including those with floating or variable rates of interest; (4) debt
obligations of foreign branches of U.S. banks, U.S. branches of foreign banks
and foreign branches of foreign banks; (5) debt obligations issued or guaranteed
by one or more foreign governments or any of their political subdivisions,
agencies or instrumentalities, including obligations of supra-national entities;
(6) debt securities issued by foreign issuers; and (7) repurchase agreements.
The Money Market Fund limits its portfolio investments to securities that the
Trust's Board of Trustees determines present minimal credit risk and that are
"Eligible Securities" at the time of acquisition by the Fund. "Eligible
Securities" as used in this Prospectus means securities rated by the requisite
nationally recognized statistical rating organizations ("NRSROs") in one of the
two highest short-term rating categories, consisting of issuers that have
received these ratings with respect to other short-term debt securities and
comparable unrated securities. "Requisite NRSROs" means (1) any two NRSROs that
have issued ratings with respect to a security or class of debt obligations of
an issuer or (2) one NRSRO, if only one NRSRO has issued such a rating at the
time that the Money Market Fund acquires the security. Currently, six
organizations are NRSROs: S&P, Moody's Investors Service, Inc. ("Moody's"),
Fitch Investors Service, Inc., Duff and Phelps, Inc., IBCA Limited and its
affiliate, IBCA, Inc., and Thomson BankWatch Inc. A discussion of the ratings
categories is contained in the appendix to the Statement of Additional
Information. By limiting its investments to Eligible Securities, the Money
Market Fund may not achieve as high a level of current income as a fund
investing in lower-rated securities.
The Money Market Fund may not invest more than 5% of its total assets in the
securities of any one issuer, except for U.S. Government Obligations and except
to the extent permitted under rules adopted by the SEC under the 1940 Act. In
addition, the Money Market Fund may not invest more than 5% of its total assets
in Eligible Securities that have not
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<PAGE>
received the highest rating from the Requisite NRSROs and comparable unrated
securities (collectively, "Second Tier Securities"), and may not invest more
than the greater of $1,000,000 or 1% of its total assets in the Second Tier
Securities of any one issuer. The Money Market Fund may invest more than 5% (but
not more than 25%) of the then-current value of the Fund's total assets in the
securities of a single issuer for a period of up to three business days, so long
as (1) the securities either are rated by the Requisite NRSROs in the highest
short-term rating category or are securities of issuers that have received such
ratings with respect to other short-term debt securities or are comparable
unrated securities and (2) the Fund does not make more than one such investment
at any one time. Determinations of comparable quality for purchases of unrated
securities are made by GEIM in accordance with procedures established by the
Board of Trustees. The Money Market Fund invests only in instruments that have
(or, pursuant to regulations adopted by the SEC, are deemed to have) remaining
maturities of 13 months or less at the date of purchase (except securities
subject to repurchase agreements), determined in accordance with a rule
promulgated by the SEC. Up to 25% of the Money Market Fund's total assets may be
invested in foreign securities, excluding, for purposes of this limitation,
ADRs, U.S. Listed Securities and Nasdaq Traded Securities. The Money Market Fund
will maintain a dollar-weighted average portfolio maturity of 90 days or less.
The assets of the Money Market Fund are valued on the basis of amortized cost,
as described below under "Net Asset Value." The Money Market Fund also may hold
liquid Rule 144A Securities (see "Additional Permitted Investments - Illiquid
Investments and Restricted Securities") and engage in certain other investments
discussed below under "Additional Permitted Investments."
INVESTMENTS IN DEBT SECURITIES
- ------------------------------
Each of the Premier Growth Fund, International Fund, Value Fund, U.S. Equity
Fund, and S&P 500 Index Fund limits investment in debt securities to those that
are rated investment grade, except that each such Fund may invest up to 5% of
that Fund's assets in securities rated lower than investment grade. A security
is considered investment grade if it is rated at the time of purchase within the
four highest rating categories assigned by S&P or Moody's or has received an
equivalent rating from another NRSRO or, if unrated, is deemed by GEIM to be of
comparable quality.
Each of the Emerging Markets Fund, Mid-Cap Fund, Strategic Fund and Income Fund
limits its purchases of debt instruments to those that are rated within the six
highest rating categories by S&P, Moody's or another NRSRO, or if unrated, are
deemed by GEIM to be of comparable quality. Each of these Funds will not
purchase a debt security if, as a result of the purchase, more than 25% of the
Fund's total assets would be invested in securities rated BBB by S&P or Baa by
Moody's, or that have received an equivalent rating from another NRSRO or, if
unrated, deemed by GEIM to be of comparable quality. In addition, each such Fund
will not purchase any obligation rated BB or B by S&P or Ba or B by Moody's or
that have received an equivalent rating from another NRSRO if, as a result of
the purchase, more than 10% of the Fund's total assets would be invested in
obligations rated in those categories or, if unrated, in obligations that are
deemed by GEIM to be of comparable quality. A description of S&P's and Moody's
ratings relevant to a Fund's investments is included as an appendix to the
Statement of Additional Information.
CASH MANAGEMENT POLICIES - NON-MONEY MARKET FUNDS
- -------------------------------------------------
The Money Market Fund's policies with respect to holding cash and investing in
money market instruments are described above under "Investment Objectives and
Management Policies - Money Market Fund." This section describes the cash
management policies of the other Funds (each, a "non-money market Fund").
A non-money market Fund, under normal circumstances, may hold cash and/or invest
in money market instruments in order to manage its cash, pending investment in
accordance with its investment objective and policies, and to meet operating
expenses. The Income Fund typically invests not more than 35% of its assets in
money market instruments if GEIM deems such investments to be consistent with
that Fund's investment objective.
When GEIM believes that economic or other conditions warrant, a non-money market
Fund, other than the S&P 500 Index Fund, may assume a temporary defensive
posture and hold cash and/or invest in money market instruments without
limitation. To the extent that a non-money market Fund holds cash or invests in
money market instruments, it may not achieve its investment objective.
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<PAGE>
TYPES OF PERMITTED MONEY MARKET INVESTMENTS. Each non-money market Fund may
invest directly, or indirectly through its investment in the GEI Short-Term
Investment Fund (the "Investment Fund"), in the following types of money market
securities during normal market conditions and/or for temporary defensive
purposes:
(i) U.S. Government Obligations (described below);
(ii) debt obligations of banks, savings and loan institutions, insurance
companies and mortgage bankers;
(iii) commercial paper and notes, including those with variable and
floating rates of interest;
(iv) debt obligations of foreign branches of U.S. banks, U.S. branches of
foreign banks and foreign branches of foreign banks;
(v) debt obligations issued or guaranteed by one or more foreign
governments or any of their political subdivisions, agencies or
instrumentalities, including obligations of supra-national entities;
(vi) debt securities issued by foreign issuers; and
(vii) repurchase agreements and reverse repurchase agreements (see "Risk
Factors and Special Considerations - Repurchase and Reverse Repurchase
Agreements" below for a further description).
Each non-money market Fund may invest up to 25% of its assets in the Investment
Fund. The Investment Fund invests exclusively in the money market instruments
described in (i) through (vii) above, and serves as the investment vehicle that
facilitates the collective investment of the cash accounts of the non-money
market Funds and other entities advised by GEIM or General Electric Investment
Corporation ("GEIC," and together with GEIM collectively referred to as "GE
Investments"), a sister company of GEIM that is wholly-owned by General Electric
Company ("GE"). GEIM is the investment adviser to the Investment Fund, and
charges no advisory fee to the Investment Fund for these services. A non-money
market Fund would incur no sales charge and no distribution or service fees in
connection with its holdings in the Investment Fund.
A non-money market Fund may hold money market instruments that are rated no
lower than A-2 by S&P or Prime-2 by Moody's, or that have received an equivalent
rating from another NRSRO, or if unrated, are issued by an entity having an
outstanding unsecured debt issue rated within an NRSRO's three highest rating
categories. A description of the rating systems of Moody's and S&P is contained
in an appendix to the Statement of Additional Information. At no time will a
non-money market Fund's investments in bank obligations, including time
deposits, exceed 25% of the value of the Fund's assets.
ADDITIONAL PERMITTED INVESTMENTS
- --------------------------------
In addition to the investments discussed above, some or all of the Funds may
invest in the types of securities or may engage in investment techniques and
strategies discussed below.
ILLIQUID INVESTMENTS AND RESTRICTED SECURITIES. Each non-money market Fund may
invest up to 15% of its net assets in illiquid securities. Illiquid securities
are securities that a Fund cannot dispose of within seven days in the ordinary
course of business at approximately the amount at which the Fund has valued the
securities. Illiquid securities include options traded over-the-counter,
repurchase agreements maturing in more than seven days, certain mortgage related
securities, and restricted securities that GEIM has determined are not liquid
under guidelines established by the Trust's Board of Trustees.
-12-
<PAGE>
In addition, each non-money market Fund may invest up to 10% of its assets in
restricted securities. A restricted security is one that is subject to a
contractual or legal restriction on transfer, excluding for purposes of this
limitation securities sold to "qualified institutional buyers" in accordance
with Rule 144A under the 1933 Act ("Rule 144A Securities") determined to be
liquid by the Trust's Board of Trustees based upon the trading markets for the
securities. A Fund's purchase of Rule 144A Securities could have the effect of
increasing the level of illiquidity in the Fund to the extent that qualified
institutional buyers become uninterested for a time in purchasing Rule 144A
Securities held by the Fund.
U.S. GOVERNMENT OBLIGATIONS. Each Fund may invest in obligations issued by the
U.S. Government or by its agencies and instrumentalities (as defined above,
"U.S. Government Obligations"). Different types of U.S. Government Obligations
have different payment guarantees, if any. Some U.S. Government Obligations,
such as U.S. Treasury securities, are supported by the full faith and credit of
the U.S. government or U.S. Treasury guarantees. U.S. Treasury securities differ
in their interest rates, maturities and dates of issuance. Other U.S. Government
Obligations are backed by the right of the issuer or guarantor to borrow from
the U.S. Treasury; others, by the discretionary authority of the U.S. Government
to purchase obligations of the agency or instrumentality issuing the security;
and still others, only by the credit of the agency or instrumentality issuing
the obligation.
Where U.S. Government Obligations are not backed by the full faith and credit of
the United States, the investor must look principally to the agency or
instrumentality (which may be privately owned) issuing the obligations for
repayment. There is no guarantee that the U.S. Government would provide
financial support to its agencies or instrumentalities if it is not required to
do so. A Fund will invest in U.S. Government Obligations that are not backed by
full faith and credit of the U.S. Government only if GEIM determines that the
issuing agency's or instrumentality's credit risk make the obligations suitable
for Fund investment.
The types of U.S. Government Obligations in which the Funds may invest are
listed in the Statement of Additional Information.
REPURCHASE AND REVERSE REPURCHASE AGREEMENTS. Each Fund may enter into
repurchase agreements involving securities that are permitted investments for
that Fund. A repurchase agreement is a transaction in which a Fund purchases a
security at one price and the seller simultaneously agrees to repurchase that
security at a specified price on a date that occurs within a relatively short
time period (usually one to seven days). Repurchase agreements allow a Fund to
earn a fixed rate of return that is not subject to market fluctuations during
the Fund's holding period, and are treated as loans by the Funds for purposes of
the 1940 Act.
The Funds may engage in repurchase agreement transactions with certain Federal
Reserve System member banks and with certain dealers listed on the Federal
Reserve Bank of New York's list of reporting dealers. If a Fund enters into a
repurchase agreement, GEIM will monitor the value of the securities underlying
the agreement on an ongoing basis to ensure that the value remains equal to the
total amount of the repurchase price (including interest). GEIM also monitors
the creditworthiness of the banks and dealers that enter into repurchase
agreements with the Funds in order to identify potential risks.
Each Fund may engage in reverse repurchase agreements, subject to its investment
restrictions. A reverse repurchase agreement involves the Fund selling
securities that it holds and concurrently agreeing to repurchase the same
securities at an agreed upon price and date. Reverse repurchase agreements are
considered to be borrowings by a Fund for purposes of the 1940 Act. A Fund will
enter into reverse repurchase agreements to provide liquidity to meet redemption
requests or to pay dividends and distributions when the sale of the Fund's
portfolio securities is considered to be disadvantageous. Cash, U.S. Government
Obligations or other liquid assets equal in value to the Fund's obligations
under outstanding reverse repurchase agreements would be segregated and
maintained with State Street, the Trust's custodian and transfer agent, or a
designated sub-custodian.
STRUCTURED AND INDEXED SECURITIES. The Strategic Fund and the Income Fund may
invest in structured and indexed securities. The value of the principal of
and/or interest on such securities is determined by reference to changes in the
value of specific currencies, interest rates, commodities, indexes or other
financial indicators (the "Reference") or a change in two or more References.
The interest rate or the principal amount payable upon maturity or redemption
may
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be increased or decreased depending upon changes in the applicable Reference.
The terms of structured and indexed securities may provide that in certain
circumstances no principal is due at maturity and, therefore, may result in a
loss of the Fund's investment. Structured and indexed securities may be
positively or negatively indexed, so that appreciation of the Reference may
produce an increase or a decrease in the interest rate or value of the security
at maturity. In addition, changes in interest rates or value of the security at
maturity may be some multiple of the change in value of the Reference.
Consequently, structured and indexed securities may entail a greater degree of
market risk than other types of debt securities because a Fund bears the risk of
the Reference. Structured and indexed securities may also be more volatile, less
liquid and more difficult to accurately price than less complex securities.
Certain of the other Funds may invest in other investment companies that issue
securities with values that are based on an underlying index. See "Appendix -
Further Information: Certain Investment Techniques and Strategies" for a
discussion of such investments, which include WEBs, CountryBaskets and SPDRs.
PURCHASING PUT AND CALL OPTIONS ON SECURITIES. A non-money market Fund may
utilize up to 10% of its assets to purchase put options on portfolio securities
and an additional 10% of its assets to purchase call options on portfolio
securities. The aggregate value of the securities underlying the calls or
obligations underlying the puts, determined as of the date the options are sold,
shall not exceed 25% of the net assets of the Fund. In addition, the premiums
paid by a Fund in purchasing options on securities, options on securities
indexes, options on foreign currencies and options on futures contracts shall
not exceed 20% of the Fund's net assets.
An option holder has the right, but not the obligation, to buy or sell a
specified amount of securities or other assets on or before a fixed date at a
predetermined price. Each non-money market Fund may purchase put and call
options that are traded on a U.S. or foreign exchange or in the over-the-counter
market.
A put option is an option to sell. If GEIM believes that the market value of a
security a Fund owns will decline, the Fund may purchase a put option on that
security. The put option would allow the Fund to sell the security at a given
price during the option period and thereby limit its losses on the security. If
the underlying security appreciates, rather than depreciates, the Fund would
choose not to exercise the option, but any appreciation in the value of the
underlying security would be offset by the premium the Fund paid for the
relevant put option, plus any related transaction costs.
A call option is an option to buy. A Fund may purchase a call option on a
security when GEIM believes the market price of that security will increase. A
call option would allow the Fund to purchase the security at a set price during
the option period, and thereby limit its losses from rising prices. A Fund also
may purchase call options to increase its return at a time when the call is
expected to increase in value because the market anticipates the value of the
underlying security will increase.
Prior to the expiration of a put or a call option, the Fund may enter into a
closing sale transaction. In a closing sale the Fund sells an option having the
same features (i.e., is of the same series) as an option previously purchased.
Profit or loss from a closing transaction would depend on whether the amount
received is more or less than the premium paid for the option plus the related
transaction costs.
COVERED OPTION WRITING. Each non-money market Fund may write only covered put
and call options on securities. Covered puts involve a Fund selling to another
party the right to compel the Fund to purchase an underlying security from the
option holder at a specified price at any time during the option period. A
covered put generally means that the Fund segregates with its custodian cash or
liquid securities with a value at least equal to the exercise price of the
option. Covered calls involve a Fund selling the right to another party to
purchase securities that the Fund owns at a specified price at any time during
the option period. A covered call generally means that the Fund owns the
underlying securities. A Fund will realize fees (referred to as "premiums") for
granting the rights evidenced by these options.
A put or call option written by a Fund will be deemed covered in any manner
permitted under the 1940 Act or determined by the SEC to be permissible. See
"Strategies Available to Some But Not All Funds - Covered Option Writing" in the
Statement of Additional Information for specific situations where put and call
options will be deemed to be covered by a Fund.
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A Fund may engage in a closing purchase transaction to realize a profit, to
prevent an underlying security from being called or put or, in the case of a
call option, to unfreeze an underlying security (thereby allowing the Fund to
sell the security or write a new option prior to the outstanding option's
expiration). A Fund effects a closing purchase transaction by purchasing, prior
to the holder's exercise of an option written by the Fund, an option of the same
series as that on which the Fund desires to terminate its obligation. The
obligation of a Fund under an option that it has written would be terminated by
a closing purchase transaction, but the Fund would not be deemed to own an
option as the result of the transaction. To facilitate closing purchase
transactions, the Funds with option-writing authority will ordinarily write
options only if a secondary market for the options exists on a U.S. or foreign
securities exchange or in the over-the-counter market.
Option writing for a Fund may be limited by position and exercise limits
established by U.S. securities exchanges and the National Association of
Securities Dealers, Inc. and by requirements of the Internal Revenue Code of
1986, as amended (the "Code") for qualification as a regulated investment
company. A Fund would enter into options transactions as hedges to reduce
investment risk, and a properly correlated hedge will result in a loss on the
portfolio position's being offset by a gain on the hedge position.
SECURITIES INDEX OPTIONS. In attempting to hedge all or a portion of its
investments, a non-money market Fund may purchase and write put or call options
on securities indexes listed on U.S. or foreign securities exchanges or traded
in the over-the-counter market. A Fund would purchase or write index options
only with respect to those indexes that include securities of the type that the
Fund would invest in. As discussed above, a Fund with option writing authority
may write only covered options. In addition to investing in securities index
options for hedging purposes, the non-money market Funds may use such options as
a means of participating in a securities market without making direct purchases
of securities.
A securities index measures the movement of a certain group of securities by
assigning relative values to the securities included in the index. Investments
in options on securities indexes generally have return characteristics similar
to direct investments in the underlying instruments.
Unlike options on securities, options on securities indexes do not involve the
delivery of an underlying security. An option on a securities index represents
the holder's right to obtain from the writer, in cash, a fixed multiple of the
amount by which the exercise price exceeds (in the case of a call) or is less
than (in the case of a put) the closing value of the underlying securities index
on the exercise date.
If a Fund writes a securities index option, that option may be deemed covered in
any manner permitted under the 1940 Act or any other method the SEC determines
to be permissible. See "Strategies Available to Some But Not All Funds Covered
Option Writing" in the Statement of Additional Information for specific
situations where securities index options will be deemed to be covered by a
Fund. If a Fund has written a securities index option, it may terminate its
obligation by effecting a closing purchase transaction, which is accomplished by
purchasing an option of the same series as the option previously written.
FUTURES AND OPTIONS ON FUTURES. Each non-money market Fund may enter into
interest rate, financial and stock or bond index futures contracts or related
options that are traded on a U.S. or foreign exchanges or traded on a board of
trade approved by the CFTC or in the over-the-counter market. The Funds would
engage in these transactions to hedge against the effects of changes in the
value of portfolio securities due to anticipated changes in interest rates
and/or market conditions, to gain market exposure for accumulating and residual
cash positions, for duration management, or when the transactions are
economically appropriate to the reduction of risks inherent in the management of
the Fund involved. No Fund will enter into a transaction involving futures and
options on futures for speculative purposes.
A Fund may not enter into futures and options contracts for which aggregate
initial margin deposits and premiums paid for unexpired options exceed 5% of the
fair market value of the Fund's total assets, after taking into account
unrealized losses or profits on futures contracts or options on futures
contracts into which it has entered. The current view of the SEC staff is that
an investment fund's long and short positions in futures contracts, as well as
put and call options on futures written by that fund, must be collateralized
with cash or other liquid assets and segregated with the fund's
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custodian or a designated sub-custodian or covered in a manner similar to that
for covered options on securities (see "Strategies Available to Some But Not All
Funds - Covered Option Writing" in the Statement of Additional Information) and
designed to eliminate any potential leveraging.
An interest rate futures contract obligates the buyer to receive and the seller
to deliver a specified amount of a particular financial instrument (debt
security) at a specified price, date, time and place. Financial futures
contracts obligate the holder to deliver (in the case of a futures contract that
is sold) or receive (in the case of a futures contract that is purchased) at a
future date a specified quantity of a financial instrument, specified
securities, or the cash value of a securities index.
An index futures contract obligates the parties to contract to take or make
delivery of an amount of cash equal to the difference between the value of the
index at the close of the last trading day of the contract and the price at
which the index contract was originally written. A municipal bond index futures
contract is based on an index of long-term, tax-exempt municipal bonds; a
corporate bond index futures contract is based on an index of corporate bonds.
Stock index futures contracts are based on indexes that reflect the market value
of common stock of the companies included in the indexes. An option on an
interest rate or index futures contract generally gives the purchaser the right,
in return for the premium paid, to assume a position in a futures contract at a
specified exercise price at any time prior to the expiration date of the option.
FORWARD CURRENCY TRANSACTIONS. Each non-money market Fund may hold currencies to
meet settlement requirements for foreign securities. Each non-money market Fund,
other than the S&P 500 Index Fund and Premier Growth Fund, may engage in
currency exchange transactions to manage currency risk, which is the risk that
fluctuations in exchange rates may adversely affect a Fund. No Fund will enter
into forward currency transactions for speculative purposes.
Forward currency contracts are agreements to purchase or sell a specific
quantity of a currency at a future date and at a price that is fixed at the time
that a Fund enters into the contract. Forward currency contracts are traded in a
market conducted directly between currency traders (typically, commercial banks
or other financial institutions) and their customers, generally have no deposit
requirements and are typically consummated without payment of any commissions. A
Fund, however, may enter into forward currency contracts requiring deposits or
involving the payment of commissions. To assure that a Fund's forward currency
contracts are not used to achieve investment leverage, cash or other liquid
assets will be segregated with State Street or a designated sub-custodian in an
amount at all times equal to or exceeding the Fund's commitment under the
contracts.
Upon maturity of a forward currency contract, a Fund may pay for and receive the
underlying currency, negotiate a roll over into a new forward currency contract
with a new settlement date, or negotiate a termination of the forward contract
into an offset whereby the Fund would pay the difference between the exchange
rate fixed in the contract and the then current exchange rate. The Trust also
may be able to negotiate such an offset on behalf of a Fund prior to maturity of
the original forward contract. No assurance can be given that new forward
contracts or offsets will always be available to a Fund.
In hedging a specific portfolio position, a Fund may enter into a forward
contract with respect to either the currency in which the position is
denominated or another currency deemed appropriate by GEIM. A Fund's exposure
with respect to forward currency contracts is limited to the amount of the
Fund's aggregate investments in instruments denominated in foreign currencies.
OPTIONS ON FOREIGN CURRENCIES. Each non-money market Fund, other than the
Premier Growth Fund, may purchase or write foreign currency options as a hedge
against variations in foreign exchange rates that would cause the U.S. dollar
value of securities denominated in foreign currency to decline or the cost of
securities to be acquired to increase. Foreign currency options provide the
holder of such options the right to buy or sell a currency at a fixed price on
or before a future date. The Funds may write only covered options, and no Fund
will enter into a transaction involving options on foreign currencies for
speculative purposes. The Funds will purchase or write options that are traded
on U.S. or foreign exchanges or in the over-the-counter market. The Trust will
limit the premiums paid on a Fund's options on foreign currencies to 5% of the
value of the Fund's total assets.
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ADDITIONAL INVESTMENT TECHNIQUES. Each Fund may enter into securities
transactions on a when-issued or delayed-delivery basis and may lend its
portfolio securities.
SEE "RISK FACTORS AND SPECIAL CONSIDERATIONS" AND "APPENDIX - FURTHER
INFORMATION: CERTAIN INVESTMENT TECHNIQUES AND STRATEGIES" FOR A DISCUSSION OF
THE RISKS AND SPECIAL CONSIDERATIONS ASSOCIATED WITH THE ADDITIONAL INVESTMENTS
AND INVESTMENT TECHNIQUES AND STRATEGIES DISCUSSED ABOVE.
INVESTMENT RESTRICTIONS
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The Trust has adopted certain fundamental investment restrictions with respect
to each Fund that may not be changed without approval of a majority of the
Fund's outstanding voting securities (as defined in the 1940 Act). Included
among those fundamental restrictions are those listed below.
1. No Fund may borrow money, except that a Fund may enter into reverse
repurchase agreements and may borrow from banks for temporary or emergency (not
leveraging) purposes, including the meeting of redemption requests and cash
payments of dividends and distributions that might otherwise require the
untimely disposition of securities, in an amount not to exceed 33-1/3% of the
value of the Fund's total assets (including the amount borrowed) valued at
market less liabilities (not including the amount borrowed) at the time the
borrowing is made. Whenever borrowings, including reverse repurchase agreements,
of 5% or more of a Fund's total assets are outstanding, the Fund will not make
any additional investments.
2. No Fund may purchase securities (other than U.S. Government Obligations) of
any issuer if, as a result of the purchase, more than 5% of the Fund's total
assets would be invested in the securities of the issuer, except that up to 25%
of the value of the total assets of each non-money market Fund may be invested
without regard to this limitation. All securities of a foreign government and
its agencies will be treated as a single issuer for purposes of this
restriction.
3. No Fund may purchase more than 10% of the voting securities of any one
issuer, or more than 10% of the outstanding securities of any class of issuer,
except that (a) this limitation is not applicable to a Fund's investments in
U.S. Government Obligations and (b) up to 25% of the value of the assets of a
non-money market Fund may be invested without regard to these 10% limitations.
All securities of a foreign government and its agencies will be treated as a
single issuer for purposes of this restriction.
4. No Fund may invest more than 25% of the value of its total assets in
securities of issuers in any one industry. For purposes of this restriction, the
term industry will be deemed to include (a) the government of any country other
than the United States, but not the U.S. Government and (b) all supra-national
organizations. In addition, securities held by the Money Market Fund that are
issued by domestic banks are excluded from this restriction. For purposes of
this investment restriction, the Trust may use the industry classifications
reflected by the S&P 500 Index, if applicable at the time of determination. For
all other portfolio holdings, the Trust may use the Directory of Companies
Required to File Annual Reports with the SEC and Bloomberg Inc. In addition, the
Trust may select its own industry classifications, provided such classifications
are reasonable.
Certain other investment restrictions adopted by the Trust with respect to the
Funds are described in the Statement of Additional Information.
RISK FACTORS AND SPECIAL CONSIDERATIONS
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Investing in the Funds involves risk factors and special considerations, such as
those described below.
GENERAL. Investments in a Fund are not insured against loss of principal. As
with any investment portfolio, there can be no assurance that a Fund will
achieve its investment objective. Investing in shares of a Fund should not be
considered to be a complete investment program.
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ABSENCE OF OPERATING HISTORY. The Funds only recently commenced operations, and
therefore lack an operating history that shareholders may look to for purposes
of evaluating Fund performance.
OTHER INVESTORS. Investors may be materially affected by the actions of other
large institutional investors. For example, if a large institutional investor
withdraws an investment in a Fund the Fund could diminish in size by a
substantial amount causing the remaining investors to experience higher pro rata
operating expenses, resulting in lower returns for such investors. The
withdrawal by a large investor also may result in significant portfolio
liquidation expenses that are borne by remaining shareholders.
EQUITY SECURITIES. A Fund's investments in common stocks and other equity
securities are subject to stock market risk, which is the risk that the value of
the equity securities the Fund holds may decline over short or even extended
periods. Equity securities also are subject to the risk that the value of a
particular issuer's securities will decline, even during periods when equity
securities traded in the stock market in general are rising.
DEBT INSTRUMENTS. A Fund's investments in debt securities are subject to
interest rate risk, which is the risk that increases in market interest rates
will adversely affect investments in such securities. The value of investments
in fixed income securities tend to decrease when interest rates rise and
increase when interest rates fall. Generally, the value of longer-term debt
instruments will tend to fluctuate more than shorter-term debt securities. In
addition, when interest rates are falling, the money a Fund receives from
continuously selling shares will likely be invested in portfolio instruments
producing lower yields than the balance of its portfolio, thereby reducing the
Fund's current yield. In periods of rising interest rates, the opposite result
can be expected to occur.
CREDIT RISK. The Funds may invest in debt securities that are not backed by the
U.S. government. Such securities are subject to credit risk, which is the risk
that the issuer may be unable to pay principal and/or interest when due.
INVESTMENT GRADE OBLIGATIONS. Obligations rated BBB by S&P or Baa by Moody's are
considered investment grade, but are somewhat riskier than higher-rated
investment grade obligations. Obligations rated BBB by S&P are regarded as
having only an adequate capacity to pay principal and interest, and those rated
Baa by Moody's are considered medium-grade obligations that lack outstanding
investment characteristics and have speculative characteristics as well.
LOW-RATED SECURITIES. Certain Funds are authorized to invest in high-yield
securities that are rated lower than investment grade by the primary rating
agencies (e.g., are rated "BB" or lower by S&P and "Ba" or lower by Moody's).
These securities are sometimes referred to as "junk bonds," and are considered
to be speculative. Lower-rated and comparable unrated securities (collectively,
"low-rated" securities) provide poor protection for payment of principal and
interest. They generally are subject to greater risks of default than
higher-rated securities, and securities with the lowest ratings may be in
default or have a substantial risk of default. Low-rated securities generally
are unsecured and frequently are subordinated to the prior payment of senior
indebtedness. A Fund may incur additional expenses to the extent that it is
required to seek recovery upon a default.
The market value of certain low-rated securities tends to be more sensitive to
individual corporate developments and changes in economic conditions than
higher-rated securities. In addition, low-rated securities generally are subject
to a greater risk that the issuer cannot meet principal and interest payments
when due (i.e., credit risk). Issuers of low-rated securities are often highly
leveraged and may not have access to more traditional methods of financing.
Accordingly, the ability of such issuers to service their debt obligations
during an economic downturn or during sustained periods of rising interest rates
may be impaired. These issuers tend to be more vulnerable to real or perceived
economic changes, political developments, new or proposed laws and adverse
publicity.
The market for low-rated securities may be thinner and less active than that for
higher-rated securities, which may adversely affect the price at which these
securities may be sold. Thinner markets may diminish a Fund's ability to obtain
accurate market quotations for purposes of valuing the portfolio securities and
calculating the Fund's net asset value.
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ILLIQUID SECURITIES. Illiquid securities may be difficult to resell, and a
Fund's net assets may be adversely affected if there is no ready buyer willing
to purchase the Fund's illiquid securities at a price GEIM deems representative
of their value.
RESTRICTED SECURITIES. Restricted securities are generally more illiquid than
publicly traded securities. The prices realized from reselling restricted
securities in privately negotiated transactions may be less than those
originally paid by a Fund. Companies whose securities are restricted are not
subject to the disclosure and other investor protection requirements applicable
to publicly traded securities.
SMALLER COMPANIES. Smaller companies in which the Premier Growth Fund and the
Mid-Cap Fund may invest may involve greater risks than large, established
issuers. Such smaller companies may have limited product lines, markets or
financial resources and their securities may trade less frequently and in more
limited volume than the securities of larger or more established companies. As a
result, the prices of smaller companies may fluctuate to a greater degree than
the prices of securities of other issuers.
REPURCHASE AND REVERSE REPURCHASE AGREEMENTS. A Fund entering into a repurchase
agreement may suffer a loss if the other party to the transaction defaults on
its obligations and the Fund is delayed or prevented from exercising its rights
to dispose of the underlying securities. Specifically, there are risks that the
value of the underlying securities might decline while the Fund seeks to assert
its rights, that the Fund will incur additional expenses in asserting its
rights, and that the Fund may lose all or part of the income from the agreement.
A reverse repurchase agreement involves the risk that the market value of the
securities retained by a Fund may decline below the price of the securities the
Fund has sold but is obligated to repurchase under the agreement. In the event
the buyer of securities under a reverse repurchase agreement files for
bankruptcy or becomes insolvent, the Fund's use of the proceeds of the agreement
may be restricted pending a determination by the party, or its trustee or
receiver, whether to enforce the Fund's obligation to repurchase the securities.
WARRANTS. A warrant is a security that permits, but does not obligate, its
holder to subscribe for another security. Warrant holders do not have a right to
dividends or voting rights with respect to underlying securities, and warrants
do not represent any rights to the assets of the issuer. Therefore, a warrant
may be considered more speculative than certain other types of investments. In
addition, the value of a warrant does not necessarily change with the value of
the underlying security and a warrant ceases to have value if it is not
exercised prior to its expiration date. Warrants acquired by a Fund in units or
attached to securities may be deemed to be without value.
RIGHTS. A right is a privilege granted to a corporation's existing shareholders
to purchase or subscribe to additional shares of stock at the time of a new
issuance, before the stock is offered to the general public. This allows the
stockholders to retain the same ownership percentage after the new stock
offering. Rights are freely transferable and generally entitle the holder to
purchase the stock at a price below the public offering price.
INVESTMENT IN FOREIGN SECURITIES. Investing in securities issued by foreign
companies and governments, including securities issued in the form of depositary
receipts, involves considerations and potential risks not typically associated
with investing in obligations issued by the U.S. Government and U.S.
corporations, including:
REGULATORY RISKS. Less information may be available about foreign companies than
about U.S. companies, and foreign companies generally are not subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements applicable to U.S. companies. The values of foreign
investments are affected by changes in exchange control regulations; application
of foreign tax laws, including withholding taxes; and changes in governmental
administration or economic or monetary policy (in the United States or abroad).
CURRENCY RISKS. The values of foreign investments are affected by changes in
currency rates or exchange control regulations. When a Fund holds a security
denominated in a local currency (rather than in U.S. dollars), it may convert
U.S. dollars into that local currency in order to purchase the security and
convert local currency back into dollars when
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the security is sold. The value of the local currency relative to the U.S.
dollar would affect the value of that foreign security. For example, if the
local currency gains strength against the U.S. dollar, the value of the foreign
security increases. Conversely, if the local currency weakens against the U.S.
dollar, the value of the foreign security would decline. U.S. dollar denominated
securities of foreign issuers also may be affected by currency risk.
Currency exchange rates generally are determined by the forces of supply and
demand in the foreign exchange markets and the relative merits of investments in
different countries as seen from an international perspective. Currency exchange
rates can also be affected unpredictably by intervention by U.S. or foreign
governments or central banks or by currency controls or political developments
in the United States or abroad.
MARKET RISKS. Foreign markets, particularly those of developing or emerging
countries, may be less liquid, more volatile and less subject to governmental
supervision than domestic markets. There may be difficulties in enforcing
contractual obligations and transactions could be subject to extended clearance
and settlement periods.
POLITICAL/ECONOMIC RISK. A foreign government might impose restrictions or
prohibitions on the repatriation of foreign currencies, limitations on the use
or removal of funds or other assets (including the withholding of dividends). It
may adopt confiscatory tax policies or expropriate the assets or operations of a
company in which a Fund invests. Changes in the relationship or dealings between
nations may affect a Fund's investments in foreign securities.
TRANSACTION COSTS. Transaction costs of buying and selling foreign securities,
including tax, brokerage and custody costs, generally are higher than those
involving domestic transactions. Costs are incurred in connection with
conversion between various currencies.
INVESTING IN DEVELOPING OR EMERGING MARKETS. Investing in securities issued by
companies located in countries with emerging economies and/or securities markets
involves risks in addition to those described above with respect to investing in
foreign securities. The economic structures in these countries generally are
less diverse and mature than those in developed countries, and their political
systems are less stable. Other characteristics of developing countries that may
affect investment in their markets include certain national policies that may
restrict investment by foreigners in issuers or industries deemed sensitive to
relevant national interests and the absence of developed legal structures
governing private and foreign investments and private property.
The small size and inexperience of the securities markets in certain emerging or
developing countries and the low or nonexistent volume of trading in securities
in those countries may make investments in such countries illiquid and more
volatile than investments in Japan or most Western European countries. As a
result, a Fund investing in such countries may be required to establish special
custody or other arrangements before investing.
The former republics of the Soviet Union and the Eastern Bloc are emerging
markets countries that are undergoing a rapid transition from centralized,
planned economies to market-oriented economies. There can be no assurance that
such transition, including ongoing privatization efforts and recently
implemented economic reform programs, will continue. Moreover, there is a risk
that such countries might return to the centrally planned economies that existed
when they had a communist form of government. Investors should note that when
the former republics of the Soviet Union and the Eastern Bloc operated under
such centralized economies, they confiscated personal property and abrogated
property and other legal rights.
INVESTING IN A SINGLE COUNTRY. As discussed above, the Emerging Markets Fund
may, from time to time, invest all of its assets in a single emerging markets
country. There is a higher degree of risk associated with investing in one
country rather than diversifying investments among countries. If the Fund
invests all or a significant portion of its assets at any time in a single
country, events occurring in that country are more likely to effect the Fund's
investments. Specific risks associated with investing in a single country
include a greater effect on portfolio holdings of currency fluctuations and
country-specific economic, social or political factors.
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MUNICIPAL OBLIGATIONS. Even though Municipal Obligations are interest-bearing
investments that promise a stable flow of income, like other debt instruments
their prices are inversely affected by changes in interest rates and, therefore,
are subject to the risk of market price fluctuations. The values of Municipal
Obligations with longer remaining maturities typically fluctuate more than those
of similarly rated Municipal Obligations with shorter remaining maturities. The
values of fixed income securities also may be affected by changes in the credit
rating or financial condition of the issuing entities.
At the time of issuance, issuers of Municipal Obligations obtain opinions from
bond counsel addressing the validity of the Obligations and whether the interest
on such Obligations is exempt from Federal income taxes. Neither the Trust nor
GEIM will review the proceedings relating to the issuance of Municipal
Obligations or the basis for opinions of counsel. The U.S. Government has
enacted various laws that have restricted or diminished the income tax exemption
on various types of Municipal Obligations and may pass similar laws in the
future.
COVERED OPTION WRITING. A Fund that writes puts and calls may experience losses
if GEIM or any sub-adviser of the Fund incorrectly predicts the direction in
which the market will move. If a Fund writes a put option obligating that Fund
to purchase a security at a certain price, the Fund may experience a loss if the
market price of the underlying security goes down. This is because the Fund
would be compelled to purchase the security at a price that is higher than
market price. The loss would be equal to the difference between the price at
which the Fund must purchase the underlying security and its market value at the
time of the option exercise, less the premium received for writing the option.
Likewise, the Fund would experience a loss if it wrote a call option and the
price of the underlying security rises. This is because the Fund would be
obligated to sell a security at a price that is lower than market price. The
loss would be equal to the excess of the security's market value at the time of
the option's exercise over the Fund's acquisition cost of the security, less the
premium received for writing the option.
In addition, no assurance can be given that a Fund will be able to close out an
option position at the desired time. A Fund's ability to enter into closing
purchase transactions depends upon the existence of a liquid secondary market.
While the Funds purchase or write options only when GEIM or any sub-adviser of
the Fund believes a liquid secondary market exists, there is a possibility that
this market may be absent or cease to exist, which would make it difficult or
impossible to close out a position when desired.
SECURITIES INDEX OPTIONS. As with other options, a Fund's ability to close out
positions in securities index options depends upon the existence of a liquid
secondary market. Although a Fund will generally purchase or write securities
index options only if a liquid secondary market for the options purchased or
sold appears to exist, no such secondary market may exist, or the market may
cease to exist at a later date. In addition, securities exchanges impose
position and exercise limits and other regulations on options traded on those
exchanges. The absence of a liquid secondary market and possible
exchange-imposed limitations may make it difficult or impossible to close out a
position when desired.
FUTURES AND OPTIONS ON FUTURES. The use of futures contracts and options on
futures contracts as a hedging device involves several risks. No assurance can
be given that a correlation will exist between price movements in the underlying
securities or index and price movements in the securities that are the subject
of the hedge. Positions in futures contracts and options on futures contracts
may be closed out only on the exchange or board of trade on which they were
entered, and no assurance can be given that an active market will exist for a
particular contract or option at any particular time.
FORWARD CURRENCY TRANSACTIONS. The market for forward currency contracts may be
limited with respect to certain currencies. The existence of a limited market
may in turn restrict a Fund's ability to hedge against the risk of devaluation
of currencies in which the Fund holds a substantial quantity of securities. The
successful use of forward currency contracts as a hedging technique draws upon
the special skills and experience of GEIM or any sub-adviser of the Fund with
respect to those instruments and will usually depend upon the ability of GEIM or
any sub-adviser of the Fund to forecast interest rate and currency exchange rate
movements correctly. Should interest or exchange rates move in an unexpected
manner, a Fund may not achieve the anticipated benefits of forward currency
contracts or may realize losses and thus be in a less advantageous position than
if those strategies had not been used. Many forward currency
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contracts are subject to no daily price fluctuation limits so that adverse
market movements could continue with respect to those contracts to an unlimited
extent over a period of time. In addition, the correlation between movements in
the prices of those contracts and movements in the prices of the currencies
hedged or used for cover will not be perfect.
The Trust's ability to dispose of a Fund's positions in forward currency
contracts depends on the availability of active markets in those instruments and
the amount of trading interest that may exist in the future in forward currency
contracts which cannot now be predicted. Forward currency contracts may be
closed out only by the parties entering into an offsetting contract. As a
result, no assurance can be given that a Fund will be able to utilize these
contracts effectively for the intended purposes.
OPTIONS ON FOREIGN CURRENCIES. Like the writing of other kinds of options, the
writing of an option on a foreign currency constitutes only a partial hedge, up
to the amount of the premium received; a Fund could also be required, with
respect to any option it has written, to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on a foreign currency may constitute an effective hedge against
fluctuation in exchange rates, although in the event of rate movements adverse
to a Fund's position, the Fund could forfeit the entire amount of the premium
plus related transaction costs.
DERIVATIVES. Certain of the Funds' permitted investments constitute derivatives,
including forward currency exchange contracts, stock options, currency options,
securities index options, futures contracts, swaps and options on futures
contracts involving U.S. Government and foreign government securities and
currencies. Certain derivative securities can, under certain circumstances,
significantly increase an investor's exposure to market and other risks.
INSTRUMENTS AND STRATEGIES INVOLVING SPECIAL RISKS. Certain instruments in which
the Funds can invest and certain investment strategies that the Funds may employ
could expose the Funds to various risks and special considerations. The
instruments presenting risks to a Fund that holds the instruments are: Rule 144A
Securities, depositary receipts, debt obligations of supra-national agencies,
securities of other investment funds, municipal leases, floating and variable
rate instruments, participation interests, zero coupon obligations, Municipal
Obligation components, custody receipts, mortgage related securities, government
stripped mortgage related securities, and asset-backed and receivable-backed
securities. Among the risks that some but not all of these instruments involve
are lack of liquid secondary markets and the risk of prepayment of principal.
The investment strategies involving special risks to some or all of the Funds
are: engaging in when-issued or delayed-delivery securities transactions,
lending portfolio securities and selling securities short against the box. Among
the risks that some but not all of these strategies involve are increased
exposure to fluctuations in market value of the securities and certain credit
risks. See "Appendix - Further Information: Certain Investment Techniques and
Strategies" for a more complete description of these instruments and strategies.
PORTFOLIO TRANSACTIONS AND TURNOVER
The Board of Trustees of the Trust has determined that, to the extent consistent
with applicable provisions of the 1940 Act and rules thereunder, transactions
for a Fund may be executed through an affiliated broker-dealer if, in the
judgment of GEIM or any sub-adviser of the Fund, the use of such broker-dealer
is likely to result in price and execution at least as favorable to the Fund as
those obtainable through other qualified broker-dealers, and if, in the
transaction, such broker-dealer charges the Fund a fair and reasonable rate
consistent with that payable by the Fund to other broker-dealers on comparable
transactions. Under rules adopted by the SEC, such broker-dealer may not execute
transactions for a Fund on the floor of any national securities exchange, but
may effect transactions by transmitting orders for execution providing for
clearance and settlement, and arranging for the performance of those functions
by members of the exchange not associated with such broker-dealer. Such
broker-dealer will be required to pay fees charged by those persons performing
the floor brokerage elements out of the brokerage compensation that it receives
from a Fund.
The Trust cannot predict precisely the turnover rate for any Fund, but expects
that the annual turnover rate will generally not exceed 50% for the Emerging
Markets Fund, 50% for the Premier Growth Fund, 200% for the Mid-Cap Fund, 50%
for the International Fund, 30% for the Value Fund, 50% for the U.S. Equity
Fund, 25% for the S&P 500 Index Fund, 200% for the Strategic Fund, and 300% for
the Income Fund. The portfolio turnover rate for the Money Market Fund is
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expected to be zero for regulatory purposes. A 100% annual turnover rate would
occur if all of a Fund's securities were replaced one time during a period of
one year. Short-term gains realized from portfolio turnover are taxable to
investors as ordinary income. In addition, higher portfolio turnover rates can
result in corresponding increases in brokerage commissions. GEIM does not
consider portfolio turnover rate a limiting factor in making investment
decisions on behalf of any Fund consistent with the Fund's investment objective
and policies. The Statement of Additional Information contains additional
information regarding portfolio transactions and turnover.
MANAGEMENT OF THE TRUST
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BOARD OF TRUSTEES
Overall responsibility for management and supervision of the Funds rests with
the Trust's Board of Trustees. The Trustees approve all significant agreements
between the Trust and the persons and companies that furnish services to the
Funds, including agreements with the Funds' investment adviser and
administrator, distributor, custodian and transfer agent. The day-to-day
operations of the Funds have been delegated to GEIM. The Statement of Additional
Information contains background information regarding each Trustee and executive
officer of the Trust.
INVESTMENT ADVISER AND ADMINISTRATOR
GEIM, located at 3003 Summer Street, P.O. Box 7900 Stamford, Connecticut 06904,
serves as the investment adviser and administrator of each Fund. GEIM was formed
under the laws of Delaware in 1988, and is a wholly-owned subsidiary of GE and a
registered investment adviser under the Investment Advisers Act of 1940, as
amended.
GEIM's principal officers, directors, and portfolio managers serve in similar
capacities with GEIC. Like GEIM, GEIC is a wholly-owned subsidiary of GE.
Through GEIM and GEIC and their predecessors, GE has nearly 70 years of
investment management experience.
GE Investments provides investment management services to various institutional
accounts with total assets as of September 30, 1997, in excess of $69 billion,
of which more than $13 billion was invested in mutual funds. GEIM or GEIC serves
as the investment adviser to the following entities:
GE FUNDS - GEIM has served as the investment adviser and administrator for GE
Funds since January 1993, when GE Funds commenced operations. GE Funds is an
open-end management investment company whose portfolios (as defined above, the
"GE Funds") are offered to individual retail and institutional investors. The GE
Funds are sold through a multiple distribution system that offers an investor
the option of choosing a class that best suits the investor's needs in terms of
purchase amount and the length of time the investor intends to hold GE Fund
shares.
GE INVESTMENTS FUNDS, INC. ("GEIFI FUNDS") - GEIM has served as the investment
adviser to the investment portfolios of GEIFI Funds since May 1, 1997. GEIFI
Funds is an open-end management investment company whose shares are currently
offered to insurance company separate accounts that fund certain variable
annuity and variable life contracts.
OTHER INSTITUTIONAL ACCOUNTS - GEIM has served as the sub-adviser to PaineWebber
Global Equity Fund, a series of PaineWebber Investment Trust, since its
inception in 1991, and to the Global Growth Portfolio of PaineWebber Series
Trust and Global Small Cap Fund Inc. since March 1995. GEIM has served as
sub-adviser to the International Equity Portfolio and the U.S. Equity Portfolio
of WRL Series Fund, Inc. since January 1997 and to the International Equity
Portfolio of IDEX Series Fund since February 1997. GEIM has also served as
investment adviser to the U.S. Government Money Market Fund and U.S. Treasury
Money Market Fund of Financial Investors Trust since March 1997.
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THE ELFUN FUNDS - GEIC serves as the investment adviser to Elfun Global Fund,
Elfun Trusts, Elfun Income Fund, Elfun Money Market Fund, Elfun Tax-Exempt
Income Fund and Elfun Diversified Fund (collectively, the "Elfun Funds"). The
first Elfun Fund, Elfun Trusts, was established in 1935. Investment in the Elfun
Funds generally is limited to regular and senior members of the Elfun Society,
whose regular members are selected from active employees of GE and/or its
majority-owned subsidiaries, and whose senior members are former members who
have retired from those companies.
S&S FUNDS - Under the General Electric Savings and Security Program, GEIC serves
as investment adviser to the GE S&S Program Mutual Fund and GE S&S Long Term
Interest Fund. GEIC also serves as the investment adviser to the General
Electric Pension Trust.
GEIM and any sub-adviser of a Fund, subject to the supervision and direction of
the Trust's Board of Trustees, manages the Funds' portfolios in accordance with
the Funds' respective investment objectives and stated policies, makes
investment decisions for the Funds and places purchase and sale orders for the
Funds' portfolio transactions. GEIM and any sub-adviser of a Fund also pays the
salaries of all personnel employed by both it and the Trust and provides each
Fund with investment officers who are authorized by the Board of Trustees to
execute purchases and sales of securities on behalf of the Funds.
GEIM and any sub-adviser of a Fund makes investment decisions for each Fund
independently from its investment considerations with respect to the entities
that it manages. However, the Funds and these other entities may invest in the
same types of securities, particularly where they have the same or similar
investment objective or policies. When a Fund and one or more other accounts or
portfolios managed by GEIM or any sub-adviser of a Fund are prepared to invest
in, or desire to dispose of, the same security, available investments or sale
opportunities will be allocated in a manner that GEIM or any sub-adviser of a
Fund believes is equitable to each entity. In some cases, this procedure may
adversely affect the price a Fund pays or receives or the size of the position
obtained or disposed of by a Fund.
The agreements governing the investment advisory services furnished to the Trust
by GEIM provide that, if GEIM ceases to act as the investment adviser to the
Trust, at GEIM's request, the Trust's license to use the initials "GE" will
terminate and the Trust will change the name of the Trust and the Funds to a
name not including the initials "GE."
FEE STRUCTURE
Each Fund pays GEIM a combined fee for advisory and administrative services that
is accrued daily and paid monthly. The advisory agreement for each Fund
specifies the advisory fee and other expenses that the Fund must pay. The
advisory and administration fee for each Fund, except the S&P 500 Index Fund,
declines incrementally as Fund assets increase. This means that investors pay a
reduced fee with respect to Fund assets over a certain level, or "breakpoint."
The advisory and administration fee or fees for each Fund, and the relevant
breakpoints, are stated in the following schedule (fees are expressed as an
annual rate):
<TABLE>
<CAPTION>
NAME OF FUND AVERAGE DAILY NET ASSETS OF FUND ANNUAL RATE PERCENTAGE (%)
- ------------ -------------------------------- --------------------------
<S> <C> <C>
Emerging Markets Fund First $50 million 1.05
Over $50 million .95
Premier Growth Fund First $25 million .55
Mid-Cap Fund Next $25 million .45
Value Equity Fund Over $50 million .35
U.S. Equity Fund
International Equity Fund First $25 million .75
Next $50 million .65
Over $75 million .55
-24-
<PAGE>
NAME OF FUND AVERAGE DAILY NET ASSETS OF FUND ANNUAL RATE PERCENTAGE (%)
- ------------ -------------------------------- --------------------------
S&P 500 Index Fund All assets .15
Strategic Fund First $25 million .45
Next $25 million .40
Over $50 million .35
Income Fund First $25 million .35
Next $25 million .30
Next $50 million .25
Over $100 million .20
Money Market Fund First $25 million .25
Next $25 million .20
Next $50 million .15
Over $100 million .10
</TABLE>
From time to time, GEIM may waive or reimburse advisory or administrative fees
paid by a Fund.
INVESTMENT SUB-ADVISER
SSGA is the investment sub-adviser to the S&P 500 Index Fund pursuant to an
investment sub-advisory agreement with GEIM. SSGA, a division of State Street,
is located at Two International Place, Boston, Massachusetts 02110. State Street
is a wholly-owned subsidiary of State Street Corporation, a publicly held bank
holding company. State Street, with over $292 billion under management as of
December 31, 1996, provides complete global investment management services from
offices in the United States, London, Sydney, Hong Kong, Tokyo, Toronto,
Montreal, Luxembourg, Melbourne, Paris, Dubai, Munich and Brussels. SSGA is also
the investment sub-adviser to the GEIFI Funds' S&P 500 Index Fund. GEIM pays
SSGA monthly compensation in the form of an investment sub-advisory fee at an
annual rate of .05% of the first $100 million, .04% of the next $200 million and
.03% for all amounts over $300 million, of the Fund's average daily net assets.
PORTFOLIO MANAGEMENT
Eugene K. Bolton is responsible for the overall management of the domestic
equity investment process at GE Investments. Mr. Bolton has served in that
capacity since 1991. Mr. Bolton leads a team of portfolio managers for the U.S.
Equity Fund. In addition, Mr. Bolton has served in a similar capacity with
respect to the GE Funds' U.S. Equity Fund since the commencement of that Fund's
operations. Mr. Bolton has more than 12 years of investment experience and has
held positions with GE Investments since 1984. He is currently a Director and
Executive Vice President of GE Investments.
David B. Carlson is the Portfolio Manager of the Premier Growth Fund and is also
responsible for the management of the domestic equity related investments of the
portfolio of the Strategic Fund. Mr. Carlson has served those Funds since the
commencement of their operations. In addition, Mr. Carlson has served as the
Portfolio Manager to similar funds of GE Funds since the commencement of their
operations. He has more than 14 years of investment experience and has held
positions with GE Investments since 1982. Mr. Carlson is currently a Senior Vice
President of GE Investments.
Peter J. Hathaway leads a team of portfolio managers for the Value Fund and has
served in that capacity since the commencement of that Fund's operations. In
addition, Mr. Hathaway has served in a similar capacity with respect to GE
Funds' Value Equity Fund since the commencement of that Fund's operations. He
has more than 36 years of investment
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<PAGE>
experience and has held positions with GE Investments since 1985. Mr. Hathaway
is currently a Senior Vice President of GE Investments.
Ralph R. Layman leads a team of portfolio managers for the International Fund
and the Emerging Markets Fund and also is responsible for the management of the
international equity-related investments of the Strategic Fund. Mr. Layman has
served those Funds since the commencement of their operations. In addition, Mr.
Layman has served in a similar capacity with respect to GE Funds' GE
International Equity Fund since the commencement of its operations and the GE
Strategic Investment Fund since September 1997. He has more than 18 years of
investment experience and has held positions with GE Investments since 1991.
From 1989 to 1991, Mr. Layman served as an Executive Vice President, Partner and
Portfolio Manager of Northern Capital Management, and prior thereto, served as
Vice President and Portfolio Manager of Templeton Investment Counsel. Mr. Layman
is currently a Director and Executive Vice President of GE Investments.
Robert A. MacDougall leads a team of portfolio managers for the Income Fund and
the Money Market Fund and is also responsible for the management of fixed income
related investments of the portfolio of the Strategic Fund. Mr. MacDougall has
served those Funds since the commencement of their operations. In addition, Mr.
MacDougall has served in a similar capacity with respect to GE Funds' GE Fixed
Income Fund and GE Strategic Investment Fund since the commencement of their
operations. He has more than 13 years investment experience and has held
positions with GE Investments since 1986. Mr. MacDougall is currently a Director
and Executive Vice President of GE Investments.
Elaine G. Harris is the Portfolio Manager for the Mid-Cap Fund and has served in
that capacity since commencement of that Fund's operations. Ms. Harris also
serves as the Portfolio Manager for GE Funds' GE Mid-Cap Growth Fund. She has
more than 13 years of investment experience and has held positions with GE
Investments since 1993. From 1991 to 1993, Ms. Harris served as Senior Vice
President and Portfolio Manager at SunAmerica Asset Management and, prior
thereto, as Portfolio Manager at Alliance Capital Management Company and as an
analyst and subsequently, a Portfolio Manager at Fidelity Investments. Ms.
Harris is currently a Senior Vice President of GE Investments.
James B. May leads a team of portfolio managers for the S&P 500 Index Fund. Mr.
May has been an investment officer and portfolio manager in the U.S. Structured
Products Group of State Street since 1994. From 1991 to 1993, Mr. May served as
an Investment Support Analyst in the U.S. Passive Service Group of State Street.
Mr. May holds a B.S. in finance from Bentley College and a M.B.A. from Boston
College.
GEIM investment personnel may engage in securities transactions for their own
accounts pursuant to a code of ethics that establishes procedures for personal
investing and restricts certain transactions.
EXPENSES OF THE FUNDS
Each Fund's Service Class bears its own expenses, which generally include all
costs not specifically borne by GEIM. Specifically, expenses borne by a Fund
include: investment advisory and administration fees; shareholder servicing and
distribution fees; fees paid to members of the Trust's Board of Trustees who are
not affiliated with GEIM or any of its affiliates; fees for necessary brokerage
services; and expenses that are not normal operating expenses of the Funds (such
as extraordinary expenses, interest and taxes). GEIM pays any fees and expenses
in excess of its advisory and administration fee that are not borne by the
Funds. The annual fees payable with respect to each Fund are intended to
compensate GEIM for its advisory and administration services.
The Trust has adopted a Shareholder Servicing and Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act with respect to the Service Class
Shares of each Fund. Under the Plan, the Trust will pay GEIM, with respect to
the Service Class shares of a Fund, fees for shareholder and distribution
services provided to that class of shares at an annual rate of .25% of the value
of the average daily net assets of such Fund attributable to the Service Class
shares. Fees to be paid with respect to the Funds under the Plan will be
calculated daily and paid monthly.
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<PAGE>
The annual fees payable with respect to the Service Class shares of a Fund are
intended to compensate GEIM, or enable GEIM to compensate other persons
("Service Providers"), for providing ongoing servicing and/or maintenance of the
accounts of shareholders of the Fund ("Shareholder Services") and to compensate
GEIM, or enable GEIM to compensate Service Providers, including any distributor
of shares of the Fund, for providing services that are primarily intended to
result in, or that are primarily attributable to, the sale of shares of the Fund
("Selling Services"). Shareholder Services means all forms of shareholder
liaison services, including, among other things, providing Service Class
shareholders with one or more of the following: (i) information on their
investments; (ii) general information regarding investing in mutual funds; (iii)
periodic newsletters containing materials relating to the Fund or to investments
in general in mutual funds; (iv) periodic financial seminars designed to assist
in the education of shareholders with respect to mutual funds generally and the
Fund specifically; (v) access to a telephone inquiry center relating to the
Fund; (vi) sub- accounting and sub-account maintenance, servicing and
transaction processing and (vii) other similar services not otherwise required
to be provided by the Trust's custodian or transfer agent. Selling Services
include, but are not limited to, the printing and distribution to prospective
investors in the Fund of prospectuses and statements of additional information
that are used in connection with sales of the Service Class shares of the Fund;
the preparation, including printing and distribution of sales literature and
media advertisements relating to the Service Class shares of a Fund; and
distributing Service Class shares of the Fund. In providing compensation for
Selling Services in accordance with the Plan, GEIM is expressly authorized: (i)
to make, or cause to be made, payments reflecting an allocation of overhead and
other office expenses related to the distribution of the Service Class shares of
the Fund; (ii) to make, or cause to be made, payments to, or provide for the
reimbursement of expenses of, persons who provide support services in connection
with the distribution of the Service Class shares of the Fund; or (iii) to make,
or cause to be made, payments to financial intermediaries who have sold Service
Class shares of the Fund.
Payments under the Plan are not tied exclusively to the expenses for shareholder
servicing and distribution expenses actually incurred by GEIM or any Service
Provider, and the payments may exceed expenses actually incurred by a Service
Provider. The Trust's Board of Trustees evaluates the appropriateness of the
Plan and its payment terms on a continuing basis and in doing so considers all
relevant factors, including the types and extent of Shareholder Services
provided by GEIM and/or Service Providers and the amounts GEIM and/or Service
Providers receive under the Plan.
PURCHASE OF SHARES
- ------------------
PURCHASING SHARES - GENERAL INFORMATION
The Distributor offers Service Class shares on a continuous basis. A purchase
order is processed at the net asset value next determined after the order (or
wire, if applicable) has been received and accepted by State Street, the Trust's
transfer agent. For a description of the manner of calculating a Fund's net
asset value, see "Net Asset Value." Shares are sold without the imposition of a
sales charge.
The Trust will accept purchase orders for shares only on each "Business Day,"
which is a day on which the Fund's net asset value is calculated as described
below under "Net Asset Value." The Trust, in its discretion, may reject any
order for the purchase of shares of a Fund. The Trust does not issue physical
certificates representing shares in any Fund.
Investors begin to earn income as of the first business day following the day
State Street has received payment for an order. Orders are accepted only upon
receipt by State Street of all documentation required to be submitted in
connection with such order. If an investor purchases or redeems shares through
an Authorized Firm (defined below), it may be subject to service fees imposed by
that Firm.
MINIMUM INVESTMENT REQUIREMENT
The minimum initial investment in each Fund is $35 million for each investor or
group of related investors. Related investors are investors that are affiliated
persons of each other within the meaning of the 1940 Act. There is no minimum
investment requirement for subsequent purchases.
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<PAGE>
The minimum investment is waived for each investor or group of related investors
that has (i) invested at least $100 million in one or more investment portfolios
or accounts that are advised by GEIM and/or GEIC, provided that at least $35
million of this $100 million amount is invested in the Trust or (ii) invested at
least $5 billion in one or more investment portfolios or accounts that are
advised by GEIM and/or GEIC.
LETTER OF INTENT. Investors or a group of related investors may meet the $35
million minimum investment requirement through a series of investments over a
period of no more than 13 months. To elect this alternative, the investor or
group must submit a letter to the Distributor indicating its commitment to
purchase at least $35 million in shares of a Fund over a 13-month period. If the
investor does not invest the required minimum amount within the 13-month period,
Service Class shares will be exchanged for Class A shares of a corresponding GE
Fund, if a corresponding GE Fund exists and is operational and the investor
meets the eligibility requirements for such fund. Currently, the following Funds
have corresponding, operational GE Funds: the Premier Growth Fund, Mid-Cap Fund,
International Fund, Value Fund, U.S. Equity Fund, Strategic Fund, Income Fund,
and Money Market Fund. If there is no corresponding GE Fund at the time an
investment would otherwise be exchanged, or the investor does not meet the
eligibility requirements for such fund, the Trust will redeem that investor's
account. The Trust will effect such exchange or redemption 30 days after the
Trust has sent the investor written notice, unless the investor increases its
account to the required minimum within such period.
ELIGIBLE INVESTORS
The Distributor offers Service Class shares to certain investors that meet the
minimum investment requirements. The Trust was designed to appeal to
institutional investors such as corporations, foundations, endowments and trusts
established to fund employee benefit plans of various types as well as
charitable, religious and educational institutions. The Trust expects that most
of the time each Fund will have relatively few shareholders (as compared with
most mutual funds) but that these shareholders will invest substantial amounts
in a Fund. Typical institutional investors may include banks, insurance
companies, trusts that fund qualified pension and profit-sharing plans (Section
401 of the Code), trusts that fund government employer non-qualified deferred
compensation obligations (Section 457 of the Code), trusts that fund charitable,
religious and educational institutions (Section 501(c)(9) of the Code),
non-government employers seeking to fund non-qualified deferred compensation
obligations, and investment companies that are not affiliated persons of the
Trust (or affiliated persons of such persons).
HOW TO OPEN AN ACCOUNT
Investors must establish an account before purchasing shares, and may do so
either by submitting an account application to the Distributor or the transfer
agent or through an Authorized Firm (defined below). Investors may obtain an
account application by telephoning the Trust at (800) 439-3042 or by writing to
the Trust at:
GE Institutional Funds
P.O. Box 120065
Stamford, CT 06912-0065
For overnight package delivery:
GE Institutional Funds
c/o National Financial Data Services Inc.
1004 Baltimore Avenue
Kansas, MO 64141
To open an account, an investor must complete and sign an application and
furnish its taxpayer identification number to the Trust. The investor also must
certify whether or not it is subject to withholding for failing to report income
to the Internal Revenue Service ("IRS").
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HOW TO BUY SHARES
After a completed account application has been received and processed, an
investor may purchase Fund shares from the Distributor or through brokers,
dealers, financial institutions or investment advisers that have entered into
sales agreements with the Distributor ("Authorized Firms").
An investor may purchase shares through an Authorized Firm with the assistance
of a sales representative (a "Sales Representative") with that Authorized Firm.
The Authorized Firm will be responsible for transmitting the investor's order
promptly to the transfer agent. Investors should contact their Sales
Representative for further instructions.
Investors also may purchase Service Class shares directly from the transfer
agent by wiring federal funds to: State Street Bank and Trust Company (ABA #
0110-0002-8) For: GE Institutional Funds - [Name of Fund] Account of:
[Investor's name, address and account number]. If a wire is received by the
close of regular trading on the NYSE on a Business Day, the shares will be
priced according to the net asset value of the Fund on that day. If a wire is
received after the close of regular trading on the NYSE, the shares will be
priced as of the time the Fund's net asset value per share is next determined.
Payment for orders that are not accepted will be returned to investors promptly.
An investor's financial institution may charge a fee for wiring its account.
PURCHASES IN-KIND
Investors may purchase Service Class shares in amounts of $5 million or more
with either cash or investment securities acceptable to the appropriate Fund.
The particular investment securities acceptable to a Fund may vary over time and
the Trust does not guarantee that any particular investment securities will be
accepted at any particular time or at all. Investors interested in purchasing
Service Class shares with investment securities should contact their Sales
Representative or the Distributor for information about which securities a
particular Fund will accept. The Trust reserves the right to require the
Distributor to suspend the offering of Service Class shares of the Emerging
Markets Fund or International Equity Fund for cash in amounts above $5 million
and of the other non-money market Funds in amounts above $10 million.
REDEMPTION OF SHARES
- --------------------
On any Business Day, investors may redeem all or a portion of their shares.
Redemption requests received in proper form prior to the close of regular
trading on the NYSE will be effected at the net asset value per share determined
on that Business Day. Redemption requests received after the close of regular
trading on the NYSE will be effected at the net asset value as next determined.
The Trust normally transmits redemption proceeds within seven days after receipt
of a redemption request.
If an investor holds more than one class of shares, it must specify which class
of shares it is redeeming. The investor's redemption request might be delayed if
it does not specify the appropriate class of shares or if it owns fewer shares
than specified in its redemption request.
REDEMPTIONS THROUGH AN AUTHORIZED FIRM
If an investor purchases shares through a Sales Representative, it may redeem
its shares in accordance with its Sales Representative's instructions. If State
Street's books reflect that the investor, and not its Sales Representative, is
the shareholder of record on an account, the investor also may redeem by mail or
by wire, as described below. The investor's Authorized Firm is responsible for
transmitting a redemption order (and crediting the investor with any redemption
proceeds) on a timely basis.
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REDEMPTION BY MAIL
If the investor is the shareholder of record on the books of State Street, it
may redeem shares by mail by a written redemption request that (1) states the
class and the number of shares or the specific dollar amount to be redeemed, (2)
identifies the Fund or Funds from which the number or dollar amount is to be
redeemed, (3) identifies the investor's account number and (4) is signed on the
investor's behalf by an authorized person exactly as the shares are registered.
Investors should send the request to the Trust at the appropriate address listed
above under "How to Open an Account."
SIGNATURE GUARANTEES
To protect investors' accounts, the Trust and the Distributor from fraud,
signature guarantees are required to enable the Trust to verify the identity of
the person authorizing a redemption from an account. Signature guarantees will
be required for redemptions over $50,000 and requests that redemption proceeds
be (1) mailed to an address other than the address of record, (2) paid to a
person other than the shareholder, (3) wired to a bank other than the bank of
record, or (4) mailed to an address that has been changed within 30 days of the
redemption request. All signature guarantees must be guaranteed by a commercial
bank, trust company, broker, dealer, credit union, national securities exchange
or registered association, clearing agency or savings association. The Trust may
require additional supporting documents for redemptions made by corporations,
executors, administrators, trustees, guardians or persons utilizing a power of
attorney. A request for redemption will not be deemed to have been submitted
until the Trust receives all documents typically required to assure the safety
of a particular account. The Trust may waive the signature guarantee on a
redemption of $50,000 or less if it is able to verify the signatures of all
registered owners from its accounts.
INVOLUNTARY EXCHANGES OR REDEMPTIONS
By investing in the Trust, each investor consents to involuntary exchanges and
redemptions. This means that if the value of a shareholder's investment in the
Fund(s) falls below the minimum requirements discussed above for more than 120
days because of redemptions (and not because of market fluctuations or
Investment Switches), the Trust will involuntarily exchange its Service Class
shares for Class A shares of a corresponding GE Fund if such a corresponding GE
Fund exists and is operational and it meets the eligibility requirements for
such fund. If there is no corresponding GE Fund at the time an investment would
be otherwise exchanged or the investor does not meet the eligibility
requirements for such fund, the Trust will involuntarily redeem the investor's
account. The Trust will effect such exchange or involuntary redemption 30 days
after the Trust has sent the investor written notice, unless the investor
increases its account to the required minimum within such period. At the
investor's request, the Trust will effect an involuntary redemption in-kind.
Proceeds of any such redemption will be mailed to the investor.
More specifically, (i) if an investor has $100 million or more invested in funds
advised by GEIM and/or GEIC, then its shares will be exchanged or redeemed, as
applicable, if its investment in the Trust falls below $35 million for the
requisite 120-day period and it does not increase its account to the required
minimum within the requisite 30-day period following written notice of
deficiency, and (ii) if the investor has invested less than $100 million in
funds advised by GEIM and/or GEIC, its shares in a Fund will be exchanged or
redeemed, as applicable, if its investment in that Fund falls below $35 million
for that period and it does not increase its account to the required minimum
within the requisite 30-day period following written notice of deficiency.
DISTRIBUTIONS IN-KIND
If the Trust's Board of Trustees determines that it would be detrimental to the
best interests of a Fund's shareholders to make a redemption payment wholly in
cash, the Trust may pay, in accordance with rules adopted by the SEC, any
portion of a redemption in excess of the lesser of $250,000 or 1% of the Fund's
net assets by a distribution in-kind of portfolio securities in lieu of cash.
Redemptions failing to meet this threshold must be made in cash. Portfolio
securities issued in a distribution in-kind will be deemed by GEIM to be readily
marketable. Shareholders receiving distributions in-kind of portfolio securities
may incur brokerage commissions when subsequently disposing of those securities.
The Trust will redeem an investor's shares in-kind at the request of that
investor.
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INVESTMENT SWITCHES
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An investor may exchange Service Class shares of a Fund for Service Class shares
of another Fund or Investment Class shares of the same or another Fund
("Investment Switches"). Such Investment Switches are permitted provided the
Fund is an option available to that investor, the investor meets the minimum
investment requirement for such Fund and the shares of such Fund may legally be
sold in the investor's state of residence.
The Trust may, upon 60 days prior written notice to a Fund's shareholders,
terminate the Investment Switch privilege. An Investment Switch to shares of
another Fund is treated for Federal income tax purposes as a redemption (that
is, a sale) of shares given in exchange by the investor, followed by a deemed
purchase of shares in the other Fund, and therefore the investor may experience
a taxable gain or loss in connection with the Investment Switch. Investors may
conduct an Investment Switch by writing the Trust at the appropriate address
listed above under "How to Open an Account."
NET ASSET VALUE
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Each class' net asset value per share is determined as of the close of regular
trading on the NYSE (currently 4:00 p.m., New York time) on each day the NYSE is
open by dividing the value of the Fund's net assets attributable to that class
by the total number of shares of that class outstanding. The NYSE is currently
open each day, Monday through Friday, except on the following holidays: New
Year's Day, Dr. Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas, and on
the preceding Friday or subsequent Monday when one of these holidays falls on a
Saturday or Sunday, respectively.
In general, a Fund's investments will be valued at market value or, in the
absence of market value, at fair value as determined by or under the direction
of the Trust's Board of Trustees. All portfolio securities held by the Money
Market Fund, and any short-term investments of the other Funds that mature in 60
days or less, will be valued on the basis of amortized cost, if the Board of
Trustees determines that amortized cost represents fair value. Amortized cost
involves valuing an investment at its cost and, thereafter, assuming a constant
amortization to maturity of any discount or premium, regardless of the effect of
fluctuating interest rates on the market value of the investment. The Trust will
seek to maintain the Money Market Fund's net asset value at $1.00 per share for
purposes of purchases and redemptions, although no assurance can be given that
the Trust will be able to do so on a continuous basis.
A security that is primarily traded on a domestic or foreign securities exchange
will be valued at the last sale price on that exchange or, if no sales occurred
during the day, at the current quoted bid price. An option that is written or
purchased by a Fund generally will be valued at the mean between the last asked
and bid prices. The value of a futures contract will be equal to the unrealized
gain or loss on the contract that is determined by marking the contract to the
current settlement price for a like contract on the valuation date of the
futures contract. A settlement price may not be used if the market makes a limit
move with respect to a particular futures contract or if the securities
underlying the futures contract experience significant price fluctuations after
the determination of the settlement price. When a settlement price cannot be
used, futures contracts will be valued at their fair market value as determined
by or under the direction of the Board of Trustees.
Securities that are primarily traded on a foreign exchange generally will be
valued for purposes of calculating a Fund's net asset value at the preceding
closing value of the securities on the exchange, except that when an occurrence
subsequent to the time a value was so established is likely to have changed that
value, the fair market value of those securities will be determined by
consideration of other factors by or under the direction of the Board. Trading
in foreign markets may not take place on every NYSE business day. In addition,
trading may take place in various foreign markets on Saturdays or on other days
when the NYSE is not open and on which a Fund's net asset value is not
calculated. Therefore, such calculation does not take place contemporaneously
with the determination of the prices of many of the
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portfolio securities used in such calculation and the value of a Fund's
portfolio may be significantly affected on days when shares of the Fund may not
be purchased or redeemed.
All assets and liabilities of a Fund initially expressed in foreign currency
values will be converted into U.S. dollar values at the mean between the bid and
offered quotations of the currencies against U.S. dollars as last quoted by any
recognized dealer. If the bid and offered quotations are not available, the rate
of exchange will be determined in good faith by the Board of Trustees. In
carrying out the Board's valuation policies, GEIM may consult with an
independent pricing service or services retained by the Trust. Further
information regarding the Trust's valuation policies is contained in the
Statement of Additional Information.
DIVIDENDS, DISTRIBUTIONS AND TAXES
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DIVIDENDS AND DISTRIBUTIONS
Dividends and capital gain distributions paid to investors will be automatically
reinvested in shares of the same class. Dividends attributable to the Income
Fund and the Money Market Fund are declared daily and paid monthly. Dividends
attributable to the net investment income of each of the other Funds are
declared and paid annually. If an investor redeems all of the shares that it may
own in the Income Fund or the Money Market Fund at any time during a month, the
investor's dividends (if any) will be paid to it along with the proceeds of its
redemption.
The Trust will send investors written confirmations relating to the automatic
reinvestment of daily dividends within five days following the end of each
quarter for the Income Fund, and within five days following the end of each
month for the Money Market Fund. Distributions of any net realized long-term and
short-term capital gains earned by a Fund will be made annually. Earnings of the
Income Fund and the Money Market Fund for Saturdays, Sundays and holidays will
be declared as dividends on the business day immediately preceding the Saturday,
Sunday or holiday. As a result of the different service fees applicable to the
Investment Class shares, dividends and distributions will be higher for the
Investment Class shares. See "Fee Table" and "Purchase of Shares."
Each Fund is subject to a 4% non-deductible excise tax measured with respect to
certain undistributed amounts of net investment income and capital gains. If
necessary to avoid the imposition of this tax, or if in the best interests of
the Fund's shareholders, the Trust will declare and pay dividends and
distributions more frequently than stated above.
TAXES
The following discussion may not be relevant to tax-deferred retirement accounts
or other tax exempt investors, and is not a complete analysis of the federal tax
implications of investing in the Funds. Investors should consult their own tax
advisor regarding the application of Federal, state, local and foreign tax laws
to their specific tax situation.
TAXES ON THE FUNDS. The Trust intends that each Fund qualify as a separate
regulated investment company under the Code. As a regulated investment company,
each Fund should not be subject to Federal income tax or Federal excise taxes if
substantially all of its net investment income and net realized capital gains
are distributed within allowable time limits, as provided under the Code. It is
important that the Funds meet these time limits and the requirements for
qualifying as regulated investment companies under the Code so that any earnings
on an investment will not be taxed twice.
Net investment income or capital gains earned by a Fund from investing in
foreign securities may be subject to foreign income taxes withheld at the
source. The Trust intends that the Funds operate in a manner that they qualify
for foreign tax rates that have been reduced under tax treaties with the United
States. Provided certain requirements are met under the Code, a Fund may elect
to treat foreign income taxes paid by that Fund as passed through to
shareholders as a foreign tax credit. The Trust anticipates that each of the
International Fund and the Emerging Markets Fund will seek to qualify for and
make this election in most, but not necessarily all, of its taxable years. The
Trust will report to shareholders any
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amount per share that must be included in gross income and that may be available
as a credit or a deduction. An investor may not claim a deduction for foreign
taxes if it does not itemize deductions, and certain limitations will be imposed
on the extent to which the credit (but not the deduction) for foreign taxes may
be claimed.
TAXES ON DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions an investor
receives from a Fund, whether reinvested or taken as cash, are subject to
Federal income tax. Dividends from a Fund's net investment income and
distributions of the Fund's short-term capital gains will be taxed as ordinary
income, and distributions of long-term capital gains will be taxed as long-term
capital gains, regardless of how long an investor has held its shares. As a
general rule, any gain or loss when an investor sells or redeems (including a
redemption in-kind) its Fund shares will be a long-term capital gain or loss if
it has held its shares for more than one year and a short-term capital gain or
loss if it has held its shares for one year or less. Some dividends received in
January may be taxable as if they had been paid the previous December.
Dividends and distributions paid by the Income Fund and the Money Market Fund,
and distributions of capital gains paid by all the Funds, will not qualify for
the Federal dividends-received deduction for corporations. Dividends paid by the
Emerging Markets Fund, Premier Growth Fund, Mid-Cap Fund, International Fund,
Value Fund, U.S. Equity Fund, S&P 500 Index Fund and Strategic Fund, to the
extent derived from dividends attributable to certain types of stock issued by
U.S. corporations, will qualify for the dividends-received deduction for
corporations. Some states, if certain asset and diversification requirements are
satisfied, permit shareholders to treat their portion of a Fund's dividends that
are attributable to interest on U.S. Treasury securities and certain U.S.
Government Obligations as income that is exempt from state and local income
taxes.
Statements regarding the tax status of income dividends and capital gains
distributions will be mailed to investors on or before January 31st of each
year.
CUSTODIAN AND TRANSFER AGENT
- ----------------------------
State Street, located at 225 Franklin Street, Boston, Massachusetts 02101,
serves as the Trust's custodian and transfer agent, and is responsible for
receiving acceptance orders for the purchase of shares and processing redemption
requests.
DISTRIBUTOR
- -----------
GE Investment Services Inc., located at 3003 Summer Street, P.O. Box 7900,
Stamford, Connecticut, 06904-7900, serves as distributor of the Funds' shares.
The Distributor, a wholly-owned subsidiary of GEIM, also serves as Distributor
for the Elfun Funds and GE Funds. GEIM or its affiliates, at their own expense,
may allocate portions of their revenues or other resources to assist the
Distributor in distributing shares of the Funds, by providing additional
promotional incentives to dealers. In some instances, these incentives may be
limited to certain dealers who have sold or may sell significant numbers of
shares of the Funds. The Distributor routinely offers dealers in Fund shares the
opportunity to participate in contests for which prizes include tickets to
theater and sporting events, dining, travel to meetings and conferences held in
locations remote from their offices and other items.
ADDITIONAL MATTERS
- ------------------
The Trust was formed as a business trust under the laws of Delaware pursuant to
a Certificate of Trust on May 23, 1997. The Trust's Declaration of Trust dated
August 29, 1997, as amended from time to time (the "Declaration"), authorizes
the Trust's Board of Trustees to create separate series, and within each series
separate classes, of an unlimited number of shares of beneficial interest, par
value $.001 per share. As of the date of this Prospectus, General Electric
Capital Assurance Company ("GE Assurance"), an indirect subsidiary of GE, owned
100% of the outstanding shares of the Trust. The shares were issued to GE
Assurance for providing the initial seed capital to the Trust. So long
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as GE Assurance owns more than 25% of the outstanding voting securities of the
Trust, it may be deemed to control the Trust.
As issued, shares of a Fund will be fully paid and non-assessable. Shares are
freely transferable and have no preemptive, subscription or conversion rights.
Each of the Service Class and the Investment Class represents an identical
interest in a Fund's investment portfolio. As a result, the classes have the
same rights, privileges and preferences, except with respect to: (1) the
designation of each class; (2) the sales arrangement; (3) the expenses allocable
exclusively to each class; and (4) voting rights on matters exclusively
affecting a single class. The Board of Trustees does not anticipate that there
will be any conflicts among the interests of the holders of the two classes. The
Trustees, on an ongoing basis, will consider whether any conflict exists and, if
so, take appropriate action. Certain aspects of the shares may be changed, upon
notice to Fund shareholders, to satisfy certain tax regulatory requirements, if
the Trust's Board of Trustees deems the change necessary.
When matters are submitted for shareholder vote, each shareholder of each Fund
will have one vote for each full share held and proportionate, fractional votes
for fractional shares held. In general, shares of each Fund vote by individual
Fund on all matters except (1) a matter affecting the interests of one or more
of the Funds, in which case only shares of the affected Funds would be entitled
to vote, (2) a matter affecting only the interests of one class, in which case
only shares of the affected class would be entitled to vote, or (3) when the
1940 Act requires that shares of the Funds be voted in the aggregate.
Normally, no meetings of shareholders of the Funds will be held for the purpose
of electing Trustees unless and until such time as less than a majority of the
Trustees holding office have been elected by shareholders of the Trust, at which
time the Trustees then in office will call a shareholders' meeting for the
election of Trustees. Shareholders of record of no less than two-thirds of the
outstanding shares of the Trust may remove a Trustee through a declaration in
writing or by vote cast in person or by proxy at a meeting called for that
purpose. A meeting will be called for the purpose of voting on the removal of a
Trustee at the written request of holders of 10% of the Trust's outstanding
shares.
Shareholders who satisfy certain criteria will be assisted by the Trust in
communicating with other shareholders in seeking the holding of the meeting.
The Trust only recently commenced operations and therefore has not yet generated
semi-annual and audited annual reports. Once semi-annual and audited annual
reports become available, the Trust will send investors a copy of each report,
each of which includes a list of the investment securities held by each Fund in
which it has invested. Only one report each will be mailed to an investor's
address. Investors may request additional copies of any report by calling the
toll-free number listed on, or by writing to the Trust at the address set forth
on, the front cover page of the Prospectus.
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APPENDIX
FURTHER INFORMATION: CERTAIN INVESTMENT TECHNIQUES AND STRATEGIES
The Funds may engage in a number of investment techniques and strategies,
including those described below. No Fund is under any obligation to use any of
the techniques or strategies at any given time or under any particular economic
condition. No assurance can be given that the use of any practice will have its
intended result or that the use of any practice is, or will be, available to any
Fund.
STRATEGIES AVAILABLE TO ALL FUNDS
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES. Each Fund may purchase when-issued
or delayed delivery securities, which means that delivery of and payment for the
securities will take place at a future time, i.e., beyond normal settlement. The
Funds purchase such securities to secure advantageous prices or yields, and not
for the purpose of leverage. When-issued securities purchased by a Fund may
include securities purchased on a "when, as and if issued" basis, meaning that
issuance of the securities depends on the occurrence of a subsequent event, such
as approval of a merger, corporate reorganization or debt restructuring.
The Funds do not earn interest or accrue income on when-issued or
delayed-delivery securities until settlement and bear the risk of market
fluctuation between the purchase and settlement dates. At the time of
settlement, a when-issued or delayed-delivery security may be valued at less
than its purchase price. In order to avoid the leveraging effect that may occur
with when-issued or delayed-delivery commitments, the Funds will maintain with
State Street, or with a designated sub-custodian, a separate account with a
segregated portfolio containing cash or other liquid assets in an amount equal
to the amount of such commitments.
LENDING PORTFOLIO SECURITIES. Each Fund may lend its portfolio securities to
well-known and recognized U.S. and foreign brokers, dealers and banks. Such
loans may not exceed 30% of the Fund's assets, and must be collateralized by
cash, letters of credit or U.S. Government Obligations. Cash or instruments
collateralizing a Fund's loans of securities will be segregated and maintained
at all times with State Street, or with a designated sub-custodian, in an amount
at least equal to the current market value of the loaned securities. A Fund that
lends portfolio securities will be subject to the risk of loss of rights in the
collateral if the borrower fails financially.
SUPRA-NATIONAL AGENCIES. Each Fund may invest in debt obligations of
supra-national agencies, which are agencies whose members make capital
contributions to support agency activities. Such agencies include the World
Bank, the European Coal and Steel Community, and the Asian Development Bank.
Debt obligations of supra-national agencies are not considered U.S. Government
Obligations and are not supported, directly or indirectly, by the U.S.
Government.
STRATEGIES AVAILABLE TO SOME BUT NOT ALL FUNDS
INVESTMENTS IN OTHER INVESTMENT COMPANIES. Each non-money market Fund, other
than the U.S. Equity Fund, may purchase securities of other investment
companies, provided that those other companies' investments are consistent with
the Fund's investment objective and policies and are permissible under the 1940
Act. Pursuant to the 1940 Act each Fund: (i) may invest a maximum of 10% of its
total assets in the securities of other investment companies; (ii) may not
invest more than 5% of its total assets in any one investment company; and (iii)
may not own more than 3% of the securities of any one investment company. The
non-money market Funds' investments in the Investment Fund are not considered
investment in another investment company for purposes of this paragraph and the
restrictions just described. To the extent a Fund invests in another investment
company, the Fund's shareholders will incur certain duplicative fees and
expenses, including two levels of investment advisory fees.
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DEPOSITARY RECEIPTS. Each non-money market Fund, may invest in American
Depositary Receipts, or "ADRs," European Depositary Receipts, or "EDRs"
(sometimes referred to as Continental Depositary Receipts, or "CDRs") and Global
Depositary Receipts, or "GDRs." Depositary receipts evidence an ownership
interest in securities of foreign corporations that are held on deposit with a
financial institution. ADRs are U.S. dollar-denominated receipts that represent
interests in shares of a foreign-based corporation held on deposit in a U.S.
bank or trust company. ADRs are traded on exchanges or over-the-counter in the
United States. EDRs represent interests in foreign or domestic securities held
in trust in a foreign bank, and are traded in European markets. EDRs may not
necessarily be denominated in the same currency as the securities they
represent. GDRs are receipts for shares in a foreign or domestic corporations
that are traded in capital markets around the world. While ADRs are intended to
permit foreign corporations to offer shares to Americans, and EDRs are designed
for use in European markets, and GDRs allow companies to offer shares in many
markets. A Fund may purchase ADRs from institutions that are not sponsored by
the issuer of the underlying foreign securities, in which case the Fund may not
receive as much information about the ADRs that it would have received if it had
purchased them from a sponsored depository.
WEBS AND OTHER INDEX-RELATED SECURITIES. Each of the Emerging Markets Fund,
International Fund and Strategic Fund may invest in shares in a particular
series issued by Foreign Fund, Inc., an investment company whose shares also are
known as "World Equity Benchmark Shares" or "WEBS." WEBS have been listed for
trading on the American Stock Exchange, Inc. The Funds also may invest in shares
in a particular series issued by CountryBaskets Index Fund, Inc., or another
fund the shares of which are the substantial equivalent of WEBS. Each of the
U.S. Equity Fund, Premier Growth Fund, Value Fund and Strategic Fund may invest
in Standard & Poor's Depositary Receipts, or "SPDRs." SPDRs are securities that
represent ownership in a long-term unit investment trust that holds a portfolio
of common stocks designed to track the performance of the S&P 500 Index. A Fund
investing in a SPDR would be entitled to receive proportionate quarterly cash
distributions corresponding to the dividends that accrue to the S&P 500 stocks
in the underlying portfolio, less trust expenses.
EMERGING MARKETS. The Emerging Markets Fund, International Fund, Strategic Fund
and Income Fund each may invest more than 5% of its total assets in securities
of issuers located in one or more emerging markets countries. The Mid-Cap Fund,
Premier Growth Fund, Value Fund, U.S. Equity Fund and S&P 500 Index Fund each
may invest up to 5% of its total assets in such securities. Emerging markets
countries are located primarily in Asia, Latin America, the Middle East,
Southern Europe, Eastern Europe (including the former republics of the Soviet
Union and the Eastern Bloc) and Africa. Risks and special considerations
associated with investing in emerging markets countries are discussed above
under "Risk Factors and Special Considerations - Investing in Developing or
Emerging Markets."
MUNICIPAL LEASES. The Strategic Fund may invest in municipal leases, which may
take the form of a lease or an installment purchase or a conditional sales
contract to acquire equipment and facilities. Interest payments on qualifying
municipal leases are exempt from Federal income taxes and state income taxes
within the state of issuance. The Fund may hold municipal leases that are rated
investment grade (or its issuer's senior debt is rated investment grade) and
unrated, if GEIM (subject to oversight and approval by the Board of Trustees)
deems such unrated leases to be of comparable quality to rated issues. Risks and
special considerations applicable to certain investment grade obligations are
described above under "Risk Factors and Special Considerations - Investment
Grade Obligations." Municipal leases will be considered illiquid securities
unless the Trust's Board of Trustees determines on an ongoing basis that the
leases are readily marketable.
Municipal leases have special risks. They represent a type of financing that has
not yet developed the depth of marketability generally associated with other
Municipal Obligations. Some municipal leases contain "non- appropriation"
clauses, which means that the governmental issuer is under no obligation to make
future payments under the lease or contract unless money is appropriated for
that purpose by the appropriate legislative body on a yearly or other periodic
basis. Moreover, although a municipal lease will be secured by financed
equipment or facilities, disposing of such collateral might prove difficult in
the event of foreclosure. To limit these risks, the Fund will invest no more
than 5% of its total assets in municipal leases. In addition, the Fund will
purchase leases with non-appropriation clauses only when the lease payments will
commence amortization of principal at an early date, so that the leases will
have an average life of five years or less.
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FLOATING AND VARIABLE RATE INSTRUMENTS. The Strategic Fund, Income Fund and
Money Market Fund each may invest in floating and variable rate instruments
(collectively, "adjustable rate securities"), which are securities with floating
or variable rates of interest or dividend payments. The floating or variable
rate is adjusted periodically according to a specified formula, which may be
determined by reference to a market interest rate or a some interest rate index,
or determined through an auction or re-marketing process. The variable and
floating rates of interest permit these Funds to take advantage of increases in
interest rates, and therefore these securities tend to be less sensitive than
fixed rate securities to interest rate changes and to have higher yields when
interest rates increase.
The amount by which the rates paid on an income security may increase or
decrease may be subject to periodic or lifetime reset limits (or "caps"), which
means that the interest rate does not increase beyond a certain level. If
interest rates exceed these levels, the values of certain capped adjustable rate
securities will fall. In addition, fluctuations in interest rates above these
caps could cause adjustable rate securities to behave more like fixed rate
securities in response to extreme movements in interest rates. Moreover, during
periods of rising interest rates, changes in the interest rate of an adjustable
rate security may lag changes in market rates. The Strategic Fund and Income
Fund may invest in adjustable rate securities that have interest rates that vary
inversely with changes in market rates of interest. Such securities also may pay
a rate of interest determined by applying a multiple to the variable rate.
Increases and decreases in the value of securities whose rates vary inversely
with changes in market rates of interest generally will be larger than
comparable changes in the value of an equal principal amount of a fixed rate
security having similar credit quality, redemption provisions and maturity.
The Strategic Fund may purchase floating and variable rate demand bonds and
notes, which are Municipal Obligations ordinarily having stated maturities in
excess of one year but which permit their holder to demand payment of principal
at any time or at specified intervals. Variable rate demand notes include master
demand notes, which permit the Fund to invest fluctuating amounts, which may
change daily without penalty, pursuant to direct arrangements between the Fund,
as lender, and the borrower. These obligations have interest rates that
fluctuate from time to time and frequently are secured by letters of credit or
other credit support arrangements provided by banks. Use of letters of credit or
other credit support arrangements will not adversely affect the tax-exempt
status of variable rate demand notes. Because they are direct lending
arrangements between the lender and borrower, variable rate demand notes
generally will not be traded and no established secondary market generally
exists for them, although they are redeemable at face value. If variable rate
demand notes are not secured by letters of credit or other credit support
arrangements, the Fund's right to demand payment will be dependent on the
ability of the borrower to pay principal and interest on demand. Each obligation
purchased by the Fund will meet the quality criteria established by GEIM for the
purchase of Municipal Obligations. GEIM, on behalf of the Fund, considers on an
ongoing basis the creditworthiness of the issuers of the floating and variable
rate demand obligations in the Fund's portfolio.
PARTICIPATION INTERESTS. The Strategic Fund may purchase participation interests
in certain Municipal Obligations from financial institutions. A participation
interest gives the Fund an undivided interest in the Municipal Obligation in the
proportion that the Fund's participation interest bears to the total principal
amount of the Municipal Obligation. These instruments may have fixed, floating
or variable rates of interest. If the participation interest is unrated, or has
been given a rating below one that is otherwise permissible for purchase by the
Fund, the participation interest will be backed by an irrevocable letter of
credit or guarantee of a bank that the Trust's Board of Trustees has determined
meets certain quality standards, or the payment obligation otherwise will be
collateralized by U.S. Government Obligations. The Fund will have the right,
with respect to certain participation interests, to demand payment, on a
specified number of days' notice, for all or any part of the Fund's
participation interest in the Municipal Obligation, plus accrued interest. The
Trust intends that the Fund exercise its right to demand payment only upon a
default under the terms of the Municipal Obligation, or to maintain or improve
the quality of its investment portfolio. The Fund will invest no more than 5% of
the value of its total assets in participation interests.
ZERO COUPON OBLIGATIONS. The U.S. Equity Fund, the Strategic Fund and the Income
Fund may invest in zero coupon obligations. Zero coupon obligations pay no
interest to their holders prior to maturity. Instead, the interest accrues (or
builds up) and is paid in a lump sum at maturity. Investors purchase zero coupon
obligations at a deep discount, or prices far lower than par value. Because zero
coupon securities bear no interest, they are more volatile than other fixed
income securities. When interest rates rise, their values fall more rapidly then
securities paying interest on a current
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basis. Conversely, when interest rates fall, the values of zero coupon bonds
rise more rapidly then securities paying interest on a current basis, because
the zeros have locked in a particular rate of reinvestment that becomes more
attractive the further rates fall.
Even though each Fund receives no payments on its zero coupon securities prior
to maturity or disposition, for Federal income tax purposes it must distribute
income to shareholders as if payments had actually been made. Each Fund must pay
these dividends to shareholders from its cash assets, from borrowing or by
liquidating portfolio securities. The Fund may have to liquidate portfolio
securities at an inopportune time, such as when securities are thinly traded,
and therefore would sell securities at lower prices. Moreover, to the extent
that portfolio assets must be used to pay distributions, the Fund would lose the
opportunity to use those assets to purchase additional income-producing
securities, and therefore current income may be reduced.
The Strategic Fund may invest up to 10% of its assets in zero coupon Municipal
Obligations, which are generally divided into two categories: "Pure Zero
Obligations," which pay no interest for their entire life and "Zero/Fixed
Obligations," which pay no interest for some initial period and thereafter pay
interest currently. In the case of a Pure Zero Obligation, the failure to pay
interest currently may result from the obligation's having no stated interest
rate, in which case the obligation pays only principal at maturity and is sold
at a discount from its stated principal. A Pure Zero Obligation may, in the
alternative, provide for a stated interest rate, but provide that no interest is
payable until maturity, in which case accrued, unpaid interest on the obligation
may be capitalized as incremental principal. The value to the investor of a zero
coupon Municipal Obligation consists of the economic accretion either of the
difference between the purchase price and the nominal principal amount (if no
interest is stated to accrue) or of accrued, unpaid interest during the
Municipal Obligation's life or payment deferral period.
MUNICIPAL OBLIGATION COMPONENTS. The Strategic Fund may invest in Municipal
Obligations the interest rate on which has been divided by the issuer into two
different and variable components, which together result in a fixed interest
rate. Typically, the first of the components (the "Auction Component") pays an
interest rate that is reset periodically through an auction process, whereas the
second of the components (the "Residual Component") pays a residual interest
rate based on the difference between the total interest paid by the issuer on
the Municipal Obligation and the auction rate paid on the Auction Component. The
Fund may purchase both Auction and Residual Components. Because the interest
rate paid to holders of Residual Components is generally determined by
subtracting the interest rate paid to the holders of Auction Components from a
fixed amount, the interest rate paid to Residual Component holders will decrease
as the Auction Component's rate increases and increase as the Auction
Component's rate decreases. Moreover, the extent of the increases and decreases
in market value of Residual Components may be larger than comparable changes in
the market value of an equal principal amount of a fixed rate Municipal
Obligation having similar credit quality, redemption provisions and maturity.
CUSTODY RECEIPTS. The Strategic Fund may acquire custody receipts or
certificates underwritten by securities dealers or banks that evidence ownership
of future interest payments, principal payments, or both, on certain Municipal
Obligations. Similar to depositary receipts, the actual Municipal Obligations
are held in an irrevocable trust or custodial account with a custodian bank,
which then issues receipts or certificates that evidence ownership. Custody
receipts evidencing specific coupon or principal payments have the same general
attributes as zero coupon Municipal Obligations described above. Although under
the terms of a custody receipt, the Fund would be typically authorized to assert
its rights directly against the issuer of the underlying obligation, the Fund
could be required to assert through the custodian bank its rights against the
underlying issuers. Thus, in the event the underlying issuer fails to pay
principal and/or interest when due, the Fund may be subject to delays, expenses
and risks that are greater than those that would have been involved if the Fund
had purchased a direct obligation of the issuer.
MORTGAGE RELATED SECURITIES. The mortgage related securities in which the
Strategic Fund and the Income Fund may invest represent pools of mortgage loans
assembled for sale to investors by various governmental agencies, such as the
Government National Mortgage Association ("GNMA"), by government related
organizations, such as the Federal National Mortgage Association ("FNMA") and
the Federal Home Loan Mortgage Corporation ("FHLMC"), as well as by private
issuers, such as commercial banks, savings and loan institutions, mortgage
bankers and private mortgage insurance companies.
-iv-
<PAGE>
Several risks are associated with mortgage related securities. The monthly cash
inflow from the underlying loans may be insufficient to meet the monthly payment
requirements of the mortgage related security. Early returns of principal (such
as from prepayments or foreclosures) will shorten the term of the underlying
mortgage pool for a mortgage related security and will affect the average life
of the mortgage related securities the Funds continue to hold. Factors affecting
the occurrence of mortgage prepayments include the level of interest rates,
general economic conditions, the location and age of the mortgaged property and
other social and demographic conditions. When interest rates fall, prepayments
tend to increase, and when they rise, prepayments tend to decrease.
Because prepayments of principal generally occur when interest rates are
declining, each Fund will likely have to reinvest the proceeds of prepayments at
lower interest rates than those at which its assets were previously invested,
resulting in a corresponding decline in the Fund's yield. Thus, mortgage related
securities may have less potential for capital appreciation in periods of
falling interest rates than other fixed income securities of comparable
maturity. To the extent that a Fund purchases mortgage related securities at a
premium, unscheduled prepayments, which are made at par, will result in a loss
equal to any unamortized premium.
Adjustable rate mortgages, or "ARMs" have interest rates that reset at periodic
intervals. The Funds may invest in ARMs that have maximum annual or lifetime
caps. ARMs have the advantages and risks associated with variable and floating
rate securities (including capped adjustable rate securities) discussed above.
Collateralized mortgage obligations, or "CMOs" are obligations fully
collateralized by a portfolio of mortgages or mortgage related securities.
Payments of principal and interest on the mortgages are passed through to the
holders of the CMOs on the same schedule as they are received, although certain
classes of CMOs have priority over others with respect to the receipt of
prepayments on the mortgages. Therefore, depending on the type of CMOs in which
the Strategic Fund or the Income Fund invests, the investment may be subject to
a greater or lesser risk of prepayment than other types of mortgage related
securities.
To the extent GEIM determines any mortgage related securities are not readily
marketable, each of the Funds would limit its investments in these securities,
together with other illiquid instruments, to not more than 15% of the value of
its net assets.
GOVERNMENT STRIPPED MORTGAGE RELATED SECURITIES. The Strategic Fund and the
Income Fund each may invest in government stripped mortgage related securities
(i.e., the issuer has stripped the security into its interest and principal
components) issued and guaranteed by GNMA, FNMA or FHLMC. These securities
represent beneficial ownership interests in either periodic principal
distributions ("principal-only") or interest distributions ("interest-only") on
mortgage related certificates. The certificates underlying the government
stripped mortgage related securities represent all or part of the beneficial
interest in pools of mortgage loans. Each Fund will invest in government
stripped mortgage related securities in order to enhance yield or to benefit
from anticipated appreciation in value of the securities at times when GEIM
believes that interest rates will remain stable or increase. In periods of
rising interest rates, the expected increase in the value of government stripped
mortgage related securities may offset all or a portion of any decline in value
of the Fund's securities.
Investing in government stripped mortgage related securities involves risks
normally associated with investing in mortgage related securities issued by
government or government related entities. In addition, the yields on government
stripped mortgage related securities are extremely sensitive to the prepayment
experience on the mortgage loans underlying the certificates collateralizing the
securities. If a decline in the level of prevailing interest rates results in a
rate of principal prepayments higher than anticipated, distributions of
principal will be accelerated, thereby reducing the yield to maturity on
interest-only government stripped mortgage related securities and increasing the
yield to maturity on principal-only government stripped mortgage related
securities. Sufficiently high prepayment rates could result in the Strategic
Fund or the Income Fund not fully recovering its initial investment in an
interest-only government stripped mortgage related security.
Under current market conditions, the Funds expect to invest in interest-only
government stripped mortgage related securities. Government stripped mortgage
related securities are currently traded in an over-the-counter market
-v-
<PAGE>
maintained by several large investment banking firms. The Funds will acquire
government stripped mortgage related securities only if a secondary market for
the securities exists at the time of acquisition, but there can be no assurance
that either Fund will be able to effect a trade of such a security at a desired
time. Except for government stripped mortgage related securities based on fixed
rate FNMA and FHLMC mortgage certificates that meet certain liquidity criteria
established by the Trust's Board of Trustees, the Trust treats government
stripped mortgage related securities as illiquid and will limit each of the
Strategic Fund's and the Income Fund's investments in these securities, together
with other illiquid investments, to not more than 15% of its net assets.
ASSET-BACKED AND RECEIVABLE-BACKED SECURITIES. The Strategic Fund and the Income
Fund each may invest in asset- backed and receivable-backed securities. These
instruments are secured by and payable from pools of assets, including credit
card receivables and pools of motor vehicle retail installment sales contracts
and security interests in the vehicles securing those contracts. A Fund's return
on an asset- or receivable-backed security may be adversely affected by early
prepayment of underlying sales contracts. In periods of falling interest rates,
there is a general tendency for prepayments to increase, shortening the average
maturity of an asset- or receivable-backed security, making it difficult to lock
in higher interest rates. If a creditor defaults on an underlying sales
contract, asset- or receivable-backed securities might be adversely affected if
the full amount receivable on such contract cannot be realized.
MORTGAGE DOLLAR ROLLS. The Strategic Fund and the Income Fund each may use up to
25% of its total assets to enter into mortgage "dollar rolls." A mortgage dollar
roll transaction requires a Fund to sell a security and simultaneously contract
with purchaser buy similar, but not identical, securities at some future date.
The Fund loses the right to principal and interest payments on the securities
sold. The Fund benefits from a dollar roll to the extent that (i) the price at
which the Fund sells the security exceeds the price at which it buys (i.e., the
"drop" price) similar securities in the future, and (ii) the Fund earns interest
on the cash proceeds from the sale. However, these gains are offset by foregone
interest income and capital appreciation on the securities sold. Therefore a
Fund's overall gains from mortgage dollar roll transactions depend upon GEIM's
ability to predict correctly mortgage prepayments and interest rates. To the
extent that GEIM incorrectly analyzes these factors, the Fund's investment
performance may be diminished compared to what it would have been without the
use of mortgage dollar rolls.
SHORT SALES AGAINST THE BOX. The International Fund, Value Fund, Mid-Cap Fund
and Emerging Markets Fund may sell securities "short against the box." A short
sale "against the box" means that at all times when the short position is open,
the Fund owns at least an equal amount of the securities, or securities
convertible into, or exchangeable without further consideration for, securities
of the same issue as the securities sold short. Short sales against the box are
typically used by sophisticated investors to defer recognition of capital gains
or losses.
-vi-
<PAGE>
GE Institutional Funds (the "Trust") is an open-end management investment
company that offers ten diversified managed investment funds (each, a "Fund" and
collectively, the "Funds"), each of which has two classes of shares - the
Investment Class and the Service Class. Each Fund has a discrete investment
objective that it seeks to achieve by following distinct investment policies.
This Prospectus describes the Investment Class shares of the Funds.
The Investment Class shares and the Service Class shares are identical, except
as to the services offered, and the expenses borne, by each class. Investors may
obtain a copy of the prospectus describing the Service Class shares free of
charge by calling the telephone number listed below or writing the Trust at the
address listed below.
o Emerging Markets Fund's investment objective is long-term growth of
capital. The Fund seeks to achieve this objective by investing primarily in
equity securities of issuers that are located in emerging markets
countries.
o Premier Growth Equity Fund's investment objective is long-term growth of
capital and future income rather than current income. The Fund seeks to
achieve this objective by investing primarily in growth-oriented equity
securities.
o Mid-Cap Growth Fund's investment objective is long-term growth of capital.
The Fund seeks to achieve this objective by investing primarily in equity
securities of companies with medium-sized market capitalization that have
the potential for above-average growth.
o International Equity Fund's investment objective is long-term growth of
capital. The Fund seeks to achieve this objective by investing primarily in
foreign equity securities.
o Value Equity Fund's investment objective is long-term growth of capital and
future income rather than current income. The Fund seeks to achieve this
objective by investing primarily in equity securities of companies with
large-sized market capitalization that the Fund's management considers to
be undervalued by the market.
o U.S. Equity Fund's investment objective is long-term growth of capital. The
Fund seeks to achieve this objective by investing primarily in equity
securities of U.S. companies.
o S&P 500 Index Fund's investment objective is to provide growth of capital
and accumulation of income that corresponds to the investment return of the
Standard & Poor's 500 Composite Stock Price Index. The Fund seeks to
achieve this objective by investing in common stocks comprising that Index.
o Strategic Investment Fund's investment objective is to maximize total
return, consisting of capital appreciation and current income. The Fund
seeks to achieve this objective by following an asset allocation strategy
that provides diversification across a range of asset classes and
contemplates shifts among them from time to time.
o Income Fund's investment objective is to seek maximum income consistent
with prudent investment management and the preservation of capital. The
Fund seeks to achieve this objective by investing in fixed income
securities.
o Money Market Fund's investment objective is to seek a high level of current
income consistent with the preservation of capital and maintenance of
liquidity. The Fund seeks to achieve this objective by investing in U.S.
dollar denominated, short-term money market instruments.
This Prospectus briefly sets forth certain information about the Funds and the
Trust that prospective investors will find helpful in making an investment
decision. Investors are encouraged to read this Prospectus carefully and retain
it for future reference.
AN INVESTMENT IN THE MONEY MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THIS FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
SHARES OF THE FUNDS ARE NOT DEPOSITS WITH OR OBLIGATIONS OF ANY FINANCIAL
INSTITUTION, ARE NOT GUARANTEED OR ENDORSED BY ANY FINANCIAL INSTITUTION OR ITS
AFFILIATES, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. THERE CAN BE NO
ASSURANCE THAT A FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE.
Additional information about the Funds and the Trust, contained in a Statement
of Additional Information dated the same date as this Prospectus, has been filed
with the Securities and Exchange Commission (the "SEC") and is available upon
request and without charge by calling the Trust at the telephone number listed
below or by contacting the Trust at the address listed below. The SEC maintains
a Web site (http://www.sec.gov) that contains the Statement of Additional
Information, material incorporated by reference and other information regarding
the Funds and the Trust. The Statement of Additional Information is incorporated
in its entirety by reference into this Prospectus.
GE INVESTMENT MANAGEMENT INCORPORATED
Investment Adviser and Administrator
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
PROSPECTUS
November ___, 1997
TABLE OF CONTENTS
EXPENSE INFORMATION................................................1
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES......................2
INVESTMENTS IN DEBT SECURITIES....................................11
CASH MANAGEMENT POLICIES - NON-MONEY MARKET FUNDS.................11
ADDITIONAL PERMITTED INVESTMENTS..................................12
INVESTMENT RESTRICTIONS...........................................17
RISK FACTORS AND SPECIAL CONSIDERATIONS...........................17
MANAGEMENT OF THE TRUST...........................................23
PURCHASE OF SHARES................................................26
REDEMPTION OF SHARES..............................................29
INVESTMENT SWITCHES...............................................30
NET ASSET VALUE...................................................30
DIVIDENDS, DISTRIBUTIONS AND TAXES................................31
CUSTODIAN AND TRANSFER AGENT......................................32
DISTRIBUTOR.......................................................33
ADDITIONAL MATTERS................................................33
APPENDIX - FURTHER INFORMATION:
CERTAIN INVESTMENT TECHNIQUES AND STRATEGIES.....................i
3003 Summer Street
Stamford, Connecticut 06905
(800) 493-3042
<PAGE>
EXPENSE INFORMATION
- -------------------
Expenses are one of several factors to consider when investing in the Funds. The
following fee table and example are designed to assist investors in
understanding the various costs and expenses that they will bear directly or
indirectly as investors in the Investment Class shares of a Fund. Annual Fund
Operating Expenses are paid out of each Fund's assets and include fees for
portfolio management, maintenance of shareholder accounts, accounting and other
services.
SHAREHOLDER TRANSACTION EXPENSES
The Funds have no sales load on purchases or reinvested dividends, deferred
sales load, redemption fee or exchange fee.
FEE TABLE
- ----------
<TABLE>
<CAPTION>
PREMIER MID- INTERNA- S&P STRATEGIC
EMERGING GROWTH CAP TIONAL VALUE U.S. 500 INVEST- MONEY
MARKETS EQUITY GROWTH EQUITY EQUITY EQUITY INDEX MENT INCOME MARKET
FUND FUND FUND FUND FUND FUND FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ANNUAL FUND
OPERATING
EXPENSES (AS OF
PERCENTAGE OF
NET ASSETS):
Maximum
Advisory an
Administration
Fees 1.05%* .55%* .55%* .75%* .55%* .55%* .15% .45%* .35%* .25%*
Other
Expenses None None None None None None None None None None
Total Operating
Expenses 1.05% .55% .55% .75% .55% .55% .15% .45% .35% .25%
</TABLE>
- ----------
* The advisory and administration fee shown is the maximum payable by the
Fund; this fee declines incrementally as the Fund's assets increase as
described under "Management of the Trust - Fee Structure."
The nature of the services provided to, and the advisory and administration fee
paid by, each Fund are described under "Management of the Trust." A Fund's
advisory and administration fee is intended to be a "unitary" fee that includes
any other operating expenses payable by a Fund, except for fees paid to the
Trust's independent Trustees, brokerage fees, and expenses that are not normal
operating expenses of the Funds (such as extraordinary expenses, interest and
taxes). The amount shown as the advisory and administration fee for a Fund
reflects the highest fee payable, and does not reflect that the fee decreases
incrementally as Fund assets increase. Because the Funds have only recently
commenced operations, "Other Expenses" in the table above are based on estimated
amounts for the current fiscal year. "Other Expenses" include only Trustees'
fees payable to the Trust's independent Trustees, brokerage fees, and expenses
that are not normal operating expenses of the Funds. This amount is expected to
be de minimus (less than .01%); therefore "Other Expenses" are reflected as
"None."
EXAMPLE
The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over a one-year and three-year period
with respect to a hypothetical investment in each Fund. These amounts are based
upon (1) payment by the Fund of operating expenses at the levels set out in the
table above and (2) the specific assumptions stated below.
- 1 -
<PAGE>
A SHAREHOLDER WOULD PAY THE FOLLOWING
EXPENSES ON A $1,000 INVESTMENT,
ASSUMING (1) A 5% ANNUAL RETURN, AND
(2) REDEMPTION AT THE END OF EACH TIME PERIOD:
----------------------------------------------
1 YEAR 3 YEARS
------ -------
Emerging Markets Fund $11 $33
Premier Growth Equity Fund $6 $18
Mid-Cap Growth Fund $6 $18
International Equity Fund $8 $24
Value Equity Fund $6 $18
U.S. Equity Fund $6 $18
S&P 500 Index Fund $2 $ 5
Strategic Investment Fund $5 $14
Income Fund $4 $11
Money Market Fund $3 $ 8
The above example is intended to assist investors in understanding various costs
and expenses that an investor in the Investment Class shares of a Fund will bear
directly or indirectly. Although the table assumes a 5% annual return, a Fund's
actual performance will vary and may result in an actual return that is greater
or less than 5%. THE EXAMPLE SHOULD NOT BE CONSIDERED TO BE A REPRESENTATION OF
PAST OR FUTURE EXPENSES OF A FUND; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN.
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES
- ---------------------------------------------
The Trust is a diversified, open-end management investment company that consists
of ten separate investment portfolios, each of which has two classes of shares -
the Investment Class and the Service Class. The Service Class shares differ from
the Investment Class shares in that an additional .25% shareholder servicing and
distribution fee is charged to each Fund with respect to Service Class shares.
This .25% fee is intended to compensate GEIM, or enable GEIM to compensate other
persons, for expenditures made on behalf of each Fund to obtain certain
shareholder services, including third-party record-keeping, transfer agency, and
ongoing services related to the maintenance of Service Class shareholder
accounts and to compensate GEIM, or enable GEIM to compensate other persons,
including GE Investment Services Inc. (the "Distributor"), for providing certain
services that are primarily intended to result in the sale of Service Class
shares of the Funds pursuant to a shareholder servicing and distribution plan
adopted in accordance with Rule 12b-1 under the Investment Company Act of 1940,
as amended (the "1940 Act"). The shareholder servicing and distribution fee paid
by the Service Class shares will cause such shares to have a higher expense
ratio and lower return than the Investment Class shares.
Investors should be aware that GE Funds, an investment company that is
affiliated with the Trust and also advised by GEIM, offers additional class
options for investors that may not meet the minimum investment requirements of
the Funds and/or require services not provided by the Funds, but that wish to
invest in portfolios (the "GE Funds") advised by GEIM with the same or similar
investment objectives and policies as those of certain of the Funds. Class A
shares of the GE Funds would be suitable for investors that require "full
service." Under the full service option, GEIM, in conjunction with the employee
retirement plan record-keeping capabilities of State Street Bank and Trust
Company ("State Street"), provides record-keeping and other shareholder services
(including shareholder communication services) to investors in the Class A
shares of the GE Funds. Class D shares of the GE Funds would be suitable for
investors that require only advisory and administration services (similar to
investors in the Investment Class shares of the Funds) but that are not able to
meet the minimum investment requirements of the Funds, as well as for
GE-affiliated employee retirement plans that require the full service option.
Because the GE Funds are marketed primarily to retail
- 2 -
<PAGE>
investors that generally invest smaller amounts in such funds, the fees charged
to investors in the GE Funds are higher than those charged to investors in the
corresponding Funds of the Trust. INVESTORS SHOULD EVALUATE THE LEVELS AT WHICH
THEY INTEND TO INVEST AND THEIR INDIVIDUAL SHAREHOLDER SERVICES REQUIREMENTS TO
DETERMINE THE CLASS OF SHARES OF THE FUNDS OR THE GE FUNDS THAT BEST SUITS THEIR
NEEDS AT THE LOWEST LEVEL OF FEES.
Set forth below is a description of the investment objective and policies of
each Fund. The investment objective of a Fund may not be changed without the
approval of the holders of a majority of the Fund's outstanding voting
securities as defined in the 1940 Act. Such a majority is defined in the 1940
Act as the lesser of (1) 67% or more of the shares present at a Fund meeting, if
the holders of more than 50% of the outstanding shares of the Fund are present
or represented by proxy or (2) more than 50% of the outstanding shares of the
Fund. No assurance can be given that a Fund will be able to achieve its
investment objective.
EMERGING MARKETS FUND
The investment objective of the Emerging Markets Fund is long-term growth of
capital. The Fund seeks to achieve this objective by investing, under normal
conditions, at least 65% of its total assets in equity securities of issuers
that are located in emerging markets countries. The determination of where an
issuer is located will be made by reference to the country in which the issuer:
(a) is organized; (b) derives at least 50% of its revenues or profits from goods
produced or sold, investments made or services performed; (c) has at least 50%
of its assets situated; or (d) has the principal trading market for its
securities (the "Country Identification Test").
GEIM allocates the Fund's assets among the selected emerging markets of newly
industrializing countries in Asia, Latin America, the Middle East, Southern
Europe, Eastern Europe (including the former republics of the Soviet Union and
the Eastern Bloc) and Africa. An emerging markets country is any country having
an economy and market that are or would be considered by the World Bank to be
emerging or developing, or emerging countries that are listed on the Morgan
Stanley Capital International Emerging Markets Index.
The Fund, from time to time, may invest all of its assets in a single country.
If the Fund invests all or a significant portion of its assets at any time in a
single country, events in that country are more likely to affect the Fund's
investments. GEIM bases its selection on certain relevant factors, including the
investment restrictions and tax barriers of a given country, the outlook for
economic growth, currency exchange rates, commodity prices, interest rates,
political factors and the stage of the local market cycle in the emerging
markets country.
Equity securities of emerging markets companies may include common stocks,
preferred stocks, convertible bonds, convertible debentures, convertible notes,
convertible preferred stocks and warrants or rights issued by foreign companies,
equity interests in foreign investment funds or trusts and foreign real estate
investment trust securities. The Fund may invest in American Depositary Receipts
("ADRs") (sometimes referred to as Continental Depositary Receipts, or "CDRs"),
European Depositary Receipts ("EDRs") and Global Depositary Receipts ("GDRs").
The Emerging Markets Fund, under normal market conditions, may invest up to 35%
of its assets in debt securities, including notes, bonds and debentures issued
by corporate or governmental entities when GEIM determines that investing in
those kinds of debt securities is consistent with the Fund's investment
objective of long-term growth of capital. GEIM believes that such a
determination could be made, for example, upon the Emerging Markets Fund's
investing in the debt securities of a company whose securities GEIM anticipates
will increase in value as a result of a development particularly or uniquely
applicable to the company. GEIM also believes such a determination could be made
with respect to an investment by the Emerging Markets Fund in debt instruments
issued by a governmental entity if GEIM concludes that the value of the
instruments will increase as a result of improvements or changes in public
finances, monetary policies, external accounts, financial markets, exchange rate
policies or labor conditions of the country in which the governmental entity is
located.
- 3 -
<PAGE>
In addition, the Emerging Markets Fund may sell securities short against the box
and may engage in certain investments discussed below under "Additional
Permitted Investments." (See "Risk Factors and Special Considerations" for a
discussion of risks associated with investing in emerging markets countries.)
PREMIER GROWTH EQUITY FUND
The investment objective of the Premier Growth Equity Fund (the "Premier Growth
Fund") is long-term growth of capital and future income rather than current
income. The Fund seeks to achieve this objective by investing primarily in
growth-oriented equity securities which, under normal market conditions, will
represent at least 65% of the Fund's assets. In pursuing its objective, the
Premier Growth Fund, under normal conditions, may invest in common stocks,
preferred stocks, convertible bonds, convertible debentures, convertible notes,
convertible preferred stocks and warrants or rights issued by U.S. and foreign
companies.
The Premier Growth Fund will seek to identify and invest in companies it
believes will offer potential for long-term growth of capital. These companies
typically would possess one or more of a variety of characteristics, including
high quality products and/or services, strong balance sheets, sustainable
internal growth, superior financial returns, competitive position in the
issuer's economic sector and shareholder-oriented management. While the Premier
Growth Fund may invest in companies of varying sizes as measured by assets,
sales or capitalization, a majority of its assets, under normal market
conditions, will be comprised of companies with relatively large capitalization.
In addition, the Premier Growth Fund normally will be invested in companies that
have above-average growth prospects and which are typically leaders in their
fields. The Fund generally will be diversified over a cross section of
industries.
Up to 25% of the Premier Growth Fund's total assets may be invested in foreign
securities, excluding, for purposes of this limitation, ADRs and securities of a
foreign issuer with a class of securities registered with the SEC and listed on
a U.S. national securities exchange ("U.S. Listed Securities") or traded on the
Nasdaq National Market or the Nasdaq SmallCap Market (collectively, "Nasdaq
Traded Securities"). The equity securities in which the Premier Growth Fund
invests in most cases will be traded on domestic or foreign securities
exchanges, or traded in the domestic or foreign over-the-counter markets. The
Premier Growth Fund may invest up to 35% of its assets in bonds, notes and
debentures. For temporary defensive purposes, the Fund may invest in fixed
income securities without limitation. To the extent that the Fund invests in
fixed income securities, it may not achieve its investment objective. The
Premier Growth Fund also may engage in certain investments discussed below under
"Additional Permitted Investments."
MID-CAP GROWTH FUND
The investment objective of the Mid-Cap Growth Fund (the "Mid-Cap Fund") is
long-term growth of capital. The Mid- Cap Fund seeks to achieve this objective
by investing primarily in the equity securities of companies with medium-sized
market capitalization ("mid-cap") that have the potential for above-average
growth. The Fund, under normal market conditions, will invest at least 65% of
its total assets in a portfolio of equity securities of mid-cap companies traded
on U.S. securities exchanges or in the U.S. over-the-counter market, including
common stocks, preferred stocks, convertible preferred stocks, convertible
bonds, convertible debentures, convertible notes, ADRs and warrants or rights
issued by foreign and U.S. companies. The Fund defines a mid-cap company as one
whose securities are within the market capitalization range of stocks listed on
the S&P MidCap 400 Index (the "S&P 400 Index").
Mid-cap growth companies are often still in the early phase of their life
cycles. Accordingly, investing in mid-cap companies generally entails greater
risk exposure and volatility (meaning upward or downward price swings) than
investing in large, well-established companies. However, GEIM believes that
mid-cap companies may offer the potential for more rapid growth. See "Risk
Factors and Special Considerations - Smaller Companies."
GEIM will rely on its proprietary research to identify mid-cap companies with
potentially attractive growth prospects. These companies typically have one or
more of a variety of characteristics, including attractive products or services,
above average earnings growth potential, superior financial returns, strong
competitive position, shareholder focused management and sound balance sheets.
There is, of course, no guarantee that GEIM will be able to identify such
companies or that the Fund's investment in them will be successful.
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The Mid-Cap Fund may invest up to 35% of its assets in: (i) securities of
companies outside the capitalization range of the S&P 400 Index; (ii) foreign
securities, excluding, for purposes of this limitation, ADRs, U.S. Listed
Securities and Nasdaq Traded Securities; and (iii) bonds, notes and debentures.
The Mid-Cap Fund may sell securities short against the box and engage in certain
investments discussed below under "Additional Permitted Investments."
INTERNATIONAL EQUITY FUND
The investment objective of the International Equity Fund (the "International
Fund") is long-term growth of capital. The Fund seeks to achieve this objective
by investing primarily in foreign equity securities. The International Fund may
invest in securities of companies and governments located in developed and
developing countries outside the United States, and also may invest in
securities of foreign issuers in the form of depositary receipts. Investing in
securities issued by foreign companies and governments involves considerations
and potential risks not typically associated with investing in securities issued
by the U.S. Government and U.S. corporations. (See "Risk Factors and Special
Considerations" for a discussion of the risks associated with investing in
foreign equity securities.) The International Fund intends to position itself
broadly among countries and, under normal circumstances, at least 65% of the
Fund's total assets will be invested in securities of issuers collectively in no
fewer than three different countries other than the United States. The
percentage of the International Fund's assets invested in particular countries
or regions of the world will vary depending on political and economic
conditions. The determination of where an issuer is located will be made by
reference to the Country Identification Test, as set forth above in "Investment
Objectives and Management Policies Emerging Markets Fund."
In selecting investments on behalf of the International Fund, GEIM seeks
companies that are expected to grow faster than relevant markets and whose
securities are available at a price that does not fully reflect the potential
growth of those companies. GEIM typically focuses on companies that possess one
or more of a variety of characteristics, including strong earnings growth
relative to price-to-earnings and price-to-cash earnings ratios, low
price-to-book value, strong cash flow, presence in an industry experiencing
strong growth and high quality management.
The International Fund, under normal conditions, invests at least 65% of its
assets in common stocks, preferred stocks, convertible debentures, convertible
notes, convertible preferred stocks and warrants or rights, issued by companies
believed by GEIM to have a potential for superior growth in sales and earnings.
In most cases, these securities are traded on foreign or U.S. exchanges or in
the U.S. or foreign over-the-counter markets. The International Fund will
emphasize established companies, although it may invest in companies of varying
sizes as measured by assets, sales or capitalization.
The International Fund, under normal market conditions, may invest up to 35% of
its assets in notes, bonds and debentures issued by corporate or governmental
entities when GEIM determines that investing in those kinds of debt securities
is consistent with the Fund's investment objective of long-term growth of
capital. GEIM believes that such a determination could be made, for example,
upon the International Fund's investing in the debt securities of a company
whose securities GEIM anticipates will increase in value as a result of a
development particularly or uniquely applicable to the company, such as a
liquidation, reorganization, recapitalization or merger, material litigation,
technological breakthrough or new management or management policies. In
addition, GEIM believes such a determination could be made with respect to an
investment by the International Fund in debt instruments issued by a
governmental entity upon GEIM's concluding that the value of the instruments
will increase as a result of improvements or changes in public finances,
monetary policies, external accounts, financial markets, exchange rate policies
or labor conditions of the country in which the governmental entity is located.
When GEIM believes there are unstable market, economic, political or currency
conditions abroad, the Fund may assume a temporary defensive posture and
restrict its investments to certain securities markets and/or invest all or a
significant portion of its assets in securities of the types described above
issued by companies incorporated in and/or
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<PAGE>
having their principal activities in the United States. In addition, the
International Fund may sell securities short against the box and may engage in
certain investments discussed below under "Additional Permitted Investments."
VALUE EQUITY FUND
The investment objective of the Value Equity Fund (the "Value Fund") is
long-term growth of capital and future income rather than current income. The
Fund seeks to achieve this objective by investing primarily in equity securities
of companies with large-sized market capitalization that the Fund's management
considers to be undervalued by the market. Undervalued securities are those
selling for low prices given the fundamental characteristics of their issuers.
During normal market conditions, the Fund will invest at least 65% of its assets
in common stocks, preferred stocks, convertible bonds, convertible debentures,
convertible notes, convertible preferred stocks, and warrants or rights issued
by foreign and U.S. companies.
The Value Fund's investment philosophy is that the market tends to overreact to
both good and bad news about issuers. Companies experiencing faster than
expected growth tend to be overvalued as the market extrapolates current good
news well beyond a sustainable time-frame and correspondingly over-forecasts the
period and magnitude of decline of companies experiencing near term
difficulties. These difficulties can be driven by factors both internal and
external to the company. Internal factors may include operational mismanagement
or strategic mistakes. External factors may include a change in the economic
environment or a shift in the competitive dynamics of an industry. The Fund
attempts to identify firms that are out of favor for a variety of reasons and
select those which Fund management believes to be undervalued relative to their
true business prospects.
In accordance with this premise, GEIM will identify and select securities that
it believes are undervalued, using factors it considers indicative of
fundamental investment value including: (i) a low price/earnings ratio relative
to a normalized growth rate and/or Standard & Poor's 500 Composite Stock Price
Index (the "S&P 500 Index"); (ii) the potential for free cash flow generation
and prospects for dividend growth; (iii) a strong balance sheet with low
financial leverage; (iv) sustainable competitive advantages such as a franchise
brand name or dominant market position; (v) an experienced and capable
management team; (vi) improving returns on invested capital; and (vii) net asset
values in a restructuring/breakup analysis framework.
GEIM believes that such investments will position the Fund to benefit from a
positive change in business prospects from an issuing company that adopts a
turnaround strategy to increase/restore the earning power of the company.
The Value Fund, under normal market conditions, may invest (i) up to 35% of its
assets in bonds, notes and debentures, and (ii) up to 25% of its assets in
foreign securities, excluding, for purposes of this limitation, ADRs, U.S.
Listed Securities and Nasdaq Traded Securities. The Fund may sell securities
short against the box and engage in certain investments discussed below under
"Additional Permitted Investments."
U.S. EQUITY FUND
The investment objective of the U.S. Equity Fund is long-term growth of capital.
The Fund seeks to achieve this objective by investing primarily in equity
securities of U.S. companies and, under normal conditions, it will invest at
least 65% of its assets in common stocks, preferred stocks, securities
convertible into common stocks, including convertible bonds, convertible
debentures, convertible notes, convertible preferred stocks, and warrants or
rights issued by U.S. companies. The U.S. Equity Fund typically will invest in
equity securities that are issued by U.S. companies and traded on U.S.
securities exchanges or in the U.S. over-the-counter market. Up to 15% of the
U.S. Equity Fund's assets may be invested in foreign securities. ADRs, U.S.
Listed Securities and Nasdaq Traded Securities will be included for purposes of
the Fund's 65% minimum described above, and excluded for purposes of the Fund's
15% maximum investments in foreign securities.
In managing the assets of the U.S. Equity Fund, GEIM uses a combination of
"value-oriented" and "growth-oriented" investing. Value-oriented investing
involves seeking securities that may have low price-to-earnings ratios, or high
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yields, or that sell for less than intrinsic value as determined by GEIM, or
that appear attractive on a dividend discount model. The U.S. Equity Fund would
sell these securities when their prices approach targeted levels.
Growth-oriented investing generally involves buying securities with above
average earnings growth rates at reasonable prices. The U.S. Equity Fund holds
these securities until GEIM determines that their growth prospects diminish or
that they have become overvalued when compared with alternative investments.
In investing on behalf of the U.S. Equity Fund, GEIM seeks to produce a
portfolio that GEIM believes will have characteristics similar to the S&P 500
Index by virtue of blending investments in both "value" and "growth" securities.
Since the U.S. Equity Fund's strategy seeks to combine these basic elements, but
is designed to select investments deemed to be the most attractive within each
category, GEIM believes that the strategy should be capable of outperforming the
U.S. equity market as reflected by the S&P 500 Index on a total return basis.
The U.S. Equity Fund, under normal market conditions, may invest up to 35% of
its assets in notes, bonds and debentures issued by corporate or governmental
entities when GEIM determines that investing in these kinds of debt securities
is consistent with the Fund's investment objective of long-term growth of
capital. GEIM believes that such a determination could be made, for example,
upon the U.S. Equity Fund's investing in the debt securities of a company whose
securities GEIM anticipates will increase in value as a result of a development
particularly or uniquely applicable to the company, such as a liquidation,
reorganization, recapitalization or merger, material litigation, technological
breakthrough or new management or management policies. The U.S. Equity Fund also
may engage in certain investments discussed below under "Additional Permitted
Investments."
S&P 500 INDEX FUND
The investment objective of the S&P 500 Index Fund is to provide growth of
capital and accumulation of income that corresponds to the investment return of
the S&P 500 Index. The Fund seeks to achieve this objective by investing in
common stocks comprising that Index. Standard & Poor's (also referred to herein
as "S&P")1 chooses the 500 common stocks comprising the S&P 500 Index on the
basis of market values, industry diversification and other factors. Most of the
common stocks in the S&P 500 Index are issued by 500 of the largest companies,
in terms of the aggregate market value of their outstanding stock, and such
companies generally are listed on the New York Stock Exchange. Additional common
stocks that are not among the 500 largest market value stocks are included in
the S&P 500 Index for diversification purposes. S&P may, from time to time,
delete common stocks from, and add common stocks to, the S&P 500 Index.
The S&P 500 Index Fund will attempt to achieve its objective by replicating the
total return of the S&P 500 Index. To the extent that it can do so consistent
with the pursuit of its investment objective, it will attempt to keep
transaction costs low and minimize portfolio turnover. To achieve its investment
objective, the S&P 500 Index Fund will purchase equity securities that reflect,
as a group, the total investment return of the S&P 500 Index. Like the S&P 500
Index, the S&P 500 Index Fund will hold both dividend paying and non-dividend
paying common stocks comprising the S&P 500 Index.
Active portfolio management strategies are not used in making investment
decisions for the S&P 500 Index Fund. Rather, State Street Global Advisors
("SSGA"), the sub-adviser to the S&P 500 Index Fund, utilizes a passive
investment management approach. From time to time SSGA also may supplement this
passive approach by using statistical selection techniques to determine which
securities to purchase or sell for the Fund in order to replicate the investment
return of the S&P 500 Index over a period of time.
- --------
(1) Standard & Poor's,(R) S&P,(R) and S&P 500 (R) are trademarks of The
McGraw-Hill Companies, Inc. and have been licensed for use. The S&P 500
Index Fund is not sponsored, endorsed, sold or promoted by S&P, and S&P
makes no representation or warranty, express or implied, to the investors
of the Fund or any member of the public regarding the advisability of
investing in securities generally or in this Fund particularly or the
ability of the S&P 500 Index to track general stock market performance.
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<PAGE>
The S&P 500 Index Fund may choose not to invest in all the securities that
comprise the S&P 500 Index, and its holdings may differ by industry segment from
the S&P 500 Index. The Fund may compensate for the omission from its portfolio
of stocks that are included in the S&P 500 Index, or for purchasing securities
included in the Index in proportions that are different from their weightings in
the Index, by purchasing securities that may or may not be included in the S&P
500 Index but which have characteristics similar to the omitted securities (such
as stocks from the same or similar industry groups having a similar market
capitalization and other investment characteristics). In addition, from time to
time adjustments may be made in the S&P 500 Index Fund's holdings due to changes
in the composition or weighting of issues comprising the S&P 500 Index.
The S&P 500 Index Fund will attempt to achieve a correlation between its total
return and that of the S&P 500 Index of at least 0.95, without taking expenses
into account. A correlation of 1.00 would indicate perfect correlation, which
would be achieved when the S&P 500 Index Fund's net asset value, including the
value of its dividends and capital gain distributions, increases or decreases in
exact proportion to changes in the S&P 500 Index. SSGA will monitor the S&P 500
Index Fund's correlation to the S&P 500 Index and attempt to minimize any
"tracking error" (i.e., the statistical measure of the difference between the
investment results of the S&P 500 Index Fund and that of the S&P 500 Index).
However, brokerage and other transaction costs, as well as other Fund expenses,
in addition to potential tracking error, will tend to cause the S&P 500 Index
Fund's return to be lower than the return of the S&P 500 Index. There can be no
assurance as to how closely the S&P 500 Index Fund's performance will correspond
to the performance of the S&P 500 Index.
The S&P 500 Index Fund will not invest more than 35% of its total assets in (i)
stocks and other securities not included in the S&P 500 Index and (ii) foreign
securities, excluding, for purposes of this limitation, ADRs, U.S. Listed
Securities and Nasdaq Traded Securities. In this regard, the S&P 500 Index Fund
may temporarily invest cash balances, pending withdrawals or investments, in
high quality money market instruments. Nevertheless, the S&P 500 Index Fund will
not adopt a temporary defensive investment posture in times of generally
declining stock prices, and, therefore, investors will bear the risk of such
general stock market declines. The Fund also may engage in certain investments
discussed below under "Additional Permitted Investments."
STRATEGIC INVESTMENT FUND
The investment objective of the Strategic Investment Fund (the "Strategic Fund")
is to maximize total return, consisting of capital appreciation and current
income. The Fund seeks to achieve this objective by following an asset
allocation strategy that provides diversification across a range of asset
classes and contemplates shifts among them from time to time. This strategy may
result in the Strategic Fund's experiencing a high portfolio turnover rate. See
"Risk Factors and Special Considerations - Portfolio Transactions and Turnover"
below.
The Strategic Fund invests in the following classes of investments: common
stocks, preferred stocks, convertible securities and warrants or rights issued
by U.S. and foreign companies; bonds, debentures and notes issued by U.S. and
foreign companies; securities issued or guaranteed by the U.S. Government or one
of its agencies or instrumentalities ("U.S. Government Obligations"); debt
obligations issued by, or on behalf of, states, territories and possessions of
the United States and the District of Columbia and their political subdivisions,
agencies and instrumentalities or multi-state agencies or authorities, the
interest on which is, in the opinion of issuers' counsel, excluded from gross
income for Federal income tax purposes ("Municipal Obligations"); obligations of
foreign governments or their agencies or instrumentalities; mortgage related
securities, adjustable rate mortgage related securities ("ARMs"), collateralized
mortgage related securities ("CMOs") and government stripped mortgage related
securities; asset-backed and receivable-backed securities; and domestic and
foreign money market instruments. The U.S. equity and debt instruments in which
the Strategic Fund invests are traded on U.S. securities exchanges or in the
U.S. over-the-counter market, except that the Fund may invest up to 10% of its
assets in non-publicly traded securities. In addition, up to 30% of the
Strategic Fund's total assets may be invested in foreign securities, excluding,
for purposes of this limitation, ADRs, U.S. Listed Securities and Nasdaq Traded
Securities. The Strategic Fund also may invest in structured and indexed
securities, the value of which is linked to currencies, interest rates,
commodities, indexes or other financial
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<PAGE>
indicators. Mortgage related securities, ARMs, CMOs, government stripped
mortgage related securities and asset-backed and receivable-backed securities
are subject to several risks, including the prepayment of principal.
The Strategic Fund generally seeks to invest in equity and debt securities that
GEIM has determined offer above average potential for total return. In making
this determination, GEIM will take into account factors including earnings
growth, industry attractiveness, company management, price-to-earnings ratios,
yield, price-to-book ratios and valuation of assets.
GEIM has broad latitude in selecting the classes of investments to which the
Strategic Fund's assets are committed. Although the Strategic Fund has the
authority to invest solely in equity securities, solely in debt securities,
solely in money market instruments or in any combination of these classes of
investments, GEIM anticipates that at most times the Fund will be invested in a
combination of equity and debt instruments.
The Strategic Fund's investments are designed to achieve favorable performance
with lower volatility than a fund that invests solely in equity or debt
securities. GEIM will determine the weightings of equity and debt holdings for
the Strategic Fund at any given time in light of its assessment of the
attractiveness of each market. Although GEIM cannot predict the mix of the
Strategic Fund's investments at any one time, GEIM can delineate certain
situations that can lead to a shift in the mix of the Strategic Fund's
investments. If, for example, the prices of U.S. equity securities decline due
to falling economic activity and profits, and GEIM determines that the condition
is transitory, GEIM could allocate a major portion of the Strategic Fund's
assets to the equity market. If, on the other hand, the prices of debt
instruments are depressed by rising economic activity combined with restrictive
monetary or fiscal policies, and GEIM concludes that this condition is
temporary, GEIM could allocate a major portion of the Strategic Fund's assets to
debt securities.
The Strategic Fund typically purchases a debt security if GEIM believes that the
yield and potential for capital appreciation of the security are sufficiently
attractive in light of the risks of ownership of the security. In determining
whether the Strategic Fund should invest in particular debt instruments, GEIM
considers factors such as: the price, coupon and yield to maturity; GEIM's
assessment of the credit quality of the issuer; the issuer's available cash flow
and the related coverage ratios; the property, if any, securing the obligation;
and the terms of the debt securities, including the subordination, default,
sinking fund and early redemption provisions.
GEIM's decision that the Strategic Fund invest in foreign securities would be
predicated on the outlook for the foreign securities markets of selected
countries, the underlying economies of those countries and the availability of
attractively priced individual securities.
In addition to investing as described above, the Fund may invest in municipal
leases, floating and variable rate instruments, participation interests in
certain Municipal Obligations, Municipal Obligation components, custody receipts
and zero coupon obligations and may enter into mortgage dollar rolls. The Fund
also may engage in certain investments discussed below under "Additional
Permitted Investments."
INCOME FUND
The investment objective of the Income Fund is to seek maximum income consistent
with prudent investment management and the preservation of capital. Capital
appreciation with respect to the Income Fund's portfolio securities may occur
but is not an objective of the Fund. In seeking to achieve its investment
objective, the Income Fund invests in the following types of fixed income
instruments: U.S. Government Obligations; obligations of foreign governments or
their agencies or instrumentalities; bonds, debentures, notes and
non-convertible preferred stocks issued by U.S. and foreign companies; mortgage
related securities, ARMs, CMOs and government stripped mortgage related
securities; asset-backed and receivable-backed securities; zero coupon
obligations; floating and variable rate instruments and money market
instruments. The Income Fund also may invest in depositary receipts and
structured and indexed securities, the value of which is linked to currencies,
interest rates, commodities, indexes or other financial indicators. Mortgage
related securities, ARMs, CMOs, government stripped mortgage related securities
and asset-backed and receivable-backed securities are subject to several risks,
including the prepayment of principal.
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The Income Fund is subject to no limitation with respect to the maturities of
the instruments in which it may invest; the weighted average maturity of the
Fund's portfolio securities is anticipated to be approximately five to 10 years.
Up to 35% of the Income Fund's total assets may be invested in foreign
securities, excluding, for purposes of this limitation, ADRs, U.S. Listed
Securities and Nasdaq Traded Securities. The Income Fund also may enter into
mortgage dollar rolls, and may engage in certain investments discussed below
under "Additional Permitted Investments." The Income Fund typically invests not
more than 35% of its assets in money market instruments if GEIM deems such
investments to be consistent with the Fund's investment objective. See "Cash
Management Policies - Non-Money Market Funds," below.
MONEY MARKET FUND
The investment objective of the Money Market Fund is to seek a high level of
current income consistent with the preservation of capital and the maintenance
of liquidity. The Money Market Fund seeks to achieve this objective by investing
in the following U.S. dollar denominated, short-term money market instruments:
(1) U.S. Government Obligations; (2) debt obligations of banks, savings and loan
institutions, insurance companies and mortgage bankers; (3) commercial paper and
notes, including those with floating or variable rates of interest; (4) debt
obligations of foreign branches of U.S. banks, U.S. branches of foreign banks
and foreign branches of foreign banks; (5) debt obligations issued or guaranteed
by one or more foreign governments or any of their political subdivisions,
agencies or instrumentalities, including obligations of supra-national entities;
(6) debt securities issued by foreign issuers; and (7) repurchase agreements.
The Money Market Fund limits its portfolio investments to securities that the
Trust's Board of Trustees determines present minimal credit risk and that are
"Eligible Securities" at the time of acquisition by the Fund. "Eligible
Securities" as used in this Prospectus means securities rated by the requisite
nationally recognized statistical rating organizations ("NRSROs") in one of the
two highest short-term rating categories, consisting of issuers that have
received these ratings with respect to other short-term debt securities and
comparable unrated securities. "Requisite NRSROs" means (1) any two NRSROs that
have issued ratings with respect to a security or class of debt obligations of
an issuer or (2) one NRSRO, if only one NRSRO has issued such a rating at the
time that the Money Market Fund acquires the security. Currently, six
organizations are NRSROs: S&P, Moody's Investors Service, Inc. ("Moody's"),
Fitch Investors Service, Inc., Duff and Phelps, Inc., IBCA Limited and its
affiliate, IBCA, Inc., and Thomson BankWatch Inc. A discussion of the ratings
categories is contained in the appendix to the Statement of Additional
Information. By limiting its investments to Eligible Securities, the Money
Market Fund may not achieve as high a level of current income as a fund
investing in lower-rated securities.
The Money Market Fund may not invest more than 5% of its total assets in the
securities of any one issuer, except for U.S. Government Obligations and except
to the extent permitted under rules adopted by the SEC under the 1940 Act. In
addition, the Money Market Fund may not invest more than 5% of its total assets
in Eligible Securities that have not received the highest rating from the
Requisite NRSROs and comparable unrated securities (collectively, "Second Tier
Securities"), and may not invest more than the greater of $1,000,000 or 1% of
its total assets in the Second Tier Securities of any one issuer. The Money
Market Fund may invest more than 5% (but not more than 25%) of the then-current
value of the Fund's total assets in the securities of a single issuer for a
period of up to three business days, so long as (1) the securities either are
rated by the Requisite NRSROs in the highest short-term rating category or are
securities of issuers that have received such ratings with respect to other
short-term debt securities or are comparable unrated securities and (2) the Fund
does not make more than one such investment at any one time. Determinations of
comparable quality for purchases of unrated securities are made by GEIM in
accordance with procedures established by the Board of Trustees. The Money
Market Fund invests only in instruments that have (or, pursuant to regulations
adopted by the SEC, are deemed to have) remaining maturities of 13 months or
less at the date of purchase (except securities subject to repurchase
agreements), determined in accordance with a rule promulgated by the SEC. Up to
25% of the Money Market Fund's total assets may be invested in foreign
securities, excluding, for purposes of this limitation, ADRs, U.S. Listed
Securities and Nasdaq Traded Securities. The Money Market Fund will maintain a
dollar-weighted average portfolio maturity of 90 days or less. The assets of the
Money Market Fund are valued on the basis of amortized
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<PAGE>
cost, as described below under "Net Asset Value." The Money Market Fund also may
hold liquid Rule 144A Securities (see "Additional Permitted Investments-Illiquid
Investments and Restricted Securities") and engage in certain other investments
discussed below under "Additional Permitted Investments."
INVESTMENTS IN DEBT SECURITIES
- ------------------------------
Each of the Premier Growth Fund, International Fund, Value Fund, U.S. Equity
Fund and S&P 500 Index Fund limits investment in debt securities to those that
are rated investment grade, except that each such Fund may invest up to 5% of
that Fund's assets in securities rated lower than investment grade. A security
is considered investment grade if it is rated at the time of purchase within the
four highest rating categories assigned by S&P or Moody's or has received an
equivalent rating from another NRSRO or, if unrated, is deemed by GEIM to be of
comparable quality.
Each of the Emerging Markets Fund, Mid-Cap Fund, Strategic Fund and Income Fund
limits its purchases of debt instruments to those that are rated within the six
highest rating categories by S&P, Moody's or another NRSRO, or if unrated, are
deemed by GEIM to be of comparable quality. Each of these Funds will not
purchase a debt security if, as a result of the purchase, more than 25% of the
Fund's total assets would be invested in securities rated BBB by S&P or Baa by
Moody's or that have received an equivalent rating from another NRSRO or, if
unrated, deemed by GEIM to be of comparable quality. In addition, each such Fund
will not purchase any obligation rated BB or B by S&P or Ba or B by Moody's, or
that have received an equivalent rating from another NRSRO if, as a result of
the purchase, more than 10% of the Fund's total assets would be invested in
obligations rated in those categories or, if unrated, in obligations that are
deemed by GEIM to be of comparable quality. A description of S&P's and Moody's
ratings relevant to a Fund's investments is included as an appendix to the
Statement of Additional Information.
CASH MANAGEMENT POLICIES - NON-MONEY MARKET FUNDS
- -------------------------------------------------
The Money Market Fund's policies with respect to holding cash and investing in
money market instruments are described above under "Investment Objectives and
Management Policies - Money Market Fund." This section describes the cash
management policies of the other Funds (each, a "non-money market Fund").
A non-money market Fund, under normal circumstances, may hold cash and/or invest
in money market instruments in order to manage its cash, pending investment in
accordance with its investment objective and policies, and to meet operating
expenses. The Income Fund typically invests not more than 35% of its assets in
money market instruments if GEIM deems such investments to be consistent with
that Fund's investment objective.
When GEIM believes that economic or other conditions warrant, a non-money market
Fund, other than the S&P 500 Index Fund, may assume a temporary defensive
posture and hold cash and/or invest in money market instruments without
limitation. To the extent that a non-money market Fund holds cash or invests in
money market instruments, it may not achieve its investment objective.
TYPES OF PERMITTED MONEY MARKET INVESTMENTS. Each non-money market Fund may
invest directly, or indirectly through its investment in the GEI Short-Term
Investment Fund (the "Investment Fund"), in the following types of money market
securities during normal market conditions and/or for temporary defensive
purposes:
(i) U.S. Government Obligations (described below);
(ii) debt obligations of banks, savings and loan institutions, insurance
companies and mortgage bankers;
(iii) commercial paper and notes, including those with variable and
floating rates of interest;
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(iv) debt obligations of foreign branches of U.S. banks, U.S. branches of
foreign banks and foreign branches of foreign banks;
(v) debt obligations issued or guaranteed by one or more foreign
governments or any of their political subdivisions, agencies or
instrumentalities, including obligations of supra-national entities;
(vi) debt securities issued by foreign issuers; and
(vii) repurchase agreements and reverse repurchase agreements (see "Risk
Factors and Special Considerations - Repurchase and Reverse Repurchase
Agreements" below for a further description).
Each non-money market Fund may invest up to 25% of its assets in the Investment
Fund. The Investment Fund invests exclusively in the money market instruments
described in (i) through (vii) above, and serves as the investment vehicle that
facilitates the collective investment of the cash accounts of the non-money
market Funds and other entities advised by GEIM or General Electric Investment
Corporation ("GEIC," and together with GEIM collectively referred to as "GE
Investments"), a sister company of GEIM that is wholly-owned by General Electric
Company ("GE"). GEIM is the investment adviser to the Investment Fund, and
charges no advisory fee to the Investment Fund for these services. A non-money
market Fund would incur no sales charge and no distribution or service fees in
connection with its holdings in the Investment Fund.
A non-money market Fund may hold money market instruments that are rated no
lower than A-2 by S&P or Prime-2 by Moody's, or that have received an equivalent
rating from another NRSRO, or if unrated, are issued by an entity having an
outstanding unsecured debt issue rated within an NRSRO's three highest rating
categories. A description of the rating systems of Moody's and S&P is contained
in an appendix to the Statement of Additional Information. At no time will a
non-money market Fund's investments in bank obligations, including time
deposits, exceed 25% of the value of the Fund's assets.
ADDITIONAL PERMITTED INVESTMENTS
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In addition to the investments discussed above, some or all of the Funds may
invest in the types of securities or may engage in investment techniques and
strategies discussed below.
ILLIQUID INVESTMENTS AND RESTRICTED SECURITIES. Each non-money market Fund may
invest up to 15% of its net assets in illiquid securities. Illiquid securities
are securities that a Fund cannot dispose of within seven days in the ordinary
course of business at approximately the amount at which the Fund has valued the
securities. Illiquid securities include options traded over-the-counter,
repurchase agreements maturing in more than seven days, certain mortgage related
securities and restricted securities that GEIM has determined are not liquid
under guidelines established by the Trust's Board of Trustees.
In addition, each non-money market Fund may invest up to 10% of its assets in
restricted securities. A restricted security is one that is subject to a
contractual or legal restriction on transfer, excluding for purposes of this
limitation securities sold to "qualified institutional buyers" in accordance
with Rule 144A under the 1933 Act ("Rule 144A Securities") determined to be
liquid by the Trust's Board of Trustees based upon the trading markets for the
securities. A Fund's purchase of Rule 144A Securities could have the effect of
increasing the level of illiquidity in the Fund to the extent that qualified
institutional buyers become uninterested for a time in purchasing Rule 144A
Securities held by the Fund.
U.S. GOVERNMENT OBLIGATIONS. Each Fund may invest in obligations issued by the
U.S. Government or by its agencies and instrumentalities (as defined above,
"U.S. Government Obligations"). Different types of U.S. Government Obligations
have different payment guarantees, if any. Some U.S. Government Obligations,
such as U.S. Treasury securities, are supported by the full faith and credit of
the U.S. government or U.S. Treasury guarantees. U.S. Treasury
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securities differ in their interest rates, maturities and dates of issuance.
Other U.S. Government Obligations are backed by the right of the issuer or
guarantor to borrow from the U.S. Treasury; others, by the discretionary
authority of the U.S. Government to purchase obligations of the agency or
instrumentality issuing the security; and still others, only by the credit of
the agency or instrumentality issuing the obligation.
Where U.S. Government Obligations are not backed by the full faith and credit of
the United States, the investor must look principally to the agency or
instrumentality (which may be privately owned) issuing the obligations for
repayment. There is no guarantee that the U.S. Government would provide
financial support to its agencies or instrumentalities if it is not required to
do so. A Fund will invest in U.S. Government Obligations that are not backed by
full faith and credit of the U.S. Government only if GEIM determines that the
issuing agency's or instrumentality's credit risk make the obligations suitable
for Fund investment.
The types of U.S. Government Obligations in which the Funds may invest are
listed in the Statement of Additional Information.
REPURCHASE AND REVERSE REPURCHASE AGREEMENTS. Each Fund may enter into
repurchase agreements involving securities that are permitted investments for
that Fund. A repurchase agreement is a transaction in which a Fund purchases a
security at one price and the seller simultaneously agrees to repurchase that
security at a specified price on a date that occurs within a relatively short
time period (usually one to seven days). Repurchase agreements allow a Fund to
earn a fixed rate of return that is not subject to market fluctuations during
the Fund's holding period, and are treated as loans by the Funds for purposes of
the 1940 Act.
The Funds may engage in repurchase agreement transactions with certain Federal
Reserve System member banks and with certain dealers listed on the Federal
Reserve Bank of New York's list of reporting dealers. If a Fund enters into a
repurchase agreement, GEIM will monitor the value of the securities underlying
the agreement on an ongoing basis to ensure that the value remains equal to the
total amount of the repurchase price (including interest). GEIM also monitors
the creditworthiness of the banks and dealers that enter into repurchase
agreements with the Funds in order to identify potential risks.
Each Fund may engage in reverse repurchase agreements, subject to its investment
restrictions. A reverse repurchase agreement involves the Fund selling
securities that it holds and concurrently agreeing to repurchase the same
securities at an agreed upon price and date. Reverse repurchase agreements are
considered to be borrowings by a Fund for purposes of the 1940 Act. A Fund will
enter into reverse repurchase agreements to provide liquidity to meet redemption
requests or to pay dividends and distributions when the sale of the Fund's
portfolio securities is considered to be disadvantageous. Cash, U.S. Government
Obligations or other liquid assets equal in value to the Fund's obligations
under outstanding reverse repurchase agreements would be segregated and
maintained with State Street, the Trust's custodian and transfer agent, or a
designated sub-custodian.
STRUCTURED AND INDEXED SECURITIES. The Strategic Fund and the Income Fund may
invest in structured and indexed securities. The value of the principal of
and/or interest on such securities is determined by reference to changes in the
value of specific currencies, interest rates, commodities, indexes or other
financial indicators (the "Reference") or a change in two or more References.
The interest rate or the principal amount payable upon maturity or redemption
may be increased or decreased depending upon changes in the applicable
Reference. The terms of structured and indexed securities may provide that in
certain circumstances no principal is due at maturity and, therefore, may result
in a loss of the Fund's investment. Structured and indexed securities may be
positively or negatively indexed, so that appreciation of the Reference may
produce an increase or a decrease in the interest rate or value of the security
at maturity. In addition, changes in interest rates or value of the security at
maturity may be some multiple of the change in value of the Reference.
Consequently, structured and indexed securities may entail a greater degree of
market risk than other types of debt securities because a Fund bears the risk of
the Reference. Structured and indexed securities may also be more volatile, less
liquid and more difficult to accurately price than less complex securities.
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Certain of the other Funds may invest in other investment companies that issue
securities with values that are based on an underlying index. See "Appendix -
Further Information: Certain Investment Techniques and Strategies" for a
discussion of such investments, which include WEBs, CountryBaskets and SPDRs.
PURCHASING PUT AND CALL OPTIONS ON SECURITIES. A non-money market Fund may
utilize up to 10% of its assets to purchase put options on portfolio securities
and an additional 10% of its assets to purchase call options on portfolio
securities. The aggregate value of the securities underlying the calls or
obligations underlying the puts, determined as of the date the options are sold,
shall not exceed 25% of the net assets of the Fund. In addition, the premiums
paid by a Fund in purchasing options on securities, options on securities
indexes, options on foreign currencies and options on futures contracts shall
not exceed 20% of the Fund's net assets.
An option holder has the right, but not the obligation, to buy or sell a
specified amount of securities or other assets on or before a fixed date at a
predetermined price. Each non-money market Fund may purchase put and call
options that are traded on a U.S. or foreign exchange or in the over-the-counter
market.
A put option is an option to sell. If GEIM believes that the market value of a
security a Fund owns will decline, the Fund may purchase a put option on that
security. The put option would allow the Fund to sell the security at a given
price during the option period and thereby limit its losses on the security. If
the underlying security appreciates, rather than depreciates, the Fund would
choose not to exercise the option, but any appreciation in the value of the
underlying security would be offset by the premium the Fund paid for the
relevant put option, plus any related transaction costs.
A call option is an option to buy. A Fund may purchase a call option on a
security when GEIM believes the market price of that security will increase. A
call option would allow the Fund to purchase the security at a set price during
the option period, and thereby limit its losses from rising prices. A Fund also
may purchase call options to increase its return at a time when the call is
expected to increase in value because the market anticipates the value of the
underlying security will increase.
Prior to the expiration of a put or a call option, the Fund may enter into a
closing sale transaction. In a closing sale the Fund sells an option having the
same features (i.e., is of the same series) as an option previously purchased.
Profit or loss from a closing transaction would depend on whether the amount
received is more or less than the premium paid for the option plus the related
transaction costs.
COVERED OPTION WRITING. Each non-money market Fund may write only covered put
and call options on securities. Covered puts involve a Fund selling to another
party the right to compel the Fund to purchase an underlying security from the
option holder at a specified price at any time during the option period. A
covered put generally means that the Fund segregates with its custodian cash or
liquid securities with a value at least equal to the exercise price of the
option. Covered calls involve a Fund selling the right to another party to
purchase securities that the Fund owns at a specified price at any time during
the option period. A covered call generally means that the Fund owns the
underlying securities. A Fund will realize fees (referred to as "premiums") for
granting the rights evidenced by these options.
A put or call option written by a Fund will be deemed covered in any manner
permitted under the 1940 Act or determined by the SEC to be permissible. See
"Strategies Available to Some But Not All Funds - Covered Option Writing" in the
Statement of Additional Information for specific situations where put and call
options will be deemed to be covered by a Fund.
A Fund may engage in a closing purchase transaction to realize a profit, to
prevent an underlying security from being called or put or, in the case of a
call option, to unfreeze an underlying security (thereby allowing the Fund to
sell the security or write a new option prior to the outstanding option's
expiration). A Fund effects a closing purchase transaction by purchasing, prior
to the holder's exercise of an option written by the Fund, an option of the same
series as that on which the Fund desires to terminate its obligation. The
obligation of a Fund under an option that it has written would be terminated by
a closing purchase transaction, but the Fund would not be deemed to own an
option as the result of the transaction. To facilitate closing purchase
transactions, the Funds with option-writing authority will ordinarily
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write options only if a secondary market for the options exists on a U.S. or
foreign securities exchange or in the over-the-counter market.
Option writing for a Fund may be limited by position and exercise limits
established by U.S. securities exchanges and the National Association of
Securities Dealers, Inc. and by requirements of the Internal Revenue Code of
1986, as amended (the "Code") for qualification as a regulated investment
company. A Fund would enter into options transactions as hedges to reduce
investment risk, and a properly correlated hedge will result in a loss on the
portfolio position's being offset by a gain on the hedge position.
SECURITIES INDEX OPTIONS. In attempting to hedge all or a portion of its
investments, a non-money market Fund may purchase and write put or call options
on securities indexes listed on U.S. or foreign securities exchanges or traded
in the over-the-counter market. A Fund would purchase or write index options
only with respect to those indexes that include securities of the type that the
Fund would invest in. As discussed above, a Fund with option writing authority
may write only covered options. In addition to investing in securities index
options for hedging purposes, the non-money market Funds may use such options as
a means of participating in a securities market without making direct purchases
of securities.
A securities index measures the movement of a certain group of securities by
assigning relative values to the securities included in the index. Investments
in options on securities indexes generally have return characteristics similar
to direct investments in the underlying instruments.
Unlike options on securities, options on securities indexes do not involve the
delivery of an underlying security. An option on a securities index represents
the holder's right to obtain from the writer, in cash, a fixed multiple of the
amount by which the exercise price exceeds (in the case of a call) or is less
than (in the case of a put) the closing value of the underlying securities index
on the exercise date.
If a Fund writes a securities index option, that option may be deemed covered in
any manner permitted under the 1940 Act or any other method the SEC determines
to be permissible. See "Strategies Available to Some But Not All Funds Covered
Option Writing" in the Statement of Additional Information for specific
situations where securities index options will be deemed to be covered by a
Fund. If a Fund has written a securities index option, it may terminate its
obligation by effecting a closing purchase transaction, which is accomplished by
purchasing an option of the same series as the option previously written.
FUTURES AND OPTIONS ON FUTURES. Each non-money market Fund may enter into
interest rate, financial and stock or bond index futures contracts or related
options that are traded on a U.S. or foreign exchanges or traded on a board of
trade approved by the CFTC or in the over-the-counter market. The Funds would
engage in these transactions to hedge against the effects of changes in the
value of portfolio securities due to anticipated changes in interest rates
and/or market conditions, to gain market exposure for accumulating and residual
cash positions, for duration management, or when the transactions are
economically appropriate to the reduction of risks inherent in the management of
the Fund involved. No Fund will enter into a transaction involving futures and
options on futures for speculative purposes.
A Fund may not enter into futures and options contracts for which aggregate
initial margin deposits and premiums paid for unexpired options exceed 5% of the
fair market value of the Fund's total assets, after taking into account
unrealized losses or profits on futures contracts or options on futures
contracts into which it has entered. The current view of the SEC staff is that
an investment fund's long and short positions in futures contracts, as well as
put and call options on futures written by that fund, must be collateralized
with cash or other liquid assets and segregated with the fund's custodian or a
designated sub-custodian or covered in a manner similar to that for covered
options on securities (see "Strategies Available to Some But Not All Funds -
Covered Option Writing" in the Statement of Additional Information) and designed
to eliminate any potential leveraging.
An interest rate futures contract obligates the buyer to receive and the seller
to deliver a specified amount of a particular financial instrument (debt
security) at a specified price, date, time and place. Financial futures
contracts obligate the holder to deliver (in the case of a futures contract that
is sold) or receive (in the case of a futures contract that is
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purchased) at a future date a specified quantity of a financial instrument,
specified securities, or the cash value of a securities index.
An index futures contract obligates the parties to contract to take or make
delivery of an amount of cash equal to the difference between the value of the
index at the close of the last trading day of the contract and the price at
which the index contract was originally written. A municipal bond index futures
contract is based on an index of long-term, tax-exempt municipal bonds; a
corporate bond index futures contract is based on an index of corporate bonds.
Stock index futures contracts are based on indexes that reflect the market value
of common stock of the companies included in the indexes. An option on an
interest rate or index futures contract generally gives the purchaser the right,
in return for the premium paid, to assume a position in a futures contract at a
specified exercise price at any time prior to the expiration date of the option.
FORWARD CURRENCY TRANSACTIONS. Each non-money market Fund may hold currencies to
meet settlement requirements for foreign securities. Each non-money market Fund,
other than the S&P 500 Index Fund and Premier Growth Fund, may engage in
currency exchange transactions to manage currency risk, which is the risk that
fluctuations in exchange rates may adversely affect a Fund. No Fund will enter
into forward currency transactions for speculative purposes.
Forward currency contracts are agreements to purchase or sell a specific
quantity of a currency at a future date and at a price that is fixed at the time
that a Fund enters into the contract. Forward currency contracts are traded in a
market conducted directly between currency traders (typically, commercial banks
or other financial institutions) and their customers, generally have no deposit
requirements and are typically consummated without payment of any commissions. A
Fund, however, may enter into forward currency contracts requiring deposits or
involving the payment of commissions. To assure that a Fund's forward currency
contracts are not used to achieve investment leverage, cash or other liquid
assets will be segregated with State Street or a designated sub-custodian in an
amount at all times equal to or exceeding the Fund's commitment under the
contracts.
Upon maturity of a forward currency contract, a Fund may pay for and receive the
underlying currency, negotiate a roll over into a new forward currency contract
with a new settlement date, or negotiate a termination of the forward contract
into an offset whereby the Fund would pay the difference between the exchange
rate fixed in the contract and the then current exchange rate. The Trust also
may be able to negotiate such an offset on behalf of a Fund prior to maturity of
the original forward contract. No assurance can be given that new forward
contracts or offsets will always be available to a Fund.
In hedging a specific portfolio position, a Fund may enter into a forward
contract with respect to either the currency in which the position is
denominated or another currency deemed appropriate by GEIM. A Fund's exposure
with respect to forward currency contracts is limited to the amount of the
Fund's aggregate investments in instruments denominated in foreign currencies.
OPTIONS ON FOREIGN CURRENCIES. Each non-money market Fund, other than the
Premier Growth Fund, may purchase or write foreign currency options as a hedge
against variations in foreign exchange rates that would cause the U.S. dollar
value of securities denominated in foreign currency to decline or the cost of
securities to be acquired to increase. Foreign currency options provide the
holder of such options the right to buy or sell a currency at a fixed price on
or before a future date. The Funds may write only covered options, and no Fund
will enter into a transaction involving options on foreign currencies for
speculative purposes. The Funds will purchase or write options that are traded
on U.S. or foreign exchanges or in the over-the-counter market. The Trust will
limit the premiums paid on a Fund's options on foreign currencies to 5% of the
value of the Fund's total assets.
ADDITIONAL INVESTMENT TECHNIQUES. Each Fund may enter into securities
transactions on a when-issued or delayed-delivery basis and may lend its
portfolio securities.
SEE "RISK FACTORS AND SPECIAL CONSIDERATIONS" AND "APPENDIX - FURTHER
INFORMATION: CERTAIN INVESTMENT TECHNIQUES AND STRATEGIES" FOR A DISCUSSION OF
THE RISKS AND SPECIAL CONSIDERATIONS ASSOCIATED WITH THE ADDITIONAL INVESTMENTS
AND INVESTMENT TECHNIQUES AND STRATEGIES DISCUSSED ABOVE.
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INVESTMENT RESTRICTIONS
- -----------------------
The Trust has adopted certain fundamental investment restrictions with respect
to each Fund that may not be changed without approval of a majority of the
Fund's outstanding voting securities (as defined in the 1940 Act). Included
among those fundamental restrictions are those listed below.
1. No Fund may borrow money, except that a Fund may enter into reverse
repurchase agreements and may borrow from banks for temporary or emergency (not
leveraging) purposes, including the meeting of redemption requests and cash
payments of dividends and distributions that might otherwise require the
untimely disposition of securities, in an amount not to exceed 33-1/3% of the
value of the Fund's total assets (including the amount borrowed) valued at
market less liabilities (not including the amount borrowed) at the time the
borrowing is made. Whenever borrowings, including reverse repurchase agreements,
of 5% or more of a Fund's total assets are outstanding, the Fund will not make
any additional investments.
2. No Fund may purchase securities (other than U.S. Government Obligations) of
any issuer if, as a result of the purchase, more than 5% of the Fund's total
assets would be invested in the securities of the issuer, except that up to 25%
of the value of the total assets of each non-money market Fund may be invested
without regard to this limitation. All securities of a foreign government and
its agencies will be treated as a single issuer for purposes of this
restriction.
3. No Fund may purchase more than 10% of the voting securities of any one
issuer, or more than 10% of the outstanding securities of any class of issuer,
except that (a) this limitation is not applicable to a Fund's investments in
U.S. Government Obligations and (b) up to 25% of the value of the assets of a
non-money market Fund may be invested without regard to these 10% limitations.
All securities of a foreign government and its agencies will be treated as a
single issuer for purposes of this restriction.
4. No Fund may invest more than 25% of the value of its total assets in
securities of issuers in any one industry. For purposes of this restriction, the
term industry will be deemed to include (a) the government of any country other
than the United States, but not the U.S. Government and (b) all supra-national
organizations. In addition, securities held by the Money Market Fund that are
issued by domestic banks are excluded from this restriction. For purposes of
this investment restriction, the Trust may use the industry classifications
reflected by the S&P 500 Index, if applicable at the time of determination. For
all other portfolio holdings, the Trust may use the Directory of Companies
Required to File Annual Reports with the SEC and Bloomberg Inc. In addition, the
Trust may select its own industry classifications, provided such classifications
are reasonable.
Certain other investment restrictions adopted by the Trust with respect to the
Funds are described in the Statement of Additional Information.
RISK FACTORS AND SPECIAL CONSIDERATIONS
- ---------------------------------------
Investing in the Funds involves risk factors and special considerations, such as
those described below.
GENERAL. Investments in a Fund are not insured against loss of principal. As
with any investment portfolio, there can be no assurance that a Fund will
achieve its investment objective. Investing in shares of a Fund should not be
considered to be a complete investment program.
ABSENCE OF OPERATING HISTORY. The Funds only recently commenced operations, and
therefore lack an operating history that shareholders may look to for purposes
of evaluating Fund performance.
OTHER INVESTORS. Investors may be materially affected by the actions of other
large institutional investors. For example, if a large institutional investor
withdraws an investment in a Fund the Fund could diminish in size by a
substantial amount causing the remaining investors to experience higher pro rata
operating expenses, resulting in lower returns for
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such investors. The withdrawal by a large investor also may result in
significant portfolio liquidation expenses that are borne by remaining
shareholders.
EQUITY SECURITIES. A Fund's investments in common stocks and other equity
securities are subject to stock market risk, which is the risk that the value of
the equity securities the Fund holds may decline over short or even extended
periods. Equity securities also are subject to the risk that the value of a
particular issuer's securities will decline, even during periods when equity
securities traded in the stock market in general are rising.
DEBT INSTRUMENTS. A Fund's investments in debt securities are subject to
interest rate risk, which is the risk that increases in market interest rates
will adversely affect investments in such securities. The value of investments
in fixed income securities tend to decrease when interest rates rise and
increase when interest rates fall. Generally, the value of longer-term debt
instruments will tend to fluctuate more than shorter-term debt securities. In
addition, when interest rates are falling, the money a Fund receives from
continuously selling shares will likely be invested in portfolio instruments
producing lower yields than the balance of its portfolio, thereby reducing the
Fund's current yield. In periods of rising interest rates, the opposite result
can be expected to occur.
CREDIT RISK. The Funds may invest in debt securities that are not backed by the
U.S. government. Such securities are subject to credit risk, which is the risk
that the issuer may be unable to pay principal and/or interest when due.
INVESTMENT GRADE OBLIGATIONS. Obligations rated BBB by S&P or Baa by Moody's are
considered investment grade, but are somewhat riskier than higher-rated
investment grade obligations. Obligations rated BBB by S&P are regarded as
having only an adequate capacity to pay principal and interest, and those rated
Baa by Moody's are considered medium-grade obligations that lack outstanding
investment characteristics and have speculative characteristics as well.
LOW-RATED SECURITIES. Certain Funds are authorized to invest in high-yield
securities that are rated lower than investment grade by the primary rating
agencies (e.g., are rated "BB" or lower by S&P and "Ba" or lower by Moody's).
These securities are sometimes referred to as "junk bonds," and are considered
to be speculative. Lower-rated and comparable unrated securities (collectively,
"low-rated" securities) provide poor protection for payment of principal and
interest. They generally are subject to greater risks of default than
higher-rated securities, and securities with the lowest ratings may be in
default or have a substantial risk of default. Low-rated securities generally
are unsecured and frequently are subordinated to the prior payment of senior
indebtedness. A Fund may incur additional expenses to the extent that it is
required to seek recovery upon a default.
The market value of certain low-rated securities tends to be more sensitive to
individual corporate developments and changes in economic conditions than
higher-rated securities. In addition, low-rated securities generally are subject
to a greater risk that the issuer cannot meet principal and interest payments
when due (i.e., credit risk). Issuers of low-rated securities are often highly
leveraged and may not have access to more traditional methods of financing.
Accordingly, the ability of such issuers to service their debt obligations
during an economic downturn or during sustained periods of rising interest rates
may be impaired. These issuers tend to be more vulnerable to real or perceived
economic changes, political developments, new or proposed laws and adverse
publicity. The market for low-rated securities may be thinner and less active
than that for higher-rated securities, which may adversely affect the price at
which these securities may be sold. Thinner markets may diminish a Fund's
ability to obtain accurate market quotations for purposes of valuing the
portfolio securities and calculating the Fund's net asset value.
ILLIQUID SECURITIES. Illiquid securities may be difficult to resell, and a
Fund's net assets may be adversely affected if there is no ready buyer willing
to purchase the Fund's illiquid securities at a price GEIM deems representative
of their value.
RESTRICTED SECURITIES. Restricted securities are generally more illiquid than
publicly traded securities. The prices realized from reselling restricted
securities in privately negotiated transactions may be less than those
originally paid by a Fund. Companies whose securities are restricted are not
subject to the disclosure and other investor protection requirements applicable
to publicly traded securities.
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SMALLER COMPANIES. Smaller companies in which the Premier Growth Fund and the
Mid-Cap Fund may invest may involve greater risks than large, established
issuers. Such smaller companies may have limited product lines, markets or
financial resources and their securities may trade less frequently and in more
limited volume than the securities of larger or more established companies. As a
result, the prices of smaller companies may fluctuate to a greater degree than
the prices of securities of other issuers.
REPURCHASE AND REVERSE REPURCHASE AGREEMENTS. A Fund entering into a repurchase
agreement may suffer a loss if the other party to the transaction defaults on
its obligations and the Fund is delayed or prevented from exercising its rights
to dispose of the underlying securities. Specifically, there are risks that the
value of the underlying securities might decline while the Fund seeks to assert
its rights, that the Fund will incur additional expenses in asserting its
rights, and that the Fund may lose all or part of the income from the agreement.
A reverse repurchase agreement involves the risk that the market value of the
securities retained by a Fund may decline below the price of the securities the
Fund has sold but is obligated to repurchase under the agreement. In the event
the buyer of securities under a reverse repurchase agreement files for
bankruptcy or becomes insolvent, the Fund's use of the proceeds of the agreement
may be restricted pending a determination by the party, or its trustee or
receiver, whether to enforce the Fund's obligation to repurchase the securities.
WARRANTS. A warrant is a security that permits, but does not obligate, its
holder to subscribe for another security. Warrant holders do not have a right to
dividends or voting rights with respect to underlying securities, and warrants
do not represent any rights to the assets of the issuer. Therefore, a warrant
may be considered more speculative than certain other types of investments. In
addition, the value of a warrant does not necessarily change with the value of
the underlying security and a warrant ceases to have value if it is not
exercised prior to its expiration date. Warrants acquired by a Fund in units or
attached to securities may be deemed to be without value.
RIGHTS. A right is a privilege granted to a corporation's existing shareholders
to purchase or subscribe to additional shares of stock at the time of a new
issuance, before the stock is offered to the general public. This allows the
stockholders to retain the same ownership percentage after the new stock
offering. Rights are freely transferable and generally entitle the holder to
purchase the stock at a price below the public offering price.
INVESTMENT IN FOREIGN SECURITIES. Investing in securities issued by foreign
companies and governments, including securities issued in the form of depositary
receipts, involves considerations and potential risks not typically associated
with investing in obligations issued by the U.S. Government and U.S.
corporations, including:
REGULATORY RISKS. Less information may be available about foreign companies than
about U.S. companies, and foreign companies generally are not subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements applicable to U.S. companies. The values of foreign
investments are affected by changes in exchange control regulations; application
of foreign tax laws, including withholding taxes; and changes in governmental
administration or economic or monetary policy (in the United States or abroad).
CURRENCY RISKS. The values of foreign investments are affected by changes in
currency rates or exchange control regulations. When a Fund holds a security
denominated in a local currency (rather than in U.S. dollars), it may convert
U.S. dollars into that local currency in order to purchase the security and
convert local currency back into dollars when the security is sold. The value of
the local currency relative to the U.S. dollar would affect the value of that
foreign security. For example, if the local currency gains strength against the
U.S. dollar, the value of the foreign security increases. Conversely, if the
local currency weakens against the U.S. dollar, the value of the foreign
security would decline. U.S. dollar denominated securities of foreign issuers
also may be affected by currency risk.
Currency exchange rates generally are determined by the forces of supply and
demand in the foreign exchange markets and the relative merits of investments in
different countries as seen from an international perspective. Currency exchange
rates can also be affected unpredictably by intervention by U.S. or foreign
governments or central banks or by currency controls or political developments
in the United States or abroad.
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<PAGE>
MARKET RISKS. Foreign markets, particularly those of developing or emerging
countries, may be less liquid, more volatile and less subject to governmental
supervision than domestic markets. There may be difficulties in enforcing
contractual obligations and transactions could be subject to extended clearance
and settlement periods.
POLITICAL/ECONOMIC RISK. A foreign government might impose restrictions or
prohibitions on the repatriation of foreign currencies, limitations on the use
or removal of funds or other assets (including the withholding of dividends). It
may adopt confiscatory tax policies or expropriate the assets or operations of a
company in which a Fund invests. Changes in the relationship or dealings between
nations may affect a Fund's investments in foreign securities.
TRANSACTION COSTS. Transaction costs of buying and selling foreign securities,
including tax, brokerage and custody costs, generally are higher than those
involving domestic transactions. Costs are incurred in connection with
conversion between various currencies.
INVESTING IN DEVELOPING OR EMERGING MARKETS. Investing in securities issued by
companies located in countries with emerging economies and/or securities markets
involves risks in addition to those described above with respect to investing in
foreign securities. The economic structures in these countries generally are
less diverse and mature than those in developed countries, and their political
systems are less stable. Other characteristics of developing countries that may
affect investment in their markets include certain national policies that may
restrict investment by foreigners in issuers or industries deemed sensitive to
relevant national interests and the absence of developed legal structures
governing private and foreign investments and private property.
The small size and inexperience of the securities markets in certain emerging or
developing countries and the low or nonexistent volume of trading in securities
in those countries may make investments in such countries illiquid and more
volatile than investments in Japan or most Western European countries. As a
result, a Fund investing in such countries may be required to establish special
custody or other arrangements before investing.
The former republics of the Soviet Union and the Eastern Bloc are emerging
markets countries that are undergoing a rapid transition from centralized,
planned economies to market-oriented economies. There can be no assurance that
such transition, including ongoing privatization efforts and recently
implemented economic reform programs, will continue. Moreover, there is a risk
that such countries might return to the centrally planned economies that existed
when they had a communist form of government. Investors should note that when
the former republics of the Soviet Union and the Eastern Bloc operated under
such centralized economies, they confiscated personal property and abrogated
property and other legal rights.
INVESTING IN A SINGLE COUNTRY. As discussed above, the Emerging Markets Fund
may, from time to time, invest all of its assets in a single emerging markets
country. There is a higher degree of risk associated with investing in one
country rather than diversifying investments among countries. If the Fund
invests all or a significant portion of its assets at any time in a single
country, events occurring in that country are more likely to effect the Fund's
investments. Specific risks associated with investing in a single country
include a greater effect on portfolio holdings of currency fluctuations and
country-specific economic, social or political factors.
MUNICIPAL OBLIGATIONS. Even though Municipal Obligations are interest-bearing
investments that promise a stable flow of income, like other debt instruments
their prices are inversely affected by changes in interest rates and, therefore,
are subject to the risk of market price fluctuations. The values of Municipal
Obligations with longer remaining maturities typically fluctuate more than those
of similarly rated Municipal Obligations with shorter remaining maturities. The
values of fixed income securities also may be affected by changes in the credit
rating or financial condition of the issuing entities.
At the time of issuance, issuers of Municipal Obligations obtain opinions from
bond counsel addressing the validity of the Obligations and whether the interest
on such Obligations is exempt from Federal income taxes. Neither the Trust nor
GEIM will review the proceedings relating to the issuance of Municipal
Obligations or the basis for opinions of
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<PAGE>
counsel. The U.S. Government has enacted various laws that have restricted or
diminished the income tax exemption on various types of Municipal Obligations
and may pass similar laws in the future.
COVERED OPTION WRITING. A Fund that writes puts and calls may experience losses
if GEIM or any sub-adviser of the Fund incorrectly predicts the direction in
which the market will move. If a Fund writes a put option obligating that Fund
to purchase a security at a certain price, the Fund may experience a loss if the
market price of the underlying security goes down. This is because the Fund
would be compelled to purchase the security at a price that is higher than
market price. The loss would be equal to the difference between the price at
which the Fund must purchase the underlying security and its market value at the
time of the option exercise, less the premium received for writing the option.
Likewise, the Fund would experience a loss if it wrote a call option and the
price of the underlying security rises. This is because the Fund would be
obligated to sell a security at a price that is lower than market price. The
loss would be equal to the excess of the security's market value at the time of
the option's exercise over the Fund's acquisition cost of the security, less the
premium received for writing the option.
In addition, no assurance can be given that a Fund will be able to close out an
option position at the desired time. A Fund's ability to enter into closing
purchase transactions depends upon the existence of a liquid secondary market.
While the Funds purchase or write options only when GEIM or any sub-adviser of
the Fund believes a liquid secondary market exists, there is a possibility that
this market may be absent or cease to exist, which would make it difficult or
impossible to close out a position when desired.
SECURITIES INDEX OPTIONS. As with other options, a Fund's ability to close out
positions in securities index options depends upon the existence of a liquid
secondary market. Although a Fund will generally purchase or write securities
index options only if a liquid secondary market for the options purchased or
sold appears to exist, no such secondary market may exist, or the market may
cease to exist at a later date. In addition, securities exchanges impose
position and exercise limits and other regulations on options traded on those
exchanges. The absence of a liquid secondary market and possible
exchange-imposed limitations may make it difficult or impossible to close out a
position when desired.
FUTURES AND OPTIONS ON FUTURES. The use of futures contracts and options on
futures contracts as a hedging device involves several risks. No assurance can
be given that a correlation will exist between price movements in the underlying
securities or index and price movements in the securities that are the subject
of the hedge. Positions in futures contracts and options on futures contracts
may be closed out only on the exchange or board of trade on which they were
entered, and no assurance can be given that an active market will exist for a
particular contract or option at any particular time.
FORWARD CURRENCY TRANSACTIONS. The market for forward currency contracts may be
limited with respect to certain currencies. The existence of a limited market
may in turn restrict a Fund's ability to hedge against the risk of devaluation
of currencies in which the Fund holds a substantial quantity of securities. The
successful use of forward currency contracts as a hedging technique draws upon
the special skills and experience of GEIM or any sub-adviser of the Fund with
respect to those instruments and will usually depend upon the ability of GEIM or
any sub-adviser of the Fund to forecast interest rate and currency exchange rate
movements correctly. Should interest or exchange rates move in an unexpected
manner, a Fund may not achieve the anticipated benefits of forward currency
contracts or may realize losses and thus be in a less advantageous position than
if those strategies had not been used. Many forward currency contracts are
subject to no daily price fluctuation limits so that adverse market movements
could continue with respect to those contracts to an unlimited extent over a
period of time. In addition, the correlation between movements in the prices of
those contracts and movements in the prices of the currencies hedged or used for
cover will not be perfect.
The Trust's ability to dispose of a Fund's positions in forward currency
contracts depends on the availability of active markets in those instruments and
the amount of trading interest that may exist in the future in forward currency
contracts which cannot now be predicted. Forward currency contracts may be
closed out only by the parties entering into an offsetting contract. As a
result, no assurance can be given that a Fund will be able to utilize these
contracts effectively for the intended purposes.
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<PAGE>
OPTIONS ON FOREIGN CURRENCIES. Like the writing of other kinds of options, the
writing of an option on a foreign currency constitutes only a partial hedge, up
to the amount of the premium received; a Fund could also be required, with
respect to any option it has written, to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on a foreign currency may constitute an effective hedge against
fluctuation in exchange rates, although in the event of rate movements adverse
to a Fund's position, the Fund could forfeit the entire amount of the premium
plus related transaction costs.
DERIVATIVES. Certain of the Funds' permitted investments constitute derivatives,
including forward currency exchange contracts, stock options, currency options,
securities index options, futures contracts, swaps and options on futures
contracts involving U.S. Government and foreign government securities and
currencies. Certain derivative securities can, under certain circumstances,
significantly increase an investor's exposure to market and other risks.
INSTRUMENTS AND STRATEGIES INVOLVING SPECIAL RISKS. Certain instruments in which
the Funds can invest and certain investment strategies that the Funds may employ
could expose the Funds to various risks and special considerations. The
instruments presenting risks to a Fund that holds the instruments are: Rule 144A
Securities, depositary receipts, debt obligations of supra-national agencies,
securities of other investment funds, municipal leases, floating and variable
rate instruments, participation interests, zero coupon obligations, Municipal
Obligation components, custody receipts, mortgage related securities, government
stripped mortgage related securities, and asset-backed and receivable-backed
securities. Among the risks that some but not all of these instruments involve
are lack of liquid secondary markets and the risk of prepayment of principal.
The investment strategies involving special risks to some or all of the Funds
are: engaging in when-issued or delayed-delivery securities transactions,
lending portfolio securities and selling securities short against the box. Among
the risks that some but not all of these strategies involve are increased
exposure to fluctuations in market value of the securities and certain credit
risks. See "Appendix - Further Information: Certain Investment Techniques and
Strategies" for a more complete description of these instruments and strategies.
PORTFOLIO TRANSACTIONS AND TURNOVER
The Board of Trustees of the Trust has determined that, to the extent consistent
with applicable provisions of the 1940 Act and rules thereunder, transactions
for a Fund may be executed through an affiliated broker-dealer if, in the
judgment of GEIM or any sub-adviser of the Fund, the use of such broker-dealer
is likely to result in price and execution at least as favorable to the Fund as
those obtainable through other qualified broker-dealers, and if, in the
transaction, such broker-dealer charges the Fund a fair and reasonable rate
consistent with that payable by the Fund to other broker-dealers on comparable
transactions. Under rules adopted by the SEC, such broker-dealer may not execute
transactions for a Fund on the floor of any national securities exchange, but
may effect transactions by transmitting orders for execution providing for
clearance and settlement, and arranging for the performance of those functions
by members of the exchange not associated with such broker-dealer. Such
broker-dealer will be required to pay fees charged by those persons performing
the floor brokerage elements out of the brokerage compensation that it receives
from a Fund.
The Trust cannot predict precisely the turnover rate for any Fund, but expects
that the annual turnover rate will generally not exceed 50% for the Emerging
Markets Fund, 50% for the Premier Growth Fund, 200% for the Mid-Cap Fund, 50%
for the International Fund, 30% for the Value Fund, 50% for the U.S. Equity
Fund, 25% for the S&P 500 Index Fund, 200% for the Strategic Fund, and 300% for
the Income Fund. The portfolio turnover rate for the Money Market Fund is
expected to be zero for regulatory purposes. A 100% annual turnover rate would
occur if all of a Fund's securities were replaced one time during a period of
one year. Short-term gains realized from portfolio turnover are taxable to
investors as ordinary income. In addition, higher portfolio turnover rates can
result in corresponding increases in brokerage commissions. GEIM does not
consider portfolio turnover rate a limiting factor in making investment
decisions on behalf of any Fund consistent with the Fund's investment objective
and policies. The Statement of Additional Information contains additional
information regarding portfolio transactions and turnover.
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<PAGE>
MANAGEMENT OF THE TRUST
- -----------------------
BOARD OF TRUSTEES
Overall responsibility for management and supervision of the Funds rests with
the Trust's Board of Trustees. The Trustees approve all significant agreements
between the Trust and the persons and companies that furnish services to the
Funds, including agreements with the Funds' investment adviser and
administrator, distributor, custodian and transfer agent. The day-to-day
operations of the Funds have been delegated to GEIM. The Statement of Additional
Information contains background information regarding each Trustee and executive
officer of the Trust.
INVESTMENT ADVISER AND ADMINISTRATOR
GEIM, located at 3003 Summer Street, P.O. Box 7900 Stamford, Connecticut 06904,
serves as the investment adviser and administrator of each Fund. GEIM was formed
under the laws of Delaware in 1988, and is a wholly-owned subsidiary of GE and a
registered investment adviser under the Investment Advisers Act of 1940, as
amended.
GEIM's principal officers, directors, and portfolio managers serve in similar
capacities with GEIC. Like GEIM, GEIC is a wholly-owned subsidiary of GE.
Through GEIM and GEIC and their predecessors, GE has nearly 70 years of
investment management experience.
GE Investments provides investment management services to various institutional
accounts with total assets as of September 30, 1997 in excess of $69 billion, of
which more than $13 billion was invested in mutual funds. GEIM or GEIC serves as
the investment adviser to the following entities:
GE FUNDS - GEIM has served as the investment adviser and administrator for GE
Funds since January 1993, when GE Funds commenced operations. GE Funds is an
open-end management investment company whose portfolios (as defined above, the
"GE Funds") are offered to individual retail and institutional investors. The GE
Funds are sold through a multiple distribution system that offers an investor
the option of choosing a class that best suits the investor's needs in terms of
purchase amount and the length of time the investor intends to hold GE Fund
shares.
GE INVESTMENTS FUNDS, INC. ("GEIFI FUNDS") - GEIM has served as the investment
adviser to the investment portfolios of GEIFI Funds since May 1, 1997. GEIFI
Funds is an open-end management investment company whose shares are currently
offered to insurance company separate accounts that fund certain variable
annuity and variable life contracts.
OTHER INSTITUTIONAL ACCOUNTS - GEIM has served as the sub-adviser to PaineWebber
Global Equity Fund, a series of PaineWebber Investment Trust, since its
inception in 1991, and to the Global Growth Portfolio of PaineWebber Series
Trust and Global Small Cap Fund Inc. since March 1995. GEIM has served as
sub-adviser to the International Equity Portfolio and the U.S. Equity Portfolio
of WRL Series Fund, Inc. since January 1997 and to the International Equity
Portfolio of IDEX Series Fund since February 1997. GEIM has also served as
investment adviser to the U.S. Government Money Market Fund and U.S. Treasury
Money Market Fund of Financial Investors Trust since March 1997.
THE ELFUN FUNDS - GEIC serves as the investment adviser to Elfun Global Fund,
Elfun Trusts, Elfun Income Fund, Elfun Money Market Fund, Elfun Tax-Exempt
Income Fund and Elfun Diversified Fund (collectively, the "Elfun Funds"). The
first Elfun Fund, Elfun Trusts, was established in 1935. Investment in the Elfun
Funds generally is limited to regular and senior members of the Elfun Society,
whose regular members are selected from active employees of GE and/or its
majority-owned subsidiaries, and whose senior members are former members who
have retired from those companies.
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<PAGE>
S&S FUNDS - Under the General Electric Savings and Security Program, GEIC serves
as investment adviser to the GE S&S Program Mutual Fund and GE S&S Long Term
Interest Fund. GEIC also serves as the investment adviser to the General
Electric Pension Trust.
GEIM and any sub-adviser of a Fund, subject to the supervision and direction of
the Trust's Board of Trustees, manages the Funds' portfolios in accordance with
the Funds' respective investment objectives and stated policies, makes
investment decisions for the Funds and places purchase and sale orders for the
Funds' portfolio transactions. GEIM and any sub-adviser of a Fund also pays the
salaries of all personnel employed by both it and the Trust and provides each
Fund with investment officers who are authorized by the Board of Trustees to
execute purchases and sales of securities on behalf of the Funds.
GEIM and any sub-adviser of a Fund makes investment decisions for each Fund
independently from its investment considerations with respect to the entities
that it manages. However, the Funds and these other entities may invest in the
same types of securities, particularly where they have the same or similar
investment objective or policies. When a Fund and one or more other accounts or
portfolios managed by GEIM or any sub-adviser of a Fund are prepared to invest
in, or desire to dispose of, the same security, available investments or sale
opportunities will be allocated in a manner that GEIM or any sub-adviser of a
Fund believes is equitable to each entity. In some cases, this procedure may
adversely affect the price a Fund pays or receives or the size of the position
obtained or disposed of by a Fund.
The agreements governing the investment advisory services furnished to the Trust
by GEIM provide that, if GEIM ceases to act as the investment adviser to the
Trust, at GEIM's request, the Trust's license to use the initials "GE" will
terminate and the Trust will change the name of the Trust and the Funds to a
name not including the initials "GE."
FEE STRUCTURE
Each Fund pays GEIM a combined fee for advisory and administrative services that
is accrued daily and paid monthly. The advisory agreement for each Fund
specifies the advisory fee and other expenses that the Fund must pay. The
advisory and administration fee for each Fund, except the S&P 500 Index Fund,
declines incrementally as Fund assets increase. This means that investors pay a
reduced fee with respect to Fund assets over a certain level, or "breakpoint."
The advisory and administration fee or fees for each Fund, and the relevant
breakpoints, are stated in the following schedule (fees are expressed as an
annual rate):
ANNUAL RATE
NAME OF FUND AVERAGE DAILY NET ASSETS OF FUND PERCENTAGE (%)
- ------------ -------------------------------- --------------
Emerging Markets Fund First $50 million 1.05
Over $50 million .95
- --------------------------------------------------------------------------------
Mid-Cap Fund First $25 million .55
Premier Growth Fund Next $25 million .45
Value Equity Fund Over $50 million .35
U.S. Equity Fund
- --------------------------------------------------------------------------------
International Equity Fund First $25 million .75
Next $50 million .65
Over $75 million .55
- --------------------------------------------------------------------------------
S&P 500 Index Fund All assets .15
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<PAGE>
ANNUAL RATE
NAME OF FUND AVERAGE DAILY NET ASSETS OF FUND PERCENTAGE (%)
- ------------ -------------------------------- -------------
Strategic Investment Fund First $25 million .45
Next $25 million .40
Over $50 million .35
- --------------------------------------------------------------------------------
Income Fund First $25 million .35
Next $25 million .30
Next $50 million .25
Over $100 million .20
- --------------------------------------------------------------------------------
Money Market Fund First $25 million .25
Next $25 million .20
Next $50 million .15
Over $100 million .10
From time to time, GEIM may waive or reimburse advisory or administrative fees
paid by a Fund.
INVESTMENT SUB-ADVISER
SSGA is the investment sub-adviser to the S&P 500 Index Fund pursuant to an
investment sub-advisory agreement with GEIM. SSGA, a division of State Street,
is located at Two International Place, Boston, Massachusetts 02110. State Street
is a wholly-owned subsidiary of State Street Corporation, a publicly held bank
holding company. State Street, with over $292 billion under management as of
December 31, 1996, provides complete global investment management services from
offices in the United States, London, Sydney, Hong Kong, Tokyo, Toronto,
Montreal, Luxembourg, Melbourne, Paris, Dubai, Munich and Brussels. SSGA is also
the investment sub-adviser to the GEIFI Funds' S&P 500 Index Fund. GEIM pays
SSGA monthly compensation in the form of an investment sub-advisory fee at an
annual rate of .05% of the first $100 million, .04% of the next $200 million and
.03% for all amounts over $300 million, of the Fund's average daily net assets.
PORTFOLIO MANAGEMENT
Eugene K. Bolton is responsible for the overall management of the domestic
equity investment process at GE Investments. Mr. Bolton has served in that
capacity since 1991. Mr. Bolton leads a team of portfolio managers for the U.S.
Equity Fund. In addition, Mr. Bolton has served in a similar capacity with
respect to the GE Funds' U.S. Equity Fund since the commencement of that Fund's
operations. Mr. Bolton has more than 12 years of investment experience and has
held positions with GE Investments since 1984. He is currently a Director and
Executive Vice President of GE Investments.
David B. Carlson is the Portfolio Manager of the Premier Growth Fund and is also
responsible for the management of the domestic equity related investments of the
portfolio of the Strategic Fund. Mr. Carlson has served those Funds since the
commencement of their operations. In addition, Mr. Carlson has served as the
Portfolio Manager to similar funds of GE Funds since the commencement of their
operations. He has more than 14 years of investment experience and has held
positions with GE Investments since 1982. Mr. Carlson is currently a Senior Vice
President of GE Investments.
Peter J. Hathaway leads a team of portfolio managers for the Value Fund and has
served in that capacity since the commencement of that Fund's operations. In
addition, Mr. Hathaway has served in a similar capacity with respect to GE
Funds' Value Equity Fund since the commencement of that Fund's operations. He
has more than 36 years of investment
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<PAGE>
experience and has held positions with GE Investments since 1985. Mr. Hathaway
is currently a Senior Vice President of GE Investments.
Ralph R. Layman leads a team of portfolio managers for the International Fund
and the Emerging Markets Fund and also is responsible for the management of the
international equity-related investments of the Strategic Fund. Mr. Layman has
served those Funds since the commencement of their operations. In addition, Mr.
Layman has served in a similar capacity with respect to GE Funds' GE
International Equity Fund since the commencement of its operations and the GE
Strategic Investment Fund since September 1997. He has more than 18 years of
investment experience and has held positions with GE Investments since 1991.
From 1989 to 1991, Mr. Layman served as an Executive Vice President, Partner and
Portfolio Manager of Northern Capital Management, and prior thereto, served as
Vice President and Portfolio Manager of Templeton Investment Counsel. Mr. Layman
is currently a Director and Executive Vice President of GE Investments.
Robert A. MacDougall leads a team of portfolio managers for the Income Fund and
the Money Market Fund and is also responsible for the management of fixed income
related investments of the portfolio of the Strategic Fund. Mr. MacDougall has
served those Funds since the commencement of their operations. In addition, Mr.
MacDougall has served in a similar capacity with respect to GE Funds' GE Fixed
Income Fund and GE Strategic Investment Fund since the commencement of their
operations. He has more than 13 years investment experience and has held
positions with GE Investments since 1986. Mr. MacDougall is currently a Director
and Executive Vice President of GE Investments.
Elaine G. Harris is the Portfolio Manager for the Mid-Cap Fund and has served in
that capacity since commencement of that Fund's operations. Ms. Harris also
serves as the Portfolio Manager for GE Funds' GE Mid-Cap Growth Fund. She has
more than 13 years of investment experience and has held positions with GE
Investments since 1993. From 1991 to 1993, Ms. Harris served as Senior Vice
President and Portfolio Manager at SunAmerica Asset Management and, prior
thereto, as Portfolio Manager at Alliance Capital Management Company and as an
analyst and subsequently, a Portfolio Manager at Fidelity Investments. Ms.
Harris is currently a Senior Vice President of GE Investments.
James B. May leads a team of portfolio managers for the S&P 500 Index Fund. Mr.
May has been an investment officer and portfolio manager in the U.S. Structured
Products Group of State Street since 1994. From 1991 to 1993, Mr. May served as
an Investment Support Analyst in the U.S. Passive Service Group of State Street.
Mr. May holds a B.S. in finance from Bentley College and a M.B.A. from Boston
College.
GEIM investment personnel may engage in securities transactions for their own
accounts pursuant to a code of ethics that establishes procedures for personal
investing and restricts certain transactions.
EXPENSES OF THE FUNDS
Each Fund's Investment Class bears its own expenses, which generally include all
costs not specifically borne by GEIM. Specifically, expenses borne by a Fund
include: investment advisory and administration fees; fees paid to members of
the Trust's Board of Trustees who are not affiliated with GEIM or any of its
affiliates; fees for necessary brokerage services; and expenses that are not
normal operating expenses of the Funds (such as extraordinary expenses, interest
and taxes). GEIM pays any fees and expenses in excess of its advisory and
administration fee that are not borne by the Funds. The annual fees payable with
respect to each Fund are intended to compensate GEIM for its advisory and
administration services.
PURCHASE OF SHARES
- ------------------
PURCHASING SHARES - GENERAL INFORMATION
The Distributor offers Investment Class shares on a continuous basis. A purchase
order is processed at the net asset value next determined after the order (or
wire, if applicable) has been received and accepted by State Street, the Trust's
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<PAGE>
transfer agent. For a description of the manner of calculating a Fund's net
asset value, see "Net Asset Value." Shares are sold without the imposition of a
sales charge.
The Trust will accept purchase orders for shares only on each "Business Day,"
which is a day on which the Fund's net asset value is calculated as described
below under "Net Asset Value." The Trust, in its discretion, may reject any
order for the purchase of shares of a Fund. The Trust does not issue physical
certificates representing shares in any Fund.
Investors begin to earn income as of the first business day following the day
State Street has received payment for an order. Orders are accepted only upon
receipt by State Street of all documentation required to be submitted in
connection with such order. If an investor purchases or redeems shares through
an Authorized Firm (defined below), it may be subject to service fees imposed by
that Firm.
MINIMUM INVESTMENT REQUIREMENT
The minimum initial investment in each Fund is $35 million for each investor or
group of related investors. Related investors are investors that are affiliated
persons of each other within the meaning of the 1940 Act. There is no minimum
investment requirement for subsequent purchases.
The minimum investment is waived for each investor or group of related investors
that has (i) invested at least $100 million in one or more investment portfolios
or accounts that are advised by GEIM and/or GEIC, provided that at least $35
million of this $100 million amount is invested in the Trust or (ii) invested at
least $5 billion in one or more investment portfolios or accounts that are
advised by GEIM and/or GEIC.
LETTER OF INTENT. Investors or a group of related investors may meet the $35
million minimum investment requirement through a series of investments over a
period of no more than 13 months. To elect this alternative, the investor or
group must submit a letter to the Distributor indicating its commitment to
purchase at least $35 million in shares of a Fund over a 13-month period. If the
investor does not invest the required minimum amount within the 13-month period,
Investment Class shares will be exchanged for Class D shares of a corresponding
GE Fund, if a corresponding GE Fund exists and is operational and the investor
meets the eligibility requirements for such fund. Currently, the following Funds
have corresponding, operational GE Funds: the Premier Growth Fund, Mid-Cap Fund,
International Fund, Value Fund, U.S. Equity Fund, Strategic Fund, Income Fund,
and Money Market Fund. If there is no corresponding GE Fund at the time an
investment would otherwise be exchanged or the investor does not meet the
eligibility requirements for such fund, the Trust will redeem that investor's
account. The Trust will effect such exchange or redemption 30 days after the
Trust has sent the investor written notice, unless the investor increases its
account to the required minimum within such period.
ELIGIBLE INVESTORS
The Distributor offers Investment Class shares to certain investors that meet
the minimum investment requirements. The Trust was designed to appeal to
institutional investors such as corporations, foundations, endowments and trusts
established to fund employee benefit plans of various types as well as
charitable, religious and educational institutions. The Trust expects that most
of the time each Fund will have relatively few shareholders (as compared with
most mutual funds) but that these shareholders will invest substantial amounts
in a Fund. Typical institutional investors may include banks, insurance
companies, trusts that fund qualified pension and profit-sharing plans (Section
401 of the Code), trusts that fund government employer non-qualified deferred
compensation obligations (Section 457 of the Code), trusts that fund charitable,
religious and educational institutions (Section 501(c)(9) of the Code),
non-government employers seeking to fund non-qualified deferred compensation
obligations, and investment companies that are not affiliated persons of the
Trust (or affiliated persons of such persons).
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<PAGE>
HOW TO OPEN AN ACCOUNT
Investors must establish an account before purchasing shares, and may do so
either by submitting an account application to the Distributor or the transfer
agent, or through an Authorized Firm (defined below). Investors may obtain an
account application by telephoning the Trust at (800) 439-3042 or by writing to
the Trust at:
GE Institutional Funds
P.O. Box 120065
Stamford, CT 06912-0065
For overnight package delivery:
GE Institutional Funds
c/o National Financial Data Services Inc.
1004 Baltimore Avenue
Kansas, MO 64141
To open an account, an investor must complete and sign an application and
furnish its taxpayer identification number to the Trust. The investor also must
certify whether or not it is subject to withholding for failing to report income
to the Internal Revenue Service ("IRS").
HOW TO BUY SHARES
After a completed account application has been received and processed, an
investor may purchase Fund shares from the Distributor or through brokers,
dealers, financial institutions or investment advisers that have entered into
sales agreements with the Distributor ("Authorized Firms").
An investor may purchase shares through an Authorized Firm with the assistance
of a sales representative (a "Sales Representative") with that Authorized Firm.
The Authorized Firm will be responsible for transmitting the investor's order
promptly to the transfer agent. Investors should contact their Sales
Representative for further instructions.
Investors also may purchase Investment Class shares directly from the transfer
agent by wiring federal funds to: State Street Bank and Trust Company (ABA #
0110-0002-8) For: GE Institutional Funds-[Name of Fund] Account of: [Investor's
name, address and account number]. If a wire is received by the close of regular
trading on the NYSE on a Business Day, the shares will be priced according to
the net asset value of the Fund on that day. If a wire is received after the
close of regular trading on the NYSE, the shares will be priced as of the time
the Fund's net asset value per share is next determined.
Payment for orders that are not accepted will be returned to investors promptly.
An investor's financial institution may charge a fee for wiring its account.
PURCHASES IN-KIND
Investors may purchase Investment Class shares in amounts of $5 million or more
with either cash or investment securities acceptable to the appropriate Fund.
The particular investment securities acceptable to a Fund may vary over time and
the Trust does not guarantee that any particular investment securities will be
accepted at any particular time or at all. Investors interested in purchasing
Investment Class shares with investment securities should contact their Sales
Representative or the Distributor for information about which securities a
particular Fund will accept. The Trust reserves the right to require the
Distributor to suspend the offering of Investment Class shares of the Emerging
Markets Fund or International Equity Fund for cash in amounts above $5 million
and of the other non-money market Funds in amounts above $10 million.
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REDEMPTION OF SHARES
- --------------------
On any Business Day, investors may redeem all or a portion of their shares.
Redemption requests received in proper form prior to the close of regular
trading on the NYSE will be effected at the net asset value per share determined
on that Business Day. Redemption requests received after the close of regular
trading on the NYSE will be effected at the net asset value as next determined.
The Trust normally transmits redemption proceeds within seven days after receipt
of a redemption request.
If an investor holds more than one class of shares, it must specify which class
of shares it is redeeming. The investor's redemption request might be delayed if
it does not specify the appropriate class of shares or if it owns fewer shares
than specified in its redemption request.
REDEMPTIONS THROUGH AN AUTHORIZED FIRM
If an investor purchases shares through a Sales Representative, it may redeem
its shares in accordance with its Sales Representative's instructions. If State
Street's books reflect that the investor, and not its Sales Representative, is
the shareholder of record on an account, the investor also may redeem by mail or
by wire, as described below. The investor's Authorized Firm is responsible for
transmitting a redemption order (and crediting the investor with any redemption
proceeds) on a timely basis.
REDEMPTION BY MAIL
If the investor is the shareholder of record on the books of State Street, it
may redeem shares by mail by a written redemption request that (1) states the
class and the number of shares or the specific dollar amount to be redeemed, (2)
identifies the Fund or Funds from which the number or dollar amount is to be
redeemed, (3) identifies the investor's account number and (4) is signed on the
investor's behalf by an authorized person exactly as the shares are registered.
Investors should send the request to the Trust at the appropriate address listed
above under "How to Open an Account."
SIGNATURE GUARANTEES
To protect investors' accounts, the Trust and the Distributor from fraud,
signature guarantees are required to enable the Trust to verify the identity of
the person authorizing a redemption from an account. Signature guarantees will
be required for redemptions over $50,000 and requests that redemption proceeds
be (1) mailed to an address other than the address of record, (2) paid to a
person other than the shareholder, (3) wired to a bank other than the bank of
record, or (4) mailed to an address that has been changed within 30 days of the
redemption request. All signature guarantees must be guaranteed by a commercial
bank, trust company, broker, dealer, credit union, national securities exchange
or registered association, clearing agency or savings association. The Trust may
require additional supporting documents for redemptions made by corporations,
executors, administrators, trustees, guardians or persons utilizing a power of
attorney. A request for redemption will not be deemed to have been submitted
until the Trust receives all documents typically required to assure the safety
of a particular account. The Trust may waive the signature guarantee on a
redemption of $50,000 or less if it is able to verify the signatures of all
registered owners from its accounts.
INVOLUNTARY EXCHANGES OR REDEMPTIONS
By investing in the Trust, each investor consents to involuntary exchanges and
redemptions. This means that if the value of a shareholder's investment in the
Fund(s) falls below the minimum requirements discussed above for more than 120
days because of redemptions (and not because of market fluctuations or
Investment Switches), the Trust will involuntarily exchange its Investment Class
shares for Class D shares of a corresponding GE Fund if such a corresponding GE
Fund exists and is operational and it meets the eligibility requirements for
such fund. If there is no corresponding GE Fund at the time an investment would
be otherwise exchanged or the investor does not meet the eligibility
requirements for such fund, the Trust will involuntarily redeem the investor's
account. The Trust will effect
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such exchange or involuntary redemption 30 days after the Trust has sent the
investor written notice, unless the investor increases its account to the
required minimum within such period. At the investor's request, the Trust will
effect an involuntary redemption in-kind. Proceeds of any such redemption will
be mailed to the investor.
More specifically, (i) if an investor has $100 million or more invested in funds
advised by GEIM and/or GEIC, then its shares will be exchanged or redeemed, as
applicable, if its investment in the Trust falls below $35 million for the
requisite 120-day period and it does not increase its account to the required
minimum within the requisite 30-day period following written notice of
deficiency, and (ii) if the investor has invested less than $100 million in
funds advised by GEIM and/or GEIC, its shares in a Fund will be exchanged or
redeemed, as applicable, if its investment in that Fund falls below $35 million
for that period and it does not increase its account to the required minimum
within the requisite 30-day period following written notice of deficiency.
DISTRIBUTIONS IN-KIND
If the Trust's Board of Trustees determines that it would be detrimental to the
best interests of a Fund's shareholders to make a redemption payment wholly in
cash, the Trust may pay, in accordance with rules adopted by the SEC, any
portion of a redemption in excess of the lesser of $250,000 or 1% of the Fund's
net assets by a distribution in-kind of portfolio securities in lieu of cash.
Redemptions failing to meet this threshold must be made in cash. Portfolio
securities issued in a distribution in-kind will be deemed by GEIM to be readily
marketable. Shareholders receiving distributions in-kind of portfolio securities
may incur brokerage commissions when subsequently disposing of those securities.
The Trust will redeem an investor's shares in-kind at the request of that
investor.
INVESTMENT SWITCHES
- -------------------
An investor may exchange Investment Class shares of a Fund for Investment Class
shares of another Fund or Service Class shares of the same or another Fund
("Investment Switches"). Such Investment Switches are permitted provided the
Fund is an option available to that investor, the investor meets the minimum
investment requirement for such Fund and the shares of such Fund may legally be
sold in the investor's state of residence.
The Trust may, upon 60 days prior written notice to a Fund's shareholders,
terminate the Investment Switch privilege. An Investment Switch to shares of
another Fund is treated for Federal income tax purposes as a redemption (that
is, a sale) of shares given in exchange by the investor, followed by a deemed
purchase of shares in the other Fund, and therefore the investor may experience
a taxable gain or loss in connection with the Investment Switch. Investors may
conduct an Investment Switch by writing the Trust at the appropriate address
listed above under "How to Open an Account."
NET ASSET VALUE
- ---------------
Each class' net asset value per share is determined as of the close of regular
trading on the NYSE (currently 4:00 p.m., New York time) on each day the NYSE is
open by dividing the value of the Fund's net assets attributable to that class
by the total number of shares of that class outstanding. The NYSE is currently
open each day, Monday through Friday, except on the following holidays: New
Year's Day, Dr. Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas, and on
the preceding Friday or subsequent Monday when one of these holidays falls on a
Saturday or Sunday, respectively.
In general, a Fund's investments will be valued at market value or, in the
absence of market value, at fair value as determined by or under the direction
of the Trust's Board of Trustees. All portfolio securities held by the Money
Market Fund, and any short-term investments of the other Funds that mature in 60
days or less, will be valued on the basis of amortized cost, if the Board of
Trustees determines that amortized cost represents fair value. Amortized cost
involves
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valuing an investment at its cost and, thereafter, assuming a constant
amortization to maturity of any discount or premium, regardless of the effect of
fluctuating interest rates on the market value of the investment. The Trust will
seek to maintain the Money Market Fund's net asset value at $1.00 per share for
purposes of purchases and redemptions, although no assurance can be given that
the Trust will be able to do so on a continuous basis.
A security that is primarily traded on a domestic or foreign securities exchange
will be valued at the last sale price on that exchange or, if no sales occurred
during the day, at the current quoted bid price. An option that is written or
purchased by a Fund generally will be valued at the mean between the last asked
and bid prices. The value of a futures contract will be equal to the unrealized
gain or loss on the contract that is determined by marking the contract to the
current settlement price for a like contract on the valuation date of the
futures contract. A settlement price may not be used if the market makes a limit
move with respect to a particular futures contract or if the securities
underlying the futures contract experience significant price fluctuations after
the determination of the settlement price. When a settlement price cannot be
used, futures contracts will be valued at their fair market value as determined
by or under the direction of the Board of Trustees.
Securities that are primarily traded on a foreign exchange generally will be
valued for purposes of calculating a Fund's net asset value at the preceding
closing value of the securities on the exchange, except that, when an occurrence
subsequent to the time a value was so established is likely to have changed that
value, the fair market value of those securities will be determined by
consideration of other factors by or under the direction of the Board. Trading
in foreign markets may not take place on every NYSE business day. In addition,
trading may take place in various foreign markets on Saturdays or on other days
when the NYSE is not open and on which a Fund's net asset value is not
calculated. Therefore, such calculation does not take place contemporaneously
with the determination of the prices of many of the portfolio securities used in
such calculation and the value of a Fund's portfolio may be significantly
affected on days when shares of the Fund may not be purchased or redeemed.
All assets and liabilities of a Fund initially expressed in foreign currency
values will be converted into U.S. dollar values at the mean between the bid and
offered quotations of the currencies against U.S. dollars as last quoted by any
recognized dealer. If the bid and offered quotations are not available, the rate
of exchange will be determined in good faith by the Board of Trustees. In
carrying out the Board's valuation policies, GEIM may consult with an
independent pricing service or services retained by the Trust. Further
information regarding the Trust's valuation policies is contained in the
Statement of Additional Information.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- ----------------------------------
DIVIDENDS AND DISTRIBUTIONS
Dividends and capital gain distributions paid to investors will be automatically
reinvested in shares of the same class. Dividends attributable to the Income
Fund and the Money Market Fund are declared daily and paid monthly. Dividends
attributable to the net investment income of each of the other Funds are
declared and paid annually. If an investor redeems all of the shares that it may
own in the Income Fund or the Money Market Fund at any time during a month, the
investor's dividends (if any) will be paid to it along with the proceeds of its
redemption.
The Trust will send investors written confirmations relating to the automatic
reinvestment of daily dividends within five days following the end of each
quarter for the Income Fund, and within five days following the end of each
month for the Money Market Fund. Distributions of any net realized long-term and
short-term capital gains earned by a Fund will be made annually. Earnings of the
Income Fund and the Money Market Fund for Saturdays, Sundays and holidays will
be declared as dividends on the business day immediately preceding the Saturday,
Sunday or holiday. As a result of the different service fees applicable to the
Service Class shares, dividends and distributions will be higher for the
Investment Class shares. See "Fee Table" and "Purchase of Shares."
Each Fund is subject to a 4% non-deductible excise tax measured with respect to
certain undistributed amounts of net investment income and capital gains. If
necessary to avoid the imposition of this tax, or if in the best interests of
the Fund's shareholders, the Trust will declare and pay dividends and
distributions more frequently than stated above.
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<PAGE>
TAXES
The following discussion may not be relevant to tax-deferred retirement accounts
or other tax exempt investors, and is not a complete analysis of the federal tax
implications of investing in the Funds. Investors should consult their own tax
advisor regarding the application of Federal, state, local and foreign tax laws
to their specific tax situation.
TAXES ON THE FUNDS. The Trust intends that each Fund qualify as a separate
regulated investment company under the Code. As a regulated investment company,
each Fund should not be subject to Federal income tax or Federal excise taxes if
substantially all of its net investment income and net realized capital gains
are distributed within allowable time limits, as provided under the Code. It is
important that the Funds meet these time limits and the requirements for
qualifying as regulated investment companies under the Code so that any earnings
on an investment will not be taxed twice.
Net investment income or capital gains earned by a Fund from investing in
foreign securities may be subject to foreign income taxes withheld at the
source. The Trust intends that the Funds operate in a manner that they qualify
for foreign tax rates that have been reduced under tax treaties with the United
States. Provided certain requirements are met under the Code, a Fund may elect
to treat foreign income taxes paid by that Fund as passed through to
shareholders as a foreign tax credit. The Trust anticipates that each of the
International Fund and the Emerging Markets Fund will seek to qualify for and
make this election in most, but not necessarily all, of its taxable years. The
Trust will report to shareholders any amount per share that must be included in
gross income and that may be available as a credit or a deduction. An investor
may not claim a deduction for foreign taxes if it does not itemize deductions,
and certain limitations will be imposed on the extent to which the credit (but
not the deduction) for foreign taxes may be claimed.
TAXES ON DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions an investor
receives from a Fund, whether reinvested or taken as cash, are subject to
Federal income tax. Dividends from a Fund's net investment income and
distributions of the Fund's short-term capital gains will be taxed as ordinary
income, and distributions of long-term capital gains will be taxed as long-term
capital gains, regardless of how long an investor has held its shares. As a
general rule, any gain or loss when an investor sells or redeems (including a
redemption in-kind) its Fund shares will be a long-term capital gain or loss if
it has held its shares for more than one year and a short-term capital gain or
loss if it has held its shares for one year or less. Some dividends received in
January may be taxable as if they had been paid the previous December.
Dividends and distributions paid by the Income Fund and the Money Market Fund,
and distributions of capital gains paid by all the Funds, will not qualify for
the Federal dividends-received deduction for corporations. Dividends paid by the
Emerging Markets Fund, Premier Growth Fund, Mid-Cap Fund, International Fund,
Value Fund, U.S. Equity Fund, S&P 500 Index Fund and Strategic Fund, to the
extent derived from dividends attributable to certain types of stock issued by
U.S. corporations, will qualify for the dividends-received deduction for
corporations. Some states, if certain asset and diversification requirements are
satisfied, permit shareholders to treat their portion of a Fund's dividends that
are attributable to interest on U.S. Treasury securities and certain U.S.
Government Obligations as income that is exempt from state and local income
taxes.
Statements regarding the tax status of income dividends and capital gains
distributions will be mailed to investors on or before January 31st of each
year.
CUSTODIAN AND TRANSFER AGENT
- ----------------------------
State Street, located at 225 Franklin Street, Boston, Massachusetts 02101,
serves as the Trust's custodian and transfer agent, and is responsible for
receiving acceptance orders for the purchase of shares and processing redemption
requests.
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<PAGE>
DISTRIBUTOR
- -----------
GE Investment Services Inc., located at 3003 Summer Street, P.O. Box 7900,
Stamford, Connecticut, 06904-7900, serves as distributor of the Funds' shares.
The Distributor, a wholly-owned subsidiary of GEIM, also serves as Distributor
for the Elfun Funds and GE Funds. GEIM or its affiliates, at their own expense,
may allocate portions of their revenues or other resources to assist the
Distributor in distributing shares of the Funds, by providing additional
promotional incentives to dealers. In some instances, these incentives may be
limited to certain dealers who have sold or may sell significant numbers of
shares of the Funds. The Distributor routinely offers dealers in Fund shares the
opportunity to participate in contests for which prizes include tickets to
theater and sporting events, dining, travel to meetings and conferences held in
locations remote from their offices and other items.
ADDITIONAL MATTERS
- ------------------
The Trust was formed as a business trust under the laws of Delaware pursuant to
a Certificate of Trust on May 23, 1997. The Trust's Declaration of Trust dated
August 29, 1997, as amended from time to time (the "Declaration"), authorizes
the Trust's Board of Trustees to create separate series, and within each series
separate classes, of an unlimited number of shares of beneficial interest, par
value $.001 per share. As of the date of this Prospectus, General Electric
Capital Assurance Company ("GE Assurance"), an indirect subsidiary of GE, owned
100% of the outstanding shares of the Trust. The shares were issued to GE
Assurance for providing the initial seed capital to the Trust. So long as GE
Assurance owns more than 25% of the outstanding voting securities of the Trust,
it may be deemed to control the Trust.
As issued, shares of a Fund will be fully paid and non-assessable. Shares are
freely transferable and have no preemptive, subscription or conversion rights.
Each of the Investment Class and the Service Class represents an identical
interest in a Fund's investment portfolio. As a result, the classes have the
same rights, privileges and preferences, except with respect to: (1) the
designation of each class; (2) the sales arrangement; (3) the expenses allocable
exclusively to each class; and (4) voting rights on matters exclusively
affecting a single class. The Board of Trustees does not anticipate that there
will be any conflicts among the interests of the holders of the two classes. The
Trustees, on an ongoing basis, will consider whether any conflict exists and, if
so, take appropriate action. Certain aspects of the shares may be changed, upon
notice to Fund shareholders, to satisfy certain tax regulatory requirements, if
the Trust's Board of Trustees deems the change necessary.
When matters are submitted for shareholder vote, each shareholder of each Fund
will have one vote for each full share held and proportionate, fractional votes
for fractional shares held. In general, shares of each Fund vote by individual
Fund on all matters except (1) a matter affecting the interests of one or more
of the Funds, in which case only shares of the affected Funds would be entitled
to vote, (2) a matter affecting only the interests of one class, in which case
only shares of the affected class would be entitled to vote, or (3) when the
1940 Act requires that shares of the Funds be voted in the aggregate.
Normally, no meetings of shareholders of the Funds will be held for the purpose
of electing Trustees unless and until such time as less than a majority of the
Trustees holding office have been elected by shareholders of the Trust, at which
time the Trustees then in office will call a shareholders' meeting for the
election of Trustees. Shareholders of record of no less than two-thirds of the
outstanding shares of the Trust may remove a Trustee through a declaration in
writing or by vote cast in person or by proxy at a meeting called for that
purpose. A meeting will be called for the purpose of voting on the removal of a
Trustee at the written request of holders of 10% of the Trust's outstanding
shares.
Shareholders who satisfy certain criteria will be assisted by the Trust in
communicating with other shareholders in seeking the holding of the meeting.
The Trust only recently commenced operations and therefore has not yet generated
semi-annual and audited annual reports. Once semi-annual and audited annual
reports become available, the Trust will send investors a copy of each report,
each of which includes a list of the investment securities held by each Fund in
which it has invested. Only one report each will be mailed to an investor's
address. Investors may request additional copies of any report by calling the
toll-free number listed on, or by writing to the Trust at the address set forth
on, the front cover page of the Prospectus.
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<PAGE>
APPENDIX
FURTHER INFORMATION: CERTAIN INVESTMENT TECHNIQUES AND STRATEGIES
The Funds may engage in a number of investment techniques and strategies,
including those described below. No Fund is under any obligation to use any of
the techniques or strategies at any given time or under any particular economic
condition. No assurance can be given that the use of any practice will have its
intended result or that the use of any practice is, or will be, available to any
Fund.
STRATEGIES AVAILABLE TO ALL FUNDS
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES. Each Fund may purchase when-issued
or delayed delivery securities, which means that delivery of and payment for the
securities will take place at a future time, i.e., beyond normal settlement. The
Funds purchase such securities to secure advantageous prices or yields, and not
for the purpose of leverage. When-issued securities purchased by a Fund may
include securities purchased on a "when, as and if issued" basis, meaning that
issuance of the securities depends on the occurrence of a subsequent event, such
as approval of a merger, corporate reorganization or debt restructuring.
The Funds do not earn interest or accrue income on when-issued or
delayed-delivery securities until settlement and bear the risk of market
fluctuation between the purchase and settlement dates. At the time of
settlement, a when-issued or delayed-delivery security may be valued at less
than its purchase price. In order to avoid the leveraging effect that may occur
with when-issued or delayed-delivery commitments, the Funds will maintain with
State Street, or with a designated sub-custodian, a separate account with a
segregated portfolio containing cash or other liquid assets in an amount equal
to the amount of such commitments.
LENDING PORTFOLIO SECURITIES. Each Fund may lend its portfolio securities to
well-known and recognized U.S. and foreign brokers, dealers and banks. Such
loans may not exceed 30% of the Fund's assets, and must be collateralized by
cash, letters of credit or U.S. Government Obligations. Cash or instruments
collateralizing a Fund's loans of securities will be segregated and maintained
at all times with State Street, or with a designated sub-custodian, in an amount
at least equal to the current market value of the loaned securities. A Fund that
lends portfolio securities will be subject to the risk of loss of rights in the
collateral if the borrower fails financially.
SUPRA-NATIONAL AGENCIES. Each Fund may invest in debt obligations of
supra-national agencies, which are agencies whose members make capital
contributions to support agency activities. Such agencies include the World
Bank, the European Coal and Steel Community, and the Asian Development Bank.
Debt obligations of supra-national agencies are not considered U.S. Government
Obligations and are not supported, directly or indirectly, by the U.S.
Government.
STRATEGIES AVAILABLE TO SOME BUT NOT ALL FUNDS
INVESTMENTS IN OTHER INVESTMENT COMPANIES. Each non-money market Fund, other
than the U.S. Equity Fund, may purchase securities of other investment
companies, provided that those other companies' investments are consistent with
the Fund's investment objective and policies and are permissible under the 1940
Act. Pursuant to the 1940 Act each Fund: (i) may invest a maximum of 10% of its
total assets in the securities of other investment companies; (ii) may not
invest more than 5% of its total assets in any one investment company; and (iii)
may not own more than 3% of the securities of any one investment company. The
non-money market Funds' investments in the Investment Fund are not considered
investment in another investment company for purposes of this paragraph and the
restrictions just described. To the extent a Fund invests in another investment
company, the Fund's shareholders will incur certain duplicative fees and
expenses, including two levels of investment advisory fees.
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<PAGE>
DEPOSITARY RECEIPTS. Each non-money market Fund, may invest in American
Depositary Receipts, or "ADRs," European Depositary Receipts, or "EDRs"
(sometimes referred to as Continental Depositary Receipts, or "CDRs") and Global
Depositary Receipts, or "GDRs." Depositary receipts evidence an ownership
interest in securities of foreign corporations that are held on deposit with a
financial institution. ADRs are U.S. dollar-denominated receipts that represent
interests in shares of a foreign-based corporation held on deposit in a U.S.
bank or trust company. ADRs are traded on exchanges or over-the-counter in the
United States. EDRs represent interests in foreign or domestic securities held
in trust in a foreign bank, and are traded in European markets. EDRs may not
necessarily be denominated in the same currency as the securities they
represent. GDRs are receipts for shares in a foreign or domestic corporations
that are traded in capital markets around the world. While ADRs are intended to
permit foreign corporations to offer shares to Americans, and EDRs are designed
for use in European markets, and GDRs allow companies to offer shares in many
markets. A Fund may purchase ADRs from institutions that are not sponsored by
the issuer of the underlying foreign securities, in which case the Fund may not
receive as much information about the ADRs that it would have received if it had
purchased them from a sponsored depository.
WEBS AND OTHER INDEX-RELATED SECURITIES. Each of the Emerging Markets Fund,
International Fund and Strategic Fund may invest in shares in a particular
series issued by Foreign Fund, Inc., an investment company whose shares also are
known as "World Equity Benchmark Shares" or "WEBS." WEBS have been listed for
trading on the American Stock Exchange, Inc. The Funds also may invest in shares
in a particular series issued by CountryBaskets Index Fund, Inc., or another
fund the shares of which are the substantial equivalent of WEBS. Each of the
U.S. Equity Fund, Premier Growth Fund, Value Fund and Strategic Fund may invest
in Standard & Poor's Depositary Receipts, or "SPDRs." SPDRs are securities that
represent ownership in a long-term unit investment trust that holds a portfolio
of common stocks designed to track the performance of the S&P 500 Index. A Fund
investing in a SPDR would be entitled to receive proportionate quarterly cash
distributions corresponding to the dividends that accrue to the S&P 500 stocks
in the underlying portfolio, less trust expenses.
EMERGING MARKETS. The Emerging Markets Fund, International Fund, Strategic Fund
and Income Fund each may invest more than 5% of its total assets in securities
of issuers located in one or more emerging markets countries. The Mid-Cap Fund,
Premier Growth Fund, Value Fund, U.S. Equity Fund and S&P 500 Index Fund each
may invest up to 5% of its total assets in such securities. Emerging markets
countries are located primarily in Asia, Latin America, the Middle East,
Southern Europe, Eastern Europe (including the former republics of the Soviet
Union and the Eastern Bloc) and Africa. Risks and special considerations
associated with investing in emerging markets countries are discussed above
under "Risk Factors and Special Considerations - Investing in Developing or
Emerging Markets."
MUNICIPAL LEASES. The Strategic Fund may invest in municipal leases, which may
take the form of a lease or an installment purchase or a conditional sales
contract to acquire equipment and facilities. Interest payments on qualifying
municipal leases are exempt from Federal income taxes and state income taxes
within the state of issuance. The Fund may hold municipal leases that are rated
investment grade (or its issuer's senior debt is rated investment grade) and
unrated, if GEIM (subject to oversight and approval by the Board of Trustees)
deems such unrated leases to be of comparable quality to rated issues. Risks and
special considerations applicable to certain investment grade obligations are
described above under "Risk Factors and Special Considerations - Investment
Grade Obligations." Municipal leases will be considered illiquid securities
unless the Trust's Board of Trustees determines on an ongoing basis that the
leases are readily marketable.
Municipal leases have special risks. They represent a type of financing that has
not yet developed the depth of marketability generally associated with other
Municipal Obligations. Some municipal leases contain "non- appropriation"
clauses, which means that the governmental issuer is under no obligation to make
future payments under the lease or contract unless money is appropriated for
that purpose by the appropriate legislative body on a yearly or other periodic
basis. Moreover, although a municipal lease will be secured by financed
equipment or facilities, disposing of such collateral might prove difficult in
the event of foreclosure. To limit these risks, the Fund will invest no more
than 5% of its total assets in municipal leases. In addition, the Fund will
purchase leases with non-appropriation
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<PAGE>
clauses only when the lease payments will commence amortization of principal at
an early date, so that the leases will have an average life of five years or
less.
FLOATING AND VARIABLE RATE INSTRUMENTS. The Strategic Fund, Income Fund and
Money Market Fund each may invest in floating and variable rate instruments
(collectively, "adjustable rate securities"), which are securities with floating
or variable rates of interest or dividend payments. The floating or variable
rate is adjusted periodically according to a specified formula, which may be
determined by reference to a market interest rate or a some interest rate index,
or determined through an auction or re-marketing process. The variable and
floating rates of interest permit these Funds to take advantage of increases in
interest rates, and therefore these securities tend to be less sensitive than
fixed rate securities to interest rate changes and to have higher yields when
interest rates increase.
The amount by which the rates paid on an income security may increase or
decrease may be subject to periodic or lifetime reset limits (or "caps"), which
means that the interest rate does not increase beyond a certain level. If
interest rates exceed these levels, the values of certain capped adjustable rate
securities will fall. In addition, fluctuations in interest rates above these
caps could cause adjustable rate securities to behave more like fixed rate
securities in response to extreme movements in interest rates. Moreover, during
periods of rising interest rates, changes in the interest rate of an adjustable
rate security may lag changes in market rates.
The Strategic Fund and Income Fund may invest in adjustable rate securities that
have interest rates that vary inversely with changes in market rates of
interest. Such securities also may pay a rate of interest determined by applying
a multiple to the variable rate. Increases and decreases in the value of
securities whose rates vary inversely with changes in market rates of interest
generally will be larger than comparable changes in the value of an equal
principal amount of a fixed rate security having similar credit quality,
redemption provisions and maturity.
The Strategic Fund may purchase floating and variable rate demand bonds and
notes, which are Municipal Obligations ordinarily having stated maturities in
excess of one year but which permit their holder to demand payment of principal
at any time or at specified intervals. Variable rate demand notes include master
demand notes, which permit the Fund to invest fluctuating amounts, which may
change daily without penalty, pursuant to direct arrangements between the Fund,
as lender, and the borrower. These obligations have interest rates that
fluctuate from time to time and frequently are secured by letters of credit or
other credit support arrangements provided by banks. Use of letters of credit or
other credit support arrangements will not adversely affect the tax-exempt
status of variable rate demand notes. Because they are direct lending
arrangements between the lender and borrower, variable rate demand notes
generally will not be traded and no established secondary market generally
exists for them, although they are redeemable at face value. If variable rate
demand notes are not secured by letters of credit or other credit support
arrangements, the Fund's right to demand payment will be dependent on the
ability of the borrower to pay principal and interest on demand. Each obligation
purchased by the Fund will meet the quality criteria established by GEIM for the
purchase of Municipal Obligations. GEIM, on behalf of the Fund, considers on an
ongoing basis the creditworthiness of the issuers of the floating and variable
rate demand obligations in the Fund's portfolio.
PARTICIPATION INTERESTS. The Strategic Fund may purchase participation interests
in certain Municipal Obligations from financial institutions. A participation
interest gives the Fund an undivided interest in the Municipal Obligation in the
proportion that the Fund's participation interest bears to the total principal
amount of the Municipal Obligation. These instruments may have fixed, floating
or variable rates of interest. If the participation interest is unrated, or has
been given a rating below one that is otherwise permissible for purchase by the
Fund, the participation interest will be backed by an irrevocable letter of
credit or guarantee of a bank that the Trust's Board of Trustees has determined
meets certain quality standards, or the payment obligation otherwise will be
collateralized by U.S. Government Obligations. The Fund will have the right,
with respect to certain participation interests, to demand payment, on a
specified number of days' notice, for all or any part of the Fund's
participation interest in the Municipal Obligation, plus accrued interest. The
Trust intends that the Fund exercise its right to demand payment only upon a
default under the terms of the Municipal Obligation, or to maintain or improve
the quality of its investment portfolio. The Fund will invest no more than 5% of
the value of its total assets in participation interests.
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ZERO COUPON OBLIGATIONS. The U.S. Equity Fund, the Strategic Fund and the Income
Fund may invest in zero coupon obligations. Zero coupon obligations pay no
interest to their holders prior to maturity. Instead, the interest accrues (or
builds up) and is paid in a lump sum at maturity. Investors purchase zero coupon
obligations at a deep discount, or prices far lower than par value. Because zero
coupon securities bear no interest, they are more volatile than other fixed
income securities. When interest rates rise, their values fall more rapidly then
securities paying interest on a current basis. Conversely, when interest rates
fall, the values of zero coupon bonds rise more rapidly then securities paying
interest on a current basis, because the zeros have locked in a particular rate
of reinvestment that becomes more attractive the further rates fall.
Even though each Fund receives no payments on its zero coupon securities prior
to maturity or disposition, for Federal income tax purposes it must distribute
income to shareholders as if payments had actually been made. Each Fund must pay
these dividends to shareholders from its cash assets, from borrowing or by
liquidating portfolio securities. The Fund may have to liquidate portfolio
securities at an inopportune time, such as when securities are thinly traded,
and therefore would sell securities at lower prices. Moreover, to the extent
that portfolio assets must be used to pay distributions, the Fund would lose the
opportunity to use those assets to purchase additional income-producing
securities, and therefore current income may be reduced.
The Strategic Fund may invest up to 10% of its assets in zero coupon Municipal
Obligations, which are generally divided into two categories: "Pure Zero
Obligations," which pay no interest for their entire life and "Zero/Fixed
Obligations," which pay no interest for some initial period and thereafter pay
interest currently. In the case of a Pure Zero Obligation, the failure to pay
interest currently may result from the obligation's having no stated interest
rate, in which case the obligation pays only principal at maturity and is sold
at a discount from its stated principal. A Pure Zero Obligation may, in the
alternative, provide for a stated interest rate, but provide that no interest is
payable until maturity, in which case accrued, unpaid interest on the obligation
may be capitalized as incremental principal. The value to the investor of a zero
coupon Municipal Obligation consists of the economic accretion either of the
difference between the purchase price and the nominal principal amount (if no
interest is stated to accrue) or of accrued, unpaid interest during the
Municipal Obligation's life or payment deferral period.
MUNICIPAL OBLIGATION COMPONENTS. The Strategic Fund may invest in Municipal
Obligations the interest rate on which has been divided by the issuer into two
different and variable components, which together result in a fixed interest
rate. Typically, the first of the components (the "Auction Component") pays an
interest rate that is reset periodically through an auction process, whereas the
second of the components (the "Residual Component") pays a residual interest
rate based on the difference between the total interest paid by the issuer on
the Municipal Obligation and the auction rate paid on the Auction Component. The
Fund may purchase both Auction and Residual Components. Because the interest
rate paid to holders of Residual Components is generally determined by
subtracting the interest rate paid to the holders of Auction Components from a
fixed amount, the interest rate paid to Residual Component holders will decrease
as the Auction Component's rate increases and increase as the Auction
Component's rate decreases. Moreover, the extent of the increases and decreases
in market value of Residual Components may be larger than comparable changes in
the market value of an equal principal amount of a fixed rate Municipal
Obligation having similar credit quality, redemption provisions and maturity.
CUSTODY RECEIPTS. The Strategic Fund may acquire custody receipts or
certificates underwritten by securities dealers or banks that evidence ownership
of future interest payments, principal payments, or both, on certain Municipal
Obligations. Similar to depositary receipts, the actual Municipal Obligations
are held in an irrevocable trust or custodial account with a custodian bank,
which then issues receipts or certificates that evidence ownership. Custody
receipts evidencing specific coupon or principal payments have the same general
attributes as zero coupon Municipal Obligations described above. Although under
the terms of a custody receipt, the Fund would be typically authorized to assert
its rights directly against the issuer of the underlying obligation, the Fund
could be required to assert through the custodian bank its rights against the
underlying issuers. Thus, in the event the underlying issuer fails to pay
principal and/or interest when due, the Fund may be subject to delays, expenses
and risks that are greater than those that would have been involved if the Fund
had purchased a direct obligation of the issuer.
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<PAGE>
MORTGAGE RELATED SECURITIES. The mortgage related securities in which the
Strategic Fund and the Income Fund may invest represent pools of mortgage loans
assembled for sale to investors by various governmental agencies, such as the
Government National Mortgage Association ("GNMA"), by government related
organizations, such as the Federal National Mortgage Association ("FNMA") and
the Federal Home Loan Mortgage Corporation ("FHLMC"), as well as by private
issuers, such as commercial banks, savings and loan institutions, mortgage
bankers and private mortgage insurance companies.
Several risks are associated with mortgage related securities. The monthly cash
inflow from the underlying loans may be insufficient to meet the monthly payment
requirements of the mortgage related security. Early returns of principal (such
as from prepayments or foreclosures) will shorten the term of the underlying
mortgage pool for a mortgage related security and will affect the average life
of the mortgage related securities the Funds continue to hold. Factors affecting
the occurrence of mortgage prepayments include the level of interest rates,
general economic conditions, the location and age of the mortgaged property and
other social and demographic conditions. When interest rates fall, prepayments
tend to increase, and when they rise, prepayments tend to decrease.
Because prepayments of principal generally occur when interest rates are
declining, each Fund will likely have to reinvest the proceeds of prepayments at
lower interest rates than those at which its assets were previously invested,
resulting in a corresponding decline in the Fund's yield. Thus, mortgage related
securities may have less potential for capital appreciation in periods of
falling interest rates than other fixed income securities of comparable
maturity. To the extent that a Fund purchases mortgage related securities at a
premium, unscheduled prepayments, which are made at par, will result in a loss
equal to any unamortized premium.
Adjustable rate mortgages, or "ARMs" have interest rates that reset at periodic
intervals. The Funds may invest in ARMs that have maximum annual or lifetime
caps. ARMs have the advantages and risks associated with variable and floating
rate securities (including capped adjustable rate securities) discussed above.
Collateralized mortgage obligations, or "CMOs" are obligations fully
collateralized by a portfolio of mortgages or mortgage related securities.
Payments of principal and interest on the mortgages are passed through to the
holders of the CMOs on the same schedule as they are received, although certain
classes of CMOs have priority over others with respect to the receipt of
prepayments on the mortgages. Therefore, depending on the type of CMOs in which
the Strategic Fund or Income Fund invests, the investment may be subject to a
greater or lesser risk of prepayment than other types of mortgage related
securities.
To the extent GEIM determines any mortgage related securities are not readily
marketable, each of the Funds would limit its investments in these securities,
together with other illiquid instruments, to not more than 15% of the value of
its net assets.
GOVERNMENT STRIPPED MORTGAGE RELATED SECURITIES. The Strategic Fund and the
Income Fund each may invest in government stripped mortgage related securities
(i.e., the issuer has stripped the security into its interest and principal
components) issued and guaranteed by GNMA, FNMA or FHLMC. These securities
represent beneficial ownership interests in either periodic principal
distributions ("principal-only") or interest distributions ("interest-only") on
mortgage related certificates. The certificates underlying the government
stripped mortgage related securities represent all or part of the beneficial
interest in pools of mortgage loans. Each Fund will invest in government
stripped mortgage related securities in order to enhance yield or to benefit
from anticipated appreciation in value of the securities at times when GEIM
believes that interest rates will remain stable or increase. In periods of
rising interest rates, the expected increase in the value of government stripped
mortgage related securities may offset all or a portion of any decline in value
of the Fund's securities.
Investing in government stripped mortgage related securities involves risks
normally associated with investing in mortgage related securities issued by
government or government related entities. In addition, the yields on government
stripped mortgage related securities are extremely sensitive to the prepayment
experience on the mortgage loans underlying the certificates collateralizing the
securities. If a decline in the level of prevailing interest rates results in a
rate of principal prepayments higher than anticipated, distributions of
principal will be accelerated, thereby reducing the
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yield to maturity on interest-only government stripped mortgage related
securities and increasing the yield to maturity on principal-only government
stripped mortgage related securities. Sufficiently high prepayment rates could
result in the Strategic Fund or the Income Fund not fully recovering its initial
investment in an interest-only government stripped mortgage related security.
Under current market conditions, the Funds expect to invest in interest-only
government stripped mortgage related securities. Government stripped mortgage
related securities are currently traded in an over-the-counter market maintained
by several large investment banking firms. The Funds will acquire government
stripped mortgage related securities only if a secondary market for the
securities exists at the time of acquisition, but there can be no assurance that
either Fund will be able to effect a trade of such a security at a desired time.
Except for government stripped mortgage related securities based on fixed rate
FNMA and FHLMC mortgage certificates that meet certain liquidity criteria
established by the Trust's Board of Trustees, the Trust treats government
stripped mortgage related securities as illiquid and will limit each of the
Strategic Fund's and the Income Fund's investments in these securities, together
with other illiquid investments, to not more than 15% of its net assets.
ASSET-BACKED AND RECEIVABLE-BACKED SECURITIES. The Strategic Fund and the Income
Fund each may invest in asset- backed and receivable-backed securities. These
instruments are secured by and payable from pools of assets, including credit
card receivables and pools of motor vehicle retail installment sales contracts
and security interests in the vehicles securing those contracts. A Fund's return
on an asset- or receivable-backed security may be adversely affected by early
prepayment of underlying sales contracts. In periods of falling interest rates,
there is a general tendency for prepayments to increase, shortening the average
maturity of an asset- or receivable-backed security, making it difficult to lock
in higher interest rates. If a creditor defaults on an underlying sales
contract, asset- or receivable-backed securities might be adversely affected if
the full amount receivable on such contract cannot be realized.
MORTGAGE DOLLAR ROLLS. The Strategic Fund and the Income Fund each may use up to
25% of its total assets to enter into mortgage "dollar rolls." A mortgage dollar
roll transaction requires a Fund to sell a security and simultaneously contract
with purchaser buy similar, but not identical, securities at some future date.
The Fund loses the right to principal and interest payments on the securities
sold. The Fund benefits from a dollar roll to the extent that (i) the price at
which the Fund sells the security exceeds the price at which it buys (i.e., the
"drop" price) similar securities in the future, and (ii) the Fund earns interest
on the cash proceeds from the sale. However, these gains are offset by foregone
interest income and capital appreciation on the securities sold. Therefore a
Fund's overall gains from mortgage dollar roll transactions depend upon GEIM's
ability to predict correctly mortgage prepayments and interest rates. To the
extent that GEIM incorrectly analyzes these factors, the Fund's investment
performance may be diminished compared to what it would have been without the
use of mortgage dollar rolls.
SHORT SALES AGAINST THE BOX. The International Fund, Value Fund, Mid-Cap Fund
and Emerging Markets Fund may sell securities "short against the box." A short
sale "against the box" means that at all times when the short position is open,
the Fund owns at least an equal amount of the securities, or securities
convertible into, or exchangeable without further consideration for, securities
of the same issue as the securities sold short. Short sales against the box are
typically used by sophisticated investors to defer recognition of capital gains
or losses.
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STATEMENT OF ADDITIONAL INFORMATION
November __, 1997
GE INSTITUTIONAL FUNDS
3003 Summer Street, Stamford, Connecticut 06905
For information, call 1-800-493-3042
* Emerging Markets Fund * U.S. Equity Fund
* Premier Growth Equity Fund * S&P 500 Index Fund
* Mid-Cap Growth Fund * Strategic Investment Fund
* International Equity Fund * Income Fund
* Value Equity Fund * Money Market Fund
This Statement of Additional Information supplements the information contained
in, and should be read in conjunction with, the current Prospectuses of GE
Institutional Funds (the "Trust"), each dated November __, 1997. Copies of the
Prospectuses may be obtained without charge by calling the Trust at the
telephone number listed above. Information regarding the status of shareholder
accounts may be obtained by calling the Trust at the telephone number listed
above or by writing to the Trust at P.O. Box 120065, Stamford, CT 06912-0065.
This Statement of Additional Information, although not a prospectus, is
incorporated in its entirety by reference into each Prospectus. Terms that are
defined in the Prospectuses shall have the same meanings in this Statement of
Additional Information.
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CONTENTS
PAGE
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Investment Objectives and Management Policies.............1
Investment Restrictions..................................12
Management of the Trust..................................15
Compensation Table.......................................19
Redemption of Shares.....................................25
Investment Switches .....................................25
Net Asset Value..........................................25
Dividends, Distributions and Taxes.......................27
The Funds' Performance...................................30
Performance Calculation..................................30
Principal Stockholders...................................34
Additional Information...................................35
Counsel..................................................37
Independent Accountants..................................37
Financial Statements.....................................37
Appendix................................................A-1
Financial Statements....................................F-1
Accountants' Report.....................................F-2
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INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES
The Prospectuses dated November ___, 1997 discuss the investment objectives
and policies of the following ten managed investment funds currently offered by
the Trust: Emerging Markets Fund, Premier Growth Equity Fund (the "Premier
Growth Fund"), Mid-Cap Growth Fund (the "Mid-Cap Fund"), International Equity
Fund (the "International Fund"), Value Equity Fund (the "Value Fund"), U.S.
Equity Fund, S&P 500 Index Fund1, Strategic Investment Fund (the "Strategic
Fund"), Income Fund, and Money Market Fund. Supplemental information is set out
below concerning certain of the securities and other instruments in which the
Funds may invest, the investment policies and strategies that the Funds may
utilize and certain risks attendant to those investments, policies and
strategies.
STRATEGIES AVAILABLE TO ALL FUNDS
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES. When-issued and
delayed-delivery securities transactions involve the purchase of a security with
payment and delivery at a future date. When a Fund engages in when-issued or
delayed-delivery securities transactions, it relies on the other party to
consummate the trade. Failure of the seller to do so may result in the Fund's
incurring a loss or missing an opportunity to obtain a price considered to be
advantageous.
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1 The S&P 500 Index Fund is not sponsored, endorsed, sold or promoted by
Standard & Poor's ("S&P"). S&P makes no representation or warranty, express
or implied, to the investors of the Fund or any member of the public
regarding the advisability of investing in securities generally or in this
Fund particularly or the ability of the S&P 500 Index to track general
stock market performance. S&P's only relationship to the Fund is the
licensing of certain trademarks and trade names of S&P and of the S&P 500
Index which is determined, composed and calculated by S&P without regard to
the Fund. S&P has no obligation to take the needs of the Fund or the
investors in the Fund into consideration in determining, composing or
calculating the S&P 500 Index. S&P is not responsible for and has not
participated in the determination of the prices or composition of the S&P
500 Index Fund or the timing of the issuance or sale of the shares of that
Fund. S&P has no obligation or liability in connection with the
administration, marketing or trading of the Fund.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500
INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY
ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS
OR IMPLIED, AS TO THE RESULTS TO BE OBTAINED BY THE FUND, INVESTORS IN THE
FUND, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX OR
ANY DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND
EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P 500 INDEX OR ANY DATA
INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL
S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL
DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF
SUCH DAMAGES.
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SECURITIES OF OTHER INVESTMENT COMPANIES. A Fund other than the Money
Market Fund (each, a "non-money market Fund") and the U.S. Equity Fund may
invest in securities of other investment companies to the extent permitted under
the Investment Company Act of 1940, as amended (the "1940 Act"). Presently,
under the 1940 Act, a non-money market Fund may hold securities of another
investment company in amounts which (a) do not exceed 3% of the total
outstanding voting stock of such company, (b) do not exceed 5% of the value of
the Fund's total assets and (c) when added to all other investment company
securities held by the Fund, do not exceed 10% of the value of the Fund's total
assets. Each non-money market Fund may invest up to 25% of its assets in the GEI
Short-Term Investment Fund (the "Investment Fund"), an investment Fund advised
by GEIM. The Investment Fund was specifically created to serve as a vehicle for
the collective investment of cash balances of the investment portfolios of other
management investment companies and accounts advised by either GEIM or its
affiliate, General Electric Investment Corporation ("GEIC"). The Investment Fund
is not considered an investment in another investment company for purposes of
this restriction.
LENDING PORTFOLIO SECURITIES. If a Fund loans its portfolio securities, it
will adhere to the following conditions: (a) the Fund must receive at least 100%
cash collateral or equivalent securities from the borrower; (b) the borrower
must increase the collateral whenever the market value of the securities loaned
rises above the level of the collateral; (c) the Fund must be able to terminate
the loan at any time; (d) the Fund must receive reasonable interest on the loan,
as well as any dividends, interest or other distributions on the loaned
securities, and any increase in market value; (e) the Fund may pay only
reasonable custodian fees in connection with the loan; and (f) voting rights on
the loaned securities may pass to the borrower except that, if a material event
adversely affecting the investment in the loaned securities occurs, the Trust's
Board of Trustees must terminate the loan and regain the right to vote the
securities. From time to time, a Fund may pay a part of the interest earned from
the investment of collateral received for securities loaned to the borrower
and/or a third party that is unaffiliated with the Fund and is acting as a
"finder."
BANK OBLIGATIONS. Domestic commercial banks organized under Federal law are
supervised and examined by the U.S. Comptroller of the Currency and are required
to be members of the Federal Reserve System and to be insured by the Federal
Deposit Insurance Corporation ("FDIC"). Foreign branches of U.S. banks and
foreign banks are not regulated by U.S. banking authorities and generally are
not bound by mandatory reserve requirements, loan limitations, accounting,
auditing and financial reporting standards comparable to those binding U.S.
banks. Obligations of foreign branches of U.S. banks and foreign banks are
subject to the risks associated with investing in foreign securities generally.
These obligations entail risks that are different from those of investments in
obligations in domestic banks, including foreign economic and political
developments outside the United States, foreign governmental restrictions that
may adversely affect payment of principal and interest on the obligations,
foreign exchange controls and foreign withholding or other taxes on income.
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A U.S. branch of a foreign bank may or may not be subject to reserve
requirements imposed by the Federal Reserve System or by the state in which the
branch is located if the branch is licensed in that state. In addition, branches
licensed by the Comptroller of the Currency and branches licensed by certain
states ("State Branches") may or may not be required to: (a) pledge to the
regulator by depositing assets with a designated bank within the state, an
amount of its assets equal to 5% of its total liabilities; and (b) maintain
assets within the state in an amount equal to a specified percentage of the
aggregate amount of liabilities of the foreign bank payable at or through all of
its agencies or branches within the state. The deposits of State Branches may
not necessarily be insured by the FDIC. In addition, less information may be
available to the public about a U.S. branch of a foreign bank than about a U.S.
bank.
RATINGS AS INVESTMENT CRITERIA. The ratings of nationally recognized
statistical rating organizations ("NRSROs") such as S&P or Moody's Investors
Service, Inc. ("Moody's") represent the opinions of those organizations as to
the quality of securities that they rate. These ratings are relative, subjective
and are not absolute standards of quality. Although GEIM uses these ratings as
initial criteria for the selection of the Funds' portfolio securities, GEIM also
relies upon its own analysis to evaluate potential investments.
A Fund may purchase a security that subsequently ceases to be rated or is
downgraded to a rating below the minimum required for purchase by the Fund.
Although neither event will require a non-money market Fund to sell the
security, GEIM will consider the event in its determination of whether the Fund
should continue to hold the security. In the event of a lowering of the rating
of a security held by the Money Market Fund or a default by the issuer of the
security, that Fund will dispose of the security as soon as practicable, unless
the Trust's Board of Trustees determines that disposal of the security would not
be in the best interests of the Fund. To the extent that an NRSRO's ratings
change as a result of a change in the NRSRO or its rating system, the Funds will
attempt to use comparable ratings as standards for their investments in
accordance with their respective investment objectives and policies.
SUPRA-NATIONAL AGENCIES. Supra-national agencies include: the International
Bank for Reconstruction and Development (commonly referred to as the World
Bank), which was chartered to finance development projects in developing member
countries; the European Community, which is a twelve-nation organization engaged
in cooperative economic activities; the European Coal and Steel Community, which
is an economic union of various European nations' steel and coal industries; and
the Asian Development Bank, which is an international development bank
established to lend funds, promote investment and provide technical assistance
to member nations in the Asian and Pacific regions. Debt obligations of
supra-national agencies are not considered U.S. Government Obligations and are
not supported, directly or indirectly, by the U.S. Government.
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STRATEGIES AVAILABLE TO SOME BUT NOT ALL FUNDS
COVERED OPTION WRITING. The Funds with option-writing authority will write
(i.e., sell) only options that are covered. A call option written by a Fund will
be deemed covered (a) if the Fund owns the securities underlying the call or has
an absolute and immediate right to acquire those securities without additional
cash consideration upon conversion or exchange of other securities held in its
portfolio, (b) if the Fund holds a call at the same exercise price for the same
exercise period and on the same securities as the call written, (c) in the case
of a call option on a stock index, if the Fund owns a portfolio of securities
substantially replicating the movement of the index underlying the call option,
or (d) if at the time the call is written, an amount of cash, U.S. Government
Obligations or other liquid assets equal to the fluctuating market value of the
optioned securities, is segregated with the Trust's custodian or with a
designated sub-custodian. A put option will be deemed covered (a) if, at the
time the put is written, an amount of cash, U.S. Government Obligations or other
liquid assets, having a value at least equal to the exercise price of the
underlying securities is segregated with the Trust's custodian or with a
designated sub-custodian, or (b) if the Fund continues to own an equivalent
number of puts of the same "series" (that is, puts on the same underlying
securities having the same exercise prices and expiration dates as those written
by the Fund), or an equivalent number of puts of the same "class" (that is, puts
on the same underlying securities) with exercise prices greater than those that
it has written (or if the exercise prices of the puts it holds are less than the
exercise prices of those it has written, the difference is segregated with the
Trust's custodian or with a designated sub-custodian).
The principal reason for writing covered call options on a securities
portfolio is to attempt to make more money from the receipt of premiums than
would be realized on the securities alone. In return for a premium, the writer
of a covered call option forfeits the right to any appreciation in the value of
the underlying security above the strike price for the life of the option (or
until a closing purchase transaction can be effected). Nevertheless, the call
writer retains the risk of a decline in the price of the underlying security.
Similarly, the principal reason for writing covered put options is to realize
income in the form of premiums. The writer of a covered put option accepts the
risk of a decline in the price of the underlying security. The size of the
premiums that a Fund may receive may be adversely affected as new or existing
institutions, including other investment companies, engage in or increase their
option-writing activities.
Options written by a Fund normally will have expiration dates between one
and nine months from the date written. The exercise price of the options may be
below, equal to or above the market values of the underlying securities at the
times the options are written. The exercise prices relative to the market is
referred to as "in-the-money," "at-the-money" and "out-of-the-money,"
respectively. In-the-money options are those where the current market price is
above the strike price for calls and below it for puts. At-the-money options are
those where the current price and the strike price are the same.
Out-of-the-money options are those whose strike price is higher than its current
market value in the case of a call, or lower in the case of a put.
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<PAGE>
So long as the obligation of a Fund as the writer of an option continues,
the Fund may be assigned an exercise notice by the broker-dealer through which
the option was sold, requiring the Fund to deliver, in the case of a call, or
take delivery of, in the case of a put, the underlying security against payment
of the exercise price. This obligation terminates when the option expires or the
Fund effects a closing purchase transaction. A Fund can no longer effect a
closing purchase transaction with respect to an option once it has been assigned
an exercise notice. To secure its obligation to deliver the underlying security
when it writes a call option, or to pay for the underlying security when it
writes a put option, a Fund will be required to deposit in escrow the underlying
security or other assets in accordance with the rules of the Options Clearing
Corporation (the "Clearing Corporation") and of the securities exchange on which
the option is written.
An option position may be closed out only if a secondary market exists for
an option of the same series on a recognized securities exchange or in the
over-the-counter market. In light of the need for a secondary market in which to
close an option position, the Funds are expected to purchase only call or put
options issued by the Clearing Corporation. GEIM expects that the Funds will
write options, other than those on U.S. Government Obligations, only on national
securities exchanges. Options on U.S. Government Obligations may be written by
the Funds in the over-the-counter market.
A Fund may realize a profit or loss upon entering into closing
transactions. When a Fund has written an option, it will realize a profit if the
cost of the closing purchase transaction is less than the premium received upon
writing the original option; the Fund will incur a loss if the cost of the
closing purchase transaction exceeds the premium received upon writing the
original option. When a Fund has purchased an option and engages in a closing
sale transaction, whether the Fund realizes a profit or loss will depend upon
whether the amount received in the closing sale transaction is more or less than
the premium the Fund initially paid for the original option plus the related
transaction costs.
STOCK INDEX OPTIONS. Certain Funds may purchase and write put and call
options on stock indexes or stock index futures contracts that are traded on a
U.S. exchange or board of trade or a foreign exchange, to the extent permitted
under rules and interpretations of the Commodity Futures Trading Commission
("CFTC"), as a hedge against changes in market conditions and interest rates,
and for duration management, and may enter into closing transactions with
respect to those options to terminate existing positions. A stock index
fluctuates with changes in the market values of the stocks included in the
index. Stock index options may be based on a broad or narrow market index or on
an industry or market segment.
The delivery requirements of options on stock indexes differ from options
on stock. Unlike a stock option, which contemplates the right to take or make
delivery of stock at a specified price, an option on a stock index gives the
holder the right to receive a cash "exercise settlement amount" equal to (a) the
amount, if any, by which the fixed exercise price of the option exceeds (in the
case of a put) or is less than (in the case of a call) the closing value of the
5
<PAGE>
underlying index on the date of exercise, multiplied by (b) a fixed "index
multiplier." Receipt of this cash amount will depend upon the closing level of
the stock index upon which the option is based being greater than, in the case
of a call, or less than, in the case of a put, the exercise price of the option.
The amount of cash received will be equal to the difference between the closing
price of the index and the exercise price of the option expressed in dollars
times a specified multiple. The writer of the option is obligated, in return for
the premium received, to make delivery of this amount. The writer may offset its
position in stock index options prior to expiration by entering into a closing
transaction on an exchange or the purchaser may allow the option to expire
unexercised.
The effectiveness of purchasing or writing stock index options as a hedging
technique will depend upon the extent to which price movements in the portion of
a securities portfolio being hedged correlate with price movements of the stock
index selected. Because the value of an index option depends upon movements in
the level of the index rather than the price of a particular stock, whether a
Fund realizes a gain or loss from the purchase or writing of options on an index
depends upon movements in the level of stock prices in the stock market
generally or, in the case of certain indexes, in an industry or market segment,
rather than movements in the price of a particular stock. As a result,
successful use by a Fund of options on stock indexes is subject to GEIM's
ability to predict correctly movements in the direction of the stock market
generally or of a particular industry. This ability contemplates different
skills and techniques from those used in predicting changes in the price of
individual stocks.
OVER-THE-COUNTER ("OTC") OPTIONS. The Funds may purchase OTC or dealer
options or sell covered OTC options. Unlike exchange-listed options where an
intermediary or clearing corporation, such as the Clearing Corporation, assures
that all transactions in such options are properly executed, the responsibility
for performing all transactions with respect to OTC options rests solely with
the writer and the holder of those options. A listed call option writer, for
example, is obligated to deliver the underlying stock to the clearing
organization if the option is exercised, and the clearing organization is then
obligated to pay the writer the exercise price of the option. If a Fund were to
purchase a dealer option, however, it would rely on the dealer from whom it
purchased the option to perform if the option were exercised. If the dealer
fails to honor the exercise of the option by the Fund, the Fund would lose the
premium it paid for the option and the expected benefit of the transaction.
Listed options generally have a continuous liquid market while dealer
options have none. Consequently, a Fund will generally be able to realize the
value of a dealer option it has purchased only by exercising it or reselling it
to the dealer who issued it. Similarly, when a Fund writes a dealer option, it
generally will be able to close out the option prior to its expiration only by
entering into a closing purchase transaction with the dealer to which the Fund
originally wrote the option. Although the Funds will seek to enter into dealer
options only with dealers who will agree to and that are expected to be capable
of entering into closing transactions with the Funds, there can be no assurance
that a Fund will be able to liquidate a dealer option at a favorable price at
any time prior to expiration. The inability to enter into a closing transaction
6
<PAGE>
may result in material losses to a Fund. Until a Fund, as a covered OTC call
option writer, is able to effect a closing purchase transaction, it will not be
able to liquidate securities (or other assets) used to cover the written option
until the option expires or is exercised. This requirement may impair a Fund's
ability to sell portfolio securities or, with respect to currency options,
currencies at a time when such sale might be advantageous. In the event of
insolvency of the other party, the Fund may be unable to liquidate a dealer
option.
FUTURES CONTRACTS. A Fund neither pays nor receives consideration upon
trading a futures contract. Upon entering into a futures contract, cash,
short-term U.S. Government Obligations or other U.S. dollar-denominated,
high-grade, short-term money market instruments, equal to approximately 1% to
10% of the contract amount, will be segregated with the Trust's custodian or a
designated sub-custodian. This amount, which is subject to change by the
exchange on which the contract is traded, is known as "initial margin" and is in
the nature of a performance bond or good faith deposit on the contract. The
initial margin is returned to the Fund upon termination of the futures contract,
so long as all contractual obligations have been satisfied. The broker will have
access to amounts in the margin account if the Fund fails to meet its
contractual obligations. Subsequent payments, known as "variation margin," to
and from the broker, will be made daily as the price of the securities
underlying the futures contract fluctuates, making the long and short positions
in the contract more or less valuable, a process known as "marking-to-market."
At any time prior to the expiration of a futures contract, a Fund may elect to
close a position by taking an opposite position, which will operate to terminate
the Fund's existing position in the contract.
Although the Trust intends that the Funds enter into futures contracts only
if an active market exists for the contracts, no assurance can be given that an
active market will exist for the contracts at any particular time. Most U.S.
futures exchanges and boards of trade limit the amount of fluctuation permitted
in futures contract prices during a single trading day. Once the daily limit has
been reached in a particular contract, no trades may be made on that day at a
price beyond that limit. Futures contract prices may move to the daily limit for
several consecutive trading days with little or no trading, thereby preventing
prompt liquidation of futures positions and subjecting some futures traders to
substantial losses. In such a case, and in the event of adverse price movements,
a Fund would be required to make daily cash payments of variation margin. In
such circumstances, an increase in the value of the portion of the portfolio
being hedged, if any, may partially or completely offset losses on the futures
contract.
If a Fund has hedged against the possibility of an increase in interest
rates and rates decrease instead, the Fund will lose part or all of the benefit
of the increased value of securities that it has hedged because it will have
offsetting losses in its futures positions. In addition, in such situations, if
the Fund had insufficient cash, it may have to sell securities to meet daily
variation margins requirements at a time when it may be disadvantageous to do
so. These sales of securities may, but will not necessarily, be at increased
prices that reflect the decline in interest rates.
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<PAGE>
OPTIONS ON FUTURES CONTRACTS. An option on a futures contract, unlike a
direct investment in such a contract, gives the purchaser the right, in return
for the premium paid, to assume a position in the futures contract at a
specified exercise price at any time prior to the expiration date of the option.
Upon exercise of an option, the delivery of the futures position by the writer
of the option to the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's futures margin account, which represents the
amount by which the market price of the futures contract exceeds, in the case of
a call, or is less than, in the case of a put, the exercise price of the option
on the futures contract. The potential loss related to the purchase of an option
on futures contracts is limited to the premium paid for the option (plus
transaction costs). Because the price of the option to the purchaser is fixed at
the point of sale, no daily cash payments are made to reflect changes in the
value of the underlying contract. The value of the option, however, does change
daily and that change would be reflected in the net asset value of the Fund
holding the options.
FORWARD CURRENCY TRANSACTIONS. The cost to a Fund of engaging in currency
transactions varies with factors such as the currency involved, the length of
the contract period and the market conditions then prevailing. Because
transactions in currency exchange are usually conducted on a principal basis, no
fees or commissions are involved. The use of forward currency contracts does not
eliminate fluctuations in the underlying prices of the securities, but it does
establish a rate of exchange that can be achieved in the future. In addition,
although forward currency contracts limit the risk of loss due to a decline in
the value of the hedged currency, at the same time they limit any potential gain
that might result should the value of the currency increase. If a devaluation is
generally anticipated, a Fund may not be able to sell currency at a price above
the anticipated devaluation level. A Fund will not enter into a currency
transaction if, as a result, it will fail to qualify as a regulated investment
company under the Internal Revenue Code of 1986, as amended (the "Code") for a
given year.
OPTIONS ON FOREIGN CURRENCIES. Certain transactions involving options on
foreign currencies are undertaken on contract markets that are not regulated by
the CFTC. Options on foreign currencies traded on national securities exchanges
are within the jurisdiction of the Securities and Exchange Commission (the
"SEC"), as are other securities traded on those exchanges. As a result, many of
the protections provided to traders on organized exchanges will be available
with respect to those transactions. In particular, all foreign currency option
positions entered into on a national securities exchange are cleared and
guaranteed by the Clearing Corporation, thereby reducing the risk of
counterparty default. In addition, a liquid secondary market in options traded
on a national securities exchange may exist, potentially permitting a Fund to
liquidate open positions at a profit prior to exercise or expiration, or to
limit losses in the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency options are
subject to the risks of the availability of a liquid secondary market as
described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
8
<PAGE>
political and economic events. In addition, exercise and settlement of
exchange-traded foreign currency options must be made exclusively through the
Clearing Corporation, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the Clearing Corporation may,
if it determines that foreign governmental restrictions or taxes would prevent
the orderly settlement of foreign currency option exercises, or would result in
undue burdens on the Clearing Corporation or its clearing members, impose
special procedures on exercise and settlement, such as technical changes in the
mechanics of delivery of currency, the fixing of dollar settlement prices or
prohibitions on exercise.
Options on foreign currencies may be traded on foreign exchanges, to the
extent permitted by the CFTC. These transactions are subject to the risk of
governmental actions affecting trading in or the prices of foreign currencies or
securities. The value of these positions could also be adversely affected by (a)
other complex foreign political and economic factors, (b) lesser availability of
data on which to make trading decisions than in the United States, (c) delays in
a Fund's ability to act upon economic events occurring in foreign markets during
non-business hours in the United States, (d) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States and (e) lesser trading volume.
MUNICIPAL OBLIGATIONS. The term "Municipal Obligations" as used in each
Prospectus and this Statement of Additional Information means debt obligations
issued by, or on behalf of, states, territories and possessions of the United
States and the District of Columbia and their political subdivisions, agencies
and instrumentalities or multistate agencies or authorities, the interest from
which debt obligations is, in the opinion of bond counsel to the issuer,
excluded from gross income for Federal income tax purposes. Municipal
Obligations generally are understood to include debt obligations issued to
obtain funds for various public purposes, including the construction of a wide
range of public facilities, refunding of outstanding obligations, payment of
general operating expenses and extensions of loans to public institutions and
facilities. Private activity bonds that are issued by or on behalf of public
authorities to finance privately operated facilities are considered to be
Municipal Obligations if the interest paid on them qualifies as excluded from
gross income (but not necessarily from alternative minimum taxable income) for
Federal income tax purposes in the opinion of bond counsel to the issuer.
Municipal Obligations may be issued to finance life care facilities, which
are an alternative form of long-term housing for the elderly that offer
residents the independence of a condominium life-style and, if needed, the
comprehensive care of nursing home services. Bonds to finance these facilities
have been issued by various state industrial development authorities. Because
the bonds are secured only by the revenues of each facility and not by state or
local government tax payments, they are subject to a wide variety of risks,
including a drop in occupancy levels, the difficulty of maintaining adequate
financial reserves to secure estimated actuarial liabilities, the possibility of
regulatory cost restrictions applied to health care delivery and competition
from alternative health care or conventional housing facilities.
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Municipal leases are Municipal Obligations that may take the form of a
lease or an installment purchase contract issued by state and local governmental
authorities to obtain funds to acquire a wide variety of equipment and
facilities such as fire and sanitation vehicles, computer equipment and other
capital assets. Although municipal lease obligations do not normally constitute
general obligations of the municipality, a lease obligation is ordinarily backed
by the municipality's agreement to make the payments due under the lease
obligation. These obligations have evolved to make it possible for state and
local government authorities to acquire property and equipment without meeting
constitutional and statutory requirements for the issuance of debt. Thus,
municipal leases have special risks not normally associated with Municipal
Obligations. These obligations frequently contain "non-appropriation" clauses
that provide that the governmental issuer of the obligation has no obligation to
make future payments under the lease or contract unless money is appropriated
for those purposes by the legislative body on a yearly or other periodic basis.
In addition to the non-appropriation risk, municipal leases represent a type of
financing that has not yet developed the depth of marketability associated with
other Municipal Obligations. Some municipal lease obligations may be, and could
become, illiquid. Moreover, although municipal leases will be secured by the
leased equipment, the disposition of the equipment in the event of foreclosure
might prove to be difficult.
Municipal lease obligations may be deemed to be illiquid as determined by
or in accordance with methods adopted by the Board. In determining the liquidity
and appropriate valuation of a municipal lease obligation, the following factors
relating to the security are considered, among others: (a) the frequency of
trades and quotes; (b) the number of dealers willing to purchase or sell the
security; (c) the willingness of dealers to undertake to make a market; (d) the
nature of the marketplace trades; and (e) the likelihood that the obligation
will continue to be marketable based on the credit quality of the municipality
or relevant obligor.
Tax legislation in recent years has included several provisions that may
affect the supply of, and the demand for, Municipal Obligations, as well as the
tax-exempt nature of interest paid on those obligations. Neither the Trust nor
GEIM can predict with certainty the effect of recent tax law changes upon the
Municipal Obligation market, including the availability of instruments for
investment by a Fund. In addition, neither the Trust nor GEIM can predict
whether additional legislation adversely affecting the Municipal Obligation
market will be enacted in the future. The Trust monitors legislative
developments and considers whether changes in the objective or policies of a
Fund need to be made in response to those developments.
MORTGAGE RELATED SECURITIES. The average maturity of pass-through pools of
mortgage related securities in which certain of the Funds may invest varies with
the maturities of the underlying mortgage instruments. In addition, a pool's
stated maturity may be shortened by unscheduled payments on the underlying
mortgages. Factors affecting mortgage prepayments include the level of interest
rates, general economic and social conditions, the location of the mortgaged
property and age of the mortgage. Because prepayment rates of individual
mortgage pools vary widely, the average life of a particular pool cannot be
predicted accurately.
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Mortgage related securities may be classified as private, governmental or
government-related, depending on the issuer or guarantor. Private mortgage
related securities represent pass-through pools consisting principally of
conventional residential mortgage loans created by non-governmental issuers,
such as commercial banks, savings and loan associations and private mortgage
insurance companies. Governmental mortgage related securities are backed by the
full faith and credit of the United States. The Government National Mortgage
Association ("GNMA"), the principal U.S. guarantor of these securities, is a
wholly-owned U.S. government corporation within the Department of Housing and
Urban Development. Government-related mortgage related securities are not backed
by the full faith and credit of the United States. Issuers include the Federal
National Mortgage Association ("FNMA") and the Federal Home Loan Mortgage
Corporation ("FHLMC"). FNMA is a government-sponsored corporation owned entirely
by private stockholders, which is subject to general regulation by the Secretary
of Housing and Urban Development. Pass-through securities issued by FNMA are
guaranteed as to timely payment of principal and interest by FNMA. FHLMC is a
corporate instrumentality of the United States, the stock of which is owned by
the Federal Home Loan Banks. Participation certificates representing interests
in mortgages from FHLMC's national portfolio are guaranteed as to the timely
payment of interest and ultimate collection of principal by FHLMC.
Private, governmental or government-related entities may create mortgage
loan pools offering pass-through investments in addition to those described
above. The mortgages underlying these securities may be alternative mortgage
instruments, that is, mortgage instruments whose principal or interest payments
may vary or whose terms to maturity may be shorter than previously customary.
GEIM assesses new types of mortgage related securities as they are developed and
offered to determine their appropriateness for investment by the relevant Fund.
ASSET-BACKED AND RECEIVABLE-BACKED SECURITIES. To date, several types of
asset-backed and receivable-backed securities have been offered to investors,
including Certificates for Automobile Receivables ("CARssm") and interests in
pools of credit card receivables. CARssm represent undivided fractional
interests in a trust, the assets of which consist of a pool of motor vehicle
retail installment sales contracts and security interests in the vehicles
securing the contracts. Payments of principal and interest on CARssm are passed
through monthly to certificate holders and are guaranteed up to certain amounts
and for a certain time period by a letter of credit issued by a financial
institution unaffiliated with the trustee or originator of the trust.
An investor's return on CARssm may be affected by early prepayment of
principal on the underlying vehicle sales contracts. If the letter of credit is
exhausted, an investor may be prevented from realizing the full amount due on a
sales contract because of state law requirements and restrictions relating to
foreclosure sales of vehicles and the availability of deficiency judgments
following these sales; depreciation, damage or loss of a vehicle; and/or the
application of Federal and state bankruptcy and insolvency laws or other
factors. Certificate holders may experience delays in payment if the letter of
credit is exhausted.
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INVESTMENT RESTRICTIONS
Investment restrictions numbered 1 through 12 below have been adopted by
the Trust as fundamental policies of all of the Funds. Under the 1940 Act, a
fundamental policy may not be changed with respect to a Fund without the vote of
a majority of the outstanding voting securities (as defined in the 1940 Act) of
the Fund. Investment restrictions 13 and 14 may be changed by a vote of the
Board of Trustees at any time.
1. No Fund may borrow money, except that a Fund may enter into reverse
repurchase agreements and may borrow from banks for temporary or emergency (not
leveraging) purposes, including the meeting of redemption requests and cash
payments of dividends and distributions that might otherwise require the
untimely disposition of securities, in an amount not to exceed 33-1/3% of the
value of the Fund's total assets (including the amount borrowed) valued at
market less liabilities (not including the amount borrowed) at the time the
borrowing is made. Whenever borrowings, including reverse repurchase agreements,
of 5% or more of a Fund's total assets are outstanding, the Fund will not make
any additional investments.
2. No Fund may lend its assets or money to other persons, except through
(a) purchasing debt obligations, (b) lending portfolio securities in an amount
not to exceed 30% of the Fund's total assets taken at market value, (c) entering
into repurchase agreements, (d) trading in financial futures contracts, index
futures contracts, securities indexes and options on financial futures
contracts, options on index futures contracts, options on securities and options
on securities indexes and (e) entering into variable rate demand notes.
3. No Fund may purchase securities (other than U.S. Government Obligations)
of any issuer if, as a result of the purchase, more than 5% of the Fund's total
assets would be invested in the securities of the issuer, except that up to 25%
of the value of the total assets of each non- money market Fund may be invested
without regard to this limitation. All securities of a foreign government and
its agencies will be treated as a single issuer for purposes of this
restriction.
4. No Fund may purchase more than 10% of the voting securities of any one
issuer, or more than 10% of the outstanding securities of any class of issuer,
except that (a) this limitation is not applicable to a Fund's investments in
U.S. Government Obligations and (b) up to 25% of the value of the assets of a
non-money market Fund may be invested without regard to these 10% limitations.
All securities of a foreign government and its agencies will be treated as a
single issuer for purposes of this restriction.
5. No Fund may invest more than 25% of the value of its total assets in
securities of issuers in any one industry unless the securities are backed only
by the assets and revenues of non-governmental issuers. For purposes of this
restriction, the term industry will be deemed to include (a) the government of
any one country other than the United States, but not the U.S. Government and
(b) all supra-national organizations. In addition, securities held by the Money
Market Fund that are issued by domestic banks are excluded from this
restriction.
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6. No Fund may underwrite any issue of securities, except to the extent
that the sale of portfolio securities in accordance with the Fund's investment
objective, policies and limitations may be deemed to be an underwriting, and
except that the Fund may acquire securities under circumstances in which, if the
securities were sold, the Fund might be deemed to be an underwriter for purposes
of the Securities Act of 1933, as amended.
7. No Fund may purchase or sell real estate or real estate limited
partnership interests, or invest in oil, gas or mineral leases, or mineral
exploration or development programs, except that a Fund may (a) invest in
securities secured by real estate, mortgages or interests in real estate or
mortgages, (b) purchase securities issued by companies that invest or deal in
real estate, mortgages or interests in real estate or mortgages, (c) engage in
the purchase and sale of real estate as necessary to provide it with an office
for the transaction of business or (d) acquire real estate or interests in real
estate securing an issuer's obligations in the event of a default by that
issuer.
8. No Fund may make short sales of securities or maintain a short position,
unless at all times when a short position is open, the Fund owns an equal amount
of the securities or securities convertible into or exchangeable for, without
payment of any further consideration, securities of the same issue as, and equal
in amount to, the securities sold short.
9. No Fund may purchase securities on margin, except that a Fund may obtain
any short-term credits necessary for the clearance of purchases and sales of
securities. For purposes of this restriction, the deposit or payment of initial
or variation margin in connection with futures contracts, financial futures
contracts or related options, and options on securities, options on securities
indexes and options on currencies will not be deemed to be a purchase of
securities on margin by a Fund.
10. No Fund may invest in commodities, except that each non-money market
Fund may invest in futures contracts (including financial futures contracts,
index futures contracts or securities index futures contracts) and related
options and other similar contracts (including foreign currency forward, futures
and options contracts) as described in this Statement of Additional Information
and in each Prospectus.
11. No Fund may invest in companies for the purpose of exercising control
or management.
12. No Fund may issue senior securities except as otherwise permitted by
the 1940 Act and as otherwise permitted herein.
13. No Fund may purchase illiquid securities if more than 15% of the net
assets of the Fund would be invested in illiquid securities; the Money Market
Fund will not purchase illiquid securities. For purposes of this restriction,
illiquid securities are securities that cannot be disposed of by a Fund within
seven days in the ordinary course of business at approximately the amount at
which the Fund has valued the securities.
14. No Fund may purchase restricted securities if more than 10% of the
total assets of the Fund would be invested in restricted securities. Restricted
securities are securities that are
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subject to contractual or legal restrictions on transfer, excluding for purposes
of this restriction, restricted securities that are eligible for resale pursuant
to Rule 144A under the Securities Act of 1933, as amended ("Rule 144A
Securities"), that have been determined to be liquid by the Trust's Board of
Trustees based upon the trading markets for the securities.
The Trust may make commitments more restrictive than the restrictions
listed above with respect to a Fund to permit the sale of shares of the Fund in
certain states. Should the Trust determine that any such commitment is no longer
in the best interests of a Fund and its shareholders, the Trust will revoke the
commitment by terminating the sale of shares of the Fund in the state involved
or may otherwise modify its commitment based on a change in the state's
restrictions. The percentage limitations in the restrictions listed above apply
at the time of purchases of securities. For purposes of investment restriction
number 5, the Trust may use the industry classifications reflected by the S&P
500 Composite Stock Index, if applicable at the time of determination. For all
other portfolio holdings, the Trust may use the Directory of Companies Required
to File Annual Reports with the SEC and Bloomberg Inc. In addition, the Trust
may select its own industry classifications, provided such classifications are
reasonable.
PORTFOLIO TRANSACTIONS AND TURNOVER
Decisions to buy and sell securities for each Fund are made by GEIM,
subject to review by the Trust's Board of Trustees. Transactions on domestic
stock exchanges and some foreign stock exchanges involve the payment of
negotiated brokerage commissions. On exchanges on which commissions are
negotiated, the cost of transactions may vary among different brokers. On most
foreign exchanges, commissions are fixed. No stated commission will be generally
applicable to securities traded in U.S. over-the-counter markets, but the prices
of those securities include undisclosed commissions or mark-ups. The cost of
securities purchased from underwriters include an underwriting commission or
concession, and the prices at which securities are purchased from and sold to
dealers include a dealer's mark-up or mark-down. U.S. Government Obligations
generally will be purchased on behalf of a Fund from underwriters or dealers,
although certain newly issued U.S. Government Obligations may be purchased
directly from the U.S. Treasury or from the issuing agency or instrumentality.
In selecting brokers or dealers to execute securities transactions on
behalf of a Fund, GEIM seeks the best overall terms available. In assessing the
best overall terms available for any transaction, GEIM considers factors that it
deems relevant, including the breadth of the market in the security, the price
of the security, the financial condition and execution capability
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of the broker or dealer and the reasonableness of the commission, if any, for
the specific transaction and on a continuing basis. In addition, the investment
advisory agreement between the Trust and GEIM relating to a Fund authorizes
GEIM, on behalf of the Fund, in selecting brokers or dealers to execute a
particular transaction, and in evaluating the best overall terms available, to
consider the brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934, as amended) provided to
the Fund and/or other accounts over which GEIM or its affiliates exercise
investment discretion. The fees under each investment advisory agreement
relating to a Fund will not be reduced by reason of the Fund's receiving
brokerage and research services. The Trust's Board of Trustees periodically
reviews the commissions paid by a Fund to determine if the commissions paid over
representative periods of time were reasonable in relation to the benefits
inuring to the Fund. Over-the-counter purchases and sales on behalf of the Funds
will be transacted directly with principal market makers except in those cases
in which better prices and executions may be obtained elsewhere. A Fund will not
purchase any security, including U.S. Government Obligations, during the
existence of any underwriting or selling group relating to the security of which
any affiliate of the Fund or GEIM is a member, except to the extent permitted
under rules, interpretations or exemptions of the SEC. GEIM may select
broker-dealers who are affiliated with the Trust or GEIM. GEIM will pay
brokerage commissions to affiliates only if it believes that such commissions
are fair and reasonable.
The Money Market Fund may attempt to increase its yield by trading to take
advantage of short-term market variations, which trading would result in the
Fund's experiencing high portfolio turnover. Because purchases and sales of
money market instruments are usually effected as principal transactions,
however, this type of trading by the Money Market Fund will not result in the
Fund's paying high brokerage commissions.
MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS
The names of the Trustees and executive officers of the Trust, their
addresses and their principal occupations during the past five years and their
other affiliations are shown below. The executive officers of the Trust are
employees of organizations that provide services to the Funds. An asterisk
appears before the name of each Trustee who is an "interested person" of the
Trust, as defined in the 1940 Act.
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<TABLE>
<CAPTION>
POSITIONS HELD AGE AND PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH TRUST DURING PAST FIVE YEARS
- ----------------- ------------------- -------------------------------
<S> <C> <C>
*Michael J. Cosgrove+ Chairman of the Board Aged 48. President, GE Mutual Funds;
3003 Summer Street and President Executive Vice President - Mutual
Stamford, CT 06905 Funds of GEIM and GEIC, each a
wholly-owned subsidiary of General Electric
Company ("GE") that is registered as an
investment adviser under the Investment
Advisers Act of 1940, as amended, since
March 1993 (responsibilities include
general management of all mutual funds
managed by GEIM and GEIC); and Director of
GEIC and Executive Vice President and
Director of GEIM since 1988; from 1988
until 1993, Mr. Cosgrove served as
Executive Vice President - Finance and
Administration of GEIM and GEIC.
*Alan M. Lewis+ Trustee and Executive Age 51. Executive Vice President,
3003 Summer Street Vice President General Counsel and Secretary of
Stamford, CT 06905 GEIM since 1988 and of GEIC since
October 1987.
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John R. Costantino++ Trustee Age 51. Managing Director, Walden
150 East 58th Street Partners, Ltd., consultants and
New York, NY 10055 investors, since August 1992;
President, CMG Acquisition Corp., Inc., a
holding company, since 1988; Vice Chairman,
Acoustiguide Holdings, Inc., a holding
company, since 1989; President CMG/IKH,
Inc., a holding company, since 1991;
Director, Crossland Federal Savings Bank, a
financial institution; Director, Brooklyn
Bankcorp, Inc., a financial institution;
Director, IK Holdings, Inc., a holding
company, since 1991; Director, I. Kleinfeld
& Son, Inc., a retailer, since 1991;
Director, High Performance Appliances,
Inc., a distributor of kitchen appliances
("HPA"), since 1991; Director, HPA Hong
Kong, Ltd., a service subsidiary of HPA,
since 1991; Director, Lancit Media
Productions, Ltd., a children's and family
television film and videotape production
company, since 1995; Partner, Costantino
Melamede-Greenberg Investment Partners, a
general investment partnership, from
September 1987 through August 1992.
William J. Lucas++ Trustee Age 50. Vice President and Treasurer
Fairfield University of Fairfield University since 1983.
North Benson Road
Fairfield, CT 06430
Robert P. Quinn++ Trustee Age 61. Retired since 1983 from
45 Shinnecock Road Salomon Brothers Inc.; Director, GP
Quogue, NY 11959 Financial Corp., a holding company,
since 1994; Director, The Greenpoint
Savings Bank, a financial institution,
since 1987.
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*Jeffrey A. Groh Treasurer Age 35. Vice President-Operations of
3003 Summer Street GEIM and GEIC since January 1997
Stamford, CT 06905 and Treasurer and Controller of GEIM
and GEIC since August 1994; prior to August
1994, Senior Manager in Investment Company
Services Group and certified public
accountant with Price Waterhouse LLP.
*Matthew J. Simpson Secretary Age 36. Vice President, Associate
3003 Summer Street General Counsel and Assistant
Stamford, CT 06905 Secretary of GEIM and GEIC since
October 1992; attorney with the law firm of
Baker & McKenzie, April 1991 to October
1992; prior to April 1991, an attorney with
the law firm of Spengler Carlson Gubar
Brodsky & Frischling.
</TABLE>
- ----------
+ As of the date of this SAI, Mr. Cosgrove serves as Trustee of four
investment companies advised by GEIM, Mr. Lewis serves as Trustee for three
investment companies advised by GEIM and Messrs. Cosgrove and Lewis serve
as Trustees of eight investment companies advised by GEIC. They are
considered to be interested persons of each investment company advised by
GEIM or GEIC, as defined under Section 2(a)(19) of the 1940 Act, and
accordingly, serve as Trustees thereof without compensation.
++ Messrs. Costantino, Lucas and Quinn serve as Trustees of three investment
companies advised by GEIM and receive compensation for their services as
Trustees of all companies.
No employee of General Electric Company ("GE") or any of its affiliates receives
any compensation from the Trust for acting as a Trustee or officer of the Trust.
Each Trustee of the Trust who is not a director, officer or employee of GEIM, GE
Investment Services Inc. (the "Distributor"), GE, or any affiliate of those
companies, receives an annual fee of $5,000 for services as Trustee. In
addition, each Trustee receives $500 for each meeting of the Trust's Board of
Trustees attended by the Trustee and is reimbursed for expenses incurred in
connection with attendance at Board meetings.
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<PAGE>
COMPENSATION TABLE*
TOTAL COMPENSATION FOR ALL
INVESTMENT COMPANIES
TOTAL COMPENSATION FROM MANAGED BY GEIM AND/OR
NAME OF TRUSTEE THE TRUST GEIC
- --------------- --------- ----
Michael J. Cosgrove None None
Alan M. Lewis None None
John R. Costantino $5,000 $25,000
William J. Lucas $5,000 $25,000
Robert P. Quinn $5,000 $25,000
- ----------
* The Trust has not yet completed a full fiscal year since its organization.
The amounts shown are estimates of future payments that will be received by
the Trustees for the fiscal year ended September 30, 1998. The Trustees
will not receive any pension or retirement benefits accrued as part of Fund
expenses.
INVESTMENT ADVISER AND ADMINISTRATOR
GEIM serves as the Trust's investment adviser and administrator. GEIM is
registered as an investment adviser under the Investment Advisers Act of 1940,
as amended and is located at 3003 Summer Street, Stamford, Connecticut 06905.
GEIM, which was formed under the laws of Delaware in 1988, is a wholly owned
subsidiary of GE. GEIM currently provides advisory services with respect to a
number of other mutual funds and private institutional accounts. The
professionals responsible for the investment operations of GEIM serve in similar
capacities with respect to GEIC, a sister company of GEIM wholly owned by GE,
which provides investment advisory services with respect to GE's pension and
benefit plans and a number of funds offered exclusively to GE employees,
retirees and certain related persons. These funds include the Elfun family of
Funds (the first of which, Elfun Trusts, was established in 1935) and the funds
offered as part of GE's 401(k) program (also known as the GE Savings and
Security Program), which are referred to as the GE S&S Program Mutual Fund and
the GE S&S Long Term Interest Fund. The investment professionals at GEIM and
GEIC and their predecessors have managed GE's pension assets since 1927. GEIM
and GEIC managed assets in excess of $69 billion as of September 30, 1997, of
which more than $13 billion was invested in mutual fund assets.
GEIM INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENTS
The duties and responsibilities of GEIM are specified in investment
advisory and administration agreements (each, an "Advisory Agreement" and
collectively, the "Advisory Agreements") between GEIM and the Trust on behalf of
the respective Funds. Under each Advisory Agreement, GEIM, subject to the
supervision of the Trust's Board of Trustees, provides a continuous investment
program for the relevant Fund's assets, including investment research and
management. GEIM determines from time to time what investments are purchased,
retained or sold by the Fund and places purchase and sale orders for the Fund's
investments. GEIM provides the Trust with all executive, administrative,
clerical and other personnel necessary to
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operate each Fund, and pays salaries and other employment-related costs of
employing these persons. GEIM furnishes the Trust and each Fund with office
space, facilities, and equipment and pays the day-to-day expenses related to the
operation of such space, facilities and equipment. GEIM, as administrator, also:
(a) maintains the books and records of each Fund; (b) prepares reports to
shareholders of each Fund; (c) prepares and files tax returns for each Fund; (d)
assists with the preparation and filing of reports and the Trust's registration
statement with the SEC; (e) provides appropriate officers for the Trust; (f)
provides administrative support necessary for the Board of Trustees to conduct
meetings; and (g) supervises and coordinates the activities of other service
providers, including independent auditors, legal counsel, custodians, accounting
service agents and transfer agents.
GEIM is generally responsible for employing sufficient staff and consulting
with other persons that it determines to be necessary or useful in the
performance of its obligations under each Advisory Agreement. Each Advisory
Agreement obligates GEIM to provide services in accordance with the relevant
Fund's investment objective, policies and restrictions as stated in the Trust's
current registration statement, as amended from time to time, and to keep the
Trust informed of developments materially affecting that Fund, including
furnishing the Trust with whatever information and reports the Board of Trustees
reasonably requests.
Except for those expenses assumed by a Fund as described below, GEIM bears
all of each Fund's expenses, including, but not limited to: charges and expense
of any registrar; the costs of custody, transfer agency and recordkeeping
services in connection with the Fund; registration costs of the Fund and its
shares under Federal and state securities laws; the cost and expense of
printing, including typesetting, and distributing of prospectuses describing the
Fund and supplements to those prospectuses to regulatory authorities and the
Fund's shareholders; all expenses incurred in conducting meetings of the Fund's
shareholders and meetings of the Board relating to the Fund, excluding fees paid
to members of the Board who are not affiliated with GEIM or any of its
affiliates; all expenses incurred in preparing, printing and mailing proxy
statements and reports to shareholders of the Fund; all expenses incident to any
dividend, withdrawal or redemption options provided to Fund shareholders (except
for purchase premiums and redemption fees, if any, charged directly to
shareholders); charges and expenses of any outside service used for pricing the
Fund's portfolio securities and calculating the net asset value of the Fund's
shares; fees and expenses of legal counsel, including counsel to the members of
the Board who are not interested persons of the Fund, or GEIM, and independent
auditors; membership dues of industry associations; postage; insurance premiums
on property or personnel (including officers and Trustees) of the Trust that
inure to their benefit; and all other costs of the Fund's operations.
Each Fund will bear the following expenses: advisory and administration
fees described in that Fund's Advisory Agreement; shareholder servicing and
distribution fees under the terms of the shareholder servicing and distribution
plan adopted by the Trust with respect to the Fund pursuant to Rule 12b-1 under
the 1940 Act; brokerage fees and commissions and other expenses incurred in the
acquisition or disposition of any securities or other investments; fees and
travel expenses of members of the Board of Trustees or members of any advisory
board or committee who are not affiliated with GEIM, or any of its affiliates;
and expenses that are not normal operating expenses of the Fund (such as
extraordinary expenses, interest and taxes).
20
<PAGE>
Each Advisory Agreement permits GEIM, subject to the approval of the Board
of Trustees and other applicable legal requirements, to enter into any advisory
or sub-advisory agreement with affiliated or unaffiliated entities whereby such
entity would perform some or all of GEIM's responsibilities under the Advisory
Agreement. In this event, GEIM remains responsible for ensuring that these
entities perform the services that each undertakes pursuant to a sub- advisory
agreement.
Each Advisory Agreement provides that GEIM may render similar advisory and
administrative services to other clients so long as when a Fund or any other
client served by GEIM are prepared to invest in or desire to dispose of the same
security, available investments or opportunities for sales will be allocated in
a manner believed by GEIM to be equitable to the Fund. The Advisory Agreements
also provide that GEIM shall not be liable for any error of judgment or mistake
of law or for any loss incurred by a Fund in connection with GEIM's services
pursuant to the Agreement, except for a loss resulting from willful misfeasance,
bad faith or gross negligence in the performance of its duties or from reckless
disregard of its obligations and duties under the Agreement.
Each Advisory Agreement was approved by the Board of Trustees (including a
majority of Trustees who are not parties to such Agreement or interested
persons, as defined by the 1940 Act, of any such party) at a meeting held for
that purpose on September 10, 1997. Each Advisory Agreement is effective from
its date of execution, and continues in effect for an initial two-year term and
will continue from year to year thereafter so long as its continuance is
approved annually by (a) the Board of Trustees or (b) a vote of a majority of
the relevant Fund's outstanding voting securities, provided that in either event
the continuance also is approved by the vote of a majority of the Trustees who
are not parties to the Agreement or "interested persons," as such term is
defined in the 1940 Act, of any party to the Agreement by a vote cast in person
at meeting called for the purpose of voting on such approval.
Each Advisory Agreement is not assignable and may be terminated without
penalty by either the Trust or GEIM upon no more than 60 days' nor less than 30
days' written notice to the other or by vote of holders of a majority of the
relevant Fund's outstanding voting securities.
GEIM INVESTMENT ADVISORY FEES
For its services to each Fund of the Trust, GEIM receives a monthly
advisory and administrative fee. The fee is deducted daily from the assets of
each of the Funds and paid to GEIM monthly. The advisory and administration fee
for each Fund, except the S&P 500 Index Fund, declines incrementally as Fund
assets increase. This means that investors pay a reduced fee with respect to
Fund assets over a certain level, or "breakpoint." The advisory and
administration fee or fees for each Fund. The fees payable to GEIM are based on
the average daily net assets of each Fund at the following rates:
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<PAGE>
AVERAGE DAILY NET ANNUAL RATE
NAME OF FUND ASSETS OF FUND PERCENTAGE (%)*
- ------------ -------------- ---------------
Emerging Markets Fund First $50 million 1.05
Over $50 million .95
Premier Growth Fund First $25 million .55
Mid-Cap Fund Next $25 million .45
Value Fund Over $50 million .35
U.S. Equity Fund
International Fund First $25 million .75
Next $50 million .65
Over $75 million .55
S&P 500 Index Fund All assets .15
Strategic Fund First $25 million .45
Next $25 million .40
Over $100 million .35
Income Fund First $25 million .35
Next $25 million .30
Next $50 million .25
Over $100 million .20
Money Market Fund First $25 million .25
Next $25 million .20
Next $50 million .15
Over $100 million .10
* From time to time, GEIM may waive or reimburse advisory or administrative
fees paid by a Fund.
The Advisory Agreement does not contain any provisions prescribing limits on the
operating expenses of the Trust or any Fund.
INVESTMENT SUB-ADVISER
GEIM has retained State Street Global Advisors ("SSGA"), a division of
State Street Bank and Trust Company ("State Street"), as investment sub-adviser
to the S&P 500 Index Fund. SSGA and State Street are located at Two
International Place, Boston, Massachusetts 02110. State Street is a wholly-owned
subsidiary of State Street Corporation, a publicly held bank holding company.
State Street with over $292 billion under management as of December 31,
22
<PAGE>
1996, provides complete global investment management services from offices in
the United States, London, Sydney, Hong Kong, Tokyo, Montreal, Luxembourg,
Melbourne, Paris, Dubai, Munich and Brussels.
INVESTMENT SUB-ADVISORY AGREEMENT
SSGA is the investment sub-adviser to the S&P 500 Index Fund pursuant to an
investment sub-advisory agreement with GEIM (the "Sub-Advisory Agreement"). The
Sub-Advisory Agreement was approved by the Board of Trustees, including a
majority of the Trustees who are not parties to the Agreement or "interested
persons," as such term is defined in the 1940 Act, of any party to the
Agreement, by a vote cast in person at meeting called for the purpose of voting
on such approval on September 10, 1997.
The Sub-Advisory Agreement is not assignable and may be terminated without
penalty by either SSGA or GEIM upon 60 days' written notice to the other or by
the Board of Trustees, or by the vote of a majority of the outstanding voting
securities of the S&P 500 Index Fund, on 60 days' written notice to SSGA. The
Agreement provides that SSGA may render similar sub- advisory services to other
clients so long as the services that it provides under the Agreement are not
impaired thereby. The Sub-Advisory Agreement also provides that SSGA shall not
be liable for any error of judgment or mistake of law or for any loss incurred
by the S&P 500 Index Fund in connection with SSGA's services pursuant to the
Agreement, except for a loss resulting from willful misfeasance, bad faith or
gross negligence in the performance of its duties or from reckless disregard of
its obligations and duties under the Agreement.
GEIM INVESTMENT SUB-ADVISORY FEE
For SSGA's services, GEIM pays SSGA monthly compensation in the form of an
investment sub-advisory fee. The fee is paid by GEIM monthly and is a percentage
of the average daily net assets of the Fund at the annual rate of .05% of the
first $100 million, .04% of the next $200 million and .03% for all amounts over
$300 million.
SECURITIES ACTIVITIES OF GEIM AND SSGA
Securities held by the Funds also may be held by other funds or separate
accounts for which GEIM or its affiliate, GEIC acts as an adviser. Because of
different investment objectives or other factors, a particular security may be
bought by GEIM or GEIC for one or more of their clients, when one or more other
clients are selling the same security. If purchases or sales of securities for a
Fund or other client of GEIM or GEIC arise for consideration at or about the
same time, transactions in such securities will be made, insofar as feasible,
for the Fund and other clients in a manner deemed equitable to all. To the
extent that transactions on behalf of more than one client of GEIM or GEIC
during the same period may increase the demand for securities being purchased or
the supply of securities being sold, there may be an adverse effect on price.
On occasions when GEIM (under the supervision of the Board of Trustees)
deems the purchase or sale of a security to be in the best interests of the
Trust as well as other funds or accounts it may, to the extent permitted by
applicable laws and regulations, but will not be
23
<PAGE>
obligated to, aggregate the securities to be sold or purchased for the Trust
with those to be sold or purchased for other funds or accounts in order to
obtain favorable execution and low brokerage commissions. In that event,
allocation of the securities purchased or sold, as well as the expenses incurred
in the transaction, will be made by GEIM in the manner it considers to be most
equitable and consistent with its fiduciary obligations to the Trust and to such
other funds or accounts. In some cases this procedure may adversely affect the
size the position obtainable for a Fund. Whenever SSGA simultaneously places
orders to purchase or sell the same security on behalf of the S&P 500 Index Fund
and one or more other accounts advised by SSGA, the orders will be allocated as
to the price and amount among all such accounts in a manner believed by SSGA to
be equitable to each account.
SHAREHOLDER SERVICING AND DISTRIBUTION PLAN
The Trust's Board of Trustees adopted a Shareholder Servicing and
Distribution Plan with respect to the Trust's Service Class shares pursuant to
Rule 12b-1 under the 1940 Act (the "Plan"). Under the Plan, the Trust pays GEIM,
with respect to the Service Class shares of each Fund, an annual fee of .25% of
the value of the average daily net assets attributed to such Service Class
shares. The shareholder servicing and distribution fee is intended to (a)
compensate GEIM, or enable GEIM to compensate other persons ("Service
Providers"), for providing ongoing servicing and/or maintenance of the accounts
of Service Class shareholders of a Fund and (b) compensate GEIM, or enable GEIM
to compensate Service Providers (including any distributor of Service Class
shares of the Fund), for providing services primarily intended to result in, or
are primarily attributable to, the sale of Service Class shares.
The Plan was approved by the sole initial shareholder of the Trust. Under
its terms, the Plan continues from year to year, provided its continuance is
approved annually by vote of the Trust's full Board of Trustees, as well as by a
majority of the Trustees who are not interested persons of the Trust and who
have no direct or indirect financial interest in the operation of the Plan or in
any agreements related to the Plan ("Independent Trustees"). The Plan may not be
amended to increase materially the amount of the fees paid under the Plan with
respect to a Fund without approval of Service Class shareholders of the Fund. In
addition, all material amendments of the Plan must be approved by the Trustees
and Independent Trustees in the manner described above. The Plan may be
terminated with respect to a Fund at any time, without penalty, by vote of a
majority of the Independent Trustees or by a vote of a majority of the
outstanding voting securities of the Service Class shares of that Fund (as
defined in the 1940 Act).
CUSTODIAN AND TRANSFER AGENT
State Street, located at 225 Franklin Street, Boston, Massachusetts 02101,
serves as custodian and transfer agent of the Funds' investments. Under its
custodian contract with the Trust, State Street is authorized to appoint one or
more banking institutions as sub-custodians of assets owned by each Fund. For
its custody services, State Street receives monthly fees charged to the Funds
based upon the month-end, aggregate net asset value of the Funds, plus certain
charges for securities transactions. The assets of the Trust are held under bank
custodianship in accordance with the 1940 Act. As transfer agent, State Street
is responsible for processing redemption requests and crediting dividends to the
accounts of shareholders of the Funds.
24
<PAGE>
DISTRIBUTOR
GE Investment Services Inc. serves as the distributor of shares of the
Funds on a best efforts basis.
REDEMPTION OF SHARES
Detailed information on how to redeem shares of a Fund is included in each
Prospectus. The right of redemption of shares of a Fund may be suspended or the
date of payment postponed (a) for any periods during which the NYSE is closed
(other than for customary weekend and holiday closings), (b) when trading in the
markets the Fund normally utilizes is restricted, or an emergency, as defined by
the rules and regulations of the SEC, exists, making disposal of a Fund's
investments or determination of its net asset value not reasonably practicable
or (c) for such other periods as the SEC by order may permit for the protection
of the Fund's shareholders. As discussed in the Prospectuses, redemption fees
will be charged with respect to cash redemptions.
INVESTMENT SWITCHES
As described in the Prospectuses, a shareholder of the Investment Class of
a Fund may exchange such shares for Investment Class shares of another Fund or
for Service Class shares of the same or another Fund ("Investment Switches").
Likewise, shareholders of the Service Class shares of a Fund may exchange such
shares for Service Class shares of another Fund or for Investment Class shares
of same or another Fund . Upon receipt of proper instructions and all necessary
supporting documents, and provided the Fund is an available option, the
shareholder meets the minimum investment requirement for the Fund that is the
"target" of the Investment Switch, and such Fund may be legally sold in the
shareholder's state of residence, shares subject to an Investment Switch would
be redeemed at the then-current net asset value and the proceeds would be
immediately invested in shares of the class being acquired. Purchase premiums
and redemption fees will not be charged on Investment Switches, and the Trust
reserves the right to reject any request for an Investment Switch. The Trust
may, upon 60 days' prior written notice to a Fund's shareholders, terminate the
Investment Switch privilege.
NET ASSET VALUE
The Trust will not calculate net asset value on certain holidays
(currently, those holidays when the NYSE is closed). On those days, securities
held by a Fund may nevertheless be actively traded, and the value of the Fund's
shares could be significantly affected.
Because of the need to obtain prices as of the close of trading on various
exchanges throughout the world, the calculation of the net asset value of a
class of a Fund may not take place contemporaneously with the determination of
the prices of many of its portfolio securities used in the calculation. A
security that is listed or traded on more than one exchange is valued at the
quotation on the exchange determined to be the primary market for the security.
All assets and liabilities of the Funds initially expressed in foreign currency
values will be converted into U.S. dollar values at the mean between the bid and
offered quotations of the currencies against
25
<PAGE>
U.S. dollars as last quoted by any recognized dealer. If these quotations are
not available, the rate of exchange will be determined in good faith by the
Trust's Board of Trustees. In carrying out the Board's valuation policies, GEIM
may consult with one or more independent pricing services (each, a "Pricing
Service") retained by the Trust.
Debt securities of U.S. issuers (other than U.S. Government Obligations and
short-term investments), including Municipal Obligations, are valued by a dealer
or by a pricing service based upon a computerized matrix system, which considers
market transactions and dealer supplied valuations. Valuations for municipal
bonds are obtained from a qualified municipal bond pricing service; prices
represent the mean of the secondary market. GEIM, under the general supervision
and responsibility of the Board of Trustees, periodically reviews the procedures
of the Pricing Service.
Under Rule 2a-7 of the 1940 Act, the Money Market Fund's portfolio
securities may be valued based upon amortized cost, which does not take into
account unrealized capital gains or losses. Amortized cost valuation involves
initially valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, regardless of the effect of
fluctuating interest rates on the market value of the instrument. Although this
method provides certainty in valuation, it may result in periods during which
value, as determined by amortized cost, is higher or lower than the price the
Money Market Fund would receive if it sold the instrument.
The use of the amortized cost method of valuing the portfolio securities of
the Money Market Fund is permitted by a Rule 2a-7 under the 1940 Act. Under this
rule, the Money Market Fund must maintain a dollar-weighted average portfolio
maturity of 90 days or less, purchase only instruments having remaining
maturities of 397 days or less, and invest only in "eligible securities" as
defined in the rule, which are determined by GEIM to present minimal credit
risks. Pursuant to the rule, GEIM has established procedures designed to
stabilize, to the extent reasonably possible, the Fund's price per share as
computed for the purpose of sales and redemptions at $1.00. These procedures
include review of the Money Market Fund's portfolio holdings at such intervals
as GEIM may deem appropriate, to determine whether the Fund's net asset value
calculated by using available market quotations or market equivalents deviates
from $1.00 per share based on amortized cost.
The rule regarding amortized cost valuation provides that the extent of any
deviation between the Money Market Fund's net asset value based upon available
market quotations or market equivalents and the $1.00 per share net asset value
based on amortized cost must be examined by the Trust's Board of Trustees. In
the event the Board of Trustees determines that a deviation exists that may
result in material dilution or other unfair results to investors or existing
shareholders of the Money Market Fund, the Board of Trustees must, in accordance
with the rule, cause the Fund to take such corrective action as the Board of
Trustees regards as necessary and appropriate, including: selling portfolio
instruments of the Fund prior to maturity to realize capital gains or losses or
to shorten average portfolio maturity; withholding dividends or paying
distributions from capital or capital gains; redeeming shares in kind; or
establishing a net asset value per share by using available market quotations.
26
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
Set forth below is a summary of certain Federal income tax considerations
generally affecting the Funds and their shareholders. The summary is not
intended as a substitute for individual tax planning, and shareholders are urged
to consult their tax advisors regarding the application of Federal, state, local
and foreign tax laws to their specific tax situations.
TAX STATUS OF THE FUNDS AND THEIR SHAREHOLDERS
Each Fund is treated as a separate entity for Federal income tax purposes.
Each Fund's net investment income and capital gains distributions are determined
separately from any other series that the Trust may designate.
The Trust intends for each Fund to continue to qualify each year as a
"regulated investment company" under the Code. If a Fund (a) is a regulated
investment company and (b) distributes to its shareholders at least 90% of its
net investment income (including for this purpose its net realized short-term
capital gains) and 90% of its tax-exempt interest income (reduced by certain
expenses), the Fund will not be liable for Federal income tax to the extent that
its net investment income and its net realized long-term and short-term capital
gains, if any, are distributed to its shareholders. In addition, in order to
avoid a 4% excise tax, a Fund must declare, no later than December 31 and
distribute no later than the following January 31, at least 98% of its taxable
ordinary income earned during the calendar year and 98% of its capital gain net
income for the year period ending on October 31 of such calendar year. One
requirement for qualification as a regulated investment company is that each
Fund must diversify its holdings so that, at the end of each quarter, (a) at
least 50% of the market value of the Fund's assets is represented by cash and
cash items, securities of other regulated investment companies, U.S. Government
Obligations and other securities, with such other securities limited for
purposes of this calculation in respect of any one issuer to an amount not
greater than 5% of the value of the Fund's assets and not greater than 10% of
the outstanding voting securities of such issuer, and (b) not more than 25% of
the value of its total assets is invested in the securities of any one issuer or
of two or more issuers that are controlled by the Fund (within the meaning of
Section 851(b)(4)(B) of the Code) that are engaged in the same or similar trades
or businesses or related trades or businesses (other than U.S. Government
Obligations or the securities of other regulated investment companies).
The requirements for qualification as a regulated investment company also
include a significant rule as to investment results. A Fund must earn at least
90% of its gross income from dividends, interest, payments with respect to
securities loans, gains from the disposition of stock or securities (including
gains from related investments in foreign currencies) and income (including
gains from options, futures or forward contracts) derived with respect to its
business of investing in such stocks, securities or currencies (the "90% Income
Test").
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<PAGE>
Dividends and distributions paid by the Income Fund and the Money Market
Fund, and distributions of capital gains paid by all the Funds, will not qualify
for the Federal dividends-received deduction for corporations. Dividends paid by
the Premier Fund, the U.S. Equity Fund, the Mid-Cap Fund, the Strategic Fund,
the S&P 500 Index Fund, the International Fund, the Emerging Markets Fund and
the Value Fund, to the extent derived from dividends attributable to certain
types of stock issued by U.S. corporations, will qualify for the
dividends-received deduction for corporations. Some states, if certain asset and
diversification requirements are satisfied, permit shareholders to treat their
portions of a Fund's dividends that are attributable to interest on U.S.
Treasury securities and certain U.S. Government Obligations as income that is
exempt from state and local income taxes. Dividends attributable to repurchase
agreement earnings are, as a general rule, subject to state and local taxation.
Net investment income or capital gains earned by the Funds investing in
foreign securities may be subject to foreign income taxes withheld at the
source. The United States has entered into tax treaties with many foreign
countries that entitle the Funds to a reduced rate of tax or exemption from tax
on this related income and gains. The effective rate of foreign tax cannot be
determined at this time since the amount of these Funds' assets to be invested
within various countries is not now known. The Trust intends that the Funds seek
to operate so as to qualify for treaty-reduced rates of tax when applicable. In
addition, if a Fund qualifies as a regulated investment company under the Code,
if certain distribution requirements are satisfied, and if more than 50% of the
value of the Fund's assets at the close of the taxable year consists of stocks
or securities of foreign corporations, the Trust may elect, for U.S. Federal
income tax purposes, to treat foreign income taxes paid by the Fund that can be
treated as income taxes under U.S. income tax principles as paid by its
shareholders. The Trust anticipates that each of the International Fund and the
Emerging Markets Fund will seek to qualify for and make this election in most,
but not necessarily all, of its taxable years. If the Trust were to make an
election with respect to a Fund, an amount equal to the foreign income taxes
paid by the Fund would be included in the income of its shareholders and the
shareholders would be entitled to
28
<PAGE>
credit their portions of this amount against their U.S. tax liabilities, if any,
or to deduct those portions from their U.S. taxable income, if any. Shortly
after any year for which it makes an election, the Trust will report to the
shareholders of the Fund, in writing, the amount per share of foreign tax that
must be included in each shareholder's gross income and the amount that will be
available as a deduction or credit. No deduction for foreign taxes may be
claimed by a shareholder who does not itemize deductions. Certain limitations
will be imposed on the extent to which the credit (but not the deduction) for
foreign taxes may be claimed.
A Fund's transactions in options and futures contracts are subject to
special provisions of the Code that, among other things, may affect the
character of gains and losses realized by the Fund (that is, may affect whether
gains or losses are ordinary or capital), accelerate recognition of income to
the Fund and defer losses of the Fund. These rules (a) could affect the
character, amount and timing of distributions to shareholders of a Fund, (b)
will require the Fund to "mark to market" certain types of the positions in its
portfolio (that is, treat them as if they were closed out) and (c) may cause the
Fund to recognize income without receiving cash with which to make distributions
in amounts necessary to satisfy the distribution requirements for avoiding
income and excise taxes described above and in the Prospectuses. The Trust seeks
to monitor transactions of each Fund, will seek to make the appropriate tax
elections on behalf of the Fund and seeks to make the appropriate entries in the
Fund's books and records when the Fund acquires any option, futures contract or
hedged investment, to mitigate the effect of these rules and prevent
disqualification of the Fund as a regulated investment company.
As a general rule, a shareholder's gain or loss on a sale or redemption of
shares of a Fund will be a long-term capital gain or loss if the shareholder has
held the shares for more than one year. The gain or loss will be a short-term
capital gain or loss if the shareholder has held the shares for one year or
less.
A Fund's net realized long-term capital gains are distributed as described
in the Prospectuses. The distributions ("capital gain dividends"), if any, are
taxable to a shareholder of a Fund as long-term capital gains, regardless of how
long a shareholder has held the shares, and will be designated as capital gain
dividends in a written notice mailed by the Trust to the shareholders of the
Fund after the close of the Fund's prior taxable year. If a shareholder receives
a capital gain dividend with respect to any share of a Fund, and if the share is
sold before it has been held by the shareholder for six months or less, then any
loss on the sale or exchange of the share, to the extent of the capital gain
dividend, will be treated as a long-term capital loss. Investors considering
buying shares of a Fund on or just prior to the record date for a taxable
dividend or capital gain distribution should be aware that the amount of the
dividend or distribution payment will be a taxable dividend or distribution
payment.
Special rules contained in the Code apply when a shareholder of a Fund
disposes of shares of the Fund through a redemption or exchange within 90 days
of purchase and subsequently acquires shares of a Fund on which a sales charge
normally is imposed without paying a sales charge in accordance with the
exchange privilege described in each Prospectus. In
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<PAGE>
these cases, any gain on the disposition of the shares of the Fund will be
increased, or loss decreased, by the amount of the sales charge paid when the
shares were acquired, and that amount will increase the adjusted basis of the
shares of the Fund subsequently acquired. In addition, if shares of a Fund are
purchased within 30 days of redeeming shares at a loss, the loss will not be
deductible and instead will increase the basis of the newly purchased shares.
If a shareholder of a Fund fails to furnish the Trust with a correct
taxpayer identification number, fails to report fully dividend or interest
income, or fails to certify that he or she has provided a correct taxpayer
identification number and that he or she is not subject to "backup withholding,"
then the shareholder may be subject to a 31% "backup withholding" tax with
respect to (a) taxable dividends and distributions from the Fund and (b) the
proceeds of any redemptions of shares of the Fund. An individual's taxpayer
identification number is his or her social security number. The 31% backup
withholding tax is not an additional tax and may be credited against a
taxpayer's regular Federal income tax liability.
THE FUNDS' PERFORMANCE
The Trust, from time to time, may quote a Fund's performance, in terms of a
class' yield and/or total return, in reports or other communications to
shareholders of the Fund or in advertising material. To the extent that any
advertisement or sales literature of a Fund describes the expenses or
performance of any class, it will also disclose the expenses or performance for
the other class. Additional information regarding the manner in which
performance figures are calculated is provided below.
PERFORMANCE CALCULATION
YIELD
The Trust may, from time to time, include the yield and effective yield of
the each class of shares of the Money Market Fund in advertisements or reports
to shareholders or prospective investors. "Current yield" will be based upon the
income that a hypothetical investment in a class of shares of the Fund would
earn over a stated seven-day period. This amount would then be "annualized,"
which means the amount of income generated over that week is assumed to be
generated each week over a 52-week period and is shown as a percentage of the
investment. The Money Market Fund's "effective yield" will be calculated
similarly, but, when annualized, the income earned by an investment in the Fund
is assumed to be reinvested. The effective yield would be slightly higher than
the current yield because of the compounding effect of this presumed
reinvestment.
The yield for the Money Market Fund is computed by (a) determining the net
change in the value of a hypothetical preexisting account in the Fund having a
balance of one share at the
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<PAGE>
beginning of a seven-calendar-day period for which yield is to be quoted, (b)
dividing the net change by the value of the account at the beginning of the
period to obtain the base period return, and (c) annualizing the results (that
is, multiplying the base period return by 365/7). The net change in the value of
the account reflects the value of additional shares purchased with dividends
declared on the original share and any such additional shares, but does not
include realized gains and losses or unrealized appreciation and depreciation.
In addition, the Money Market Fund may calculate a compound effective annualized
yield by adding one to the base period return (calculated as described above),
raising the sum to a power equal to 365/7 and subtracting one.
The Income Fund's yield is calculated using a standardized formula the
income component of which is computed from the yields to maturity of all debt
obligations in the Fund's portfolio based on the market value of such
obligations (with all purchases and sales of securities during such period
included in the income calculation on a settlement date basis). Yield quotations
will be computed based on a 30-day period by dividing (a) the net income based
on the yield to maturity of each security earned during the period by (b) the
average daily number of shares outstanding during the period that were entitled
to receive dividends multiplied by the offering price per share on the last day
of the period.
The 30-day yield figure is calculated for a each class of the Income Fund
according to a formula prescribed by the SEC. The formula can be expressed as
follows:
Yield = 2[(a - b + 1)6 - 1]
-----
cd
Where:
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursement).
c = the average daily number of shares outstanding during the period that
were entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
For the purpose of determining the interest earned (variable "a" in the
formula) on debt obligations that were purchased by a Fund at a discount or
premium, the formula generally calls for amortization of the discount or
premium; the amortization schedule will be adjusted monthly to reflect changes
in the market values of the debt obligations.
Investors should recognize that, in periods of declining interest rates,
the yield will tend to be somewhat higher than prevailing market rates, and in
periods of rising interest rates the yield will tend to be somewhat lower. In
addition, when interest rates are falling, moneys
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<PAGE>
received by a Fund from the continuous sale of its shares will likely be
invested in portfolio instruments producing lower yields than the balance of the
Fund's portfolio, thereby reducing the current yield of the Fund. In periods of
rising interest rates, the opposite result can be expected to occur.
Yield information is useful in reviewing the performance of a Fund, but
because yields fluctuate, this information cannot necessarily be used to compare
an investment in shares of the Fund with bank deposits, savings accounts and
similar investment alternatives that often provide an agreed or guaranteed fixed
yield for a stated period of time. Shareholders of a Fund should remember that
yield is a function of the kind and quality of the instruments in the Fund's
portfolio, portfolio maturity, operating expenses and market conditions.
TOTAL RETURN
From time to time, the Trust may advertise a Fund's "average annual total
return," which represents the average annual compounded rates of return over
one-, five- and ten-year periods, or other periods, or over the life of the Fund
(as stated in the advertisement) for each class of shares of a Fund. This total
return figure shows an average percentage change in value of an investment in
the Fund from the beginning date of the measuring period to the ending date of
the period, reflects changes in the price of a class of shares and assumes that
any income, dividends and/or capital gains distributions made by the Fund during
the period are reinvested. When considering average annual total return figures
for periods longer than one year, investors should note that a Fund's annual
total return for any one year in the period might have been greater or less than
the average for the entire period.
The Trust may use "aggregate total return" in advertisements, which
represents the cumulative change in value of an investment in a class of shares
of a Fund for a specific period, and which reflects changes in the Fund's share
price and reinvestment of dividends and distributions. Aggregate total return
may be shown by means of schedules, charts or graphs, and may indicate subtotals
of the various components of total return (that is, the change in value of
initial investment, income dividends and capital gains distributions). Because
there is a .25% shareholder servicing fee imposed on the Service Class shares,
the total returns for each of the Investment Class and the Service Class will
differ. Aggregate total return data reflects compounding over a longer period of
time than does annual total return data, and therefore aggregate total return
will be higher.
The Trust also may advertise the actual annual and annualized total return
performance data for various periods of time, which may be shown by means of
schedules, charts or graphs. Actual annual or annualized total return data
generally will be lower than average annual total return data, because the
latter reflects compounding of return.
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AVERAGE ANNUAL TOTAL RETURN COMPUTATION:
The "average annual total return" figures for the Funds described in the
Prospectuses are computed for a class according to a formula prescribed by the
SEC. The formula can be expressed as follows:
P(1 + T)n = ERV
Where P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years; and
ERV = Ending Redeemable Value of a hypothetical $1,000 investment made
at the beginning of a 1-, 5- or 10-year period at the end of a 1-,
5- or 10-year period (or fractional portion thereof), assuming
reinvestment of all dividends and distributions.
The ERV assumes complete redemption of the hypothetical investment at the end of
the measuring period.
AGGREGATE TOTAL RETURN COMPUTATION:
The "aggregate total return" figures described in the Prospectuses
represent the cumulative change in the value of an investment in a class for the
specified period are computed by the following formula:
Aggregate Total Return = ERV - P
-------
P
Where P = a hypothetical initial payment of $1,000; and
ERV = Ending Redeemable Value of a hypothetical $1,000 investment made
at the beginning of a 1-, 5- or 10-year period at the end of the
1-, 5- or 10-year period (or fractional portion thereof), assuming
reinvestment of all dividends and distributions.
Yield and total return figures are based on historical earnings and are not
intended to indicate future performances.
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DISTRIBUTION RATE
The Trust may advertise the Income Fund's distribution rate and/or
effective distribution rate. The Fund's distribution rate differs from yield and
total return and therefore is not intended to be a complete measure of
performance.
The Income Fund's distribution rate measures dividends distributed for a
specified period. The Fund's distribution rate is computed by dividing the most
recent monthly distribution per share annualized by the current net asset value
per share. The Fund's effective distribution rate is computed by dividing the
distribution rate by the ratio used to annualize the distribution and
reinvesting the resulting amount for a full year on the basis of such ratio. The
effective distribution rate will be higher than the distribution rate because of
the compounding effect of the assumed reinvestment. The Fund's yield is
calculated using the standardized formula described above. In contrast, the
distribution rate is based on the Fund's last monthly distribution, which tends
to be relatively stable and may be more or less than the amount of net
investment income and short-term capital gain actually earned by the Fund during
the month.
COMPARATIVE PERFORMANCE INFORMATION
In addition to the comparative information set forth under "Performance"
above and otherwise quoted in sales and advertising materials, the Trust may
compare the Fund's performance with (a) the performance of other mutual funds as
listed in the rankings prepared by Lipper Analytical Services, Inc. or similar
independent services that monitor the performance of mutual funds, (b) various
unmanaged indexes, including the Russell Index, S&P 500 Index, and the Dow Jones
Industrial Average or (c) other appropriate indexes of investment securities or
with data developed by GEIM derived from those indexes.
Performance information also may include evaluations of a Fund published by
nationally recognized ranking services and by financial publications that are
nationally recognized, such as Barron's, Business Week, Forbes, Fortune,
Institutional Investor, Kiplinger's Personal Finance, Money, Morningstar Mutual
Fund Values, The New York Times, The Wall Street Journal and USA Today. These
ranking services or publications may compare a Fund's performance to, or rank it
within, a universe of mutual funds with investment objectives and policies
similar, but not necessarily identical to, the Fund's. Such comparisons or
rankings are made on the basis of several factors, including the size of the
Fund, objectives and policies, management style and strategy, and portfolio
composition, and may change over time if any of those factors change.
PRINCIPAL STOCKHOLDERS
The Funds commenced operations as of the date of this Statement of
Additional Information. As of that date, General Electric Capital Assurance
Company ("GE Assurance"), an indirect subsidiary of GE, owned 100% of the shares
of the Trust. The shares were issued to GE Assurance for providing the initial
seed capital to the Trust. So long as GE Assurance owns more than 25% of the
outstanding voting securities of the Trust, it may be deemed to control the
Trust.
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As of the date of this Statement of Additional Information, the current Trustees
and officers of each Fund, as a group, beneficially owned less than 1% of each
Fund's outstanding shares.
ADDITIONAL INFORMATION
SHARES OF BENEFICIAL INTEREST
The Trust was organized as an unincorporated business trust under the laws
of Delaware pursuant to a Certificate of Trust dated May 23, 1997, as amended
from time to time. The Trust has no prior history. The Trust's Declaration of
Trust, dated August 29, 1997 (the "Declaration of Trust") permits the Trustees
to issue an unlimited number of full and fractional shares of beneficial
interest of the Trust par value .001 per share. Under the Declaration of Trust,
the Trustees have the authority to create and classify shares of beneficial
interest in separate series, without further action by shareholders. As of the
date of this Statement of Additional Information, the Trustees have authorized
shares of the ten Funds described in the Prospectuses. Additional series may be
added in the future. The Declaration of Trust also authorizes the Trustees to
classify and reclassify the shares of the Trust, or new series of the Trust,
into one or more classes. As of the date of this Statement of Additional
Information, the Trustees have authorized the issuance of two classes of shares
of the Funds, designated as the Investment Class shares and the Service Class
shares. State Street maintains a record of each shareholder's ownership of
shares of a Fund. The shares of each class of each Fund represent an equal
proportionate interest in the aggregate net assets attributable to that class of
that Fund. Holders of Service Class shares have certain exclusive voting rights
on matters relating to the Plan. The different classes of the Fund may bear
different expenses relating to the cost of holding shareholder meetings
necessitated by the exclusive voting rights of any class of shares. In the
interest of economy and convenience, certificates representing shares of a Fund
are not physically issued.
Dividends paid by each Fund, if any, with respect to each class of shares
will be calculated in the same manner, at the same time and on the same day and
will be in the same amount, except for differences resulting from the facts
that: (a) the distribution and service fees relating to Service Class shares
will be borne exclusively by that class; and (b) each of the Service Class
shares and the Investment Class shares will bear any other class expenses
properly allocable to such class of shares, subject to the requirements imposed
by the Internal Revenue Service on funds having a multiple-class structure.
Similarly, the NAV per share may vary depending on whether Service Class shares
or Investment Class shares are purchased. In the event of liquidation,
shareholders of each class of each Fund are entitled to share pro rata in the
net assets of the class of the Fund available for distribution to these
shareholders. Shares entitle their holders to one vote per share, are freely
transferable and have no preemptive, subscription or conversion rights. When
issued, shares are fully paid and non-assessable.
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Unless otherwise required by the 1940 Act or the Declaration of Trust, the
Trust has no intention of holding annual meetings of shareholders. Fund
shareholders may remove a Trustee by the affirmative vote of at least two-thirds
of the Trust's outstanding shares and the Trustees shall promptly call a meeting
for such purpose when requested to do so in writing by the record holders of not
less than 10% of the outstanding shares of the Trust.
Generally, Delaware business trust shareholders are not personally liable
for obligations of the Delaware business trust under Delaware law. The Delaware
Business Trust Act ("DBTA") provides that a shareholder of a Delaware business
trust shall be entitled to the same limitation of liability extended to
shareholders of private for-profit corporations. The Declaration expressly
provides that the Trust has been organized under the DBTA and that the
Declaration is to be governed by and interpreted in accordance with Delaware
law. It is nevertheless possible that a Delaware business trust, such as the
Trust, might become a party to an action in another state whose courts refuse to
apply Delaware law, in which case the Trust's shareholders could possibly be
subject to personal liability.
To guard against this risk, the Declaration: (a) contains an express
disclaimer of shareholder liability for acts or obligations of the Trust and
provides that notice of such disclaimer may be given in each agreement,
obligation and instrument entered into or executed by the Trust or its Trustees,
(b) provides for the indemnification out of Trust property of any shareholders
held personally liable for any obligations of the Trust or any Fund, and (c)
provides that the Trust shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the Trust and satisfy
any judgment thereon. Thus, the risk of a shareholder incurring financial loss
beyond his or her investment because of shareholder liability is limited to
circumstances in which all of the following factors are present: (a) a court
refuses to apply Delaware law; (b) the liability arose under tort law or, if
not, no contractual limitation of liability was in effect; and (c) the Trust
itself would be unable to meet its obligations. In the light of DBTA, the nature
of the Trust's business, and the nature of its assets, the risk of personal
liability to a shareholder is remote.
LIMITATION OF TRUSTEE AND OFFICER LIABILITY
The Declaration further provides that the Trust shall indemnify each of its
Trustees and officers against liabilities and expenses reasonably incurred by
them, in connection with, or arising out of, any action, suit or proceeding,
threatened against or otherwise involving such Trustee or officer, directly or
indirectly, by reason of being or having been a Trustee or officer of the Trust.
The Declaration does not authorize the Trust to indemnify any Trustee or officer
against any liability to which he or she would otherwise be subject by reason of
or for willful misfeasance, bad faith, gross negligence or reckless disregard of
such person's duties.
LIMITATION OF INTERSERIES LIABILITY
All persons dealing with a Fund must look solely to the property of that
particular Fund for the enforcement of any claims against that Fund, as neither
the Trustees, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of a Fund or the Trust. No Fund is liable for
the obligations of any other Fund.
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COUNSEL
Sutherland, Asbill & Brennan LLP, 1275 Pennsylvania Avenue, N.W.,
Washington, D.C. 20004-2404 serves as counsel for the Trust.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110,
serves as independent accountants of the Trust.
FINANCIAL STATEMENTS
The Trust recently commenced operations and has not been in operation long
enough to have generated an Annual Report. The Annual Report, when issued, will
contain financial statements and other information relevant to the Trust. The
Trust will furnish, without charge, a copy of the Annual Report (when it is
issued) upon request to the Trust at P.O. Box 120065, Stamford, CT
06912-0065,(800) 493-3042. Included as part of this Statement of Additional
Information, at page F-1 is the audited balance sheet with respect to the
Trust's initial capitalization. The Accountants' Report appears at page F-2.
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APPENDIX
DESCRIPTION OF RATINGS
COMMERCIAL PAPER RATINGS
The rating A-1+ is the highest, and A-1 the second highest commercial paper
rating assigned by S&P. Paper rated A-1+ must have either the direct credit
support of an issuer or guarantor that possesses excellent long-term operating
and financial strength combined with strong liquidity characteristics
(typically, such issuers or guarantors would display credit quality
characteristics that would warrant a senior bond rating of AA or higher) or the
direct credit support of an issuer or guarantor that possesses above average
long-term fundamental operating and financing capabilities combined with ongoing
excellent liquidity characteristics. Paper rated A-1 must have the following
characteristics: liquidity ratios are adequate to meet cash requirements;
long-term senior debt is rated A or better; the issuer has access to at least
two additional channels of borrowing; basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances; typically, the
issuer's industry is well established and the issuer has a strong position
within the industry; and the reliability and quality of management are
unquestioned. Capacity for timely payment on issues rated A-2 is satisfactory.
However, the relative degree of safety is not as high as issues designated
"A-1."
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Among the factors considered by Moody's in assigning ratings are the
following: (a) evaluation of the management of the issuer; (b) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks that may be inherent in certain areas; (c) evaluation of
the issuer's products in relation to competition and customer acceptance; (d)
liquidity; (e) amount and quality of long-term debt; (f) trend of earnings over
a period of ten years; (g) financial strength of parent company and the
relationships that exist with the issue; and (h) recognition by the management
of obligations that may be present or may arise as a result of public interest
questions and preparations to meet the obligations.
Issuers rated Prime-2 (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This normally will be
evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Short-term obligations, including commercial paper, rated A-1+ by IBCA
Limited or its affiliate IBCA Inc. are obligations supported by the highest
capacity for timely repayment. Obligations rated A-1 have a very strong capacity
for timely repayment. Obligations rated A-2 have a strong capacity for timely
repayment, although that capacity may be susceptible to adverse changes in
business, economic and financial conditions.
A-1
<PAGE>
Fitch Investors Services, Inc. employs the rating F-1+ to indicate issues
regarded as having the strongest degree of assurance of timely payment. The
rating F-1 reflects an assurance of timely payment only slightly less in degree
than issues rated F-1+, while the rating F-2 indicates a satisfactory degree of
assurance of timely payment although the margin of safety is not as great as
indicated by the F-1+ and F-1 categories.
Duff & Phelps Inc. employs the designation of Duff 1 with respect to top
grade commercial paper and bank money instruments. Duff 1+ indicates the highest
certainty of timely payment: short-term liquidity is clearly outstanding and
safety is just below risk-free U.S. Treasury short-term obligations. Duff 1-
indicates high certainty of timely payment. Duff 2 indicates good certainty of
timely payment; liquidity factors and company fundamentals are sound.
Thompson BankWatch Inc. employs the rating TBW-1 to indicate issues having
a very high degree of likelihood of timely payment. TBW-2 indicates a strong
degree of safety regarding timely payment, however, the relative degree of
safety is not as high as for issues rated TBW-1. While the rating TBW-3
indicates issues that are more susceptible to adverse developments than
obligations with higher ratings, capacity to service principal and interest in a
timely fashion is considered adequate. The lowest rating category is TBW-4; this
rating is regarded as non-investment grade and, therefore, speculative.
Various NRSROs utilize rankings within ratings categories indicated by a
plus or minus sign. The Funds, in accordance with industry practice, recognize
such ratings within categories or gradations, viewing for example S&P's ratings
of A-1+ and A-1 as being in S&P's highest rating category.
DESCRIPTION OF S&P CORPORATE BOND RATINGS
AAA -- This is the highest rating assigned by S&P to a bond and indicates
an extremely strong capacity to pay interest and repay principal.
AA -- Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from AAA issues only in small degree.
A -- Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB -- Bonds rated BBB have an adequate capacity to pay interest and repay
principal. Adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity to pay interest and repay principal for bonds in
this category (even though they normally exhibit adequate protection parameters)
than for bonds in higher rated categories.
A-2
<PAGE>
BB, B and CCC -- Bonds rated BB and B are regarded, on balance, as
predominately speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB represents a lower
degree of speculation than B, and CCC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
To provide more detailed indications of credit quality, the ratings from AA
to B may be modified by the addition of a plus or minus sign to show relative
standing within this major rating category.
DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS
Aaa -- Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa -- Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present that
make the long-term risks appear somewhat larger than in Aaa securities.
A -- Bonds that are rated A possess favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds that are rated Baa are considered as medium-grade obligations,
that is, they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba -- Bonds that are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B -- Bonds that are rated B generally lack characteristics of desirable
investments. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
A-3
<PAGE>
Caa -- Bonds that are rated Caa are of poor standing. These issues may be
in default, or present elements of danger may exist with respect to principal or
interest.
Moody's applies numerical modifiers (1, 2 and 3) with respect to the bonds
rated Aa through B, The modifier 1 indicates that the bond being rated ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the bond ranks in the lower
end of its generic rating category.
DESCRIPTION OF S&P MUNICIPAL BOND RATINGS
AAA -- Prime -- These are obligations of the highest quality. They have the
strongest capacity for timely payment of debt service.
General Obligation Bonds -- In a period of economic stress, the issuers
will suffer the smallest declines in income and will be least susceptible to
autonomous decline. Debt burden is moderate. A strong revenue structure appears
more than adequate to meet future expenditure requirements. Quality of
management appears superior.
Revenue Bonds -- Debt service coverage has been, and is expected to remain,
substantial. Stability of the pledged revenues is also exceptionally strong due
to the competitive position of the municipal enterprise or to the nature of the
revenues. Basic security provisions (including rate covenant, earnings test for
issuance of additional bonds, debt service reserve requirements) are rigorous.
There is evidence of superior management.
AA -- High Grade -- The investment characteristics of bonds in this group
are only slightly less marked than those of the prime quality issues. Bonds
rated AA have the second strongest capacity for payment of debt service.
A -- Good Grade -- Principal and interest payments on bonds in this
category are regarded as safe although the bonds are somewhat more susceptible
to the adverse effects of changes in circumstances and economic conditions than
bonds in higher rated categories. This rating describes the third strongest
capacity for payment of debt service. The ratings differ from the two higher
ratings of municipal bonds, because:
General Obligations Bonds -- There is some weakness, either in the local
economic base, in debt burden, in the balance between revenues and expenditures,
or in quality of management. Under certain adverse circumstances, any one such
weakness might impair the ability of the issuer to meet debt obligations at some
future date.
Revenue Bonds -- Debt service coverage is good, but not exceptional.
Stability of the pledged revenues could show some variations because of
increased competition or economic influences on revenues. Basic security
provisions, while satisfactory, are less stringent.
Management performance appears adequate.
A-4
<PAGE>
BBB -- Medium Grade -- Of the investment grade ratings, this is the lowest.
Bonds in this group are regarded as having an adequate capacity to pay interest
and repay principal. Adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for bonds in this category (even though they normally exhibit adequate
protection parameters) than for bonds in higher rated categories.
General Obligation Bonds -- Under certain adverse conditions, several of
the above factors could contribute to a lesser capacity for payment of debt
service. The difference between A and BBB ratings is that the latter shows more
than one fundamental weakness, or one very substantial fundamental weakness,
whereas, the former shows only one deficiency among the factors considered.
Revenue Bonds -- Debt coverage is only fair. Stability of the pledged
revenues could show substantial variations, with the revenue flow possibly being
subject to erosion over time. Basic security provisions are no more than
adequate. Management performance could be stronger.
BB, B, CCC and CC -- Bonds rated BB, B, CCC and CC are regarded, on
balance, as predominately speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB includes
the lowest degree of speculation and CC the highest degree of speculation. While
these bonds will likely have some quality and protective characteristics, these
characteristics are outweighed by large uncertainties or major risk exposures to
adverse conditions.
C -- The rating C is reserved for income bonds on which no interest is
being paid.
D -- Bonds rated D are in default, and payment of interest and/or repayment
of principal is in arrears.
S&P's letter ratings may be modified by the addition of a plus or a minus
sign, which is used to show relative standing within the major rating
categories, except in the AAA-Prime Grade category.
DESCRIPTION OF S&P MUNICIPAL NOTE RATINGS
Municipal notes with maturities of three years or less are usually given
note ratings (designated SP-1, -2 or -3) to distinguish more clearly the credit
quality of notes as compared to bonds. Notes rated SP-1 have a very strong or
strong capacity to pay principal and interest. Those issues determined to
possess overwhelming safety characteristics are given the designation of SP-1+.
Notes rated SP-2 have satisfactory capacity to pay principal and interest.
A-5
<PAGE>
DESCRIPTION OF MOODY'S MUNICIPAL BOND RATINGS
Aaa -- Bonds that are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa -- Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, or fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present that make the long-term risks appear somewhat larger than in Aaa
securities.
A -- Bonds that are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present that suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds that are rated Baa are considered as medium grade obligations,
that is, they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba -- Bonds that are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future.
Uncertainty of position characterize bonds in this class.
B -- Bonds that are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa -- Bonds that are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca -- Bonds that are rated Ca represent obligations that are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C -- Bonds that are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
A-6
<PAGE>
Moody's applies the numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B. The modifier 1 indicates that the security
ranks in the higher end of its generic ratings category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks
in the lower end of its generic ratings category.
DESCRIPTION OF MOODY'S MUNICIPAL NOTE RATINGS
Moody's ratings for state and municipal notes and other short-term loans
are designated Moody's Investment Grade (MIG) and for variable rate demand
obligations are designated Variable Moody's Investment Grade (VMIG). This
distinction recognizes the differences between short-term credit risk and
long-term risk. Loans bearing the designation MIG 1/VMIG 1 are the best quality,
enjoying strong protection from established cash flows of funds for their
servicing or from established and broad-based access to the market for
refinancing, or both. Loans bearing the designation MIG 2/VMIG 2 are of high
quality, with margins of protection ample, although not as large as the
preceding group. Loans bearing the designation MIG 3/VMIG3 are of favorable
quality, with all security elements accounted for but lacking the undeniable
strength of the higher grades. Market access for refinancing, in particular, is
likely to be less well established. Loans bearing the designation MIG 4/VMIG 4
are of adequate quality. Protection commonly regarded as required of an
investment security is present and although not distinctly or predominantly
speculative, there is specific risk.
A-7
<PAGE>
GE Institutional Funds
Statement of Assets and Liabilities
October 9, 1997
<TABLE>
<CAPTION>
EMERGING INT'L MID-CAP PREMIER VALUE U.S. S&P 500 STRATEGIC MONEY
MARKETS EQUITY GROWTH GROWTH EQUITY EQUITY EQUITY INDEX INVESTMENT INCOME MARKET
INVESTMENT CLASS: FUND FUND FUND FUND FUND FUND FUND FUND FUND FUND
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Assets 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000
Liabilities -- -- -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Assets 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000
Units of
Beneficial
Interest 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 10,000
Net Asset Value
and Offering
Price Per Share $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $1.00
SERVICE CLASS:
ASSETS
Cash $10 $10 $10 $10 $10 $10 $10 $10 $10 $1
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Assets 10 10 10 10 10 10 10 10 10 1
Liabilities -- -- -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Assets 10 10 10 10 10 10 10 10 10 1
Units of
Beneficial
Interest 1 1 1 1 1 1 1 1 1 1
Net Asset
Value and
Offering Price
Per Share $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $1.00
</TABLE>
NOTE 1:
GE Institutional Funds (the "Trust"), an open-end series management investment
company, was formed under the laws of Delaware by Certificate of Trust Dated May
23, 1997. The Trust has been inactive since that date except for matters
relating to its organization and registration as an investment company under the
Investment Company Act of 1940 and the sale of shares to GE Capital Assurance
Company, an affiliate of GE Investment Management Incorporated ("GEIM"), the
Trust's Investment Advisor. Investment advisory and portfolio management
services provided by GEIM are described in the prospectus under the sections
"Management of the Trust" and "Investment Objectives and Management Policies."
NOTE 2:
Each Fund of the Trust has entered into an Investment Advisory and
Administrative Agreement with GEIM, as described under "Management of the Trust"
in the Prospectus. As compensation for the advisory and administrative service
rendered, the Funds will pay GEIM a fee accrued daily and paid monthly at an
annual rate based on each funds average daily net assets. Such rates are set
forth below. Under this agreement, GEIM has agreed to bear all expenses of the
Funds other than brokerage, interest, trustee fees and expenses, taxes, transfer
agency fees, extraordinary expenses and, with respect to the Service Class,
shareholder servicing fees.
<PAGE>
<TABLE>
<CAPTION>
AVERAGE DAILY ANNUAL RATE AVERAGE DAILY ANNUAL RATE
NAME OF FUND NET ASSETS OF FUND PERCENTAGE (%) NAME OF FUND NET ASSETS OF FUND PERCENTAGE (%)
- ------------ ------------------ -------------- ------------ ------------------ --------------
<S> <C> <C> <C> <C> <C>
Emerging Markets Fund First $50 million 1.05 Strategic Investment Fund First $25 million 0.45
Over $50 million 0.95 Next $25 million 0.40
Over $50 million 0.35
International Equity Fund First $25 million 0.75 Income Fund First $25 million 0.35
Next $50 million 0.65 Next $25 million 0.30
Over $75 million 0.55 Next $50 million 0.25
Over $100 million 0.20
Mid-Cap Growth Fund First $25 million 0.55
Premier Growth Equity Fund Next $25 million 0.45
Value Equity Fund Over $50 million 0.35 Money Market Fund First $25 million 0.25
U.S. Equity Fund Next $25 million 0.20
Next $50 million 0.15
S&P 500 Index Fund All Assets 0.15 Over $100 million 0.10
</TABLE>
F-1
<PAGE>
Report of Independent Accountants
In our opinion, the accompanying Statements of Assets and Liabilities
present fairly, in all material respects, the financial position of GE Emerging
Markets Fund, GE International Equity Fund, GE Mid-Cap Growth Fund, GE Premier
Growth Equity Fund, GE Value Equity Fund, GE U.S. Equity Fund, GE S&P 500 Index
Fund, GE Strategic Investment Fund, GE Income Fund, and GE Money Market Fund,
each a series of GE Institutional Funds (the "Funds"), at October 9, 1997, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Funds' management; our responsibility
is to express an opinion on these financial statements based on our audit. We
conducted our audit of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of investments at October 9, 1997 by
correspondence with the custodian, provides a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE, LLP
Boston, Massachusetts
October 15, 1997
F-2
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
FINANCIAL STATEMENTS:
Included in Part A:
None
Included in Part B:
Statement of Assets and Liabilities*
Report of Independent Auditors*
(b) EXHIBITS:
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
---- ----------------------
1(a) Certificate of Trust, incorporated herein by reference to GE
Institutional Funds' ("Registrant") Form N-1A registration statement
(File Nos. 333-29337; 811-08257) (the "Registration Statement"), filed
with the Securities and Exchange Commission on June 16, 1997.
1(b) Declaration of Trust, incorporated herein by reference to
pre-effective amendment number one to the Registration Statement,
filed with the Securities and Exchange Commission on September 17,
1997.
2 Inapplicable
3 Inapplicable
4 Inapplicable
5(a) Investment Advisory and Administration Agreement between GE
Institutional Funds Emerging Markets Fund and GE Investment Management
Incorporated ("GEIM")*
5(b) Investment Advisory and Administration Agreement between GE
Institutional Funds Premier Growth Equity Fund and GEIM *
5(c) Investment Advisory and Administration Agreement between GE
Institutional Funds Mid-Cap Growth Fund and GEIM *
<PAGE>
5(d) Investment Advisory and Administration Agreement between GE
Institutional Funds International Equity Fund and GEIM *
5(e) Investment Advisory and Administration Agreement between GE
Institutional Funds Value Equity Fund and GEIM *
5(f) Investment Advisory and Administration Agreement between GE
Institutional Funds U.S. Equity Fund and GEIM*
5(g) Investment Advisory and Administration Agreement between GE
Institutional Funds S&P 500 Index Fund and GEIM*
5(h) Investment Advisory and Administration Agreement between GE
Institutional Funds Strategic Investment Fund and GEIM*
5(i) Investment Advisory and Administration Agreement between GE
Institutional Funds Income Fund and GEIM*
5(j) Investment Advisory and Administration Agreement between GE
Institutional Funds Money Market Fund and GEIM*
5(k) Sub-Advisory Agreement between GEIM and State Street Bank and Trust
Company ("State Street")*
6(a) Distribution Agreement between Registrant and GE Investment Services
Inc.*
6(b) Shareholder Servicing and Distribution Agreement between Registrant
and GEIM*
7 Inapplicable
8 Custodian Contract, incorporated by reference to the Form N-1A
registration statement of GE Investments Funds, Inc. (File Nos.
2-91369; 811-4041), filed with the Securities and Exchange Commission
on October 24, 1997.
9 Transfer Agency and Service Agreement between Registrant and State
Street*
10 Opinion of Counsel, including consent*
11 Consent of Independent Auditors*
12 Inapplicable
<PAGE>
13 Purchase Agreement between Registrant and General Electric Capital
Assurance Company*
14 Inapplicable
15 Shareholder Servicing and Distribution Plan Adopted pursuant to Rule
12b-1 under the Investment Company Act of 1940, as amended (the "1940
Act")*
16 Inapplicable
17 Inapplicable
18 Multiple Class Plan for GE Institutional Funds Adopted pursuant to
Rule 18f-3 under the 1940 Act*
- ---------------------
* Filed herewith
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Registrant was organized as a business trust in Delaware on May 23, 1997.
General Electric Capital Assurance Company, a corporation organized under the
laws of Delaware and an indirect, wholly owned subsidiary of General Electric
Capital Corporation ("GE Capital"), provided the initial investment in
Registrant and currently owns 100% of the outstanding common stock of
Registrant. GE Capital, a diversified financial services company, is an indirect
wholly owned subsidiary of General Electric Company ("GE").
The list required by this Item 25 of persons controlled by or under common
control with Registrant, which includes the subsidiaries of GE, is incorporated
herein by reference to Exhibit 21, "Subsidiaries of Registrant," of the Form
10-K filed by GE pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934, as amended (SEC File No. 1-35) for the fiscal year ended December 31,
1996 (the "Form 10-K"). Additional information about persons controlled by or
under common control with Registrant is incorporated herein by reference to
pages 10-12 of the Form 10-K, beginning under the caption "GECs Segments."
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
NUMBER OF RECORD
TITLE OF CLASS HOLDERS AS OF NOVEMBER 6, 1997
-------------- ------------------------------
Shares representing General Electric Capital Assurance Company
beneficial interests,
par value $.001 per share
of the Fund
<PAGE>
ITEM 27. INDEMNIFICATION
As a Delaware business trust, the operations of Registrant are governed by
its Declaration of Trust dated August 29, 1997 (the "Declaration of Trust").
Generally, Delaware business trust shareholders are not personally liable for
obligations of the Delaware business trust under Delaware law. The Delaware
Business Trust Act (the DBTA) provides that a shareholder of a trust shall be
entitled to the same limitation of liability extended to shareholders of private
for-profit Delaware corporations. Registrant's Declaration of Trust expressly
provides that it has been organized under the DBTA and that the Declaration of
Trust is to be governed by Delaware law. It is nevertheless possible that a
Delaware business trust, such as Registrant, might become a party to an action
in another state whose courts refuse to apply Delaware law, in which case
Registrant's shareholders could be subject to personal liability.
To protect Registrant's shareholders against the risk of personal
liability, the Declaration of Trust: (i) contains an express disclaimer of
shareholder liability for acts or obligations of Registrant and provides that
notice of such disclaimer may be given in each agreement, obligation and
instrument entered into or executed by Registrant or its Trustees; (ii) provides
for the indemnification out of Trust property of any shareholders held
personally liable for any obligations of Registrant or any series of Registrant;
and (iii) provides that Registrant shall, upon request, assume the defense of
any claim made against any shareholder for any act or obligation of Registrant
and satisfy any judgment thereon. Thus, the risk of a shareholder incurring
financial loss beyond his or her investment because of shareholder liability is
limited to circumstances in which all of the following factors are present: (i)
a court refuses to apply Delaware law; (ii) the liability arose under tort law
or, if not, no contractual limitation of liability was in effect; and (iii)
Registrant itself would be unable to meet its obligations. In the light of
Delaware law, the nature of Registrant's business and the nature of its assets,
the risk of personal liability to a shareholder is remote.
The Declaration of Trust further provides that Registrant shall indemnify
each of its Trustees and officers against liabilities and expenses reasonably
incurred by them, in connection with, or arising out of, any action, suit or
proceeding, threatened against or otherwise involving such Trustee or officer,
directly or indirectly, by reason of being or having been a Trustee or officer
of Registrant. The Declaration of Trust does not authorize Registrant to
indemnify any Trustee or officer against any liability to which he or she would
otherwise be subject by reason of or for willful misfeasance, bad faith, gross
negligence or reckless disregard of such person's duties.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to Trustees, officers and controlling persons pursuant
to the foregoing provisions, or otherwise, Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification may
be against public policy as expressed in the Act and may be, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by Registrant of expenses incurred or paid
by a Trustee, officer or controlling person of Registrant in the successful
defense of any action, suit or proceeding) is
<PAGE>
asserted by such Trustee, officer or controlling person in connection with the
securities being registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Reference is made to "Management of the Trust" in the Prospectus forming
Part A, and "The Management of the Trust" in the Statement of Additional
Information forming Part B, of this Registration Statement.
The list required by this Item 28 of officers and directors of GEIM, the
Funds' investment adviser, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by those
officers and directors during the past two years, is incorporated by reference
to Schedules A and D of the Forms ADV filed by GEIM pursuant to the Investment
Advisers Act of 1940, as amended (SEC File No. 801-31947).
ITEM 29. PRINCIPAL UNDERWRITERS
(a) GE Investment Services Inc. ("GEIS") also serves as distributor for the
investment portfolios of GE Funds and GE Investments Funds, Inc. and for Elfun
Tax-Exempt Income Fund, Elfun Income Fund, Elfun Global Fund, Elfun Money Market
Fund, Elfun Trusts and Elfun Diversified Fund.
(b) The information required by this Item 29 with respect to each director
and Officer of GEIS is incorporated by reference to Schedule A of Form BD filed
by GEIS pursuant to the Securities Exchange Act of 1934, as amended (SEC File
No. 8-45710).
(c) Inapplicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the 1940 Act, and the rules thereunder,
are maintained at the offices of: Registrant located at 3003 Summer Street,
Stamford, Connecticut 06905; State Street, Registrant's custodian and transfer
agent, located at 225 Franklin Street, Boston, Massachusetts 02101; and National
Financial Data Services Inc., an indirect subsidiary of State Street, located at
P.O. Box 419631, Kansas, MO 64141-6631.
ITEM 31. MANAGEMENT SERVICES
Inapplicable.
<PAGE>
ITEM 32. UNDERTAKINGS
(a) Inapplicable
(b) Registrant undertakes to file a post-effective amendment containing
reasonably current financial statements that need not be certified, within four
to six months from the effective date of this Registration Statement.
(c) Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.
(d) Registrant undertakes to call a meeting of the shareholders of each
Fund for the purpose of voting upon the question of removal of a trustee or
trustees of Registrant when requested in writing to do so by the holders of at
least 10% of Registrant's outstanding shares and, in connection with the
meeting, to comply with the provisions of Section 16(c) of the 1940 Act relating
to communications with the shareholders of certain common-law trusts.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, Registrant has duly caused this
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Stamford, State of
Connecticut, on the 6th day of November, 1997.
By: /s/ MICHAEL J. COSGROVE
---------------------------------
Michael J. Cosgrove
President and Chairman
of the Board
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment to the Registration Statement on Form N-1A has been signed below
by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ MICHAEL J. COSGROVE Trustee, President and November 6, 1997
- ------------------------ Chairman of the Board
Michael J. Cosgrove (Chief Executive Officer)
/s/ ALAN M. LEWIS Trustee, November 6, 1997
- ------------------------ Executive Vice President
Alan M. Lewis
/s/ JOHN R. COSTANTINO Trustee November 6, 1997
- ------------------------
John R. Costantino
/s/ WILLIAM J. LUCAS Trustee November 6, 1997
- ------------------------
William J. Lucas
/s/ ROBERT P. QUINN Trustee November 6, 1997
- ------------------------
Robert P. Quinn
/s/ JEFFREY A. GROH Treasurer November 6, 1997
- ------------------------ (Chief Financial and
Jeffrey A. Groh Accounting Officer)
<PAGE>
EXHIBIT INDEX
EX-99.B5(a) Investment Advisory and Administration Agreement between GE
Institutional Funds Emerging Markets Fund and GE Investment
Management Incorporated ("GEIM")
EX-99.B5(b) Investment Advisory and Administration Agreement between GE
Institutional Funds Premier Growth Equity Fund and GEIM
EX-99.B5(c) Investment Advisory and Administration Agreement between GE
Institutional Funds Mid-Cap Growth Fund and GEIM
EX-99.B5(d) Investment Advisory and Administration Agreement between GE
Institutional Funds International Equity Fund and GEIM
EX-99.B5(e) Investment Advisory and Administration Agreement between GE
Institutional Funds Value Equity Fund and GEIM
EX-99.B5(f) Investment Advisory and Administration Agreement between GE
Institutional Funds U.S. Equity Fund and GEIM
EX-99.B5(g) Investment Advisory and Administration Agreement between GE
Institutional Funds S&P 500 Index Fund and GEIM
EX-99.B5(h) Investment Advisory and Administration Agreement between GE
Institutional Funds Strategic Investment Fund and GEIM
EX-99.B5(i) Investment Advisory and Administration Agreement between GE
Institutional Funds Income Fund and GEIM
EX-99.B5(j) Investment Advisory and Administration Agreement between GE
Institutional Funds Money Market Fund and GEIM
EX-99.B5(k) Sub-Advisory Agreement between GEIM and State Street Bank and
Trust Company ("State Street")
EX-99.B6(a) Distribution Agreement between Registrant and GE Investment
Services Inc.
EX-99.B6(b) Shareholder Servicing and Distribution Agreement between
Registrant and GEIM
EX-99.B9 Transfer Agency and Service Agreement between Registrant and
State Street
EX-99.B10 Opinion of Counsel
EX-99.B11 Consent of Independent Auditors
EX-99.B13 Purchase Agreement between Registrant and General Electric
Capital Assurance Company
EX-99.B15 Shareholder Servicing and Distribution Plan Adopted pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended
EX-99.B18 Multiple Class Plan for GE Institutional Funds Adopted pursuant
to Rule 18f-3 under the 1940 Act
Exhibit 99.B5(a)
INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT
GE INSTITUTIONAL FUNDS
EMERGING MARKETS FUND
GE INVESTMENT MANAGEMENT INCORPORATED
Agreement made as of October 16, 1997 between GE INVESTMENT MANAGEMENT
INCORPORATED ("GEIM") and GE INSTITUTIONAL FUNDS (the "Trust") on behalf of its
Emerging Markets Fund (the "Fund").
RECITALS
The Trust is a business trust organized under the laws of the State of
Delaware on May 23, 1997 and registered under the Investment Company Act of
1940, as amended (the "1940 Act"). The Trust is authorized to divide shares of
beneficial interests in the Trust into two or more separate series and to divide
each such series into two or more classes of Shares. The Fund is a series of the
Trust.
GEIM is a Delaware corporation registered as an investment adviser under
the Investment Advisers Act of 1940 (the "Advisers Act").
The Trust wishes to retain GEIM to serve as investment adviser and
administrator to the Fund and GEIM wishes to serve in this capacity.
SECTION 1. APPOINTMENT
The Trust hereby appoints GEIM as investment adviser and administrator with
respect to the Fund's assets for the period and on the terms set forth in this
Agreement. GEIM accepts this appointment and hereby agrees to render the
services herein set forth for the compensation herein provided.
Subject to the approval of the Board and to other applicable legal
requirements, GEIM may enter into any advisory or sub-advisory agreement or
contract with another affiliated or unaffiliated entity pursuant to which such
entity will carry out some or all of GEIM's responsibilities listed herein.
SECTION 2. SERVICES AS INVESTMENT ADVISER AND ADMINISTRATOR
(a) Subject to the oversight and supervision of the Trust's board of
trustees (the "Board"), GEIM agrees to provide a continuous investment program
for the Fund's assets, including investment research and management. GEIM will
determine from time to time what
1
<PAGE>
investments will be purchased, retained or sold by the Fund. GEIM will place
purchase and sale orders for the Fund's investments. GEIM will provide services
under this Agreement in accordance with the Fund's investment objectives,
policies and restrictions as stated in the Trust's current Registration
Statement on Form N-1A, as amended from time to time (the "Registration
Statement").
(b) The Trust has furnished or will furnish GEIM with copies of the
Registration Statement, its articles of incorporation and by-laws, if any, as
currently in effect and agrees during the continuance of this agreement to
furnish GEIM with copies of any amendment or supplements thereto before or at
the time such amendments or supplements become effective. GEIM may rely on all
documents furnished to it by the Trust.
(c) Subject to the oversight and supervision of the Board, GEIM agrees to
serve as administrator to the Trust and the Fund and, in this capacity, will:
(i) insure the maintenance of the books and records of the Fund (including those
required to be maintained or preserved by Rules 31a-1 and 31a-2 under the 1940
Act); (ii) prepare reports to shareholders of the Fund, (iii) prepare and file
tax returns for the Fund, (iv) assist with the preparation and filing of reports
and the Registration Statement with the Securities and Exchange Commission (the
"Commission"), (v) provide appropriate officers for the Trust, including a
Secretary or Assistant Secretary, (vi) provide administrative support necessary
for the Board to conduct meetings, and (vii) supervise and coordinate the
activities of other service providers, including independent auditors, legal
counsel, custodians, accounting service agents, and transfer agents.
(d) GEIM will, at its own expense, maintain sufficient staff, and employ or
retain sufficient personnel and consult with any other persons that it
determines may be necessary or useful to the performance of its obligations
under this agreement.
(e) GEIM will keep the Trust informed of developments materially affecting
the Fund, and will, on its own initiative, furnish the Trust from time to time
with whatever information and reports that the Board reasonably requests as
appropriate for this purpose.
SECTION 3. SELECTION OF INVESTMENTS ON BEHALF OF THE FUND.
Unless otherwise set forth in the Registration Statement or directed by the
Trust, GEIM will, in selecting brokers or dealers to effect transactions on
behalf of the Fund select the best overall terms available. In so doing, GEIM
may consider the breadth of the market on the investment, the price of the
security, the size and difficulty of the order, the willingness of the broker
or dealer to position, the reliability, financial condition and execution and
operational capabilities of the broker or dealer, and the reasonableness of the
commission or size of the dealer's "spread", if any, for the specific
transaction and on a continuing basis. GEIM may also consider brokerage and
research services provided to the Fund and/or other accounts over which GEIM or
its affiliates exercise investment discretion. The Trust recognizes the
desirability of GEIM's having access to supplemental investment and market
research and security and
2
<PAGE>
economic analyses provided by brokers and that those brokers may execute
brokerage transactions at a higher cost to the Trust than would be the case if
the transactions were executed on the basis of the most favorable price and
efficient execution. The Trust, thus, authorizes GEIM, to the extent permitted
by applicable law and regulations, to pay higher brokerage commissions or dealer
spreads for the purchase and sale of securities for the Fund to brokers who
provide supplemental investment and market research and security and economic
analyses, subject to GEIM's determining in good faith that such commissions are
reasonable in terms either of the particular transaction or of the overall
responsibility of GEIM to the Fund and its other clients and that the total
commissions paid by the Fund will be reasonable in relation to the benefits to
the Fund over the long term. In no instance will portfolio securities be
purchased from or sold to GEIM, or any affiliated person thereof or any
investment advisory client thereof, except in accordance with the federal
securities laws and the rules and regulations thereunder.
SECTION 4. COSTS AND EXPENSES.
GEIM will bear the cost of rendering the services it is obligated to
provide under this Agreement and will provide the Trust with all executive,
administrative, clerical and other personnel necessary for the investment and
administrative operations of the Fund and will pay salaries and other
employment-related costs of employing these persons. GEIM will furnish the Trust
and the Fund with office space, facilities, and equipment and will pay the
day-to-day expenses related to the operation of such space, facilities and
equipment.
Except for those expenses assumed by the Fund as provided below, GEIM shall
bear all of the Fund's expenses, including, but not limited to: charges and
expenses of any registrar, the costs of custody, transfer agency and
recordkeeping services in connection with the Fund; registration costs of the
Fund and its shares under Federal and state securities laws; the cost and
expense of printing, including typesetting, and distributing of prospectuses
describing the Fund and supplements to those prospectuses to regulatory
authorities and the Fund's shareholders; all expenses incurred in conducting
meetings of the Fund's shareholders and meetings of the Board relating to the
Fund, excluding fees paid to members of the Board who are not affiliated with
GEIM or any of its affiliates; all expenses incurred in preparing, printing and
mailing proxy statements and reports to shareholders of the Fund; all expenses
incident to any dividend, withdrawal or redemption options provided to Fund
shareholders (except for purchase premiums and redemption fees, if any, charged
directly to shareholders); charges and expenses of any outside service used for
pricing the Fund's portfolio securities and calculating the net asset value of
the Fund's shares; fees and expenses of legal counsel, including counsel to the
members of the Board who are not interested persons of the Fund, or GEIM, and
independent auditors; membership dues of industry associations; postage;
insurance premiums on property or personnel (including officers and Trustees) of
the Trust that inure to their benefit; and all other costs of the Fund's
operations.
The Fund will bear the following expenses: advisory and administration fees
as described in Section 5 of this Agreement; shareholder servicing and
distribution fees under the
3
<PAGE>
terms of the shareholder servicing and distribution plan adopted by the Trust
with respect to the Fund pursuant to Rule 12b-1 (the "Plan") under the 1940 Act;
brokerage fees and commissions and other expenses incurred in the acquisition or
disposition of any securities or other investments; fees and travel expenses of
members of the Board or members of any advisory board or committee who are not
affiliated with GEIM, or any of its affiliates; and expenses that are not normal
operating expenses of the Fund (such as extraordinary expenses, interest and
taxes).
SECTION 5. COMPENSATION.
In consideration of services rendered and the expenses paid by GEIM
pursuant to this Agreement, the Trust will pay GEIM on the first business day of
each month a fee calculated as a percentage of the average daily net assets of
the Fund during the previous month at the following annual rates:
Average Daily Net Assets Annual Rate Percentage of Fund (%)
------------------------ ----------------------------------
First $50 million 1.05
Over $50 million .95
For the purpose of determining fees payable to GEIM under this Agreement, the
value of the Fund's net assets will be computed in the manner described in the
Registration Statement.
SECTION 6. SERVICES TO OTHER COMPANIES OR ACCOUNTS.
(a) The Trust understands and acknowledges that GEIM now acts and will
continue to act as investment manager or adviser to various fiduciary or other
managed accounts ("Other Accounts") and the Trust has no objection to GEIM's so
acting, so long as that when the Fund and any Other Account served by GEIM are
prepared to invest in, or desire to dispose of the same security, available
investments or opportunities for sales will be allocated in a manner believed by
GEIM to be equitable to the Fund and the Other Account. In addition, the Trust
understands and acknowledges that GEIM may, to the extent permitted by
applicable laws and regulations, aggregate securities to be sold or purchased
for the Trust with those to be sold or purchased for Other Accounts so long as
the securities purchased or sold, as well as the expenses incurred in the
transaction, are allocated in a manner believed by GEIM to be equitable to the
Trust and the Other Accounts. The Trust recognizes that, in some cases, the
above procedures may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund.
(b) It is agreed that GEIM may use any supplemental investment research and
other services provided by brokers or dealer obtained for the benefit of the
Fund or the Trust in providing investment advice to Other Accounts.
4
<PAGE>
(c) The Trust understands and acknowledges that the persons employed by
GEIM to assist in the performance of its duties under this Agreement will not
devote their full time to that service and agrees that nothing contained in this
Agreement will be deemed to limit or restrict the right of GEIM or any affiliate
of GEIM to engage in and devote time and attention to other businesses or to
render services of whatever kind or nature.
SECTION 7. CONTINUANCE AND TERMINATION OF THE AGREEMENT.
(a) This Agreement will become effective as of the date hereof and will
continue for an initial two-year term and will continue thereafter so long as
the continuance is specifically approved at least annually (a) by the Board or
(b) by a vote of a majority of the Fund's outstanding voting securities, as
defined in the 1940 Act, provided that in either event the continuance is also
approved by a majority of the Trustees who are not parties to this Agreement or
"interested persons" (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on the approval.
(b) This Agreement is terminable without penalty, by the Trust on not more
than 60 nor less than 30 days' written notice to GEIM, by vote of holders of a
majority of the Fund's outstanding voting securities, as defined in the 1940
Act, or by GEIM on not more than 60 nor less than 30 days' notice to the Trust.
(c) This Agreement will terminate automatically in the event of its
assignment (as defined in the 1940 Act or in rules adopted under the 1940 Act).
SECTION 8. LIMITATION OF LIABILITY.
(a) GEIM will exercise its best judgment in rendering the services
described in this Agreement, except that GEIM will not be liable for any error
of judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which this Agreement relates, other than a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of GEIM in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement or to the extent specified in
Section 36(b) of the 1940 Act concerning loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services. Any
person, even though also an officer, director, employee or agent of GEIM, who
may be or become an officer, Trustee, employee or agent of the Trust, will be
deemed, when rendering services to the Trust or acting on any business of the
Trust, to be rendering services to, or acting solely for, the Trust and not as
an officer, director, employee or agent, or one under the control or direction
of, GEIM even though paid by GEIM.
(b) The Trust and GEIM agree that the obligations of the Trust under this
Agreement will not be binding upon any of the Trustees, shareholders, nominees,
officers, employees or agents, whether past, present or future, of the Trust,
individually, but are binding only upon the assets and property of the Fund, as
provided in the Declaration of Trust. The
5
<PAGE>
execution and delivery of this Agreement have been authorized by the Trustees of
the Trust, and signed by an authorized officer of the Trust, acting as such, and
neither the authorization by the Trustees nor the execution and delivery by the
officer will be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but will bind only the trust
property of the Trust as provided in the Declaration of Trust. No series of the
Trust, including the Fund, will be liable for any claims against any other
series.
SECTION 9. MISCELLANEOUS.
The Trust recognizes that trustees, officers and employees of GEIM and its
affiliates may from time to time serve as trustees, trustees, officers and
employees of corporations, partnerships, group trusts and business trusts
(including other investment companies) and that such other entities may include
the initials "GE" or the words "General Electric" as part of their name, and
that GEIM or its affiliates may enter into distribution, investment advisory or
other agreements with such other corporations and trusts. If GEIM ceases to act
as the investment adviser to the Trust, the Trust agrees that, at GEIM's
request, any license granted to the Trust for the use of the initials "GE" will
terminate and that the Trust will cease and discontinue completely further use
of such initials and will take all necessary action to change the name of the
Trust and the Fund to a name not including the initials of "GE."
* * * * *
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized signatories as of the date and year first
above written.
GE INSTITUTIONAL FUNDS
By: /s/ Michael J. Cosgrove
----------------------------------------
Name: Michael J. Cosgrove
Title: Chairman of the Board and President
GE INVESTMENT MANAGEMENT INCORPORATED
By: /s/ Alan M. Lewis
----------------------------------------
Name: Alan M. Lewis
Title: Executive Vice President
6
Exhibit 99.B5(b)
INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT
GE INSTITUTIONAL FUNDS
PREMIER GROWTH EQUITY FUND
GE INVESTMENT MANAGEMENT INCORPORATED
Agreement made as of October 16, 1997 between GE INVESTMENT MANAGEMENT
INCORPORATED ("GEIM") and GE INSTITUTIONAL FUNDS (the "Trust") on behalf of its
Premier Growth Equity Fund (the "Fund").
RECITALS
The Trust is a business trust organized under the laws of the State of
Delaware on May 23, 1997 and registered under the Investment Company Act of
1940, as amended (the "1940 Act"). The Trust is authorized to divide shares of
beneficial interests in the Trust into two or more separate series and to divide
each such series into two or more classes of Shares. The Fund is a series of the
Trust.
GEIM is a Delaware corporation registered as an investment adviser under
the Investment Advisers Act of 1940 (the "Advisers Act").
The Trust wishes to retain GEIM to serve as investment adviser and
administrator to the Fund and GEIM wishes to serve in this capacity.
SECTION 1. APPOINTMENT
The Trust hereby appoints GEIM as investment adviser and administrator with
respect to the Fund's assets for the period and on the terms set forth in this
Agreement. GEIM accepts this appointment and hereby agrees to render the
services herein set forth for the compensation herein provided.
Subject to the approval of the Board and to other applicable legal
requirements, GEIM may enter into any advisory or sub-advisory agreement or
contract with another affiliated or unaffiliated entity pursuant to which such
entity will carry out some or all of GEIM's responsibilities listed herein.
SECTION 2. SERVICES AS INVESTMENT ADVISER AND ADMINISTRATOR
(a) Subject to the oversight and supervision of the Trust's board of
trustees (the "Board"), GEIM agrees to provide a continuous investment program
for the Fund's assets, including investment research and management. GEIM will
determine from time to time what
1
<PAGE>
investments will be purchased, retained or sold by the Fund. GEIM will place
purchase and sale orders for the Fund's investments. GEIM will provide services
under this Agreement in accordance with the Fund's investment objectives,
policies and restrictions as stated in the Trust's current Registration
Statement on Form N-1A, as amended from time to time (the "Registration
Statement").
(b) The Trust has furnished or will furnish GEIM with copies of the
Registration Statement, its articles of incorporation and by-laws, if any, as
currently in effect and agrees during the continuance of this agreement to
furnish GEIM with copies of any amendment or supplements thereto before or at
the time such amendments or supplements become effective. GEIM may rely on all
documents furnished to it by the Trust.
(c) Subject to the oversight and supervision of the Board, GEIM agrees to
serve as administrator to the Trust and the Fund and, in this capacity, will:
(i) insure the maintenance of the books and records of the Fund (including those
required to be maintained or preserved by Rules 31a-1 and 31a-2 under the 1940
Act); (ii) prepare reports to shareholders of the Fund, (iii) prepare and file
tax returns for the Fund, (iv) assist with the preparation and filing of reports
and the Registration Statement with the Securities and Exchange Commission (the
"Commission"), (v) provide appropriate officers for the Trust, including a
Secretary or Assistant Secretary, (vi) provide administrative support necessary
for the Board to conduct meetings, and (vii) supervise and coordinate the
activities of other service providers, including independent auditors, legal
counsel, custodians, accounting service agents, and transfer agents.
(d) GEIM will, at its own expense, maintain sufficient staff, and employ or
retain sufficient personnel and consult with any other persons that it
determines may be necessary or useful to the performance of its obligations
under this agreement.
(e) GEIM will keep the Trust informed of developments materially affecting
the Fund, and will, on its own initiative, furnish the Trust from time to time
with whatever information and reports that the Board reasonably requests as
appropriate for this purpose.
SECTION 3. SELECTION OF INVESTMENTS ON BEHALF OF THE FUND.
Unless otherwise set forth in the Registration Statement or directed by the
Trust, GEIM will, in selecting brokers or dealers to effect transactions on
behalf of the Fund select the best overall terms available. In so doing, GEIM
may consider the breadth of the market on the investment, the price of the
security, the size and difficulty of the order, the willingness of the broker
or dealer to position, the reliability, financial condition and execution and
operational capabilities of the broker or dealer, and the reasonableness of the
commission or size of the dealer's "spread", if any, for the specific
transaction and on a continuing basis. GEIM may also consider brokerage and
research services provided to the Fund and/or other accounts over which GEIM or
its affiliates exercise investment discretion. The Trust recognizes the
desirability of GEIM's having access to supplemental investment and market
research and security and
2
<PAGE>
economic analyses provided by brokers and that those brokers may execute
brokerage transactions at a higher cost to the Trust than would be the case if
the transactions were executed on the basis of the most favorable price and
efficient execution. The Trust, thus, authorizes GEIM, to the extent permitted
by applicable law and regulations, to pay higher brokerage commissions or dealer
spreads for the purchase and sale of securities for the Fund to brokers who
provide supplemental investment and market research and security and economic
analyses, subject to GEIM's determining in good faith that such commissions are
reasonable in terms either of the particular transaction or of the overall
responsibility of GEIM to the Fund and its other clients and that the total
commissions paid by the Fund will be reasonable in relation to the benefits to
the Fund over the long term. In no instance will portfolio securities be
purchased from or sold to GEIM, or any affiliated person thereof or any
investment advisory client thereof, except in accordance with the federal
securities laws and the rules and regulations thereunder.
SECTION 4. COSTS AND EXPENSES.
GEIM will bear the cost of rendering the services it is obligated to
provide under this Agreement and will provide the Trust with all executive,
administrative, clerical and other personnel necessary for the investment and
administrative operations of the Fund and will pay salaries and other
employment-related costs of employing these persons. GEIM will furnish the Trust
and the Fund with office space, facilities, and equipment and will pay the
day-to-day expenses related to the operation of such space, facilities and
equipment.
Except for those expenses assumed by the Fund as provided below, GEIM shall
bear all of the Fund's expenses, including, but not limited to: charges and
expenses of any registrar, the costs of custody, transfer agency and
recordkeeping services in connection with the Fund; registration costs of the
Fund and its shares under Federal and state securities laws; the cost and
expense of printing, including typesetting, and distributing of prospectuses
describing the Fund and supplements to those prospectuses to regulatory
authorities and the Fund's shareholders; all expenses incurred in conducting
meetings of the Fund's shareholders and meetings of the Board relating to the
Fund, excluding fees paid to members of the Board who are not affiliated with
GEIM or any of its affiliates; all expenses incurred in preparing, printing and
mailing proxy statements and reports to shareholders of the Fund; all expenses
incident to any dividend, withdrawal or redemption options provided to Fund
shareholders (except for purchase premiums and redemption fees, if any, charged
directly to shareholders); charges and expenses of any outside service used for
pricing the Fund's portfolio securities and calculating the net asset value of
the Fund's shares; fees and expenses of legal counsel, including counsel to the
members of the Board who are not interested persons of the Fund, or GEIM, and
independent auditors; membership dues of industry associations; postage;
insurance premiums on property or personnel (including officers and Trustees) of
the Trust that inure to their benefit; and all other costs of the Fund's
operations.
The Fund will bear the following expenses: advisory and administration fees
as described in Section 5 of this Agreement; shareholder servicing and
distribution fees under the
3
<PAGE>
terms of the shareholder servicing and distribution plan adopted by the Trust
with respect to the Fund pursuant to Rule 12b-1 (the "Plan") under the 1940 Act;
brokerage fees and commissions and other expenses incurred in the acquisition or
disposition of any securities or other investments; fees and travel expenses of
members of the Board or members of any advisory board or committee who are not
affiliated with GEIM, or any of its affiliates; and expenses that are not normal
operating expenses of the Fund (such as extraordinary expenses, interest and
taxes).
SECTION 5. COMPENSATION.
In consideration of services rendered and the expenses paid by GEIM
pursuant to this Agreement, the Trust will pay GEIM on the first business day of
each month a fee calculated as a percentage of the average daily net assets of
the Fund during the previous month at the following annual rates:
Average Daily Net Assets Annual Rate Percentage of Fund (%)
------------------------ ----------------------------------
First $25 million .55
Next $25 million .45
Over $50 million .35
For the purpose of determining fees payable to GEIM under this Agreement, the
value of the Fund's net assets will be computed in the manner described in the
Registration Statement.
SECTION 6. SERVICES TO OTHER COMPANIES OR ACCOUNTS.
(a) The Trust understands and acknowledges that GEIM now acts and will
continue to act as investment manager or adviser to various fiduciary or other
managed accounts ("Other Accounts") and the Trust has no objection to GEIM's so
acting, so long as that when the Fund and any Other Account served by GEIM are
prepared to invest in, or desire to dispose of the same security, available
investments or opportunities for sales will be allocated in a manner believed by
GEIM to be equitable to the Fund and the Other Account. In addition, the Trust
understands and acknowledges that GEIM may, to the extent permitted by
applicable laws and regulations, aggregate securities to be sold or purchased
for the Trust with those to be sold or purchased for Other Accounts so long as
the securities purchased or sold, as well as the expenses incurred in the
transaction, are allocated in a manner believed by GEIM to be equitable to the
Trust and the Other Accounts. The Trust recognizes that, in some cases, the
above procedures may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund.
(b) It is agreed that GEIM may use any supplemental investment research and
other services provided by brokers or dealer obtained for the benefit of the
Fund or the Trust in providing investment advice to Other Accounts.
4
<PAGE>
(c) The Trust understands and acknowledges that the persons employed by
GEIM to assist in the performance of its duties under this Agreement will not
devote their full time to that service and agrees that nothing contained in this
Agreement will be deemed to limit or restrict the right of GEIM or any affiliate
of GEIM to engage in and devote time and attention to other businesses or to
render services of whatever kind or nature.
SECTION 7. CONTINUANCE AND TERMINATION OF THE AGREEMENT.
(a) This Agreement will become effective as of the date hereof and will
continue for an initial two-year term and will continue thereafter so long as
the continuance is specifically approved at least annually (a) by the Board or
(b) by a vote of a majority of the Fund's outstanding voting securities, as
defined in the 1940 Act, provided that in either event the continuance is also
approved by a majority of the Trustees who are not parties to this Agreement or
"interested persons" (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on the approval.
(b) This Agreement is terminable without penalty, by the Trust on not more
than 60 nor less than 30 days' written notice to GEIM, by vote of holders of a
majority of the Fund's outstanding voting securities, as defined in the 1940
Act, or by GEIM on not more than 60 nor less than 30 days' notice to the Trust.
(c) This Agreement will terminate automatically in the event of its
assignment (as defined in the 1940 Act or in rules adopted under the 1940 Act).
SECTION 8. LIMITATION OF LIABILITY.
(a) GEIM will exercise its best judgment in rendering the services
described in this Agreement, except that GEIM will not be liable for any error
of judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which this Agreement relates, other than a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of GEIM in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement or to the extent specified in
Section 36(b) of the 1940 Act concerning loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services. Any
person, even though also an officer, director, employee or agent of GEIM, who
may be or become an officer, Trustee, employee or agent of the Trust, will be
deemed, when rendering services to the Trust or acting on any business of the
Trust, to be rendering services to, or acting solely for, the Trust and not as
an officer, director, employee or agent, or one under the control or direction
of, GEIM even though paid by GEIM.
(b) The Trust and GEIM agree that the obligations of the Trust under this
Agreement will not be binding upon any of the Trustees, shareholders, nominees,
officers, employees or agents, whether past, present or future, of the Trust,
individually, but are binding
5
<PAGE>
only upon the assets and property of the Fund, as provided in the Declaration of
Trust. The execution and delivery of this Agreement have been authorized by the
Trustees of the Trust, and signed by an authorized officer of the Trust, acting
as such, and neither the authorization by the Trustees nor the execution and
delivery by the officer will be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but will bind
only the trust property of the Trust as provided in the Declaration of Trust. No
series of the Trust, including the Fund, will be liable for any claims against
any other series.
SECTION 9. MISCELLANEOUS.
The Trust recognizes that trustees, officers and employees of GEIM and its
affiliates may from time to time serve as trustees, trustees, officers and
employees of corporations, partnerships, group trusts and business trusts
(including other investment companies) and that such other entities may include
the initials "GE" or the words "General Electric" as part of their name, and
that GEIM or its affiliates may enter into distribution, investment advisory or
other agreements with such other corporations and trusts. If GEIM ceases to act
as the investment adviser to the Trust, the Trust agrees that, at GEIM's
request, any license granted to the Trust for the use of the initials "GE" will
terminate and that the Trust will cease and discontinue completely further use
of such initials and will take all necessary action to change the name of the
Trust and the Fund to a name not including the initials of "GE."
* * * * *
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized signatories as of the date and year first
above written.
GE INSTITUTIONAL FUNDS
By: /s/ Michael J. Cosgrove
----------------------------------------
Name: Michael J. Cosgrove
Title: Chairman of the Board and President
GE INVESTMENT MANAGEMENT INCORPORATED
By: /s/ Alan M. Lewis
----------------------------------------
Name: Alan M. Lewis
Title: Executive Vice President
6
Exhibit 99.B5(c)
INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT
GE INSTITUTIONAL FUNDS
MID-CAP GROWTH FUND
GE INVESTMENT MANAGEMENT INCORPORATED
Agreement made as of October 16, 1997 between GE INVESTMENT MANAGEMENT
INCORPORATED ("GEIM") and GE INSTITUTIONAL FUNDS (the "Trust") on behalf of its
Mid-Cap Growth Fund (the "Fund").
RECITALS
The Trust is a business trust organized under the laws of the State of
Delaware on May 23, 1997 and registered under the Investment Company Act of
1940, as amended (the "1940 Act"). The Trust is authorized to divide shares of
beneficial interests in the Trust into two or more separate series and to divide
each such series into two or more classes of Shares. The Fund is a series of the
Trust.
GEIM is a Delaware corporation registered as an investment adviser under
the Investment Advisers Act of 1940 (the "Advisers Act").
The Trust wishes to retain GEIM to serve as investment adviser and
administrator to the Fund and GEIM wishes to serve in this capacity.
SECTION 1. APPOINTMENT
The Trust hereby appoints GEIM as investment adviser and administrator with
respect to the Fund's assets for the period and on the terms set forth in this
Agreement. GEIM accepts this appointment and hereby agrees to render the
services herein set forth for the compensation herein provided.
Subject to the approval of the Board and to other applicable legal
requirements, GEIM may enter into any advisory or sub-advisory agreement or
contract with another affiliated or unaffiliated entity pursuant to which such
entity will carry out some or all of GEIM's responsibilities listed herein.
SECTION 2. SERVICES AS INVESTMENT ADVISER AND ADMINISTRATOR
(a) Subject to the oversight and supervision of the Trust's board of
trustees (the "Board"), GEIM agrees to provide a continuous investment program
for the Fund's assets, including investment research and management. GEIM will
determine from time to time what
1
<PAGE>
investments will be purchased, retained or sold by the Fund. GEIM will place
purchase and sale orders for the Fund's investments. GEIM will provide services
under this Agreement in accordance with the Fund's investment objectives,
policies and restrictions as stated in the Trust's current Registration
Statement on Form N-1A, as amended from time to time (the "Registration
Statement").
(b) The Trust has furnished or will furnish GEIM with copies of the
Registration Statement, its articles of incorporation and by-laws, if any, as
currently in effect and agrees during the continuance of this agreement to
furnish GEIM with copies of any amendment or supplements thereto before or at
the time such amendments or supplements become effective. GEIM may rely on all
documents furnished to it by the Trust.
(c) Subject to the oversight and supervision of the Board, GEIM agrees to
serve as administrator to the Trust and the Fund and, in this capacity, will:
(i) insure the maintenance of the books and records of the Fund (including those
required to be maintained or preserved by Rules 31a-1 and 31a-2 under the 1940
Act); (ii) prepare reports to shareholders of the Fund, (iii) prepare and file
tax returns for the Fund, (iv) assist with the preparation and filing of reports
and the Registration Statement with the Securities and Exchange Commission (the
"Commission"), (v) provide appropriate officers for the Trust, including a
Secretary or Assistant Secretary, (vi) provide administrative support necessary
for the Board to conduct meetings, and (vii) supervise and coordinate the
activities of other service providers, including independent auditors, legal
counsel, custodians, accounting service agents, and transfer agents.
(d) GEIM will, at its own expense, maintain sufficient staff, and employ or
retain sufficient personnel and consult with any other persons that it
determines may be necessary or useful to the performance of its obligations
under this agreement.
(e) GEIM will keep the Trust informed of developments materially affecting
the Fund, and will, on its own initiative, furnish the Trust from time to time
with whatever information and reports that the Board reasonably requests as
appropriate for this purpose.
SECTION 3. SELECTION OF INVESTMENTS ON BEHALF OF THE FUND.
Unless otherwise set forth in the Registration Statement or directed by the
Trust, GEIM will, in selecting brokers or dealers to effect transactions on
behalf of the Fund select the best overall terms available. In so doing, GEIM
may consider the breadth of the market on the investment, the price of the
security, the size and difficulty of the order, the willingness of the broker
or dealer to position, the reliability, financial condition and execution and
operational capabilities of the broker or dealer, and the reasonableness of the
commission or size of the dealer's "spread", if any, for the specific
transaction and on a continuing basis. GEIM may also consider brokerage and
research services provided to the Fund and/or other accounts over which GEIM or
its affiliates exercise investment discretion. The Trust recognizes the
desirability of GEIM's having access to supplemental investment and market
research and security and
2
<PAGE>
economic analyses provided by brokers and that those brokers may execute
brokerage transactions at a higher cost to the Trust than would be the case if
the transactions were executed on the basis of the most favorable price and
efficient execution. The Trust, thus, authorizes GEIM, to the extent permitted
by applicable law and regulations, to pay higher brokerage commissions or dealer
spreads for the purchase and sale of securities for the Fund to brokers who
provide supplemental investment and market research and security and economic
analyses, subject to GEIM's determining in good faith that such commissions are
reasonable in terms either of the particular transaction or of the overall
responsibility of GEIM to the Fund and its other clients and that the total
commissions paid by the Fund will be reasonable in relation to the benefits to
the Fund over the long term. In no instance will portfolio securities be
purchased from or sold to GEIM, or any affiliated person thereof or any
investment advisory client thereof, except in accordance with the federal
securities laws and the rules and regulations thereunder.
SECTION 4. COSTS AND EXPENSES.
GEIM will bear the cost of rendering the services it is obligated to
provide under this Agreement and will provide the Trust with all executive,
administrative, clerical and other personnel necessary for the investment and
administrative operations of the Fund and will pay salaries and other
employment-related costs of employing these persons. GEIM will furnish the Trust
and the Fund with office space, facilities, and equipment and will pay the
day-to-day expenses related to the operation of such space, facilities and
equipment.
Except for those expenses assumed by the Fund as provided below, GEIM shall
bear all of the Fund's expenses, including, but not limited to: charges and
expenses of any registrar, the costs of custody, transfer agency and
recordkeeping services in connection with the Fund; registration costs of the
Fund and its shares under Federal and state securities laws; the cost and
expense of printing, including typesetting, and distributing of prospectuses
describing the Fund and supplements to those prospectuses to regulatory
authorities and the Fund's shareholders; all expenses incurred in conducting
meetings of the Fund's shareholders and meetings of the Board relating to the
Fund, excluding fees paid to members of the Board who are not affiliated with
GEIM or any of its affiliates; all expenses incurred in preparing, printing and
mailing proxy statements and reports to shareholders of the Fund; all expenses
incident to any dividend, withdrawal or redemption options provided to Fund
shareholders (except for purchase premiums and redemption fees, if any, charged
directly to shareholders); charges and expenses of any outside service used for
pricing the Fund's portfolio securities and calculating the net asset value of
the Fund's shares; fees and expenses of legal counsel, including counsel to the
members of the Board who are not interested persons of the Fund, or GEIM, and
independent auditors; membership dues of industry associations; postage;
insurance premiums on property or personnel (including officers and Trustees) of
the Trust that inure to their benefit; and all other costs of the Fund's
operations.
The Fund will bear the following expenses: advisory and administration fees
as described in Section 5 of this Agreement; shareholder servicing and
distribution fees under the
3
<PAGE>
terms of the shareholder servicing and distribution plan adopted by the Trust
with respect to the Fund pursuant to Rule 12b-1 (the "Plan") under the 1940 Act;
brokerage fees and commissions and other expenses incurred in the acquisition or
disposition of any securities or other investments; fees and travel expenses of
members of the Board or members of any advisory board or committee who are not
affiliated with GEIM, or any of its affiliates; and expenses that are not normal
operating expenses of the Fund (such as extraordinary expenses, interest and
taxes).
SECTION 5. COMPENSATION.
In consideration of services rendered and the expenses paid by GEIM
pursuant to this Agreement, the Trust will pay GEIM on the first business day of
each month a fee calculated as a percentage of the average daily net assets of
the Fund during the previous month at the following annual rates:
Average Daily Net Assets Annual Rate Percentage of Fund (%)
------------------------ ----------------------------------
First $25 million .55
Next $25 million .45
Over $50 million .35
For the purpose of determining fees payable to GEIM under this Agreement, the
value of the Fund's net assets will be computed in the manner described in the
Registration Statement.
SECTION 6. SERVICES TO OTHER COMPANIES OR ACCOUNTS.
(a) The Trust understands and acknowledges that GEIM now acts and will
continue to act as investment manager or adviser to various fiduciary or other
managed accounts ("Other Accounts") and the Trust has no objection to GEIM's so
acting, so long as that when the Fund and any Other Account served by GEIM are
prepared to invest in, or desire to dispose of the same security, available
investments or opportunities for sales will be allocated in a manner believed by
GEIM to be equitable to the Fund and the Other Account. In addition, the Trust
understands and acknowledges that GEIM may, to the extent permitted by
applicable laws and regulations, aggregate securities to be sold or purchased
for the Trust with those to be sold or purchased for Other Accounts so long as
the securities purchased or sold, as well as the expenses incurred in the
transaction, are allocated in a manner believed by GEIM to be equitable to the
Trust and the Other Accounts. The Trust recognizes that, in some cases, the
above procedures may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund.
(b) It is agreed that GEIM may use any supplemental investment research and
other services provided by brokers or dealer obtained for the benefit of the
Fund or the Trust in providing investment advice to Other Accounts.
4
<PAGE>
(c) The Trust understands and acknowledges that the persons employed by
GEIM to assist in the performance of its duties under this Agreement will not
devote their full time to that service and agrees that nothing contained in this
Agreement will be deemed to limit or restrict the right of GEIM or any affiliate
of GEIM to engage in and devote time and attention to other businesses or to
render services of whatever kind or nature.
SECTION 7. CONTINUANCE AND TERMINATION OF THE AGREEMENT.
(a) This Agreement will become effective as of the date hereof and will
continue for an initial two-year term and will continue thereafter so long as
the continuance is specifically approved at least annually (a) by the Board or
(b) by a vote of a majority of the Fund's outstanding voting securities, as
defined in the 1940 Act, provided that in either event the continuance is also
approved by a majority of the Trustees who are not parties to this Agreement or
"interested persons" (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on the approval.
(b) This Agreement is terminable without penalty, by the Trust on not more
than 60 nor less than 30 days' written notice to GEIM, by vote of holders of a
majority of the Fund's outstanding voting securities, as defined in the 1940
Act, or by GEIM on not more than 60 nor less than 30 days' notice to the Trust.
(c) This Agreement will terminate automatically in the event of its
assignment (as defined in the 1940 Act or in rules adopted under the 1940 Act).
SECTION 8. LIMITATION OF LIABILITY.
(a) GEIM will exercise its best judgment in rendering the services
described in this Agreement, except that GEIM will not be liable for any error
of judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which this Agreement relates, other than a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of GEIM in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement or to the extent specified in
Section 36(b) of the 1940 Act concerning loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services. Any
person, even though also an officer, director, employee or agent of GEIM, who
may be or become an officer, Trustee, employee or agent of the Trust, will be
deemed, when rendering services to the Trust or acting on any business of the
Trust, to be rendering services to, or acting solely for, the Trust and not as
an officer, director, employee or agent, or one under the control or direction
of, GEIM even though paid by GEIM.
(b) The Trust and GEIM agree that the obligations of the Trust under this
Agreement will not be binding upon any of the Trustees, shareholders, nominees,
officers, employees or agents, whether past, present or future, of the Trust,
individually, but are binding
5
<PAGE>
only upon the assets and property of the Fund, as provided in the Declaration of
Trust. The execution and delivery of this Agreement have been authorized by the
Trustees of the Trust, and signed by an authorized officer of the Trust, acting
as such, and neither the authorization by the Trustees nor the execution and
delivery by the officer will be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but will bind
only the trust property of the Trust as provided in the Declaration of Trust. No
series of the Trust, including the Fund, will be liable for any claims against
any other series.
SECTION 9. MISCELLANEOUS.
The Trust recognizes that trustees, officers and employees of GEIM and its
affiliates may from time to time serve as trustees, trustees, officers and
employees of corporations, partnerships, group trusts and business trusts
(including other investment companies) and that such other entities may include
the initials "GE" or the words "General Electric" as part of their name, and
that GEIM or its affiliates may enter into distribution, investment advisory or
other agreements with such other corporations and trusts. If GEIM ceases to act
as the investment adviser to the Trust, the Trust agrees that, at GEIM's
request, any license granted to the Trust for the use of the initials "GE" will
terminate and that the Trust will cease and discontinue completely further use
of such initials and will take all necessary action to change the name of the
Trust and the Fund to a name not including the initials of "GE."
* * * * *
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized signatories as of the date and year first
above written.
GE INSTITUTIONAL FUNDS
By: /s/ Michael J. Cosgrove
---------------------------------------
Name: Michael J. Cosgrove
Title: Chairman of the Board and President
GE INVESTMENT MANAGEMENT INCORPORATED
By: /s/ Alan M. Lewis
---------------------------------------
Name: Alan M. Lewis
Title: Executive Vice President
6
Exhibit 99.B5(d)
INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT
GE INSTITUTIONAL FUNDS
INTERNATIONAL EQUITY FUND
GE INVESTMENT MANAGEMENT INCORPORATED
Agreement made as of October 16, 1997 between GE INVESTMENT MANAGEMENT
INCORPORATED ("GEIM") and GE INSTITUTIONAL FUNDS (the "Trust") on behalf of its
International Equity Fund (the "Fund").
RECITALS
The Trust is a business trust organized under the laws of the State of
Delaware on May 23, 1997 and registered under the Investment Company Act of
1940, as amended (the "1940 Act"). The Trust is authorized to divide shares of
beneficial interests in the Trust into two or more separate series and to divide
each such series into two or more classes of Shares. The Fund is a series of the
Trust.
GEIM is a Delaware corporation registered as an investment adviser under
the Investment Advisers Act of 1940 (the "Advisers Act").
The Trust wishes to retain GEIM to serve as investment adviser and
administrator to the Fund and GEIM wishes to serve in this capacity.
SECTION 1. APPOINTMENT
The Trust hereby appoints GEIM as investment adviser and administrator with
respect to the Fund's assets for the period and on the terms set forth in this
Agreement. GEIM accepts this appointment and hereby agrees to render the
services herein set forth for the compensation herein provided.
Subject to the approval of the Board and to other applicable legal
requirements, GEIM may enter into any advisory or sub-advisory agreement or
contract with another affiliated or unaffiliated entity pursuant to which such
entity will carry out some or all of GEIM's responsibilities listed herein.
SECTION 2. SERVICES AS INVESTMENT ADVISER AND ADMINISTRATOR
(a) Subject to the oversight and supervision of the Trust's board of
trustees (the "Board"), GEIM agrees to provide a continuous investment program
for the Fund's assets, including investment research and management. GEIM will
determine from time to time what
1
<PAGE>
investments will be purchased, retained or sold by the Fund. GEIM will place
purchase and sale orders for the Fund's investments. GEIM will provide services
under this Agreement in accordance with the Fund's investment objectives,
policies and restrictions as stated in the Trust's current Registration
Statement on Form N-1A, as amended from time to time (the "Registration
Statement").
(b) The Trust has furnished or will furnish GEIM with copies of the
Registration Statement, its articles of incorporation and by-laws, if any, as
currently in effect and agrees during the continuance of this agreement to
furnish GEIM with copies of any amendment or supplements thereto before or at
the time such amendments or supplements become effective. GEIM may rely on all
documents furnished to it by the Trust.
(c) Subject to the oversight and supervision of the Board, GEIM agrees to
serve as administrator to the Trust and the Fund and, in this capacity, will:
(i) insure the maintenance of the books and records of the Fund (including those
required to be maintained or preserved by Rules 31a-1 and 31a-2 under the 1940
Act); (ii) prepare reports to shareholders of the Fund, (iii) prepare and file
tax returns for the Fund, (iv) assist with the preparation and filing of reports
and the Registration Statement with the Securities and Exchange Commission (the
"Commission"), (v) provide appropriate officers for the Trust, including a
Secretary or Assistant Secretary, (vi) provide administrative support necessary
for the Board to conduct meetings, and (vii) supervise and coordinate the
activities of other service providers, including independent auditors, legal
counsel, custodians, accounting service agents, and transfer agents.
(d) GEIM will, at its own expense, maintain sufficient staff, and employ or
retain sufficient personnel and consult with any other persons that it
determines may be necessary or useful to the performance of its obligations
under this agreement.
(e) GEIM will keep the Trust informed of developments materially affecting
the Fund, and will, on its own initiative, furnish the Trust from time to time
with whatever information and reports that the Board reasonably requests as
appropriate for this purpose.
SECTION 3. SELECTION OF INVESTMENTS ON BEHALF OF THE FUND.
Unless otherwise set forth in the Registration Statement or directed by the
Trust, GEIM will, in selecting brokers or dealers to effect transactions on
behalf of the Fund select the best overall terms available. In so doing, GEIM
may consider the breadth of the market on the investment, the price of the
security, the size and difficulty of the order, the willingness of the broker
or dealer to position, the reliability, financial condition and execution and
operational capabilities of the broker or dealer, and the reasonableness of the
commission or size of the dealer's "spread", if any, for the specific
transaction and on a continuing basis. GEIM may also consider brokerage and
research services provided to the Fund and/or other accounts over which GEIM or
its affiliates exercise investment discretion. The Trust recognizes the
desirability of GEIM's having access to supplemental investment and market
research and security and
2
<PAGE>
economic analyses provided by brokers and that those brokers may execute
brokerage transactions at a higher cost to the Trust than would be the case if
the transactions were executed on the basis of the most favorable price and
efficient execution. The Trust, thus, authorizes GEIM, to the extent permitted
by applicable law and regulations, to pay higher brokerage commissions or dealer
spreads for the purchase and sale of securities for the Fund to brokers who
provide supplemental investment and market research and security and economic
analyses, subject to GEIM's determining in good faith that such commissions are
reasonable in terms either of the particular transaction or of the overall
responsibility of GEIM to the Fund and its other clients and that the total
commissions paid by the Fund will be reasonable in relation to the benefits to
the Fund over the long term. In no instance will portfolio securities be
purchased from or sold to GEIM, or any affiliated person thereof or any
investment advisory client thereof, except in accordance with the federal
securities laws and the rules and regulations thereunder.
SECTION 4. COSTS AND EXPENSES.
GEIM will bear the cost of rendering the services it is obligated to
provide under this Agreement and will provide the Trust with all executive,
administrative, clerical and other personnel necessary for the investment and
administrative operations of the Fund and will pay salaries and other
employment-related costs of employing these persons. GEIM will furnish the Trust
and the Fund with office space, facilities, and equipment and will pay the
day-to-day expenses related to the operation of such space, facilities and
equipment.
Except for those expenses assumed by the Fund as provided below, GEIM shall
bear all of the Fund's expenses, including, but not limited to: charges and
expenses of any registrar, the costs of custody, transfer agency and
recordkeeping services in connection with the Fund; registration costs of the
Fund and its shares under Federal and state securities laws; the cost and
expense of printing, including typesetting, and distributing of prospectuses
describing the Fund and supplements to those prospectuses to regulatory
authorities and the Fund's shareholders; all expenses incurred in conducting
meetings of the Fund's shareholders and meetings of the Board relating to the
Fund, excluding fees paid to members of the Board who are not affiliated with
GEIM or any of its affiliates; all expenses incurred in preparing, printing and
mailing proxy statements and reports to shareholders of the Fund; all expenses
incident to any dividend, withdrawal or redemption options provided to Fund
shareholders (except for purchase premiums and redemption fees, if any, charged
directly to shareholders); charges and expenses of any outside service used for
pricing the Fund's portfolio securities and calculating the net asset value of
the Fund's shares; fees and expenses of legal counsel, including counsel to the
members of the Board who are not interested persons of the Fund, or GEIM, and
independent auditors; membership dues of industry associations; postage;
insurance premiums on property or personnel (including officers and Trustees) of
the Trust that inure to their benefit; and all other costs of the Fund's
operations.
The Fund will bear the following expenses: advisory and administration fees
as described in Section 5 of this Agreement; shareholder servicing and
distribution fees under the
3
<PAGE>
terms of the shareholder servicing and distribution plan adopted by the Trust
with respect to the Fund pursuant to Rule 12b-1 (the "Plan") under the 1940 Act;
brokerage fees and commissions and other expenses incurred in the acquisition or
disposition of any securities or other investments; fees and travel expenses of
members of the Board or members of any advisory board or committee who are not
affiliated with GEIM, or any of its affiliates; and expenses that are not normal
operating expenses of the Fund (such as extraordinary expenses, interest and
taxes).
SECTION 5. COMPENSATION.
In consideration of services rendered and the expenses paid by GEIM
pursuant to this Agreement, the Trust will pay GEIM on the first business day of
each month a fee calculated as a percentage of the average daily net assets of
the Fund during the previous month at the following annual rates:
Average Daily Net Assets Annual Rate Percentage of Fund (%)
------------------------ ----------------------------------
First $25 million .75
Next $50 million .65
Over $75 million .55
For the purpose of determining fees payable to GEIM under this Agreement, the
value of the Fund's net assets will be computed in the manner described in the
Registration Statement.
SECTION 6. SERVICES TO OTHER COMPANIES OR ACCOUNTS.
(a) The Trust understands and acknowledges that GEIM now acts and will
continue to act as investment manager or adviser to various fiduciary or other
managed accounts ("Other Accounts") and the Trust has no objection to GEIM's so
acting, so long as that when the Fund and any Other Account served by GEIM are
prepared to invest in, or desire to dispose of the same security, available
investments or opportunities for sales will be allocated in a manner believed by
GEIM to be equitable to the Fund and the Other Account. In addition, the Trust
understands and acknowledges that GEIM may, to the extent permitted by
applicable laws and regulations, aggregate securities to be sold or purchased
for the Trust with those to be sold or purchased for Other Accounts so long as
the securities purchased or sold, as well as the expenses incurred in the
transaction, are allocated in a manner believed by GEIM to be equitable to the
Trust and the Other Accounts. The Trust recognizes that, in some cases, the
above procedures may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund.
(b) It is agreed that GEIM may use any supplemental investment research and
other services provided by brokers or dealer obtained for the benefit of the
Fund or the Trust in providing investment advice to Other Accounts.
4
<PAGE>
(c) The Trust understands and acknowledges that the persons employed by
GEIM to assist in the performance of its duties under this Agreement will not
devote their full time to that service and agrees that nothing contained in this
Agreement will be deemed to limit or restrict the right of GEIM or any affiliate
of GEIM to engage in and devote time and attention to other businesses or to
render services of whatever kind or nature.
SECTION 7. CONTINUANCE AND TERMINATION OF THE AGREEMENT.
(a) This Agreement will become effective as of the date hereof and will
continue for an initial two-year term and will continue thereafter so long as
the continuance is specifically approved at least annually (a) by the Board or
(b) by a vote of a majority of the Fund's outstanding voting securities, as
defined in the 1940 Act, provided that in either event the continuance is also
approved by a majority of the Trustees who are not parties to this Agreement or
"interested persons" (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on the approval.
(b) This Agreement is terminable without penalty, by the Trust on not more
than 60 nor less than 30 days' written notice to GEIM, by vote of holders of a
majority of the Fund's outstanding voting securities, as defined in the 1940
Act, or by GEIM on not more than 60 nor less than 30 days' notice to the Trust.
(c) This Agreement will terminate automatically in the event of its
assignment (as defined in the 1940 Act or in rules adopted under the 1940 Act).
SECTION 8. LIMITATION OF LIABILITY.
(a) GEIM will exercise its best judgment in rendering the services
described in this Agreement, except that GEIM will not be liable for any error
of judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which this Agreement relates, other than a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of GEIM in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement or to the extent specified in
Section 36(b) of the 1940 Act concerning loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services. Any
person, even though also an officer, director, employee or agent of GEIM, who
may be or become an officer, Trustee, employee or agent of the Trust, will be
deemed, when rendering services to the Trust or acting on any business of the
Trust, to be rendering services to, or acting solely for, the Trust and not as
an officer, director, employee or agent, or one under the control or direction
of, GEIM even though paid by GEIM.
(b) The Trust and GEIM agree that the obligations of the Trust under this
Agreement will not be binding upon any of the Trustees, shareholders, nominees,
officers, employees or agents, whether past, present or future, of the Trust,
individually, but are binding
5
<PAGE>
only upon the assets and property of the Fund, as provided in the Declaration of
Trust. The execution and delivery of this Agreement have been authorized by the
Trustees of the Trust, and signed by an authorized officer of the Trust, acting
as such, and neither the authorization by the Trustees nor the execution and
delivery by the officer will be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but will bind
only the trust property of the Trust as provided in the Declaration of Trust. No
series of the Trust, including the Fund, will be liable for any claims against
any other series.
SECTION 9. MISCELLANEOUS.
The Trust recognizes that trustees, officers and employees of GEIM and its
affiliates may from time to time serve as trustees, trustees, officers and
employees of corporations, partnerships, group trusts and business trusts
(including other investment companies) and that such other entities may include
the initials "GE" or the words "General Electric" as part of their name, and
that GEIM or its affiliates may enter into distribution, investment advisory or
other agreements with such other corporations and trusts. If GEIM ceases to act
as the investment adviser to the Trust, the Trust agrees that, at GEIM's
request, any license granted to the Trust for the use of the initials "GE" will
terminate and that the Trust will cease and discontinue completely further use
of such initials and will take all necessary action to change the name of the
Trust and the Fund to a name not including the initials of "GE."
* * * * *
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized signatories as of the date and year first
above written.
GE INSTITUTIONAL FUNDS
By: /s/ Michael J. Cosgrove
----------------------------------------
Name: Michael J. Cosgrove
Title: Chairman of the Board and President
GE INVESTMENT MANAGEMENT INCORPORATED
By: /s/ Alan M. Lewis
----------------------------------------
Name: Alan M. Lewis
Title: Executive Vice President
6
Exhibit 99.B5(e)
INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT
GE INSTITUTIONAL FUNDS
VALUE EQUITY FUND
GE INVESTMENT MANAGEMENT INCORPORATED
Agreement made as of October 16, 1997 between GE INVESTMENT MANAGEMENT
INCORPORATED ("GEIM") and GE INSTITUTIONAL FUNDS (the "Trust") on behalf of its
Value Equity Fund (the "Fund").
RECITALS
The Trust is a business trust organized under the laws of the State of
Delaware on May 23, 1997 and registered under the Investment Company Act of
1940, as amended (the "1940 Act"). The Trust is authorized to divide shares of
beneficial interests in the Trust into two or more separate series and to divide
each such series into two or more classes of Shares. The Fund is a series of the
Trust.
GEIM is a Delaware corporation registered as an investment adviser under
the Investment Advisers Act of 1940 (the "Advisers Act").
The Trust wishes to retain GEIM to serve as investment adviser and
administrator to the Fund and GEIM wishes to serve in this capacity.
SECTION 1. APPOINTMENT
The Trust hereby appoints GEIM as investment adviser and administrator with
respect to the Fund's assets for the period and on the terms set forth in this
Agreement. GEIM accepts this appointment and hereby agrees to render the
services herein set forth for the compensation herein provided.
Subject to the approval of the Board and to other applicable legal
requirements, GEIM may enter into any advisory or sub-advisory agreement or
contract with another affiliated or unaffiliated entity pursuant to which such
entity will carry out some or all of GEIM's responsibilities listed herein.
SECTION 2. SERVICES AS INVESTMENT ADVISER AND ADMINISTRATOR
(a) Subject to the oversight and supervision of the Trust's board of
trustees (the "Board"), GEIM agrees to provide a continuous investment program
for the Fund's assets, including investment research and management. GEIM will
determine from time to time what
1
<PAGE>
investments will be purchased, retained or sold by the Fund. GEIM will place
purchase and sale orders for the Fund's investments. GEIM will provide services
under this Agreement in accordance with the Fund's investment objectives,
policies and restrictions as stated in the Trust's current Registration
Statement on Form N-1A, as amended from time to time (the "Registration
Statement").
(b) The Trust has furnished or will furnish GEIM with copies of the
Registration Statement, its articles of incorporation and by-laws, if any, as
currently in effect and agrees during the continuance of this agreement to
furnish GEIM with copies of any amendment or supplements thereto before or at
the time such amendments or supplements become effective. GEIM may rely on all
documents furnished to it by the Trust.
(c) Subject to the oversight and supervision of the Board, GEIM agrees to
serve as administrator to the Trust and the Fund and, in this capacity, will:
(i) insure the maintenance of the books and records of the Fund (including those
required to be maintained or preserved by Rules 31a-1 and 31a-2 under the 1940
Act); (ii) prepare reports to shareholders of the Fund, (iii) prepare and file
tax returns for the Fund, (iv) assist with the preparation and filing of reports
and the Registration Statement with the Securities and Exchange Commission (the
"Commission"), (v) provide appropriate officers for the Trust, including a
Secretary or Assistant Secretary, (vi) provide administrative support necessary
for the Board to conduct meetings, and (vii) supervise and coordinate the
activities of other service providers, including independent auditors, legal
counsel, custodians, accounting service agents, and transfer agents.
(d) GEIM will, at its own expense, maintain sufficient staff, and employ or
retain sufficient personnel and consult with any other persons that it
determines may be necessary or useful to the performance of its obligations
under this agreement.
(e) GEIM will keep the Trust informed of developments materially affecting
the Fund, and will, on its own initiative, furnish the Trust from time to time
with whatever information and reports that the Board reasonably requests as
appropriate for this purpose.
SECTION 3. SELECTION OF INVESTMENTS ON BEHALF OF THE FUND.
Unless otherwise set forth in the Registration Statement or directed by the
Trust, GEIM will, in selecting brokers or dealers to effect transactions on
behalf of the Fund select the best overall terms available. In so doing, GEIM
may consider the breadth of the market on the investment, the price of the
security, the size and difficulty of the order, the willingness of the broker
or dealer to position, the reliability, financial condition and execution and
operational capabilities of the broker or dealer, and the reasonableness of the
commission or size of the dealer's "spread", if any, for the specific
transaction and on a continuing basis. GEIM may also consider brokerage and
research services provided to the Fund and/or other accounts over which GEIM or
its affiliates exercise investment discretion. The Trust recognizes the
desirability of GEIM's having access to supplemental investment and market
research and security and
2
<PAGE>
economic analyses provided by brokers and that those brokers may execute
brokerage transactions at a higher cost to the Trust than would be the case if
the transactions were executed on the basis of the most favorable price and
efficient execution. The Trust, thus, authorizes GEIM, to the extent permitted
by applicable law and regulations, to pay higher brokerage commissions or dealer
spreads for the purchase and sale of securities for the Fund to brokers who
provide supplemental investment and market research and security and economic
analyses, subject to GEIM's determining in good faith that such commissions are
reasonable in terms either of the particular transaction or of the overall
responsibility of GEIM to the Fund and its other clients and that the total
commissions paid by the Fund will be reasonable in relation to the benefits to
the Fund over the long term. In no instance will portfolio securities be
purchased from or sold to GEIM, or any affiliated person thereof or any
investment advisory client thereof, except in accordance with the federal
securities laws and the rules and regulations thereunder.
SECTION 4. COSTS AND EXPENSES.
GEIM will bear the cost of rendering the services it is obligated to
provide under this Agreement and will provide the Trust with all executive,
administrative, clerical and other personnel necessary for the investment and
administrative operations of the Fund and will pay salaries and other
employment-related costs of employing these persons. GEIM will furnish the Trust
and the Fund with office space, facilities, and equipment and will pay the
day-to-day expenses related to the operation of such space, facilities and
equipment.
Except for those expenses assumed by the Fund as provided below, GEIM shall
bear all of the Fund's expenses, including, but not limited to: charges and
expenses of any registrar, the costs of custody, transfer agency and
recordkeeping services in connection with the Fund; registration costs of the
Fund and its shares under Federal and state securities laws; the cost and
expense of printing, including typesetting, and distributing of prospectuses
describing the Fund and supplements to those prospectuses to regulatory
authorities and the Fund's shareholders; all expenses incurred in conducting
meetings of the Fund's shareholders and meetings of the Board relating to the
Fund, excluding fees paid to members of the Board who are not affiliated with
GEIM or any of its affiliates; all expenses incurred in preparing, printing and
mailing proxy statements and reports to shareholders of the Fund; all expenses
incident to any dividend, withdrawal or redemption options provided to Fund
shareholders (except for purchase premiums and redemption fees, if any, charged
directly to shareholders); charges and expenses of any outside service used for
pricing the Fund's portfolio securities and calculating the net asset value of
the Fund's shares; fees and expenses of legal counsel, including counsel to the
members of the Board who are not interested persons of the Fund, or GEIM, and
independent auditors; membership dues of industry associations; postage;
insurance premiums on property or personnel (including officers and Trustees) of
the Trust that inure to their benefit; and all other costs of the Fund's
operations.
The Fund will bear the following expenses: advisory and administration fees
as described in Section 5 of this Agreement; shareholder servicing and
distribution fees under the
3
<PAGE>
terms of the shareholder servicing and distribution plan adopted by the Trust
with respect to the Fund pursuant to Rule 12b-1 (the "Plan") under the 1940 Act;
brokerage fees and commissions and other expenses incurred in the acquisition or
disposition of any securities or other investments; fees and travel expenses of
members of the Board or members of any advisory board or committee who are not
affiliated with GEIM, or any of its affiliates; and expenses that are not normal
operating expenses of the Fund (such as extraordinary expenses, interest and
taxes).
SECTION 5. COMPENSATION.
In consideration of services rendered and the expenses paid by GEIM
pursuant to this Agreement, the Trust will pay GEIM on the first business day of
each month a fee calculated as a percentage of the average daily net assets of
the Fund during the previous month at the following annual rates:
Average Daily Net Assets Annual Rate Percentage of Fund (%)
------------------------ ----------------------------------
First $25 million .55
Next $25 million .45
Over $50 million .35
For the purpose of determining fees payable to GEIM under this Agreement, the
value of the Fund's net assets will be computed in the manner described in the
Registration Statement.
SECTION 6. SERVICES TO OTHER COMPANIES OR ACCOUNTS.
(a) The Trust understands and acknowledges that GEIM now acts and will
continue to act as investment manager or adviser to various fiduciary or other
managed accounts ("Other Accounts") and the Trust has no objection to GEIM's so
acting, so long as that when the Fund and any Other Account served by GEIM are
prepared to invest in, or desire to dispose of the same security, available
investments or opportunities for sales will be allocated in a manner believed by
GEIM to be equitable to the Fund and the Other Account. In addition, the Trust
understands and acknowledges that GEIM may, to the extent permitted by
applicable laws and regulations, aggregate securities to be sold or purchased
for the Trust with those to be sold or purchased for Other Accounts so long as
the securities purchased or sold, as well as the expenses incurred in the
transaction, are allocated in a manner believed by GEIM to be equitable to the
Trust and the Other Accounts. The Trust recognizes that, in some cases, the
above procedures may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund.
(b) It is agreed that GEIM may use any supplemental investment research and
other services provided by brokers or dealer obtained for the benefit of the
Fund or the Trust in providing investment advice to Other Accounts.
4
<PAGE>
(c) The Trust understands and acknowledges that the persons employed by
GEIM to assist in the performance of its duties under this Agreement will not
devote their full time to that service and agrees that nothing contained in this
Agreement will be deemed to limit or restrict the right of GEIM or any affiliate
of GEIM to engage in and devote time and attention to other businesses or to
render services of whatever kind or nature.
SECTION 7. CONTINUANCE AND TERMINATION OF THE AGREEMENT.
(a) This Agreement will become effective as of the date hereof and will
continue for an initial two-year term and will continue thereafter so long as
the continuance is specifically approved at least annually (a) by the Board or
(b) by a vote of a majority of the Fund's outstanding voting securities, as
defined in the 1940 Act, provided that in either event the continuance is also
approved by a majority of the Trustees who are not parties to this Agreement or
"interested persons" (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on the approval.
(b) This Agreement is terminable without penalty, by the Trust on not more
than 60 nor less than 30 days' written notice to GEIM, by vote of holders of a
majority of the Fund's outstanding voting securities, as defined in the 1940
Act, or by GEIM on not more than 60 nor less than 30 days' notice to the Trust.
(c) This Agreement will terminate automatically in the event of its
assignment (as defined in the 1940 Act or in rules adopted under the 1940 Act).
SECTION 8. LIMITATION OF LIABILITY.
(a) GEIM will exercise its best judgment in rendering the services
described in this Agreement, except that GEIM will not be liable for any error
of judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which this Agreement relates, other than a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of GEIM in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement or to the extent specified in
Section 36(b) of the 1940 Act concerning loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services. Any
person, even though also an officer, director, employee or agent of GEIM, who
may be or become an officer, Trustee, employee or agent of the Trust, will be
deemed, when rendering services to the Trust or acting on any business of the
Trust, to be rendering services to, or acting solely for, the Trust and not as
an officer, director, employee or agent, or one under the control or direction
of, GEIM even though paid by GEIM.
(b) The Trust and GEIM agree that the obligations of the Trust under this
Agreement will not be binding upon any of the Trustees, shareholders, nominees,
officers, employees or agents, whether past, present or future, of the Trust,
individually, but are binding
5
<PAGE>
only upon the assets and property of the Fund, as provided in the Declaration of
Trust. The execution and delivery of this Agreement have been authorized by the
Trustees of the Trust, and signed by an authorized officer of the Trust, acting
as such, and neither the authorization by the Trustees nor the execution and
delivery by the officer will be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but will bind
only the trust property of the Trust as provided in the Declaration of Trust. No
series of the Trust, including the Fund, will be liable for any claims against
any other series.
SECTION 9. MISCELLANEOUS.
The Trust recognizes that trustees, officers and employees of GEIM and its
affiliates may from time to time serve as trustees, trustees, officers and
employees of corporations, partnerships, group trusts and business trusts
(including other investment companies) and that such other entities may include
the initials "GE" or the words "General Electric" as part of their name, and
that GEIM or its affiliates may enter into distribution, investment advisory or
other agreements with such other corporations and trusts. If GEIM ceases to act
as the investment adviser to the Trust, the Trust agrees that, at GEIM's
request, any license granted to the Trust for the use of the initials "GE" will
terminate and that the Trust will cease and discontinue completely further use
of such initials and will take all necessary action to change the name of the
Trust and the Fund to a name not including the initials of "GE."
* * * * *
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized signatories as of the date and year first
above written.
GE INSTITUTIONAL FUNDS
By: /s/ Michael J. Cosgrove
---------------------------------------
Name: Michael J. Cosgrove
Title: Chairman of the Board and President
GE INVESTMENT MANAGEMENT INCORPORATED
By: /s/ Alan M. Lewis
---------------------------------------
Name: Alan M. Lewis
Title: Executive Vice President
6
Exhibit 99.B5(f)
INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT
GE INSTITUTIONAL FUNDS
U.S. EQUITY FUND
GE INVESTMENT MANAGEMENT INCORPORATED
Agreement made as of October 16, 1997 between GE INVESTMENT MANAGEMENT
INCORPORATED ("GEIM") and GE INSTITUTIONAL FUNDS (the "Trust") on behalf of its
U.S. Equity Fund (the "Fund").
RECITALS
The Trust is a business trust organized under the laws of the State of
Delaware on May 23, 1997 and registered under the Investment Company Act of
1940, as amended (the "1940 Act"). The Trust is authorized to divide shares of
beneficial interests in the Trust into two or more separate series and to divide
each such series into two or more classes of Shares. The Fund is a series of the
Trust.
GEIM is a Delaware corporation registered as an investment adviser under
the Investment Advisers Act of 1940 (the "Advisers Act").
The Trust wishes to retain GEIM to serve as investment adviser and
administrator to the Fund and GEIM wishes to serve in this capacity.
SECTION 1. APPOINTMENT
The Trust hereby appoints GEIM as investment adviser and administrator with
respect to the Fund's assets for the period and on the terms set forth in this
Agreement. GEIM accepts this appointment and hereby agrees to render the
services herein set forth for the compensation herein provided.
Subject to the approval of the Board and to other applicable legal
requirements, GEIM may enter into any advisory or sub-advisory agreement or
contract with another affiliated or unaffiliated entity pursuant to which such
entity will carry out some or all of GEIM's responsibilities listed herein.
SECTION 2. SERVICES AS INVESTMENT ADVISER AND ADMINISTRATOR
(a) Subject to the oversight and supervision of the Trust's board of
trustees (the "Board"), GEIM agrees to provide a continuous investment program
for the Fund's assets, including investment research and management. GEIM will
determine from time to time what
1
<PAGE>
investments will be purchased, retained or sold by the Fund. GEIM will place
purchase and sale orders for the Fund's investments. GEIM will provide services
under this Agreement in accordance with the Fund's investment objectives,
policies and restrictions as stated in the Trust's current Registration
Statement on Form N-1A, as amended from time to time (the "Registration
Statement").
(b) The Trust has furnished or will furnish GEIM with copies of the
Registration Statement, its articles of incorporation and by-laws, if any, as
currently in effect and agrees during the continuance of this agreement to
furnish GEIM with copies of any amendment or supplements thereto before or at
the time such amendments or supplements become effective. GEIM may rely on all
documents furnished to it by the Trust.
(c) Subject to the oversight and supervision of the Board, GEIM agrees to
serve as administrator to the Trust and the Fund and, in this capacity, will:
(i) insure the maintenance of the books and records of the Fund (including those
required to be maintained or preserved by Rules 31a-1 and 31a-2 under the 1940
Act); (ii) prepare reports to shareholders of the Fund, (iii) prepare and file
tax returns for the Fund, (iv) assist with the preparation and filing of reports
and the Registration Statement with the Securities and Exchange Commission (the
"Commission"), (v) provide appropriate officers for the Trust, including a
Secretary or Assistant Secretary, (vi) provide administrative support necessary
for the Board to conduct meetings, and (vii) supervise and coordinate the
activities of other service providers, including independent auditors, legal
counsel, custodians, accounting service agents, and transfer agents.
(d) GEIM will, at its own expense, maintain sufficient staff, and employ or
retain sufficient personnel and consult with any other persons that it
determines may be necessary or useful to the performance of its obligations
under this agreement.
(e) GEIM will keep the Trust informed of developments materially affecting
the Fund, and will, on its own initiative, furnish the Trust from time to time
with whatever information and reports that the Board reasonably requests as
appropriate for this purpose.
SECTION 3. SELECTION OF INVESTMENTS ON BEHALF OF THE FUND.
Unless otherwise set forth in the Registration Statement or directed by the
Trust, GEIM will, in selecting brokers or dealers to effect transactions on
behalf of the Fund select the best overall terms available. In so doing, GEIM
may consider the breadth of the market on the investment, the price of the
security, the size and difficulty of the order, the willingness of the broker
or dealer to position, the reliability, financial condition and execution and
operational capabilities of the broker or dealer, and the reasonableness of the
commission or size of the dealer's "spread", if any, for the specific
transaction and on a continuing basis. GEIM may also consider brokerage and
research services provided to the Fund and/or other accounts over which GEIM or
its affiliates exercise investment discretion. The Trust recognizes the
desirability of GEIM's having access to supplemental investment and market
research and security and
2
<PAGE>
economic analyses provided by brokers and that those brokers may execute
brokerage transactions at a higher cost to the Trust than would be the case if
the transactions were executed on the basis of the most favorable price and
efficient execution. The Trust, thus, authorizes GEIM, to the extent permitted
by applicable law and regulations, to pay higher brokerage commissions or dealer
spreads for the purchase and sale of securities for the Fund to brokers who
provide supplemental investment and market research and security and economic
analyses, subject to GEIM's determining in good faith that such commissions are
reasonable in terms either of the particular transaction or of the overall
responsibility of GEIM to the Fund and its other clients and that the total
commissions paid by the Fund will be reasonable in relation to the benefits to
the Fund over the long term. In no instance will portfolio securities be
purchased from or sold to GEIM, or any affiliated person thereof or any
investment advisory client thereof, except in accordance with the federal
securities laws and the rules and regulations thereunder.
SECTION 4. COSTS AND EXPENSES.
GEIM will bear the cost of rendering the services it is obligated to
provide under this Agreement and will provide the Trust with all executive,
administrative, clerical and other personnel necessary for the investment and
administrative operations of the Fund and will pay salaries and other
employment-related costs of employing these persons. GEIM will furnish the Trust
and the Fund with office space, facilities, and equipment and will pay the
day-to-day expenses related to the operation of such space, facilities and
equipment.
Except for those expenses assumed by the Fund as provided below, GEIM shall
bear all of the Fund's expenses, including, but not limited to: charges and
expenses of any registrar, the costs of custody, transfer agency and
recordkeeping services in connection with the Fund; registration costs of the
Fund and its shares under Federal and state securities laws; the cost and
expense of printing, including typesetting, and distributing of prospectuses
describing the Fund and supplements to those prospectuses to regulatory
authorities and the Fund's shareholders; all expenses incurred in conducting
meetings of the Fund's shareholders and meetings of the Board relating to the
Fund, excluding fees paid to members of the Board who are not affiliated with
GEIM or any of its affiliates; all expenses incurred in preparing, printing and
mailing proxy statements and reports to shareholders of the Fund; all expenses
incident to any dividend, withdrawal or redemption options provided to Fund
shareholders (except for purchase premiums and redemption fees, if any, charged
directly to shareholders); charges and expenses of any outside service used for
pricing the Fund's portfolio securities and calculating the net asset value of
the Fund's shares; fees and expenses of legal counsel, including counsel to the
members of the Board who are not interested persons of the Fund, or GEIM, and
independent auditors; membership dues of industry associations; postage;
insurance premiums on property or personnel (including officers and Trustees) of
the Trust that inure to their benefit; and all other costs of the Fund's
operations.
The Fund will bear the following expenses: advisory and administration fees
as described in Section 5 of this Agreement; shareholder servicing and
distribution fees under the
3
<PAGE>
terms of the shareholder servicing and distribution plan adopted by the Trust
with respect to the Fund pursuant to Rule 12b-1 (the "Plan") under the 1940 Act;
brokerage fees and commissions and other expenses incurred in the acquisition or
disposition of any securities or other investments; fees and travel expenses of
members of the Board or members of any advisory board or committee who are not
affiliated with GEIM, or any of its affiliates; and expenses that are not normal
operating expenses of the Fund (such as extraordinary expenses, interest and
taxes).
SECTION 5. COMPENSATION.
In consideration of services rendered and the expenses paid by GEIM
pursuant to this Agreement, the Trust will pay GEIM on the first business day of
each month a fee calculated as a percentage of the average daily net assets of
the Fund during the previous month at the following annual rates:
Average Daily Net Assets Annual Rate Percentage of Fund (%)
------------------------ ----------------------------------
First $25 million .55
Next $25 million .45
Over $50 million .35
For the purpose of determining fees payable to GEIM under this Agreement, the
value of the Fund's net assets will be computed in the manner described in the
Registration Statement.
SECTION 6. SERVICES TO OTHER COMPANIES OR ACCOUNTS.
(a) The Trust understands and acknowledges that GEIM now acts and will
continue to act as investment manager or adviser to various fiduciary or other
managed accounts ("Other Accounts") and the Trust has no objection to GEIM's so
acting, so long as that when the Fund and any Other Account served by GEIM are
prepared to invest in, or desire to dispose of the same security, available
investments or opportunities for sales will be allocated in a manner believed by
GEIM to be equitable to the Fund and the Other Account. In addition, the Trust
understands and acknowledges that GEIM may, to the extent permitted by
applicable laws and regulations, aggregate securities to be sold or purchased
for the Trust with those to be sold or purchased for Other Accounts so long as
the securities purchased or sold, as well as the expenses incurred in the
transaction, are allocated in a manner believed by GEIM to be equitable to the
Trust and the Other Accounts. The Trust recognizes that, in some cases, the
above procedures may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund.
(b) It is agreed that GEIM may use any supplemental investment research and
other services provided by brokers or dealer obtained for the benefit of the
Fund or the Trust in providing investment advice to Other Accounts.
4
<PAGE>
(c) The Trust understands and acknowledges that the persons employed by
GEIM to assist in the performance of its duties under this Agreement will not
devote their full time to that service and agrees that nothing contained in this
Agreement will be deemed to limit or restrict the right of GEIM or any affiliate
of GEIM to engage in and devote time and attention to other businesses or to
render services of whatever kind or nature.
SECTION 7. CONTINUANCE AND TERMINATION OF THE AGREEMENT.
(a) This Agreement will become effective as of the date hereof and will
continue for an initial two-year term and will continue thereafter so long as
the continuance is specifically approved at least annually (a) by the Board or
(b) by a vote of a majority of the Fund's outstanding voting securities, as
defined in the 1940 Act, provided that in either event the continuance is also
approved by a majority of the Trustees who are not parties to this Agreement or
"interested persons" (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on the approval.
(b) This Agreement is terminable without penalty, by the Trust on not more
than 60 nor less than 30 days' written notice to GEIM, by vote of holders of a
majority of the Fund's outstanding voting securities, as defined in the 1940
Act, or by GEIM on not more than 60 nor less than 30 days' notice to the Trust.
(c) This Agreement will terminate automatically in the event of its
assignment (as defined in the 1940 Act or in rules adopted under the 1940 Act).
SECTION 8. LIMITATION OF LIABILITY.
(a) GEIM will exercise its best judgment in rendering the services
described in this Agreement, except that GEIM will not be liable for any error
of judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which this Agreement relates, other than a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of GEIM in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement or to the extent specified in
Section 36(b) of the 1940 Act concerning loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services. Any
person, even though also an officer, director, employee or agent of GEIM, who
may be or become an officer, Trustee, employee or agent of the Trust, will be
deemed, when rendering services to the Trust or acting on any business of the
Trust, to be rendering services to, or acting solely for, the Trust and not as
an officer, director, employee or agent, or one under the control or direction
of, GEIM even though paid by GEIM.
(b) The Trust and GEIM agree that the obligations of the Trust under this
Agreement will not be binding upon any of the Trustees, shareholders, nominees,
officers, employees or agents, whether past, present or future, of the Trust,
individually, but are binding
5
<PAGE>
only upon the assets and property of the Fund, as provided in the Declaration of
Trust. The execution and delivery of this Agreement have been authorized by the
Trustees of the Trust, and signed by an authorized officer of the Trust, acting
as such, and neither the authorization by the Trustees nor the execution and
delivery by the officer will be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but will bind
only the trust property of the Trust as provided in the Declaration of Trust. No
series of the Trust, including the Fund, will be liable for any claims against
any other series.
SECTION 9. MISCELLANEOUS.
The Trust recognizes that trustees, officers and employees of GEIM and its
affiliates may from time to time serve as trustees, trustees, officers and
employees of corporations, partnerships, group trusts and business trusts
(including other investment companies) and that such other entities may include
the initials "GE" or the words "General Electric" as part of their name, and
that GEIM or its affiliates may enter into distribution, investment advisory or
other agreements with such other corporations and trusts. If GEIM ceases to act
as the investment adviser to the Trust, the Trust agrees that, at GEIM's
request, any license granted to the Trust for the use of the initials "GE" will
terminate and that the Trust will cease and discontinue completely further use
of such initials and will take all necessary action to change the name of the
Trust and the Fund to a name not including the initials of "GE."
* * * * *
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized signatories as of the date and year first
above written.
GE INSTITUTIONAL FUNDS
By: /s/ Michael J. Cosgrove
----------------------------------------
Name: Michael J. Cosgrove
Title: Chairman of the Board and President
GE INVESTMENT MANAGEMENT INCORPORATED
By: /s/ Alan M. Lewis
----------------------------------------
Name: Alan M. Lewis
Title: Executive Vice President
6
Exhibit 99.B5(g)
INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT
GE INSTITUTIONAL FUNDS
S&P 500 INDEX FUND
GE INVESTMENT MANAGEMENT INCORPORATED
Agreement made as of October 16, 1997 between GE INVESTMENT MANAGEMENT
INCORPORATED ("GEIM") and GE INSTITUTIONAL FUNDS (the "Trust") on behalf of its
S&P 500 Index Fund (the "Fund").
RECITALS
The Trust is a business trust organized under the laws of the State of
Delaware on May 23, 1997 and registered under the Investment Company Act of
1940, as amended (the "1940 Act"). The Trust is authorized to divide shares of
beneficial interests in the Trust into two or more separate series and to divide
each such series into two or more classes of Shares. The Fund is a series of the
Trust.
GEIM is a Delaware corporation registered as an investment adviser under
the Investment Advisers Act of 1940 (the "Advisers Act").
The Trust wishes to retain GEIM to serve as investment adviser and
administrator to the Fund and GEIM wishes to serve in this capacity.
SECTION 1. APPOINTMENT
The Trust hereby appoints GEIM as investment adviser and administrator with
respect to the Fund's assets for the period and on the terms set forth in this
Agreement. GEIM accepts this appointment and hereby agrees to render the
services herein set forth for the compensation herein provided.
Subject to the approval of the Board and to other applicable legal
requirements, GEIM may enter into any advisory or sub-advisory agreement or
contract with another affiliated or unaffiliated entity pursuant to which such
entity will carry out some or all of GEIM's responsibilities listed herein.
SECTION 2. SERVICES AS INVESTMENT ADVISER AND ADMINISTRATOR
(a) Subject to the oversight and supervision of the Trust's board of
trustees (the "Board"), GEIM agrees to provide a continuous investment program
for the Fund's assets, including investment research and management. GEIM will
determine from time to time what
1
<PAGE>
investments will be purchased, retained or sold by the Fund. GEIM will place
purchase and sale orders for the Fund's investments. GEIM will provide services
under this Agreement in accordance with the Fund's investment objectives,
policies and restrictions as stated in the Trust's current Registration
Statement on Form N-1A, as amended from time to time (the "Registration
Statement").
(b) The Trust has furnished or will furnish GEIM with copies of the
Registration Statement, its articles of incorporation and by-laws, if any, as
currently in effect and agrees during the continuance of this agreement to
furnish GEIM with copies of any amendment or supplements thereto before or at
the time such amendments or supplements become effective. GEIM may rely on all
documents furnished to it by the Trust.
(c) Subject to the oversight and supervision of the Board, GEIM agrees to
serve as administrator to the Trust and the Fund and, in this capacity, will:
(i) insure the maintenance of the books and records of the Fund (including those
required to be maintained or preserved by Rules 31a-1 and 31a-2 under the 1940
Act); (ii) prepare reports to shareholders of the Fund, (iii) prepare and file
tax returns for the Fund, (iv) assist with the preparation and filing of reports
and the Registration Statement with the Securities and Exchange Commission (the
"Commission"), (v) provide appropriate officers for the Trust, including a
Secretary or Assistant Secretary, (vi) provide administrative support necessary
for the Board to conduct meetings, and (vii) supervise and coordinate the
activities of other service providers, including independent auditors, legal
counsel, custodians, accounting service agents, and transfer agents.
(d) GEIM will, at its own expense, maintain sufficient staff, and employ or
retain sufficient personnel and consult with any other persons that it
determines may be necessary or useful to the performance of its obligations
under this agreement.
(e) GEIM will keep the Trust informed of developments materially affecting
the Fund, and will, on its own initiative, furnish the Trust from time to time
with whatever information and reports that the Board reasonably requests as
appropriate for this purpose.
SECTION 3. SELECTION OF INVESTMENTS ON BEHALF OF THE FUND.
Unless otherwise set forth in the Registration Statement or directed by the
Trust, GEIM will, in selecting brokers or dealers to effect transactions on
behalf of the Fund select the best overall terms available. In so doing, GEIM
may consider the breadth of the market on the investment, the price of the
security, the size and difficulty of the order, the willingness of the broker
or dealer to position, the reliability, financial condition and execution and
operational capabilities of the broker or dealer, and the reasonableness of the
commission or size of the dealer's "spread", if any, for the specific
transaction and on a continuing basis. GEIM may also consider brokerage and
research services provided to the Fund and/or other accounts over which GEIM or
its affiliates exercise investment discretion. The Trust recognizes the
desirability of GEIM's having access to supplemental investment and market
research and security and
2
<PAGE>
economic analyses provided by brokers and that those brokers may execute
brokerage transactions at a higher cost to the Trust than would be the case if
the transactions were executed on the basis of the most favorable price and
efficient execution. The Trust, thus, authorizes GEIM, to the extent permitted
by applicable law and regulations, to pay higher brokerage commissions or dealer
spreads for the purchase and sale of securities for the Fund to brokers who
provide supplemental investment and market research and security and economic
analyses, subject to GEIM's determining in good faith that such commissions are
reasonable in terms either of the particular transaction or of the overall
responsibility of GEIM to the Fund and its other clients and that the total
commissions paid by the Fund will be reasonable in relation to the benefits to
the Fund over the long term. In no instance will portfolio securities be
purchased from or sold to GEIM, or any affiliated person thereof or any
investment advisory client thereof, except in accordance with the federal
securities laws and the rules and regulations thereunder.
SECTION 4. COSTS AND EXPENSES.
GEIM will bear the cost of rendering the services it is obligated to
provide under this Agreement and will provide the Trust with all executive,
administrative, clerical and other personnel necessary for the investment and
administrative operations of the Fund and will pay salaries and other
employment-related costs of employing these persons. GEIM will furnish the Trust
and the Fund with office space, facilities, and equipment and will pay the
day-to-day expenses related to the operation of such space, facilities and
equipment.
Except for those expenses assumed by the Fund as provided below, GEIM shall
bear all of the Fund's expenses, including, but not limited to: charges and
expenses of any registrar, the costs of custody, transfer agency and
recordkeeping services in connection with the Fund; registration costs of the
Fund and its shares under Federal and state securities laws; the cost and
expense of printing, including typesetting, and distributing of prospectuses
describing the Fund and supplements to those prospectuses to regulatory
authorities and the Fund's shareholders; all expenses incurred in conducting
meetings of the Fund's shareholders and meetings of the Board relating to the
Fund, excluding fees paid to members of the Board who are not affiliated with
GEIM or any of its affiliates; all expenses incurred in preparing, printing and
mailing proxy statements and reports to shareholders of the Fund; all expenses
incident to any dividend, withdrawal or redemption options provided to Fund
shareholders (except for purchase premiums and redemption fees, if any, charged
directly to shareholders); charges and expenses of any outside service used for
pricing the Fund's portfolio securities and calculating the net asset value of
the Fund's shares; fees and expenses of legal counsel, including counsel to the
members of the Board who are not interested persons of the Fund, or GEIM, and
independent auditors; membership dues of industry associations; postage;
insurance premiums on property or personnel (including officers and Trustees) of
the Trust that inure to their benefit; and all other costs of the Fund's
operations.
The Fund will bear the following expenses: advisory and administration fees
as described in Section 5 of this Agreement; shareholder servicing and
distribution fees under the
3
<PAGE>
terms of the shareholder servicing and distribution plan adopted by the Trust
with respect to the Fund pursuant to Rule 12b-1 (the "Plan") under the 1940 Act;
brokerage fees and commissions and other expenses incurred in the acquisition or
disposition of any securities or other investments; fees and travel expenses of
members of the Board or members of any advisory board or committee who are not
affiliated with GEIM, or any of its affiliates; and expenses that are not normal
operating expenses of the Fund (such as extraordinary expenses, interest and
taxes).
SECTION 5. COMPENSATION.
In consideration of services rendered and the expenses paid by GEIM
pursuant to this Agreement, the Trust will pay GEIM on the first business day of
each month a fee calculated as a percentage of the average daily net assets of
the Fund during the previous month at the following annual rates:
Average Daily Net Assets Annual Rate Percentage of Fund (%)
------------------------ ----------------------------------
All assets .15
For the purpose of determining fees payable to GEIM under this Agreement, the
value of the Fund's net assets will be computed in the manner described in the
Registration Statement.
SECTION 6. SERVICES TO OTHER COMPANIES OR ACCOUNTS.
(a) The Trust understands and acknowledges that GEIM now acts and will
continue to act as investment manager or adviser to various fiduciary or other
managed accounts ("Other Accounts") and the Trust has no objection to GEIM's so
acting, so long as that when the Fund and any Other Account served by GEIM are
prepared to invest in, or desire to dispose of the same security, available
investments or opportunities for sales will be allocated in a manner believed by
GEIM to be equitable to the Fund and the Other Account. In addition, the Trust
understands and acknowledges that GEIM may, to the extent permitted by
applicable laws and regulations, aggregate securities to be sold or purchased
for the Trust with those to be sold or purchased for Other Accounts so long as
the securities purchased or sold, as well as the expenses incurred in the
transaction, are allocated in a manner believed by GEIM to be equitable to the
Trust and the Other Accounts. The Trust recognizes that, in some cases, the
above procedures may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund.
(b) It is agreed that GEIM may use any supplemental investment research and
other services provided by brokers or dealer obtained for the benefit of the
Fund or the Trust in providing investment advice to Other Accounts.
(c) The Trust understands and acknowledges that the persons employed by
4
<PAGE>
GEIM to assist in the performance of its duties under this Agreement will not
devote their full time to that service and agrees that nothing contained in this
Agreement will be deemed to limit or restrict the right of GEIM or any affiliate
of GEIM to engage in and devote time and attention to other businesses or to
render services of whatever kind or nature.
SECTION 7. CONTINUANCE AND TERMINATION OF THE AGREEMENT.
(a) This Agreement will become effective as of the date hereof and will
continue for an initial two-year term and will continue thereafter so long as
the continuance is specifically approved at least annually (a) by the Board or
(b) by a vote of a majority of the Fund's outstanding voting securities, as
defined in the 1940 Act, provided that in either event the continuance is also
approved by a majority of the Trustees who are not parties to this Agreement or
"interested persons" (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on the approval.
(b) This Agreement is terminable without penalty, by the Trust on not more
than 60 nor less than 30 days' written notice to GEIM, by vote of holders of a
majority of the Fund's outstanding voting securities, as defined in the 1940
Act, or by GEIM on not more than 60 nor less than 30 days' notice to the Trust.
(c) This Agreement will terminate automatically in the event of its
assignment (as defined in the 1940 Act or in rules adopted under the 1940 Act).
SECTION 8. LIMITATION OF LIABILITY.
(a) GEIM will exercise its best judgment in rendering the services
described in this Agreement, except that GEIM will not be liable for any error
of judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which this Agreement relates, other than a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of GEIM in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement or to the extent specified in
Section 36(b) of the 1940 Act concerning loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services. Any
person, even though also an officer, director, employee or agent of GEIM, who
may be or become an officer, Trustee, employee or agent of the Trust, will be
deemed, when rendering services to the Trust or acting on any business of the
Trust, to be rendering services to, or acting solely for, the Trust and not as
an officer, director, employee or agent, or one under the control or direction
of, GEIM even though paid by GEIM.
(b) The Trust and GEIM agree that the obligations of the Trust under this
Agreement will not be binding upon any of the Trustees, shareholders, nominees,
officers, employees or agents, whether past, present or future, of the Trust,
individually, but are binding only upon the assets and property of the Fund, as
provided in the Declaration of Trust. The execution and delivery of this
Agreement have been authorized by the Trustees of the Trust, and
5
<PAGE>
signed by an authorized officer of the Trust, acting as such, and neither the
authorization by the Trustees nor the execution and delivery by the officer will
be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but will bind only the trust property of
the Trust as provided in the Declaration of Trust. No series of the Trust,
including the Fund, will be liable for any claims against any other series.
SECTION 9. MISCELLANEOUS.
The Trust recognizes that trustees, officers and employees of GEIM and its
affiliates may from time to time serve as trustees, trustees, officers and
employees of corporations, partnerships, group trusts and business trusts
(including other investment companies) and that such other entities may include
the initials "GE" or the words "General Electric" as part of their name, and
that GEIM or its affiliates may enter into distribution, investment advisory or
other agreements with such other corporations and trusts. If GEIM ceases to act
as the investment adviser to the Trust, the Trust agrees that, at GEIM's
request, any license granted to the Trust for the use of the initials "GE" will
terminate and that the Trust will cease and discontinue completely further use
of such initials and will take all necessary action to change the name of the
Trust and the Fund to a name not including the initials of "GE."
* * * * *
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized signatories as of the date and year first
above written.
GE INSTITUTIONAL FUNDS
By: /s/ Michael J. Cosgrove
----------------------------------------
Name: Michael J. Cosgrove
Title: Chairman of the Board and President
GE INVESTMENT MANAGEMENT INCORPORATED
By: /s/ Alan M. Lewis
----------------------------------------
Name: Alan M. Lewis
Title: Executive Vice President
6
Exhibit 99.B5(h)
INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT
GE INSTITUTIONAL FUNDS
STRATEGIC INVESTMENT FUND
GE INVESTMENT MANAGEMENT INCORPORATED
Agreement made as of October 16, 1997 between GE INVESTMENT MANAGEMENT
INCORPORATED ("GEIM") and GE INSTITUTIONAL FUNDS (the "Trust") on behalf of its
Strategic Investment Fund (the "Fund").
RECITALS
The Trust is a business trust organized under the laws of the State of
Delaware on May 23, 1997 and registered under the Investment Company Act of
1940, as amended (the "1940 Act"). The Trust is authorized to divide shares of
beneficial interests in the Trust into two or more separate series and to divide
each such series into two or more classes of Shares. The Fund is a series of the
Trust.
GEIM is a Delaware corporation registered as an investment adviser under
the Investment Advisers Act of 1940 (the "Advisers Act").
The Trust wishes to retain GEIM to serve as investment adviser and
administrator to the Fund and GEIM wishes to serve in this capacity.
SECTION 1. APPOINTMENT
The Trust hereby appoints GEIM as investment adviser and administrator with
respect to the Fund's assets for the period and on the terms set forth in this
Agreement. GEIM accepts this appointment and hereby agrees to render the
services herein set forth for the compensation herein provided.
Subject to the approval of the Board and to other applicable legal
requirements, GEIM may enter into any advisory or sub-advisory agreement or
contract with another affiliated or unaffiliated entity pursuant to which such
entity will carry out some or all of GEIM's responsibilities listed herein.
SECTION 2. SERVICES AS INVESTMENT ADVISER AND ADMINISTRATOR
(a) Subject to the oversight and supervision of the Trust's board of
trustees (the "Board"), GEIM agrees to provide a continuous investment program
for the Fund's assets, including investment research and management. GEIM will
determine from time to time what
1
<PAGE>
investments will be purchased, retained or sold by the Fund. GEIM will place
purchase and sale orders for the Fund's investments. GEIM will provide services
under this Agreement in accordance with the Fund's investment objectives,
policies and restrictions as stated in the Trust's current Registration
Statement on Form N-1A, as amended from time to time (the "Registration
Statement").
(b) The Trust has furnished or will furnish GEIM with copies of the
Registration Statement, its articles of incorporation and by-laws, if any, as
currently in effect and agrees during the continuance of this agreement to
furnish GEIM with copies of any amendment or supplements thereto before or at
the time such amendments or supplements become effective. GEIM may rely on all
documents furnished to it by the Trust.
(c) Subject to the oversight and supervision of the Board, GEIM agrees to
serve as administrator to the Trust and the Fund and, in this capacity, will:
(i) insure the maintenance of the books and records of the Fund (including those
required to be maintained or preserved by Rules 31a-1 and 31a-2 under the 1940
Act); (ii) prepare reports to shareholders of the Fund, (iii) prepare and file
tax returns for the Fund, (iv) assist with the preparation and filing of reports
and the Registration Statement with the Securities and Exchange Commission (the
"Commission"), (v) provide appropriate officers for the Trust, including a
Secretary or Assistant Secretary, (vi) provide administrative support necessary
for the Board to conduct meetings, and (vii) supervise and coordinate the
activities of other service providers, including independent auditors, legal
counsel, custodians, accounting service agents, and transfer agents.
(d) GEIM will, at its own expense, maintain sufficient staff, and employ or
retain sufficient personnel and consult with any other persons that it
determines may be necessary or useful to the performance of its obligations
under this agreement.
(e) GEIM will keep the Trust informed of developments materially affecting
the Fund, and will, on its own initiative, furnish the Trust from time to time
with whatever information and reports that the Board reasonably requests as
appropriate for this purpose.
SECTION 3. SELECTION OF INVESTMENTS ON BEHALF OF THE FUND.
Unless otherwise set forth in the Registration Statement or directed by the
Trust, GEIM will, in selecting brokers or dealers to effect transactions on
behalf of the Fund select the best overall terms available. In so doing, GEIM
may consider the breadth of the market on the investment, the price of the
security, the size and difficulty of the order, the willingness of the broker
or dealer to position, the reliability, financial condition and execution and
operational capabilities of the broker or dealer, and the reasonableness of the
commission or size of the dealer's "spread", if any, for the specific
transaction and on a continuing basis. GEIM may also consider brokerage and
research services provided to the Fund and/or other accounts over which GEIM or
its affiliates exercise investment discretion. The Trust recognizes the
desirability of GEIM's having access to supplemental investment and market
research and security and
2
<PAGE>
economic analyses provided by brokers and that those brokers may execute
brokerage transactions at a higher cost to the Trust than would be the case if
the transactions were executed on the basis of the most favorable price and
efficient execution. The Trust, thus, authorizes GEIM, to the extent permitted
by applicable law and regulations, to pay higher brokerage commissions or dealer
spreads for the purchase and sale of securities for the Fund to brokers who
provide supplemental investment and market research and security and economic
analyses, subject to GEIM's determining in good faith that such commissions are
reasonable in terms either of the particular transaction or of the overall
responsibility of GEIM to the Fund and its other clients and that the total
commissions paid by the Fund will be reasonable in relation to the benefits to
the Fund over the long term. In no instance will portfolio securities be
purchased from or sold to GEIM, or any affiliated person thereof or any
investment advisory client thereof, except in accordance with the federal
securities laws and the rules and regulations thereunder.
SECTION 4. COSTS AND EXPENSES.
GEIM will bear the cost of rendering the services it is obligated to
provide under this Agreement and will provide the Trust with all executive,
administrative, clerical and other personnel necessary for the investment and
administrative operations of the Fund and will pay salaries and other
employment-related costs of employing these persons. GEIM will furnish the Trust
and the Fund with office space, facilities, and equipment and will pay the
day-to-day expenses related to the operation of such space, facilities and
equipment.
Except for those expenses assumed by the Fund as provided below, GEIM shall
bear all of the Fund's expenses, including, but not limited to: charges and
expenses of any registrar, the costs of custody, transfer agency and
recordkeeping services in connection with the Fund; registration costs of the
Fund and its shares under Federal and state securities laws; the cost and
expense of printing, including typesetting, and distributing of prospectuses
describing the Fund and supplements to those prospectuses to regulatory
authorities and the Fund's shareholders; all expenses incurred in conducting
meetings of the Fund's shareholders and meetings of the Board relating to the
Fund, excluding fees paid to members of the Board who are not affiliated with
GEIM or any of its affiliates; all expenses incurred in preparing, printing and
mailing proxy statements and reports to shareholders of the Fund; all expenses
incident to any dividend, withdrawal or redemption options provided to Fund
shareholders (except for purchase premiums and redemption fees, if any, charged
directly to shareholders); charges and expenses of any outside service used for
pricing the Fund's portfolio securities and calculating the net asset value of
the Fund's shares; fees and expenses of legal counsel, including counsel to the
members of the Board who are not interested persons of the Fund, or GEIM, and
independent auditors; membership dues of industry associations; postage;
insurance premiums on property or personnel (including officers and Trustees) of
the Trust that inure to their benefit; and all other costs of the Fund's
operations.
The Fund will bear the following expenses: advisory and administration fees
as described in Section 5 of this Agreement; shareholder servicing and
distribution fees under the
3
<PAGE>
terms of the shareholder servicing and distribution plan adopted by the Trust
with respect to the Fund pursuant to Rule 12b-1 (the "Plan") under the 1940 Act;
brokerage fees and commissions and other expenses incurred in the acquisition or
disposition of any securities or other investments; fees and travel expenses of
members of the Board or members of any advisory board or committee who are not
affiliated with GEIM, or any of its affiliates; and expenses that are not normal
operating expenses of the Fund (such as extraordinary expenses, interest and
taxes).
SECTION 5. COMPENSATION.
In consideration of services rendered and the expenses paid by GEIM
pursuant to this Agreement, the Trust will pay GEIM on the first business day of
each month a fee calculated as a percentage of the average daily net assets of
the Fund during the previous month at the following annual rates:
Average Daily Net Assets Annual Rate Percentage of Fund (%)
------------------------ ----------------------------------
First $25 million .45
Next $25 million .40
Over $50 million .35
For the purpose of determining fees payable to GEIM under this Agreement, the
value of the Fund's net assets will be computed in the manner described in the
Registration Statement.
SECTION 6. SERVICES TO OTHER COMPANIES OR ACCOUNTS.
(a) The Trust understands and acknowledges that GEIM now acts and will
continue to act as investment manager or adviser to various fiduciary or other
managed accounts ("Other Accounts") and the Trust has no objection to GEIM's so
acting, so long as that when the Fund and any Other Account served by GEIM are
prepared to invest in, or desire to dispose of the same security, available
investments or opportunities for sales will be allocated in a manner believed by
GEIM to be equitable to the Fund and the Other Account. In addition, the Trust
understands and acknowledges that GEIM may, to the extent permitted by
applicable laws and regulations, aggregate securities to be sold or purchased
for the Trust with those to be sold or purchased for Other Accounts so long as
the securities purchased or sold, as well as the expenses incurred in the
transaction, are allocated in a manner believed by GEIM to be equitable to the
Trust and the Other Accounts. The Trust recognizes that, in some cases, the
above procedures may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund.
(b) It is agreed that GEIM may use any supplemental investment research and
other services provided by brokers or dealer obtained for the benefit of the
Fund or the Trust in providing investment advice to Other Accounts.
4
<PAGE>
(c) The Trust understands and acknowledges that the persons employed by
GEIM to assist in the performance of its duties under this Agreement will not
devote their full time to that service and agrees that nothing contained in this
Agreement will be deemed to limit or restrict the right of GEIM or any affiliate
of GEIM to engage in and devote time and attention to other businesses or to
render services of whatever kind or nature.
SECTION 7. CONTINUANCE AND TERMINATION OF THE AGREEMENT.
(a) This Agreement will become effective as of the date hereof and will
continue for an initial two-year term and will continue thereafter so long as
the continuance is specifically approved at least annually (a) by the Board or
(b) by a vote of a majority of the Fund's outstanding voting securities, as
defined in the 1940 Act, provided that in either event the continuance is also
approved by a majority of the Trustees who are not parties to this Agreement or
"interested persons" (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on the approval.
(b) This Agreement is terminable without penalty, by the Trust on not more
than 60 nor less than 30 days' written notice to GEIM, by vote of holders of a
majority of the Fund's outstanding voting securities, as defined in the 1940
Act, or by GEIM on not more than 60 nor less than 30 days' notice to the Trust.
(c) This Agreement will terminate automatically in the event of its
assignment (as defined in the 1940 Act or in rules adopted under the 1940 Act).
SECTION 8. LIMITATION OF LIABILITY.
(a) GEIM will exercise its best judgment in rendering the services
described in this Agreement, except that GEIM will not be liable for any error
of judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which this Agreement relates, other than a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of GEIM in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement or to the extent specified in
Section 36(b) of the 1940 Act concerning loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services. Any
person, even though also an officer, director, employee or agent of GEIM, who
may be or become an officer, Trustee, employee or agent of the Trust, will be
deemed, when rendering services to the Trust or acting on any business of the
Trust, to be rendering services to, or acting solely for, the Trust and not as
an officer, director, employee or agent, or one under the control or direction
of, GEIM even though paid by GEIM.
(b) The Trust and GEIM agree that the obligations of the Trust under this
Agreement will not be binding upon any of the Trustees, shareholders, nominees,
officers, employees or agents, whether past, present or future, of the Trust,
individually, but are binding
5
<PAGE>
only upon the assets and property of the Fund, as provided in the Declaration of
Trust. The execution and delivery of this Agreement have been authorized by the
Trustees of the Trust, and signed by an authorized officer of the Trust, acting
as such, and neither the authorization by the Trustees nor the execution and
delivery by the officer will be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but will bind
only the trust property of the Trust as provided in the Declaration of Trust. No
series of the Trust, including the Fund, will be liable for any claims against
any other series.
SECTION 9. MISCELLANEOUS.
The Trust recognizes that trustees, officers and employees of GEIM and its
affiliates may from time to time serve as trustees, trustees, officers and
employees of corporations, partnerships, group trusts and business trusts
(including other investment companies) and that such other entities may include
the initials "GE" or the words "General Electric" as part of their name, and
that GEIM or its affiliates may enter into distribution, investment advisory or
other agreements with such other corporations and trusts. If GEIM ceases to act
as the investment adviser to the Trust, the Trust agrees that, at GEIM's
request, any license granted to the Trust for the use of the initials "GE" will
terminate and that the Trust will cease and discontinue completely further use
of such initials and will take all necessary action to change the name of the
Trust and the Fund to a name not including the initials of "GE."
* * * * *
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized signatories as of the date and year first
above written.
GE INSTITUTIONAL FUNDS
By: /s/ Michael J. Cosgrove
---------------------------------------
Name: Michael J. Cosgrove
Title: Chairman of the Board and President
GE INVESTMENT MANAGEMENT INCORPORATED
By: /s/ Alan M. Lewis
---------------------------------------
Name: Alan M. Lewis
Title: Executive Vice President
6
Exhibit 99.B5(i)
INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT
GE INSTITUTIONAL FUNDS
INCOME FUND
GE INVESTMENT MANAGEMENT INCORPORATED
Agreement made as of October 16, 1997 between GE INVESTMENT MANAGEMENT
INCORPORATED ("GEIM") and GE INSTITUTIONAL FUNDS (the "Trust") on behalf of its
Income Fund (the "Fund").
RECITALS
The Trust is a business trust organized under the laws of the State of
Delaware on May 23, 1997 and registered under the Investment Company Act of
1940, as amended (the "1940 Act"). The Trust is authorized to divide shares of
beneficial interests in the Trust into two or more separate series and to divide
each such series into two or more classes of Shares. The Fund is a series of the
Trust.
GEIM is a Delaware corporation registered as an investment adviser under
the Investment Advisers Act of 1940 (the "Advisers Act").
The Trust wishes to retain GEIM to serve as investment adviser and
administrator to the Fund and GEIM wishes to serve in this capacity.
SECTION 1. APPOINTMENT
The Trust hereby appoints GEIM as investment adviser and administrator with
respect to the Fund's assets for the period and on the terms set forth in this
Agreement. GEIM accepts this appointment and hereby agrees to render the
services herein set forth for the compensation herein provided.
Subject to the approval of the Board and to other applicable legal
requirements, GEIM may enter into any advisory or sub-advisory agreement or
contract with another affiliated or unaffiliated entity pursuant to which such
entity will carry out some or all of GEIM's responsibilities listed herein.
SECTION 2. SERVICES AS INVESTMENT ADVISER AND ADMINISTRATOR
(a) Subject to the oversight and supervision of the Trust's board of
trustees (the "Board"), GEIM agrees to provide a continuous investment program
for the Fund's assets, including investment research and management. GEIM will
determine from time to time what
1
<PAGE>
investments will be purchased, retained or sold by the Fund. GEIM will place
purchase and sale orders for the Fund's investments. GEIM will provide services
under this Agreement in accordance with the Fund's investment objectives,
policies and restrictions as stated in the Trust's current Registration
Statement on Form N-1A, as amended from time to time (the "Registration
Statement").
(b) The Trust has furnished or will furnish GEIM with copies of the
Registration Statement, its articles of incorporation and by-laws, if any, as
currently in effect and agrees during the continuance of this agreement to
furnish GEIM with copies of any amendment or supplements thereto before or at
the time such amendments or supplements become effective. GEIM may rely on all
documents furnished to it by the Trust.
(c) Subject to the oversight and supervision of the Board, GEIM agrees to
serve as administrator to the Trust and the Fund and, in this capacity, will:
(i) insure the maintenance of the books and records of the Fund (including those
required to be maintained or preserved by Rules 31a-1 and 31a-2 under the 1940
Act); (ii) prepare reports to shareholders of the Fund, (iii) prepare and file
tax returns for the Fund, (iv) assist with the preparation and filing of reports
and the Registration Statement with the Securities and Exchange Commission (the
"Commission"), (v) provide appropriate officers for the Trust, including a
Secretary or Assistant Secretary, (vi) provide administrative support necessary
for the Board to conduct meetings, and (vii) supervise and coordinate the
activities of other service providers, including independent auditors, legal
counsel, custodians, accounting service agents, and transfer agents.
(d) GEIM will, at its own expense, maintain sufficient staff, and employ or
retain sufficient personnel and consult with any other persons that it
determines may be necessary or useful to the performance of its obligations
under this agreement.
(e) GEIM will keep the Trust informed of developments materially affecting
the Fund, and will, on its own initiative, furnish the Trust from time to time
with whatever information and reports that the Board reasonably requests as
appropriate for this purpose.
SECTION 3. SELECTION OF INVESTMENTS ON BEHALF OF THE FUND.
Unless otherwise set forth in the Registration Statement or directed by the
Trust, GEIM will, in selecting brokers or dealers to effect transactions on
behalf of the Fund select the best overall terms available. In so doing, GEIM
may consider the breadth of the market on the investment, the price of the
security, the size and difficulty of the order, the willingness of the broker
or dealer to position, the reliability, financial condition and execution and
operational capabilities of the broker or dealer, and the reasonableness of the
commission or size of the dealer's "spread", if any, for the specific
transaction and on a continuing basis. GEIM may also consider brokerage and
research services provided to the Fund and/or other accounts over which GEIM or
its affiliates exercise investment discretion. The Trust recognizes the
desirability of GEIM's having access to supplemental investment and market
research and security and
2
<PAGE>
economic analyses provided by brokers and that those brokers may execute
brokerage transactions at a higher cost to the Trust than would be the case if
the transactions were executed on the basis of the most favorable price and
efficient execution. The Trust, thus, authorizes GEIM, to the extent permitted
by applicable law and regulations, to pay higher brokerage commissions or dealer
spreads for the purchase and sale of securities for the Fund to brokers who
provide supplemental investment and market research and security and economic
analyses, subject to GEIM's determining in good faith that such commissions are
reasonable in terms either of the particular transaction or of the overall
responsibility of GEIM to the Fund and its other clients and that the total
commissions paid by the Fund will be reasonable in relation to the benefits to
the Fund over the long term. In no instance will portfolio securities be
purchased from or sold to GEIM, or any affiliated person thereof or any
investment advisory client thereof, except in accordance with the federal
securities laws and the rules and regulations thereunder.
SECTION 4. COSTS AND EXPENSES.
GEIM will bear the cost of rendering the services it is obligated to
provide under this Agreement and will provide the Trust with all executive,
administrative, clerical and other personnel necessary for the investment and
administrative operations of the Fund and will pay salaries and other
employment-related costs of employing these persons. GEIM will furnish the Trust
and the Fund with office space, facilities, and equipment and will pay the
day-to-day expenses related to the operation of such space, facilities and
equipment.
Except for those expenses assumed by the Fund as provided below, GEIM shall
bear all of the Fund's expenses, including, but not limited to: charges and
expenses of any registrar, the costs of custody, transfer agency and
recordkeeping services in connection with the Fund; registration costs of the
Fund and its shares under Federal and state securities laws; the cost and
expense of printing, including typesetting, and distributing of prospectuses
describing the Fund and supplements to those prospectuses to regulatory
authorities and the Fund's shareholders; all expenses incurred in conducting
meetings of the Fund's shareholders and meetings of the Board relating to the
Fund, excluding fees paid to members of the Board who are not affiliated with
GEIM or any of its affiliates; all expenses incurred in preparing, printing and
mailing proxy statements and reports to shareholders of the Fund; all expenses
incident to any dividend, withdrawal or redemption options provided to Fund
shareholders (except for purchase premiums and redemption fees, if any, charged
directly to shareholders); charges and expenses of any outside service used for
pricing the Fund's portfolio securities and calculating the net asset value of
the Fund's shares; fees and expenses of legal counsel, including counsel to the
members of the Board who are not interested persons of the Fund, or GEIM, and
independent auditors; membership dues of industry associations; postage;
insurance premiums on property or personnel (including officers and Trustees) of
the Trust that inure to their benefit; and all other costs of the Fund's
operations.
The Fund will bear the following expenses: advisory and administration fees
as described in Section 5 of this Agreement; shareholder servicing and
distribution fees under the
3
<PAGE>
terms of the shareholder servicing and distribution plan adopted by the Trust
with respect to the Fund pursuant to Rule 12b-1 (the "Plan") under the 1940 Act;
brokerage fees and commissions and other expenses incurred in the acquisition or
disposition of any securities or other investments; fees and travel expenses of
members of the Board or members of any advisory board or committee who are not
affiliated with GEIM, or any of its affiliates; and expenses that are not normal
operating expenses of the Fund (such as extraordinary expenses, interest and
taxes).
SECTION 5. COMPENSATION.
In consideration of services rendered and the expenses paid by GEIM
pursuant to this Agreement, the Trust will pay GEIM on the first business day of
each month a fee calculated as a percentage of the average daily net assets of
the Fund during the previous month at the following annual rates:
Average Daily Net Assets Annual Rate Percentage of Fund (%)
------------------------ ----------------------------------
First $25 million .35
Next $25 million .30
Next $50 million .25
Over $100 million .20
For the purpose of determining fees payable to GEIM under this Agreement, the
value of the Fund's net assets will be computed in the manner described in the
Registration Statement.
SECTION 6. SERVICES TO OTHER COMPANIES OR ACCOUNTS.
(a) The Trust understands and acknowledges that GEIM now acts and will
continue to act as investment manager or adviser to various fiduciary or other
managed accounts ("Other Accounts") and the Trust has no objection to GEIM's so
acting, so long as that when the Fund and any Other Account served by GEIM are
prepared to invest in, or desire to dispose of the same security, available
investments or opportunities for sales will be allocated in a manner believed by
GEIM to be equitable to the Fund and the Other Account. In addition, the Trust
understands and acknowledges that GEIM may, to the extent permitted by
applicable laws and regulations, aggregate securities to be sold or purchased
for the Trust with those to be sold or purchased for Other Accounts so long as
the securities purchased or sold, as well as the expenses incurred in the
transaction, are allocated in a manner believed by GEIM to be equitable to the
Trust and the Other Accounts. The Trust recognizes that, in some cases, the
above procedures may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund.
(b) It is agreed that GEIM may use any supplemental investment research and
other services provided by brokers or dealer obtained for the benefit of the
Fund or the Trust in
4
<PAGE>
providing investment advice to Other Accounts.
(c) The Trust understands and acknowledges that the persons employed by
GEIM to assist in the performance of its duties under this Agreement will not
devote their full time to that service and agrees that nothing contained in this
Agreement will be deemed to limit or restrict the right of GEIM or any affiliate
of GEIM to engage in and devote time and attention to other businesses or to
render services of whatever kind or nature.
SECTION 7. CONTINUANCE AND TERMINATION OF THE AGREEMENT.
(a) This Agreement will become effective as of the date hereof and will
continue for an initial two-year term and will continue thereafter so long as
the continuance is specifically approved at least annually (a) by the Board or
(b) by a vote of a majority of the Fund's outstanding voting securities, as
defined in the 1940 Act, provided that in either event the continuance is also
approved by a majority of the Trustees who are not parties to this Agreement or
"interested persons" (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on the approval.
(b) This Agreement is terminable without penalty, by the Trust on not more
than 60 nor less than 30 days' written notice to GEIM, by vote of holders of a
majority of the Fund's outstanding voting securities, as defined in the 1940
Act, or by GEIM on not more than 60 nor less than 30 days' notice to the Trust.
(c) This Agreement will terminate automatically in the event of its
assignment (as defined in the 1940 Act or in rules adopted under the 1940 Act).
SECTION 8. LIMITATION OF LIABILITY.
(a) GEIM will exercise its best judgment in rendering the services
described in this Agreement, except that GEIM will not be liable for any error
of judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which this Agreement relates, other than a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of GEIM in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement or to the extent specified in
Section 36(b) of the 1940 Act concerning loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services. Any
person, even though also an officer, director, employee or agent of GEIM, who
may be or become an officer, Trustee, employee or agent of the Trust, will be
deemed, when rendering services to the Trust or acting on any business of the
Trust, to be rendering services to, or acting solely for, the Trust and not as
an officer, director, employee or agent, or one under the control or direction
of, GEIM even though paid by GEIM.
(b) The Trust and GEIM agree that the obligations of the Trust under this
Agreement will not be binding upon any of the Trustees, shareholders, nominees,
officers,
5
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employees or agents, whether past, present or future, of the Trust,
individually, but are binding only upon the assets and property of the Fund, as
provided in the Declaration of Trust. The execution and delivery of this
Agreement have been authorized by the Trustees of the Trust, and signed by an
authorized officer of the Trust, acting as such, and neither the authorization
by the Trustees nor the execution and delivery by the officer will be deemed to
have been made by any of them individually or to impose any liability on any of
them personally, but will bind only the trust property of the Trust as provided
in the Declaration of Trust. No series of the Trust, including the Fund, will be
liable for any claims against any other series.
SECTION 9. MISCELLANEOUS.
The Trust recognizes that trustees, officers and employees of GEIM and its
affiliates may from time to time serve as trustees, trustees, officers and
employees of corporations, partnerships, group trusts and business trusts
(including other investment companies) and that such other entities may include
the initials "GE" or the words "General Electric" as part of their name, and
that GEIM or its affiliates may enter into distribution, investment advisory or
other agreements with such other corporations and trusts. If GEIM ceases to act
as the investment adviser to the Trust, the Trust agrees that, at GEIM's
request, any license granted to the Trust for the use of the initials "GE" will
terminate and that the Trust will cease and discontinue completely further use
of such initials and will take all necessary action to change the name of the
Trust and the Fund to a name not including the initials of "GE."
* * * * *
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized signatories as of the date and year first
above written.
GE INSTITUTIONAL FUNDS
By: /s/ Michael J. Cosgrove
----------------------------------------
Name: Michael J. Cosgrove
Title: Chairman of the Board and President
GE INVESTMENT MANAGEMENT INCORPORATED
By: /s/ Alan M. Lewis
----------------------------------------
Name: Alan M. Lewis
Title: Executive Vice President
6
Exhibit 99.B5(j)
INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT
GE INSTITUTIONAL FUNDS
MONEY MARKET FUND
GE INVESTMENT MANAGEMENT INCORPORATED
Agreement made as of October 16, 1997 between GE INVESTMENT MANAGEMENT
INCORPORATED ("GEIM") and GE INSTITUTIONAL FUNDS (the "Trust") on behalf of its
Money Market Fund (the "Fund").
RECITALS
The Trust is a business trust organized under the laws of the State of
Delaware on May 23, 1997 and registered under the Investment Company Act of
1940, as amended (the "1940 Act"). The Trust is authorized to divide shares of
beneficial interests in the Trust into two or more separate series and to divide
each such series into two or more classes of Shares. The Fund is a series of the
Trust.
GEIM is a Delaware corporation registered as an investment adviser under
the Investment Advisers Act of 1940 (the "Advisers Act").
The Trust wishes to retain GEIM to serve as investment adviser and
administrator to the Fund and GEIM wishes to serve in this capacity.
SECTION 1. APPOINTMENT
The Trust hereby appoints GEIM as investment adviser and administrator with
respect to the Fund's assets for the period and on the terms set forth in this
Agreement. GEIM accepts this appointment and hereby agrees to render the
services herein set forth for the compensation herein provided.
Subject to the approval of the Board and to other applicable legal
requirements, GEIM may enter into any advisory or sub-advisory agreement or
contract with another affiliated or unaffiliated entity pursuant to which such
entity will carry out some or all of GEIM's responsibilities listed herein.
SECTION 2. SERVICES AS INVESTMENT ADVISER AND ADMINISTRATOR
(a) Subject to the oversight and supervision of the Trust's board of
trustees (the "Board"), GEIM agrees to provide a continuous investment program
for the Fund's assets, including investment research and management. GEIM will
determine from time to time what
1
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investments will be purchased, retained or sold by the Fund. GEIM will place
purchase and sale orders for the Fund's investments. GEIM will provide services
under this Agreement in accordance with the Fund's investment objectives,
policies and restrictions as stated in the Trust's current Registration
Statement on Form N-1A, as amended from time to time (the "Registration
Statement").
(b) The Trust has furnished or will furnish GEIM with copies of the
Registration Statement, its articles of incorporation and by-laws, if any, as
currently in effect and agrees during the continuance of this agreement to
furnish GEIM with copies of any amendment or supplements thereto before or at
the time such amendments or supplements become effective. GEIM may rely on all
documents furnished to it by the Trust.
(c) Subject to the oversight and supervision of the Board, GEIM agrees to
serve as administrator to the Trust and the Fund and, in this capacity, will:
(i) insure the maintenance of the books and records of the Fund (including those
required to be maintained or preserved by Rules 31a-1 and 31a-2 under the 1940
Act); (ii) prepare reports to shareholders of the Fund, (iii) prepare and file
tax returns for the Fund, (iv) assist with the preparation and filing of reports
and the Registration Statement with the Securities and Exchange Commission (the
"Commission"), (v) provide appropriate officers for the Trust, including a
Secretary or Assistant Secretary, (vi) provide administrative support necessary
for the Board to conduct meetings, and (vii) supervise and coordinate the
activities of other service providers, including independent auditors, legal
counsel, custodians, accounting service agents, and transfer agents.
(d) GEIM will, at its own expense, maintain sufficient staff, and employ or
retain sufficient personnel and consult with any other persons that it
determines may be necessary or useful to the performance of its obligations
under this agreement.
(e) GEIM will keep the Trust informed of developments materially affecting
the Fund, and will, on its own initiative, furnish the Trust from time to time
with whatever information and reports that the Board reasonably requests as
appropriate for this purpose.
SECTION 3. SELECTION OF INVESTMENTS ON BEHALF OF THE FUND.
Unless otherwise set forth in the Registration Statement or directed by the
Trust, GEIM will, in selecting brokers or dealers to effect transactions on
behalf of the Fund select the best overall terms available. In so doing, GEIM
may consider the breadth of the market on the investment, the price of the
security, the size and difficulty of the order, the willingness of the broker
or dealer to position, the reliability, financial condition and execution and
operational capabilities of the broker or dealer, and the reasonableness of the
commission or size of the dealer's "spread", if any, for the specific
transaction and on a continuing basis. GEIM may also consider brokerage and
research services provided to the Fund and/or other accounts over which GEIM or
its affiliates exercise investment discretion. The Trust recognizes the
desirability of GEIM's having access to supplemental investment and market
research and security and
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economic analyses provided by brokers and that those brokers may execute
brokerage transactions at a higher cost to the Trust than would be the case if
the transactions were executed on the basis of the most favorable price and
efficient execution. The Trust, thus, authorizes GEIM, to the extent permitted
by applicable law and regulations, to pay higher brokerage commissions or dealer
spreads for the purchase and sale of securities for the Fund to brokers who
provide supplemental investment and market research and security and economic
analyses, subject to GEIM's determining in good faith that such commissions are
reasonable in terms either of the particular transaction or of the overall
responsibility of GEIM to the Fund and its other clients and that the total
commissions paid by the Fund will be reasonable in relation to the benefits to
the Fund over the long term. In no instance will portfolio securities be
purchased from or sold to GEIM, or any affiliated person thereof or any
investment advisory client thereof, except in accordance with the federal
securities laws and the rules and regulations thereunder.
SECTION 4. COSTS AND EXPENSES.
GEIM will bear the cost of rendering the services it is obligated to
provide under this Agreement and will provide the Trust with all executive,
administrative, clerical and other personnel necessary for the investment and
administrative operations of the Fund and will pay salaries and other
employment-related costs of employing these persons. GEIM will furnish the Trust
and the Fund with office space, facilities, and equipment and will pay the
day-to-day expenses related to the operation of such space, facilities and
equipment.
Except for those expenses assumed by the Fund as provided below, GEIM shall
bear all of the Fund's expenses, including, but not limited to: charges and
expenses of any registrar, the costs of custody, transfer agency and
recordkeeping services in connection with the Fund; registration costs of the
Fund and its shares under Federal and state securities laws; the cost and
expense of printing, including typesetting, and distributing of prospectuses
describing the Fund and supplements to those prospectuses to regulatory
authorities and the Fund's shareholders; all expenses incurred in conducting
meetings of the Fund's shareholders and meetings of the Board relating to the
Fund, excluding fees paid to members of the Board who are not affiliated with
GEIM or any of its affiliates; all expenses incurred in preparing, printing and
mailing proxy statements and reports to shareholders of the Fund; all expenses
incident to any dividend, withdrawal or redemption options provided to Fund
shareholders (except for purchase premiums and redemption fees, if any, charged
directly to shareholders); charges and expenses of any outside service used for
pricing the Fund's portfolio securities and calculating the net asset value of
the Fund's shares; fees and expenses of legal counsel, including counsel to the
members of the Board who are not interested persons of the Fund, or GEIM, and
independent auditors; membership dues of industry associations; postage;
insurance premiums on property or personnel (including officers and Trustees) of
the Trust that inure to their benefit; and all other costs of the Fund's
operations.
The Fund will bear the following expenses: advisory and administration fees
as described in Section 5 of this Agreement; shareholder servicing and
distribution fees under the
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terms of the shareholder servicing and distribution plan adopted by the Trust
with respect to the Fund pursuant to Rule 12b-1 (the "Plan") under the 1940 Act;
brokerage fees and commissions and other expenses incurred in the acquisition or
disposition of any securities or other investments; fees and travel expenses of
members of the Board or members of any advisory board or committee who are not
affiliated with GEIM, or any of its affiliates; and expenses that are not normal
operating expenses of the Fund (such as extraordinary expenses, interest and
taxes).
SECTION 5. COMPENSATION.
In consideration of services rendered and the expenses paid by GEIM
pursuant to this Agreement, the Trust will pay GEIM on the first business day of
each month a fee calculated as a percentage of the average daily net assets of
the Fund during the previous month at the following annual rates:
Average Daily Net Assets Annual Rate Percentage of Fund (%)
------------------------ ----------------------------------
First $25 million .25
Next $25 million .20
Next $50 million .15
Over $100 million .10
For the purpose of determining fees payable to GEIM under this Agreement, the
value of the Fund's net assets will be computed in the manner described in the
Registration Statement.
SECTION 6. SERVICES TO OTHER COMPANIES OR ACCOUNTS.
(a) The Trust understands and acknowledges that GEIM now acts and will
continue to act as investment manager or adviser to various fiduciary or other
managed accounts ("Other Accounts") and the Trust has no objection to GEIM's so
acting, so long as that when the Fund and any Other Account served by GEIM are
prepared to invest in, or desire to dispose of the same security, available
investments or opportunities for sales will be allocated in a manner believed by
GEIM to be equitable to the Fund and the Other Account. In addition, the Trust
understands and acknowledges that GEIM may, to the extent permitted by
applicable laws and regulations, aggregate securities to be sold or purchased
for the Trust with those to be sold or purchased for Other Accounts so long as
the securities purchased or sold, as well as the expenses incurred in the
transaction, are allocated in a manner believed by GEIM to be equitable to the
Trust and the Other Accounts. The Trust recognizes that, in some cases, the
above procedures may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund.
(b) It is agreed that GEIM may use any supplemental investment research and
other services provided by brokers or dealer obtained for the benefit of the
Fund or the Trust in
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<PAGE>
providing investment advice to Other Accounts.
(c) The Trust understands and acknowledges that the persons employed by
GEIM to assist in the performance of its duties under this Agreement will not
devote their full time to that service and agrees that nothing contained in this
Agreement will be deemed to limit or restrict the right of GEIM or any affiliate
of GEIM to engage in and devote time and attention to other businesses or to
render services of whatever kind or nature.
SECTION 7. CONTINUANCE AND TERMINATION OF THE AGREEMENT.
(a) This Agreement will become effective as of the date hereof and will
continue for an initial two-year term and will continue thereafter so long as
the continuance is specifically approved at least annually (a) by the Board or
(b) by a vote of a majority of the Fund's outstanding voting securities, as
defined in the 1940 Act, provided that in either event the continuance is also
approved by a majority of the Trustees who are not parties to this Agreement or
"interested persons" (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on the approval.
(b) This Agreement is terminable without penalty, by the Trust on not more
than 60 nor less than 30 days' written notice to GEIM, by vote of holders of a
majority of the Fund's outstanding voting securities, as defined in the 1940
Act, or by GEIM on not more than 60 nor less than 30 days' notice to the Trust.
(c) This Agreement will terminate automatically in the event of its
assignment (as defined in the 1940 Act or in rules adopted under the 1940 Act).
SECTION 8. LIMITATION OF LIABILITY.
(a) GEIM will exercise its best judgment in rendering the services
described in this Agreement, except that GEIM will not be liable for any error
of judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which this Agreement relates, other than a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of GEIM in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement or to the extent specified in
Section 36(b) of the 1940 Act concerning loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services. Any
person, even though also an officer, director, employee or agent of GEIM, who
may be or become an officer, Trustee, employee or agent of the Trust, will be
deemed, when rendering services to the Trust or acting on any business of the
Trust, to be rendering services to, or acting solely for, the Trust and not as
an officer, director, employee or agent, or one under the control or direction
of, GEIM even though paid by GEIM.
(b) The Trust and GEIM agree that the obligations of the Trust under this
Agreement will not be binding upon any of the Trustees, shareholders, nominees,
officers,
5
<PAGE>
employees or agents, whether past, present or future, of the Trust,
individually, but are binding only upon the assets and property of the Fund, as
provided in the Declaration of Trust. The execution and delivery of this
Agreement have been authorized by the Trustees of the Trust, and signed by an
authorized officer of the Trust, acting as such, and neither the authorization
by the Trustees nor the execution and delivery by the officer will be deemed to
have been made by any of them individually or to impose any liability on any of
them personally, but will bind only the trust property of the Trust as provided
in the Declaration of Trust. No series of the Trust, including the Fund, will be
liable for any claims against any other series.
SECTION 9. MISCELLANEOUS.
The Trust recognizes that trustees, officers and employees of GEIM and its
affiliates may from time to time serve as trustees, trustees, officers and
employees of corporations, partnerships, group trusts and business trusts
(including other investment companies) and that such other entities may include
the initials "GE" or the words "General Electric" as part of their name, and
that GEIM or its affiliates may enter into distribution, investment advisory or
other agreements with such other corporations and trusts. If GEIM ceases to act
as the investment adviser to the Trust, the Trust agrees that, at GEIM's
request, any license granted to the Trust for the use of the initials "GE" will
terminate and that the Trust will cease and discontinue completely further use
of such initials and will take all necessary action to change the name of the
Trust and the Fund to a name not including the initials of "GE."
* * * * *
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized signatories as of the date and year first
above written.
GE INSTITUTIONAL FUNDS
By: /s/ Michael J. Cosgrove
---------------------------------------
Name: Michael J. Cosgrove
Title: Chairman of the Board and President
GE INVESTMENT MANAGEMENT INCORPORATED
By: /s/ Alan M. Lewis
---------------------------------------
Name: Alan M. Lewis
Title: Executive Vice President
6
Exhibit 99.B5(k)
GE INSTITUTIONAL FUNDS
S&P 500 INDEX FUND
SUB-ADVISORY AGREEMENT
Agreement made as of October 16, 1997, between GE INVESTMENT MANAGEMENT
INCORPORATED ("GEIM"), a Delaware corporation, and STATE STREET BANK AND TRUST
COMPANY, a Massachusetts bank and trust company, through its division STATE
STREET GLOBAL ADVISORS (the "Sub-Adviser") (the "Agreement").
RECITALS
GEIM has entered into an Investment Advisory and Administration Agreement
dated October 16, 1997 ("Advisory Agreement") with GE Institutional Funds.
("Company"), an open-end management investment company registered under the
Investment Company Act of 1940, as amended ("1940 Act"), with respect to the S&P
500 Index Fund ("Fund"), a series of the Company;
Pursuant to Section 1 of the Advisory Agreement, GEIM is authorized to
delegate its investment advisory responsibilities to other investment advisers,
subject to the requirements of the 1940 Act;
GEIM wishes to retain the Sub-Adviser to furnish certain investment
advisory services to GEIM and the Fund, and the Sub-Adviser is willing to
furnish those services; and
GEIM intends that this Agreement will become effective when approved in
accordance with Section 15 of the 1940 Act and shareholder(s) for approval
hereafter;
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, the parties agree as follows:
1. APPOINTMENT. GEIM hereby appoints the Sub-Adviser as an investment
sub-adviser with respect to the Fund's assets for the period and on the terms
set forth in this Agreement. The Sub-Adviser accepts that appointment and agrees
to render the services herein set forth, for the compensation herein provided.
2. DUTIES AS SUB-ADVISER.
(a) Subject to the oversight and supervision of GEIM and the Board of the
Company (the "Board"), the Sub-Adviser will provide a continuous investment
program for the Fund's assets, including investment research and management. The
Sub-Adviser will determine from time to time what investments will be purchased,
retained or sold by the Fund. The Sub-Adviser will be responsible for placing
purchase and sell orders for Fund investments. The Sub-Adviser will consult with
GEIM from time to time regarding matters pertaining to the Fund, including
market strategy and portfolio characteristics. The Sub-Adviser will provide
services
<PAGE>
under this Agreement in accordance with the Fund's investment objective,
policies and restrictions as stated in the Company's current Registration
Statement on Form N-1A and any amendments or supplements thereto (the
"Registration Statement") and the Company's Declaration of Trust and By-Laws, if
any, ("Constituent Documents"). In this connection and in connection with the
further duties set forth in paragraphs 2(b) - (g) below, the Sub-Adviser shall
provide GEIM and the Board with such periodic reports and documentation as GEIM
or the Board shall request regarding the Sub-Adviser's management of the Fund's
assets and compliance with the Registration Statement and all requirements
hereunder.
(b) The Sub-Adviser shall carry out its responsibilities under this
Agreement in compliance with: (1) the Fund's investment objective, policies and
restrictions as set forth in the Registration Statement, (2) the Constituent
Documents, (3) such policies, procedures or directives as the Board may from
time to time establish or issue, (4) the License Agreement by and between
Standard & Poor's and GEIM dated April 30, 1997 (the "License Agreement"), and
(5) applicable law and related regulations. In particular, in carrying out its
duties as Sub-Adviser, Sub-Adviser shall make every effort to ensure that the
Fund continuously qualifies as a regulated investment company under sub-chapter
M of the Internal Revenue Code of 1986, as amended (the "Code"). GEIM shall
promptly notify the Sub-Adviser of changes to (1), (2), (3) or (4) above and
shall notify the Sub-Adviser of changes to (5) above promptly after it becomes
aware of such changes.
(c) The Sub-Adviser shall take all actions which it considers necessary to
implement the investment objectives and policies of the Fund, and in particular,
to place all orders for the purchase or sale of securities or other investments
for the Fund with brokers or dealers selected by it, and to that end, the
Sub-Adviser is authorized as the agent of the Company to give instructions to
the Company's custodian as to deliveries of securities or other investments and
payments of cash for the account of the Fund. In connection with the selection
of brokers or dealers and the placing of purchase and sale orders with respect
to investments of the Fund, the Sub-Adviser is directed at all times to seek to
obtain best execution and price within the policy guidelines determined by the
Board and set forth in the Registration Statement.
In addition to seeking the best price and execution, to the extent covered
by Section 28(e) of the Securities Exchange Act of 1934, as amended (the "1934
Act"), the Sub-Adviser is also authorized to take into consideration research
and statistical information and wire and other quotation services provided by
brokers and dealers to the Sub-Adviser. The Sub-Adviser is also authorized to
effect individual securities transactions at commission rates in excess of the
minimum commission rates available, if it determines in good faith that such
amount of commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in terms of either
that particular transaction or the Sub-Adviser's overall responsibilities with
respect to the Fund. The policies with respect to brokerage allocation,
determined from time to time by the Board are those disclosed in the
Registration Statement. The Sub-Adviser will periodically evaluate the
statistical data, research and other investment services provided to it by
brokers and dealers. Such services may be used by the Sub-Adviser in connection
with the performance of its obligations under this Agreement or in connection
with other advisory or investment operations including using such information
2
<PAGE>
in managing its own accounts. The Sub-Adviser is also authorized to use
soft-dollar services as requested by the Board from time to time. Whenever the
Sub-Adviser simultaneously places orders to purchase or sell the same security
on behalf of the Fund and one or more other accounts advised by the Sub-Adviser,
the orders will be allocated as to price and amount among all such accounts in a
manner believed to be equitable by the Sub-Adviser to each account.
(d) Subject to: (1) the requirement that the Sub-Adviser seek to obtain
best execution and price within the policy guidelines determined by the Board
and set forth in the Registration Statement, (2) the provisions of the 1940 Act
and the Investment Advisers Act of 1940, as amended (the "Advisers Act"), (3)
the provisions of the 1934 Act, and (4) other applicable provisions of law, the
Sub-Adviser or an affiliated person of the Sub-Adviser or of GEIM may act as
broker for the Fund in connection with the purchase or sale of securities or
other investments for the Fund. Such brokerage services are not within the scope
of the duties of the Sub-Adviser under this Agreement. Subject to the
requirements of applicable law and any procedures adopted by the Board, the
Sub-Adviser or its affiliated persons may receive brokerage commissions, fees or
other remuneration from the Fund or the Company for such services in addition to
the Sub-Adviser's fees for services under this Agreement.
(e) The Sub-Adviser will maintain all books and records required to be
maintained by the Company pursuant to the 1940 Act and the rules and regulations
promulgated thereunder with respect to transactions on behalf of the Fund, and
will furnish the Board and GEIM with such periodic and special reports as the
Board or GEIM reasonably may request. In compliance with the requirements of
Rule 3la-3 under the 1940 Act, the Sub-Adviser hereby agrees that all records
which it maintains for the Fund are the property of the Company, agrees to
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act any records
which it maintains for the Company and which are required to be maintained by
Rule 31a-1 under the 1940 Act, and further agrees to surrender promptly to the
Company any records which it maintains for the Company upon request by the
Company.
(f) At such times as shall reasonably be requested by the Board or GEIM,
the Sub-Adviser will provide the Board and GEIM with economic and investment
analyses and reports as well as quarterly reports setting forth the Fund's
performance and make available to the Board and GEIM any economic, statistical
and investment services normally available to institutional or other customers
of the Sub-Adviser. The Sub-Adviser will make available its officers and
employees to meet with the Board on reasonable notice to review the Fund's
investments.
(g) In accordance with procedures adopted by the Board, as amended from
time to time, the Sub-Adviser is responsible for assisting the Board in
determining the fair valuation of any illiquid portfolio securities and will
assist the Company's accounting services agent or GEIM to obtain independent
sources of market value for all other portfolio securities.
3. FURTHER DUTIES. In all matters relating to the performance of this
Agreement, the Sub-Adviser will act in conformity with the Constituent Documents
and Registration Statement and with the written instructions and directions of
the Board and GEIM and will
3
<PAGE>
comply with the requirements of the 1940 Act, the Advisers Act, the rules under
each, Subchapter M of the Code as applicable to regulated investment companies,
and the License Agreement. In addition, the Sub-Adviser will act in conformity
with all other applicable federal and state laws and regulations. GEIM agrees to
provide to the Sub-Adviser copies of the License Agreement, the Constituent
Documents, Registration Statement and any amendments or supplements to any of
these materials as soon as practicable after such materials become available.
4. EXPENSES. During the term of this Agreement, the Sub-Adviser will bear
all expenses incurred by it in connection with its investment sub-advisory
services under this Agreement.
5. COMPENSATION.
For the services rendered, the facilities furnished and the expenses
assumed by the Sub-Adviser, the Adviser shall pay the Sub-Adviser no later than
the twentieth (20th) business day following the end of each calendar month a fee
based on the average daily net assets of the Fund at the following annual rates:
.05% of the first $100,000,000; .04% of the next $200,000,000; and .03% of
amounts in excess of $300,000,000.
The Sub-Adviser's fee shall be paid by GEIM out of GEIM's advisory fee to
the extent such fee is received by GEIM pursuant to the Advisory Agreement. To
the extent that GEIM determines to waive, or to reimburse the Fund for, all or a
portion of its advisory fee, the Sub-Adviser agrees to a reduction of its fee
pro-rata.
The Sub-Adviser's fee shall be accrued daily at 1/365th of the applicable
annual rate set forth above. For the purpose of accruing compensation, the net
assets of the Fund shall be determined in the manner and on the dates set forth
in the current prospectus of the Company, and, on dates on which the net assets
are not so determined, the net asset value computation to be used shall be as
determined on the next day on which the net assets shall have been determined.
In the event of termination of this Agreement, all compensation due through the
date of termination will be calculated on a pro-rated basis through the date of
termination and paid within thirty business days of the date of termination.
During any period when the determination of net asset value is suspended,
the net asset value of the Fund as of the last business day prior to such
suspension shall for this purpose be deemed to be the net asset value at the
close of each succeeding business day until it is again determined.
6. LIMITATION OF LIABILITY. The Sub-Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund, the
Company or its shareholders or by GEIM in connection with the matters to which
this Agreement relates, except a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of
4
<PAGE>
its duties or from reckless disregard by it of its obligations and duties under
this Agreement. Notwithstanding the foregoing, Sub-Adviser shall be liable for
any loss suffered by the Fund, the Company or its shareholders or by GEIM as a
result of any negligent act or omission by Sub-Adviser relating to or arising
out of the License Agreement.
7. INDEMNIFICATION.
(a) GEIM agrees to indemnify the Sub-Adviser, its officers and directors,
and any person who controls the Sub-Adviser within the meaning of Section 15 of
the Securities Act of 1933, as amended ("1933 Act"), for any loss or expense
(including attorneys' fees) arising out of any claim, demand, action or suit in
the event that the Sub-Adviser has been found to be without fault and GEIM has
been found at fault (i) by the final judgment of a court of competent
jurisdiction or (ii) in any order of settlement of any claim, demand, action or
suit that has been approved by the Board of Directors of GEIM.
(b) The Sub-Adviser agrees to indemnify GEIM, its officers and directors,
and any person who controls GEIM within the meaning of Section 15 of the 1933
Act for any loss or expense (including attorneys' fees) arising out of any
claim, demand, action or suit in the event that GEIM has been found to be
without fault and the Sub-Adviser has been found at fault (i) by the final
judgment of a court of competent jurisdiction or (ii) in any order of settlement
of any claim, demand, action or suit that has been approved by the Board of
Directors of the Sub-Adviser. In addition to the foregoing, Sub-Adviser agrees
to indemnify and hold harmless GEIM, its officers and directors, and any person
who controls GEIM within the meaning of Section 15 of the 1933 Act for any loss
or expense (including attorneys' fees) arising out of any claim, demand, action
or suit as a result of any negligent act or omission by Sub-Adviser relating to
or arising out of the License Agreement.
8. REPRESENTATIONS AND WARRANTIES OF SUB-ADVISER. The Sub-Adviser
represents, warrants and agrees as follows:
(a) The Sub-Adviser (i) is a "bank" as defined in the Advisers Act and
therefore is exempt from registration pursuant to the Advisers Act and will
continue to be a "bank" as defined by the Advisers Act and so exempt for so long
as this Agreement remains in effect; (ii) is not prohibited by the 1940 Act or
the Advisers Act from performing the services contemplated by this Agreement;
(iii) has met, and will seek to continue to meet for so long as this Agreement
remains in effect, any other applicable federal or state requirements, or the
applicable requirements of any regulatory or industry self-regulatory agency,
necessary to be met in order to perform the services contemplated by this
Agreement; (iv) has the authority to enter into and perform the services
contemplated by this Agreement and the execution, delivery and performance by
the Sub-Adviser of this Agreement does not contravene or constitute a default
under any agreement binding upon the Sub-Adviser; (v) will promptly notify GEIM
of the occurrence of any event that would disqualify the Sub-Adviser from
serving as an investment adviser of an investment company pursuant to Section
9(a) of the 1940 Act or otherwise; (vi) is registered as a Commodity Trading
Adviser and Commodity Pool Operator under the Commodity Exchange Act with the
Commodity Futures Trading Commission and the National
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Futures Association; and (vii) is duly organized and validly existing under the
Laws of the Commonwealth of Massachusetts with the power to own and possess its
assets and carry on its business as it is now being conducted.
(b) The Sub-Adviser has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act and will provide GEIM and the
Board with a copy of that code of ethics, together with evidence of its
adoption. Within fifteen days of the end of the last calendar quarter of each
year that this Agreement is in effect, the president or a vice president of the
Sub-Adviser shall certify to GEIM that the Sub-Adviser has complied with the
requirements of Rule 17j-1 during the previous year and that there has been no
violation of the Sub-Adviser's code of ethics or, if such a violation has
occurred, that appropriate action was taken in response to such violation. Upon
the written request of GEIM, the Sub-Adviser shall permit GEIM, its employees or
its agents to examine the reports required to be made to the Sub-Adviser by Rule
17j-1(c)(1) and all other records relevant to the Sub-Adviser's code of ethics.
(c) The Sub-Adviser will notify GEIM of any change of control of the
Sub-Adviser, including any change of its general partners or 25% shareholders,
as applicable, and any changes in the key personnel of the Sub-Adviser,
including in particular portfolio management personnel responsible for the
Fund's assets in each case prior to or promptly after such change.
9. REPRESENTATIONS AND WARRANTIES OF GEIM. GEIM represents, warrants and
agrees that GEIM (i) is registered as an investment adviser under the Advisers
Act and will continue to be so registered for so long as this Agreement remains
in effect; (ii) is not prohibited by the 1940 Act or the Advisers Act from
performing the services contemplated by the Advisory Agreement; (iii) has met,
and will seek to continue to meet for so long as this Agreement remains in
effect, any other applicable federal or state requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency, necessary to
be met in order to perform the services contemplated by the Advisory Agreement;
(iv) has the authority to enter into and perform the services contemplated by
the Advisory Agreement and the execution, delivery and performance by GEIM of
the Advisory Agreement does not contravene or constitute a default under any
agreement binding upon GEIM; (v) will promptly notify the Sub-Adviser of the
occurrence of any event that would disqualify GEIM from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise; (vi) has filed a notice of exemption pursuant to Rule 4.14 under the
Commodity Exchange Act with the Commodity Futures Trading Commission and the
National Futures Association, or is not required to file such exemption; and
(vii) is duly organized and validly existing under the Laws of the State of
Delaware with the power to own and possess its assets and carry on its business
as it is now being conducted.
10. SURVIVAL OF REPRESENTATIVES AND WARRANTIES; DUTY TO UPDATE INFORMATION.
All representations and warranties made by the Sub-Adviser and GEIM pursuant to
Sections 8 and 9, respectively, shall survive for the duration of this Agreement
and the parties hereto shall promptly notify each other in writing upon becoming
aware that any of the foregoing representations and warranties are no longer
true.
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11. DURATION AND TERMINATION.
(a) This Agreement shall become effective upon the date first above written
and will continue in effect until July 23, 1999 and will continue thereafter so
long as the continuance is specifically approved at least annually (a) by the
Board or (b) by a vote of a majority of the Fund's outstanding voting
securities, as defined in the 1940 Act, provided that in either event the
continuance is also approved by a majority of the Board who are not parties to
this Agreement or "interested persons" (as defined in the 1940 Act) of any party
to this Agreement, by vote cast in person at a meeting called for the purpose of
voting on the approval.
(b) This Agreement may be terminated at any time without the payment of any
penalty, by the Board, or by vote of a majority of the Fund's outstanding voting
securities, on 60 days' written notice to the Sub-Adviser. This Agreement may
also be terminated, without the payment of any penalty, by GEIM: (i) upon 60
days' written notice to the Sub-Adviser; (ii) upon material breach by the
Sub-Adviser of any of the representations and warranties set forth in Paragraph
8 of this Agreement; or (iii) if the Sub-Adviser becomes unable to discharge its
duties and obligations under this Agreement, including circumstances such as
financial insolvency of the Sub-Adviser or other circumstances that could
adversely affect the Fund. The Sub-Adviser may terminate this Agreement at any
time, without the payment of a penalty, on 60 days' written notice to GEIM. This
Agreement will terminate automatically in the event of its assignment or upon
termination of the Advisory Agreement.
12. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no material amendment to the terms of
this Agreement shall be effective until approved by a vote of a majority of the
Fund's outstanding voting securities (unless the Company receives an SEC order
or opinion of counsel permitting it to modify the Agreement without such vote).
13. GOVERNING LAW. This Agreement shall be construed in accordance with the
1940 Act and the laws of the State of New York, without giving effect to the
conflicts of laws principles thereof. To the extent that the applicable laws of
the State of New York conflict with the applicable provisions of the 1940 Act,
the latter shall control.
14. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto. As used in this Agreement, the terms "majority of
the outstanding voting securities," "affiliated person," "interested person,"
"assignment," "broker," "investment adviser," "net assets," "sale," "sell" and
"security" shall have the same meaning as such terms have in the 1940 Act,
subject to such exemption as may be granted by the SEC by any rule, regulation
or order. Where the effect of a requirement of the federal securities laws
reflected in any provision of this Agreement is made less restrictive by rule,
regulation or order of the SEC, whether of special or general
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application, such provision shall be deemed to incorporate the effect of such
rule, regulation or order. This Agreement may be signed in counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized signatories as of the date and year first
above written.
Attest: GE INVESTMENT MANAGEMENT INCORPORATED
/s/ Jeanne LaPorta
- -------------------------
BY: /s/ Alan M. Lewis
-------------------------------------
Name: Alan M. Lewis
Title: Executive Vice President
Attest: STATE STREET BANK AND TRUST COMPANY
/s/ Andrew Hone
- -------------------------
BY: /s/ Nicholas A. Lopardo
-------------------------------------
Name: Nicholas A. Lopardo
Title: Executive Vice President
8
Exhibit 99.B6(a)
DISTRIBUTION AGREEMENT
October 16, 1997
GE Investment Services Inc.
3003 Summer Street
Stamford, Connecticut 06905
Dear Sirs:
This is to confirm that, in consideration of the agreements set out below,
GE Institutional Funds, a business trust organized under the laws of the State
of Delaware (the "Trust"), has agreed that GE Investment Services Inc. ("GEIS")
will be, for the period of this Agreement, the distributor of shares of
beneficial interest of each series of the Trust (individually a "Fund" and
collectively the "Funds").
1. SERVICES AS DISTRIBUTOR.
1.1 GEIS agrees to solicit orders for the sale of shares of the Trust and
to undertake advertising and promotion that it believes reasonable in connection
with the solicitation.
1.2 GEIS will act as agent for the distribution of shares of the Trust
covered by, and in accordance with, the Trust's Registration Statement on Form
N-1A then in effect under the Securities Act of 1933, as amended (the
"Securities Act"), the Registration Statement on Form N-1A, together with the
prospectuses (the "Prospectuses") and statement of additional information (the
"Statement") included as part of the Registration Statement on Form N-1A, any
amendments to the Registration Statement on Form N-1A, and any supplements to,
or material incorporated by reference into the Prospectuses or Statement, being
referred to collectively in this Agreement as the "Registration Statement."
1.3 All activities by GEIS as distributor of shares of the Trust will
comply with all applicable laws, rules and regulations, including, without
limitation, all rules and regulations made or adopted pursuant to the Securities
Act or the Investment Company Act of 1940, as amended (the "1940 Act"), by
<PAGE>
the Securities and Exchange Commission (the "Commission") or any securities
association registered under the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
1.4 (a) GEIS will have the right to purchase from the Trust the shares
needed, but not more than the shares needed (except for clerical errors in
transmission), to fill unconditional orders for shares placed through GEIS. The
price that GEIS will pay for the shares so purchased from the Trust will be the
current public offering price on which the orders were based, as described in
paragraph (b) of this Section 1.4.
(b) The public offering price of the shares of the Trust will be the net
asset value determined as set forth in the Registration Statement, plus any
applicable sales charge.
(c) GEIS will have the right to enter into selected dealer or selling
agreements. All dealers or selling parties of Trust shares will act in
accordance with the Registration Statement then in effect under the Securities
Act. All activities by dealers or selling parties of Trust shares will comply
with all applicable laws, rules and regulations, including, without limitation,
all rules and regulations made or adopted pursuant to the Securities Act and the
1940 Act by the Commission or any securities association registered under the
Exchange Act.
(d) The Trust's transfer and dividend agent, or any other agent designated
in writing by the Trust, will be promptly advised by GEIS of all purchase orders
for shares of the Trust. The Trust may cease, on the basis of market, economic
or political conditions, or on the basis of any other abnormal conditions, to
accept any orders for Trust shares or continue to sell shares until the Trustees
deem it advisable to accept the orders and to make the sales. The Trust will
promptly advise GEIS of the determination to recommence accepting orders or
selling shares. The Trust (or its agent) will confirm orders for shares upon
their receipt, or in accordance with any exemptive order of the Commission, and
will make appropriate book entries pursuant to the instructions of GEIS. GEIS
agrees to cause payment for shares and instructions as to book entries to be
delivered promptly to the Trust (or its agent).
1.5 The outstanding shares of the Trust are subject to redemption as set
forth in the Trust's Declaration of Trust dated
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as of August 29, 1997, as amended from time to time (the "Declaration of
Trust"), and in accordance with the applicable provisions set forth in the
Prospectuses. The price to be paid to redeem the shares will be equal to their
net asset value, determined as set forth in the Prospectuses.
1.6 GEIS will provide one or more persons, during normal business hours, to
respond to telephone questions with respect to the Trust.
1.7 The Trust agrees, at its own expense, to execute any and all documents,
to furnish any and all information, and to take any other actions, that may be
reasonably necessary in connection with (a) registering shares under the
Securities Act to the extent necessary to have available for sale the number of
shares as may reasonably be expected to be purchased and (b) the qualification
and maintenance of the qualification of shares of the Trust for sale in such
states as GEIS may designate, except that the Trust will not be obligated to
execute a general consent to service of process in any state.
1.8 The Trust will furnish GEIS from time to time, for use in connection
with the sale of shares of the Trust such information with respect to the Trust
and its shares as GEIS may reasonably request, all of which information must be
signed by one or more of the Trust's duly authorized officers; and the Trust
warrants that the statements contained in any such information, when so signed
by the Trust's officers, will be true and correct. The Trust will also furnish
GEIS upon request with: (a) financial statements of the Trust or any series of
the Trust audited at least annually by independent public accountants regularly
retained by the Trust, (b) quarterly earnings statements of the Trust or any
series of the Trust prepared by the Trust, (c) a monthly itemized list of the
securities in the portfolio of the Trust or any series of the Trust, (d) monthly
balance sheets with respect to the Trust or any series of the Trust as soon as
practicable after the end of each month and (e) from time to time any additional
information regarding the financial condition of the Trust or any series of the
Trust as GEIS may reasonably request.
1.9 The Trust represents to GEIS that the Registration Statement filed by
the Trust with the Commission under the Securities Act has been carefully
prepared in conformity with the requirements of the Securities Act and the 1940
Act and the
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respective rules and regulations of the Commission thereunder. The Trust
represents and warrants to GEIS that the Registration Statement, upon its
becoming effective, will contain all statements required to be stated therein in
conformity with the Securities Act and the rules and regulations of the
Commission thereunder; that all statements of fact contained in the Registration
Statement will be true and correct when the Registration Statement becomes
effective; and that the Registration Statement, upon its becoming effective,
will not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading. The Trust may, but will not be obligated to, propose
from time to time such amendment or amendments to the Registration Statement and
such supplement or supplements to the Prospectuses as may, in the Trust's
judgment, be necessary or advisable. If the Trust does not propose an amendment
or amendments or supplement or supplements within 15 days after receipt by the
Trust of a written request from GEIS to do so, GEIS may, at its option,
terminate this Agreement in accordance with the requirements of Section 2 of
this Agreement or decline to make offers of the Trust's securities until the
amendments are made. The Trust will not file any amendment to the Registration
Statement or supplement to the Prospectuses without giving GEIS reasonable
notice thereof in advance; provided, however, that nothing contained in this
Agreement will in any way limit the Trust's right to file at any time such
amendments to the Registration Statement or supplements to the Prospectuses, of
whatever character, as the Trust may deem advisable, this right being in all
respects absolute and unconditional.
1.10 (a) The Trust authorizes GEIS to use any prospectuses with respect to
the Trust or series of the Trust in the forms furnished to GEIS from time to
time in connection with the sale of Trust shares and agrees to furnish such
quantities of the prospectuses as GEIS may reasonably request. GEIS will devote
reasonable time and effort to effect sales of Trust shares, but will not be
obligated to sell any specific number of shares. The services of GEIS under this
Agreement are not to be deemed exclusive and nothing contained in this Agreement
should be deemed to prevent GEIS from entering into distribution arrangements
with other investment companies so long as the performance of its obligations
under this Agreement is not impaired by GEIS's doing so.
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(b) In selling the shares of the Trust, GEIS and selected dealers will
use their best efforts in all respects duly to conform with the requirements of
all federal and state laws and regulations of the National Association of
Securities Dealers, Inc. (the "NASD") relating to the sale of the shares.
Neither GEIS nor any other person is authorized by the Trust to give any
information or to make any representations, other than those contained in the
Registration Statement or in any sales literature specifically approved by the
Trust.
(c) GEIS will adopt and follow procedures, as approved by the Trust,
for the confirmation of sales to purchasers of Trust shares, the collection of
amounts payable by those purchasers, and the cancellation of unsettled
transactions, as may be necessary to comply with the requirements of the NASD
and applicable rules and regulations of the Commission.
(d) GEIS represents to the Trust that GEIS is a broker-dealer
registered with the Commission under the Exhange Act, is a member of the NASD,
and is registered or licensed under the laws of all jurisdictions in which its
activities require it to be so registered or licensed. GEIS shall maintain such
registration or license in effect at all times during the term of this Agreement
and will immediately notify the Trust of the occurrence of any event that would
disqualify GEIS from serving as the distributor of shares of the Funds by
operation of Section 9(a) of the 1940 or otherwise.
1.11 (a) The Trust agrees promptly to notify GEIS of the commencement of
any litigation or proceedings against the Trust or any of its officers or
trustees in connection with the issuance and sale of any shares of the Trust.
(b) The Trust agrees to indemnify and hold GEIS, its several officers
and directors, and any person who controls GEIS within the meaning of Section 15
of the Securities Act, free and harmless from and against any and all claims,
demands, liabilities and expenses (including the cost of investigating or
defending those claims, demands or liabilities and any counsel fees incurred in
connection with them) that GEIS, its officers and directors, or the controlling
person may incur under the Securities Act or under common law or otherwise,
arising out of or based upon any untrue statement, or alleged untrue statement,
of a material fact contained in the Registration Statement or the Prospectuses
or arising out of or based upon any omission, or
5
<PAGE>
alleged omission, to state a material fact required to be stated in either the
Registration Statement or Prospectuses or necessary to make the statements in
either not misleading; provided, however, that the Trust's agreement to
indemnify GEIS, its officers and directors, and the controlling person will not
be deemed to cover any claims, demands, liabilities or expenses arising out of
any untrue statement or alleged untrue statement or omission or alleged omission
in the Registration Statement or Prospectuses made in reliance upon and in
conformity with written information furnished to the Trust by GEIS specifically
for use in the preparation of the Registration Statement.
(c) The Trust's agreement to indemnify GEIS, its officers and
directors, and any controlling person, described in paragraph (b) of this
Section 1.11, is expressly conditioned upon the Trust's being notified of any
action brought against GEIS, its officers or directors, or any controlling
person, such notification to be given by letter or by telegram addressed to the
Trust at its principal office in Stamford, Connecticut within ten days after the
summons or other first legal process is served. The failure to notify the Trust
in this manner of any such action will relieve the Trust from any liability that
the Trust may have to the person against whom the action is brought by reason of
any such untrue, or alleged untrue, statement or omission, or alleged omission,
otherwise than on account of the Trust's indemnity agreement contained in this
Section 1.11.
(d) The Trust will be entitled to assume the defense of any suit
brought to enforce any claim, demand or liability contemplated by this Section
1.11, but, in such case, the defense will be conducted by counsel of good
standing chosen by the Trust and approved by GEIS (who will not, except with the
consent of GEIS, be counsel to the Trust). In the event the Trust elects to
assume the defense of any such suit and retain counsel of good standing approved
by GEIS, the defendant or defendants in the suit will bear the fees and expenses
of any additional counsel retained by any of them; but in case the Trust does
not elect to assume the defense of any such suit, or in case GEIS does not
approve of counsel chosen by the Trust, the Trust will reimburse GEIS, its
officers and directors, or the controlling person or persons named as defendant
or defendants in the suit, for the fees and expenses of any counsel retained by
GEIS or them.
6
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(e) The Trust's indemnification agreement contained in this Section
1.11 and the Trust's representations and warranties in this Agreement will
remain operative and in full force and effect regardless of any investigation
made by or on behalf of GEIS, its officers and directors, or any controlling
person, and will survive the delivery of any shares of the Trust. The Trust's
agreement of indemnity will inure exclusively to GEIS's benefit, to the benefit
of its several officers and directors, and their respective estates, and to the
benefit of any controlling persons and their successors, except that the Trust
will not be obligated to indemnify any entity or person pursuant to this Section
1.11 against any liability to which GEIS, its officers and directors, or any
controlling person would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in performance of, or reckless disregard of, the
obligations and duties set forth in this Agreement.
1.12 (a) GEIS agrees to indemnify and hold the Trust, its several officers
and trustees, and any person, if any, who controls the Trust within the meaning
of Section 15 of the Securities Act, free and harmless from and against any and
all claims, demands, liabilities and expenses (including the cost of
investigating or defending those claims, demands or liabilities and any counsel
fees incurred in connection with them) that the Trust, its officers or trustees,
or the controlling person, may incur under the Securities Act, or under common
law or otherwise, but only to the extent that the liability or expense incurred
by the Trust, its officers or trustees, or the controlling person resulting from
the claims or demands arise out of or are based upon any untrue, or alleged
untrue statement of a material fact contained in information furnished in
writing by GEIS to the Trust specifically for use in the Registration Statement
and used in the Trust's answers to any of the items of the Registration
Statement or in the corresponding statements made in the Prospectuses, or arise
out of or are based upon any omission, or alleged omission, to state a material
fact in connection with the information furnished in writing by GEIS to the
Trust and required to be stated in the answers or necessary to make the
information not misleading.
(b) GEIS's agreement to indemnify the Trust, its officers and
trustees, and any controlling person under this Section 1.12 is expressly
conditioned upon GEIS being notified of any action brought against the Trust,
its officers or trustees, or any controlling person, such notification to be
given by
7
<PAGE>
letter or telegram addressed to GEIS at its principal office in Stamford,
Connecticut and sent to GEIS by the person against whom the action is brought,
within ten days after the summons or other first legal process is served. The
failure to notify GEIS of any such action will not relieve GEIS from any
liability that GEIS may have to the Trust, its officers or trustees, or to the
controlling person otherwise than on account of GEIS's indemnity agreement
contained in this Section 1.12.
(c) GEIS will have the right to control the defense of any action
contemplated by this Section 1.12, with counsel of its own choosing,
satisfactory to the Trust, unless the action referred to in paragraph (a) of
this Section 1.12 is not based solely upon an alleged misstatement or omission
on GEIS's part. In such event, the Trust, its officers or trustees or the
controlling person will each have the right to participate in the defense or
preparation of the defense of the action.
(d) GEIS will not be obligated to indemnify any entity or person
pursuant to this Section 1.12 against any liability to which the Trust, its
officers and trustees, or any controlling person would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in performance of,
or reckless disregard of, the obligations and duties set forth in this
Agreement.
1.13 No shares of the Trust may be offered by GEIS, selected dealers,
selling parties or the Trust under any of the provisions of this Agreement, and
no orders for the purchase or sale of shares of the Trust pursuant to this
Agreement may be accepted by the Trust if and so long as the effectiveness of
the Registration Statement is suspended under any of the provisions of the
Securities Act or if and so long as a current prospectus as required by Section
10 of the Securities Act is not on file with the Commission; provided, however,
that nothing contained in this Section 1.13 will in any way restrict or have an
application to or bearing upon the Trust's obligation to redeem its shares from
any shareholder in accordance with the provisions of Section 1.5 of this
Agreement and provided, further, that GEIS may continue to offer shares of the
Trust until GEIS has been notified in writing of the occurrence of any of the
foregoing events.
1.14 The Trust agrees to advise GEIS immediately in writing:
8
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(a) of any request by the Commission for amendments to the
Registration Statement or the Prospectuses or any additional information
regarding the Trust or any of its series;
(b) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceeding
for that purpose;
(c) of the happening of any event that makes untrue any statement of a
material fact made in the Registration Statement or the Prospectuses or that
requires the making of any change in the Registration Statement or the
Prospectuses in order to make the statements therein not misleading; and
(d) of all actions of the Commission with respect to any amendments to
the Registration Statement or the Prospectuses that may from time to time be
filed with the Commission.
2. TERM.
This Agreement will become effective as of the date herein and thereafter
will continue automatically for successive annual periods, so long as its
continuance is specifically approved at least annually (a) by the Trustees of
the Trust or (b) by a vote of a majority (as defined in the 1940 Act) of the
Trust's outstanding voting securities, provided that in either event the
continuance is also approved by a majority of the Trustees who are not parties
to this Agreement or interested persons (as defined in the 1940 Act) of any
party by vote cast in person at a meeting called for the purpose of voting on
the approval. This Agreement is terminable without penalty, (a) on not less than
60 days' notice (i) by action of the Trustees who are not interested persons (as
defined in the 1940 Act) of the Trust, or (ii) by the vote of holders of a
majority of the Trust's shares, or (b) upon not less than 60 days' written
notice by GEIS. This Agreement will also terminate automatically in the event of
its assignment (as defined in the 1940 Act and the rules under the 1940 Act).
3. AMENDMENTS.
This Agreement may be amended by the parties only if the amendment is
specifically approved by (a) the Trustees of the Trust, or by the vote of a
majority of outstanding voting securities of the Trust, and (b) a majority of
those Trustees of the Trust who are not parties to this Agreement or interested
9
<PAGE>
persons (as defined in the 1940 Act) of any party cast in person at a meeting
called for the purpose of voting on the approval.
4. MISCELLANEOUS.
4.1 (a) The Trust will bear all costs and expenses including fees and
disbursements of its counsel and independent accountants, in connection with the
preparation and filing of any registration statements and prospectuses under the
Securities Act and the 1940 Act, and all amendments and supplements thereto, and
the expense of preparing, printing, mailing and otherwise distributing
prospectuses, annual or interim reports or proxy materials to shareholders.
(b) The Trust will bear all costs and expenses of qualification of its
shares for sale in such states of the United States or other jurisdictions as
selected by GEIS pursuant to Section 1.7 of this Agreement and the cost and
expenses payable to each for continuing qualification therein.
4.2 (a) The Trust represents that a copy of the Certificate of Trust is on
file with the Secretary of the State of Delaware. The Trust further represents
that a copy of the Declaration of Trust is maintained by the Trust.
(b) The Trust and GEIS agree that the obligations of the Trust under
this Agreement will not be binding upon any of the Trustees, shareholders,
nominees, officers, employees or agents, whether past, present or future, of the
Trust, individually, but are binding only upon the assets and property of the
Trust, as provided in the Declaration of Trust. The execution and delivery of
this Agreement have been authorized by the Trustees of the Trust, and signed by
an authorized officer of the Trust, acting as such, and neither the
authorization by the Trustees nor the execution and delivery by the officer will
be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but will bind only the trust property of
the Trust as provided in the Declaration of Trust. No class or series of the
Trust will be liable for any claims against any other class or series.
* * * * *
If the terms and conditions described above are in
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accordance with your understanding, kindly indicate your acceptance of this
Agreement by signing and returning to us the enclosed copy of this Agreement.
Very truly yours,
GE INSTITUTIONAL FUNDS
By: /s/ Michael J. Cosgrove
--------------------------------
Name: Michael J. Cosgrove
Title: President
Accepted:
GE INVESTMENT SERVICES INC.
By: /s/ Alan M. Lewis
--------------------------------
Name: Alan M. Lewis
Title: Secretary
11
Exhibit 99.B6(b)
GE INSTITUTIONAL FUNDS
SHAREHOLDER SERVICING AND DISTRIBUTION AGREEMENT
GE Investment Management Incorporated
3003 Summer Street
Stamford, Connecticut 06905
Dear Sir or Madam:
GE Institutional Funds (the "Trust") confirms its agreement with GE
Investment Management Incorporated ("GEIM"), a corporation organized under the
laws of the State of Delaware, implementing the terms of the Shareholder
Servicing and Distribution Plan (the "Plan"), adopted by the Trust with respect
to the Emerging Markets Fund, International Equity Fund, Mid-Cap Growth Fund,
Premier Growth Equity Fund, Value Equity Fund, U.S. Equity Fund, S&P 500 Index
Fund, Strategic Investment Fund, Income Fund and Money Market Fund and any other
investment fund offered by the Trust in the future that adopts the Plan
(individually, a "Covered Fund" and collectively, the "Covered Funds"), each a
series of the Trust, pursuant to Rule 12b-1 (the "Rule") under the Investment
Company Act of 1940, as amended (the "1940 Act"). Each of the Covered Funds has
two classes of shares of beneficial interest ("Shares"), designated as the
Investment Class and the Service Class, respectively. This Agreement is intended
to describe the shareholder servicing and distribution services to be provided
by GEIM, and/or any distributor of the Covered Funds' Shares (the
"Distributor"). Those services will be provided as set out below, as follows:
SECTION 1. AMOUNT OF PAYMENTS.
(a) The Trust will pay GEIM, with respect to the Service Class Shares of
each Covered Fund, for shareholder and distribution-related services provided to
that class of Shares, an annual fee of .25% of the value of the average daily
net assets of the Covered Fund attributable to the Service Class Shares (the
"Service and Distribution Fee").
(b) The Service and Distribution Fee to be paid with respect to the Covered
Funds under this Agreement will be calculated daily and paid monthly by the
Trust with respect to the Service Class Shares of the Covered Funds at the
annual rate indicated above.
SECTION 2. SERVICES PAYABLE UNDER THE AGREEMENT.
The Service and Distribution Fee payable with respect to the Service Class
Shares of a Covered Fund is intended to compensate GEIM, or enable GEIM to
compensate other persons ("Service Providers"), for providing ongoing servicing
and/or maintenance of the accounts of shareholders of the Covered Fund
("Shareholder Services") and to compensate
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GEIM, or enable GEIM to compensate Service Providers, including any Distributor
of Shares of the Covered Fund, for providing services that are primarily
intended to result in, or that are primarily attributable to, the sale of
Service Class Shares of the Covered Fund ("Selling Services"). "Shareholder
Services" as used in this Agreement means all forms of shareholder liaison
services, including, among other things, providing record and/or beneficial
holders of Service Class shares of a Covered Fund with one or more of the
following: (i) information on their investments; (ii) general information
regarding investing in mutual funds; (iii) periodic newsletters containing
materials relating to the Covered Fund or to investments in general in mutual
funds; (iv) periodic financial seminars designed to assist in the education of
shareholders with respect to mutual funds generally and the Covered Fund
specifically; (v) access to a telephone inquiry center relating to the Covered
Fund; (vi) sub-accounting and sub-account maintenance, servicing and transaction
processing and (vii) other similar services not otherwise required to be
provided by the Trust's custodian or transfer agent. "Selling Services" as used
in this Agreement include, but are not limited to: the printing and distribution
to prospective investors in the Covered Fund of prospectuses and statements of
additional information that are used in connection with sales of Service Class
Shares of the Covered Fund; the preparation, including printing, and
distribution of sales literature and media advertisements relating to the
Service Class Shares of the Covered Fund; and distributing Service Class Shares
of the Covered Fund. In providing compensation for Selling Services in
accordance with this Agreement, GEIM is expressly authorized: (i) to make, or
cause to be made, payments reflecting an allocation of overhead and other office
expenses related to the distribution of the Service Class Shares of a Covered
Fund; (ii) to make, or cause to be made, payments, or to provide for the
reimbursement of expenses of, persons who provide support services in connection
with the distribution of the Service Class Shares of the Covered Fund; and (iii)
to make, or cause to be made, payments to financial intermediaries who have sold
Service Class Shares of the Covered Fund.
SECTION 3. APPROVAL BY TRUSTEES.
This Agreement will not take effect with respect to any Class of a Covered
Fund until approved by a majority vote of (a) the full Board of Trustees of the
Trust and (b) those Trustees who are not interested persons of the Trust and who
have no direct or indirect financial interest in the operation of the Plan or in
this Agreement (the "Independent Trustees"), cast in person at a meeting called
for the purpose of voting on this Agreement.
SECTION 4. CONTINUANCE OF AGREEMENT.
This Agreement will continue in effect with respect to a Covered Fund from
year to year so long as its continuance is specifically approved annually by
vote of the Trust's Board of Trustees in the manner described in Section 3
above.
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SECTION 5. TERMINATION.
(a) This Agreement may be terminated with respect to the Service Class
Shares of a Covered Fund at any time, without the payment of any penalty, by
vote of a majority of the Independent Trustees or by vote of a majority of the
outstanding voting securities of the Service Class on not more than 60 days'
written notice to GEIM.
(b) This Agreement will terminate automatically in the event of its
assignment.
SECTION 6. SELECTION OF CERTAIN TRUSTEES.
While this Agreement is in effect with respect to the Service Class Shares
of a Covered Fund, the selection and nomination of the Trust's Trustees who are
not interested persons of the Trust will be committed to the discretion of the
Trustees then in office who are not interested persons of the Trust.
SECTION 7. WRITTEN REPORTS.
GEIM agrees that, in each year during which this Agreement remains in
effect with respect to a Covered Fund, GEIM will prepare and furnish to the
Trust's Board of Trustees, and the Board will review, at least quarterly,
written reports, complying with the requirements of the Rule, that set out the
amounts expended under this Agreement and the purposes for which those
expenditures were made.
SECTION 8. PRESERVATION OF MATERIALS.
The Trust will preserve copies of this Agreement and any report made
pursuant to Section 7 above, for a period of not less than six years (the first
two years in an easily accessible place) from the date of this Agreement.
SECTION 9. MEANING OF CERTAIN TERMS.
As used in this Agreement, the terms "interested person" and "majority of
the outstanding voting securities" will be deemed to have the same meaning that
those terms have under the 1940 Act and the rules and regulations under the 1940
Act, subject to any exemption that may be granted to the Trust under the 1940
Act by the Securities and Exchange Commission.
SECTION 10. FILING OF CERTIFICATE OF TRUST.
The Trust represents that a copy of its Certificate of Trust, dated as of
May 23, 1997, as amended from time to time, is on file with the Secretary of
State of the State of Delaware.
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SECTION 11. LIMITATION OF LIABILITY.
The obligations of the Trust under this Agreement will not be binding upon
any of the Trustees, shareholders, nominees, officers, employees or agents,
whether past, present or future, of the Trust, individually, but are binding
only upon the assets and property of the Trust, as provided in the Trust's
Declaration of Trust, dated as of August 29, 1997 (the "Declaration of Trust").
The execution and delivery of this Agreement have been authorized by the
Trustees of the Trust, and signed by an authorized officer of the Trust, acting
as such, and neither the authorization by the Trustees nor the execution and
delivery by the officer will be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but will bind
only the trust property of the Trust as provided in the Declaration of Trust. No
Covered Fund will be liable for any claims against any other Covered Fund.
SECTION 12. EFFECTIVE DATE.
This Agreement has been executed by the Trust with respect to the Covered
Funds as of October 16, 1997 and will become effective with respect to the
Service Class Shares of a Covered Fund as of the date on which interests in the
Service Class Shares are first offered to or held by the public.
* * * * *
If the terms and conditions described above are in accordance with your
understanding, kindly indicate your acceptance of this Agreement by signing and
returning to us the enclosed copy of this Agreement.
Very truly yours,
GE INSTITUTIONAL FUNDS
By: /s/ Michael J. Cosgrove
---------------------------------
Name: Michael J. Cosgrove
Title: President
Accepted:
GE INVESTMENT MANAGEMENT INCORPORATED
By: /s/ Alan M. Lewis
---------------------------------
Name: Alan M. Lewis
Title: Executive Vice President
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Exhibit 99.B9
TRANSFER AGENCY AND SERVICE AGREEMENT
between
GE INSTITUTIONAL FUNDS
and
STATE STREET BANK AND TRUST COMPANY
1C-Domestic Trust/Series
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TABLE OF CONTENTS
Page
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1. Terms of Appointment; Duties of the Bank................1
2. Fees and Expenses.......................................3
3. Representations and Warranties of the Bank..............4
4. Representations and Warranties of the Fund..............4
5. Wire Transfer Operating Guidelines......................5
6. Data Access and Proprietary Information.................6
7. Indemnification.........................................8
8. Standard of Care........................................9
9. Covenants of the Fund and the Bank......................9
10. Termination of Agreement...............................10
11. Additional Funds.......................................10
12. Assignment.............................................10
13. Amendment..............................................11
14. Massachusetts Law to Apply.............................11
15. Force Majeure..........................................11
16. Consequential Damages..................................11
17. Merger of Agreement....................................11
18. Limitations of Liability of the Trustees
or Shareholders........................................11
19. Counterparts...........................................11
20. Reproduction of Documents..............................12
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TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 16th day of October, 1997, by and between GE
INSTITUTIONAL FUNDS, a Delaware business trust, having its principal office and
place of business at 3003 Summer Street, Stamford, Connecticut 06905 (the
"Fund"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company
having its principal office and place of business at 225 Franklin Street,
Boston, Massachusetts 02110 (the "Bank").
WHEREAS, the Fund is authorized to issue shares in separate series, with each
such series representing interests in a separate portfolio of securities and
other assets; and
WHEREAS, the Fund intends to initially offer shares in ten series (each such
series, together with all other series subsequently established by the Fund,
such series shall be named in the attached Schedule A which may be amended by
the parties from time to time and made subject to this Agreement in accordance
with Article 11, being herein referred to as a "Portfolio", and collectively as
the "Portfolios");
WHEREAS, the Fund on behalf of the Portfolios desires to appoint the Bank as its
transfer agent, dividend disbursing agent, custodian of certain retirement plans
and agent in connection with certain other activities, and the Bank desires to
accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
l. TERMS OF APPOINTMENT; DUTIES OF THE BANK
1.1 Subject to the terms and conditions set forth in this Agreement, the Fund,
on behalf of the Portfolios, hereby employs and appoints the Bank to act
as, and the Bank agrees to act as its transfer agent for the Fund's
authorized and issued shares of its beneficial interest, of each class of
each of the Portfolios, $ .001 par value, ("Shares"), dividend disbursing
agent, custodian of certain retirement plans and agent in connection with
any accumulation, open-account or similar plans provided to the
shareholders of each of the respective Portfolios of the Fund
("Shareholders") and set out in the currently effective prospectus and
statement of additional information ("prospectus") of the Fund on behalf of
the applicable Portfolio, including without limitation any periodic
investment plan or periodic withdrawal program.
1.2 The Bank agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund on behalf of each of the Portfolios, as
applicable and the Bank, the Bank shall:
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(i) Receive for acceptance, orders for the purchase of Shares,
and promptly deliver payment and appropriate documentation
thereof to the Custodian of the Fund authorized pursuant to
the Declaration of Trust of the Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number
of Shares and hold such Shares in the appropriate
Shareholder account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation
thereof to the Custodian;
(iv) In respect to the transactions in items (i), (ii) and (iii)
above, the Bank shall execute transactions directly with
broker-dealers authorized by the Fund;
(v) At the appropriate time as and when it receives monies paid
to it by the Custodian with respect to any redemption, pay
over or cause to be paid over in the appropriate manner
such monies as instructed by the redeeming Shareholders;
(vi) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vii) Prepare and transmit payments for dividends and
distributions declared by the Fund on behalf of the
applicable Portfolio;
(viii) Issue replacement certificates for those certificates
alleged to have been lost, stolen or destroyed upon receipt
by the Bank of indemnification satisfactory to the Bank and
protecting the Bank and the Fund, and the Bank at its
option, may issue replacement certificates in place of
mutilated stock certificates upon presentation thereof and
without such indemnity;
(ix) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing and
(x) Record the issuance of shares of the Fund and maintain
pursuant to SEC Rule 17Ad-10(e) a record of the total
number of shares of the Fund which are authorized, based
upon data provided to it by the Fund, and issued and
outstanding. The Bank shall also provide the Fund on a
regular basis with the total number of shares which are
authorized and issued and outstanding and shall have no
obligation, when recording the issuance of shares, to
monitor the issuance of such shares or to take cognizance
of any laws relating to the issue or sale of such Shares,
which functions shall be the sole responsibility of the
Fund.
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(b) In addition to and neither in lieu nor in contravention of the
services set forth in the above paragraph (a), the Bank shall: (i)
perform the customary services of a transfer agent, dividend
disbursing agent, custodian of certain retirement plans and, as
relevant, agent in connection with accumulation, open-account or
similar plans (including without limitation any periodic investment
plan or periodic withdrawal program), including but not limited to:
maintaining all Shareholder accounts, preparing Shareholder meeting
lists, mailing Shareholder proxies, Shareholder reports and
prospectuses to current Shareholders, withholding taxes on U.S.
resident and non-resident alien accounts, preparing and filing U.S.
Treasury Department Forms 1099 and other appropriate forms required
with respect to dividends and distributions by federal authorities for
all Shareholders, preparing and mailing confirmation forms and
statements of account to Shareholders for all purchases and
redemptions of Shares and other confirmable transactions in
Shareholder accounts, preparing and mailing activity statements for
Shareholders, and providing Shareholder account information and (ii)
provide a system which will enable the Fund to monitor the total
number of Shares sold in each State.
(c) In addition, the Fund shall (i) identify to the Bank in writing those
transactions and assets to be treated as exempt from blue sky
reporting for each State and (ii) verify the establishment of
transactions for each State on the system prior to activation and
thereafter monitor the daily activity for each State. The
responsibility of the Bank for the Fund's blue sky State registration
status is solely limited to the initial establishment of transactions
subject to blue sky compliance by the Fund and the reporting of such
transactions to the Fund as provided above.
(d) Procedures as to who shall provide certain of these services in
Section 1 may be established from time to time by agreement between
the Fund on behalf of each Portfolio and the Bank per the attached
service responsibility schedule. The Bank may at times perform only a
portion of these services and the Fund or its agent may perform these
services on the Fund's behalf.
(e) The Bank shall provide additional services on behalf of the Fund
(i.e., escheatment services) which may be agreed upon in writing
between the Fund and the Bank.
2. FEES AND EXPENSES
2.1 For the performance by the Bank pursuant to this Agreement, the Fund agrees
on behalf of each of the Portfolios to pay the Bank an annual maintenance
fee for each Shareholder account as set out in the initial fee schedule
attached hereto. Such fees and out-of-pocket expenses and advances
identified under Section 2.2 below may be changed from time to time subject
to mutual written agreement between the Fund and the Bank.
2.2 In addition to the fee paid under Section 2.1 above, the Fund agrees on
behalf of each of the Portfolios to reimburse the Bank for out-of-pocket
expenses, including but not limited
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to confirmation production, postage, forms, telephone, microfilm,
microfiche, mailing and tabulating proxies, records storage, or advances
incurred by the Bank for the items set out in the fee schedule attached
hereto. In addition, any other expenses incurred by the Bank at the request
or with the consent of the Fund, will be reimbursed by the Fund on behalf
of the applicable Portfolio.
2.3 The Fund agrees on behalf of each of the Portfolios to pay all fees and
reimbursable expenses within five days following the receipt of the
respective billing notice. Postage for mailing of dividends, proxies, Fund
reports and other mailings to all shareholder accounts shall be advanced to
the Bank by the Fund at least seven (7) days prior to the mailing date of
such materials.
3. REPRESENTATIONS AND WARRANTIES OF THE BANK
The Bank represents and warrants to the Fund that:
3.1 It is a trust company duly organized and existing and in good standing
under the laws of The Commonwealth of Massachusetts.
3.2 It is duly qualified to carry on its business in The Commonwealth of
Massachusetts.
3.3 It is empowered under applicable laws and by its Charter and By-Laws to
enter into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
3.5 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
4. REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Bank that:
4.1 It is a business trust duly organized and existing and in good standing
under the laws of the State of Delaware.
4.2 It is empowered under applicable laws and by its Declaration of Trust to
enter into and perform this Agreement.
4.3 All corporate proceedings required by said Declaration of Trust have been
taken to authorize it to enter into and perform this Agreement.
4.4 It is an open-end and diversified management investment company registered
under the Investment Company Act of 1940, as amended.
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4.5 A registration statement under the Securities Act of 1933, as amended on
behalf of each of the Portfolios is currently effective and will remain
effective, and appropriate state securities law filings have been made and
will continue to be made, with respect to all Shares of the Fund being
offered for sale.
5. WIRE TRANSFER OPERATING GUIDELINES/ARTICLES 4A OF THE UNIFORM COMMERCIAL
CODE
5.1 The Bank is authorized to promptly debit the appropriate Fund
account(s) upon the receipt of a payment order in compliance with the
selected security procedure (the "Security Procedure") chosen for
funds transfer and in the amount of money that the Bank has been
instructed to transfer. The Bank shall execute payment orders in
compliance with the Security Procedure and with the Fund instructions
on the execution date provided that such payment order is received by
the customary deadline for processing such a request, unless the
payment order specifies a later time. All payment orders and
communications received after this the customary deadline will be
deemed to have been received the next business day.
5.2 The Fund acknowledges that the Security Procedure it has designated on
the Fund Selection Form was selected by the Fund from security
procedures offered by the Bank. The Fund shall restrict access to
confidential information relating to the Security Procedure to
authorized persons as communicated to the Bank in writing by the Fund.
The Fund must notify the Bank immediately if it has reason to believe
unauthorized persons may have obtained access to such information or
of any change in the Fund's authorized personnel. The Bank shall
verify the authenticity of all Fund instructions according to the
Security Procedure.
5.3 The Bank shall process all payment orders on the basis of the account
number contained in the payment order. In the event of a discrepancy
between any name indicated on the payment order and the account
number, the account number shall take precedence and govern.
5.4 The Bank reserves the right to decline to process or delay the
processing of a payment order which (a) is in excess of the collected
balance in the account to be charged at the time of the Bank's receipt
of such payment order; (b) if initiating such payment order would
cause the Bank, in the Bank's sole reasonable judgement, to exceed any
volume, aggregate dollar, network, time, credit or similar limits
which are applicable to the Bank; or (c) if the Bank, in good faith,
is unable to satisfy itself that the transaction has been properly
authorized.
5.5 The Bank shall use reasonable efforts to act on all authorized
requests to cancel or amend payment orders received in compliance with
the Security Procedure provided that such requests are received in a
timely manner affording the Bank reasonable opportunity to act.
However, the Bank assumes no liability if the request for amendment or
cancellation cannot be satisfied.
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5.6 The Bank shall assume no responsibility for failure to detect any
erroneous payment order provided that the Bank complies with the
payment order instructions as received and the Bank complies with the
Security Procedure. The Security Procedure is established for the
purpose of authenticating payment orders only and not for the
detection of errors in payment orders.
5.7 The Bank shall assume no responsibility for lost interest with respect
to the refundable amount of any unauthorized payment order, unless the
Bank is notified of the unauthorized payment order within thirty (30)
days of notification by the Bank of the acceptance of such payment
order. In no event (including failure to execute a payment order)
shall the Bank be liable for special, indirect or consequential
damages, even if advised of the possibility of such damages.
5.8 When the Fund initiates or receives Automated Clearing House credit
and debit entries pursuant to these guidelines and the rules of the
National Automated Clearing House Association and the New England
Clearing House Association, the Bank will act as an Originating
Depository Financial Institution and/or receiving depository Financial
Institution, as the case may be, with respect to such entries. Credits
given by the Bank with respect to an ACH credit entry are provisional
until the Bank receives final settlement for such entry from the
Federal Reserve Bank. If the Bank does not receive such final
settlement, the Fund agrees that the Bank shall receive a refund of
the amount credited to the Fund in connection with such entry, and the
party making payment to the Fund via such entry shall not be deemed to
have paid the amount of the entry.
5.9 Confirmation of Bank's execution of payment orders shall ordinarily be
provided within twenty four (24) hours notice of which may be
delivered through the Bank's proprietary information systems, or by
facsimile or call-back. Fund must report any objections to the
execution of an order within thirty (30) days.
6. DATA ACCESS AND PROPRIETARY INFORMATION
6.1 The Fund acknowledges that the data bases, computer programs, screen
formats, report formats, interactive design techniques, and
documentation manuals furnished to the Fund by the Bank as part of the
Fund's ability to access certain Fund-related data ("Customer Data")
maintained by the Bank on data bases under the control and ownership
of the Bank or other third party ("Data Access Services") constitute
copyrighted, trade secret, or other proprietary information
(collectively, "Proprietary Information") of substantial value to the
Bank or other third party. In no event shall Proprietary Information
be deemed Customer Data. The Fund agrees to treat all Proprietary
Information as proprietary to the Bank and further agrees that it
shall not divulge any Proprietary Information to any person or
organization except as may be provided hereunder. Without limiting the
foregoing, the Fund agrees for itself and its employees and agents:
(a) to access Customer Data solely from locations as may be
designated in writing by
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the Bank and solely in accordance with the Bank's applicable user
documentation;
(b) to refrain from copying or duplicating in any way the Proprietary
Information;
(c) to refrain from obtaining unauthorized access to any portion of
the Proprietary Information, and if such access is inadvertently
obtained, to inform in a timely manner of such fact and dispose
of such information in accordance with the Bank's instructions;
(d) to refrain from causing or allowing the data acquired hereunder
from being retransmitted to any other computer facility or other
location, except with the prior written consent of the Bank;
(e) that the Fund shall have access only to those authorized
transactions agreed upon by the parties;
(f) to honor all reasonable written requests made by the Bank to
protect at the Bank's expense the rights of the Bank in
Proprietary Information at common law, under federal copyright
law and under other federal or state law.
Each party shall take reasonable efforts to advise its employees of their
obligations pursuant to this Section 6. The obligations of this Section shall
survive any earlier termination of this Agreement.
6.2 If the Fund notifies the Bank that any of the Data Access Services do not
operate in material compliance with the most recently issued user
documentation for such services, the Bank shall endeavor in a timely manner
to correct such failure. Organizations from which the Bank may obtain
certain data included in the Data Access Services are solely responsible
for the contents of such data and the Fund agrees to make no claim against
the Bank arising out of the contents of such third-party data, including,
but not limited to, the accuracy thereof. DATA ACCESS SERVICES AND ALL
COMPUTER PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH
ARE PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE BANK EXPRESSLY DISCLAIMS
ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT
LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
6.3 If the transactions available to the Fund include the ability to originate
electronic instructions to the Bank in order to (i) effect the transfer or
movement of cash or Shares or (ii) transmit Shareholder information or
other information, then in such event the Bank shall be entitled to rely on
the validity and authenticity of such instruction without undertaking any
further inquiry as long as such instruction is undertaken in conformity
with security procedures established by the Bank from time to time.
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7. INDEMNIFICATION
7.1 The Bank shall not be responsible for, and the Fund shall on behalf of the
applicable Portfolio indemnify and hold the Bank harmless from and against,
any and all losses, damages, costs, charges, reasonable counsel fees,
payments, expenses and liability arising out of or attributable to:
(a) All actions of the Bank or its agents or subcontractors required to be
taken pursuant to this Agreement, provided that such actions are taken
in good faith and without negligence or willful misconduct;
(b) The Fund's lack of good faith, negligence or willful misconduct which
arise out of the breach of any representation or warranty of the Fund
hereunder;
(c) The reliance on or use by the Bank or its agents or subcontractors of
information, records, documents or services which (i) are received by
the Bank or its agents or subcontractors, and (ii) have been prepared,
maintained or performed by the Fund or any other person or firm on
behalf of the Fund including but not limited to any previous transfer
agent or registrar;
(d) The reliance on, or the carrying out by the Bank or its agents or
subcontractors of any instructions or requests of the Fund on behalf
of the applicable Portfolio;
(e) The offer or sale of Shares in violation of federal or state
securities laws or regulations requiring that such Shares be
registered or in violation of any stop order or other determination or
ruling by any federal or any state agency with respect to the offer or
sale of such Shares and
(f) The negotiations and processing of checks made payable to prospective
or existing Shareholders tendered to the Bank for the purchase of
Shares, such checks are commonly known as "third party checks."
7.2 At any time the Bank may apply to any officer of the Fund for instructions,
and may consult with legal counsel with respect to any matter arising in
connection with the services to be performed by the Bank under this
Agreement, and the Bank and its agents or subcontractors shall not be
liable and shall be indemnified by the Fund on behalf of the applicable
Portfolio for any action taken or omitted by it in reliance upon such
instructions or upon the opinion of such counsel. The Bank, its agents and
subcontractors shall be protected and indemnified in acting upon any paper
or document furnished by or on behalf of the Fund, reasonably believed to
be genuine and to have been signed by the proper person or persons, or upon
any instruction, information, data, records or documents provided the Bank
or its agents or subcontractors by machine readable input, telex, CRT data
entry or other similar means authorized by the Fund, and shall not be held
to have notice of any change of authority of any person, until receipt of
written notice thereof from the Fund. The Bank, its agents and
subcontractors shall also be protected and indemnified
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in recognizing stock certificates which are reasonably believed to bear the
proper manual or facsimile signatures of the officers of the Fund, and the
proper countersignature of any former transfer agent or former registrar,
or of a co-transfer agent or co-registrar.
7.3 In order that the indemnification provisions contained in this Section 7
shall apply, upon the assertion of a claim for which the Fund may be
required to indemnify the Bank, the Bank shall promptly notify the Fund of
such assertion, and shall keep the Fund advised with respect to all
developments concerning such claim. The Fund shall have the option to
participate with the Bank in the defense of such claim or to defend against
said claim in its own name or in the name of the Bank. The Bank shall in no
case confess any claim or make any compromise in any case in which the Fund
may be required to indemnify the Bank except with the Fund's prior written
consent.
8. STANDARD OF CARE
The Bank shall at all times act in good faith and agrees to use its best
efforts within reasonable limits to insure the accuracy of all services
performed under this Agreement, but assumes no responsibility and shall not
be liable for loss or damage due to errors unless said errors are caused by
its negligence, bad faith, or willful misconduct or that of its employees.
9. COVENANTS OF THE FUND AND THE BANK
9.1 The Fund shall on behalf of each of the Portfolios promptly furnish to the
Bank the following:
(a) A certified copy of the resolution of the Board of Trustees of the
Fund authorizing the appointment of the Bank and the execution and
delivery of this Agreement.
(b) A copy of the Declaration of Trust of the Fund and all amendments
thereto.
9.2 The Bank hereby agrees to establish and maintain facilities and procedures
reasonably acceptable to the Fund for safekeeping of stock certificates,
check forms and facsimile signature imprinting devices, if any; and for the
preparation or use, and for keeping account of, such certificates, forms
and devices.
9.3 The Bank shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Fund Act of 1940, as amended, and
the Rules thereunder, the Bank agrees that all such records prepared or
maintained by the Bank relating to the services to be performed by the Bank
hereunder are the property of the Fund and will be preserved, maintained
and made available in accordance with such Section and Rules, and will be
surrendered promptly to the Fund on and in accordance with its request.
9.4 The Bank and the Fund agree that all books, records, information and data
pertaining to the
9
<PAGE>
business of the other party which are exchanged or received pursuant to the
negotiation or the carrying out of this Agreement shall remain
confidential, and shall not be voluntarily disclosed to any other person,
except as may be required by law.
9.5 In case of any requests or demands for the inspection of the Shareholder
records of the Fund, the Bank will endeavor to notify the Fund and to
secure instructions from an authorized officer of the Fund as to such
inspection. The Bank reserves the right, however, to exhibit the
Shareholder records to any person whenever it is advised by its counsel
that it may be held liable for the failure to exhibit the Shareholder
records to such person.
10. TERMINATION OF AGREEMENT
10.1 This Agreement may be terminated by either party upon one hundred twenty
(120) days written notice to the other.
10.2 Should the Fund exercise its right to terminate, all out-of-pocket expenses
associated with the movement of records and material will be borne by the
Fund on behalf of the applicable Portfolio(s). Additionally, (a) the Bank
reserves the right to charge for any other reasonable expenses associated
with such termination for any additional services required by the Fund, (b)
if the Fund should exercise its right to terminate within twelve (12)
months of the execution of this Agreement, the Bank may impose upon the
Fund a charge equivalent to the average of three (3) months' fees.
11. ADDITIONAL FUNDS
In the event that the Fund establishes one or more series of Shares in
addition to the series named in the attached Schedule A, with respect to
which it desires to have the Bank render services as transfer agent under
the terms hereof, it shall so notify the Bank in writing, and if the Bank
agrees in writing to provide such services, such series of Shares shall
become a Portfolio hereunder.
12. ASSIGNMENT
12.1 Except as provided in Section 12.3 below, neither this Agreement nor any
rights or obligations hereunder may be assigned by either party without the
written consent of the other party.
12.2 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
12.3 The Bank may, without further consent on the part of the Fund, subcontract
for the performance hereof with (i) Boston Financial Data Services, Inc., a
Massachusetts corporation ("BFDS") which is duly registered as a transfer
agent pursuant to Section 17A(c)(2) of the Securities Exchange Act of 1934,
as amended ("Section 17A(c)(2)"), (ii) a BFDS subsidiary duly registered as
a transfer agent pursuant to Section 17A(c)(2) or (iii)
10
<PAGE>
a BFDS affiliate; provided, however, that the Bank shall be as fully
responsible to the Fund for the acts and omissions of any subcontractor as
it is for its own acts and omissions.
13. AMENDMENT
This Agreement may be amended or modified by a written agreement executed
by both parties and authorized or approved by a resolution of the Board of
Trustees of the Fund.
14. MASSACHUSETTS LAW TO APPLY
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of The Commonwealth of Massachusetts.
15. FORCE MAJEURE
In the event either party is unable to perform its obligations under the
terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other
causes reasonably beyond its control, such party shall not be liable for
damages to the other for any damages resulting from such failure to perform
or otherwise from such causes.
16. CONSEQUENTIAL DAMAGES
Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any
consequential damages arising out of any act or failure to act hereunder.
17. MERGER OF AGREEMENT
This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written.
18. LIMITATIONS OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby given
that this instrument is executed on behalf of the Trustees of the Trust as
Trustees and not individually and that the obligations of this instrument
are not binding upon any of the Trustees or Shareholders individually but
are binding only upon the assets and property of the Fund.
19. COUNTERPARTS
This Agreement may be executed by the parties hereto on any number of
counterparts, and all of said counterparts taken together shall be deemed
to constitute one and the same instrument.
11
<PAGE>
20. REPRODUCTION OF DOCUMENTS
This Agreement and all schedules, exhibits, attachments and amendments
hereto may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The parties
hereto each agree that any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative
proceeding, whether or not the original is in existence and whether or not
such reproduction was made by a party in the regular course of business,
and that any enlargement, facsimile or further reproduction shall likewise
be admissible in evidence.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
GE INSTITUTIONAL FUNDS
BY: /s/ Michael J. Cosgrove
--------------------------------
Michael J. Cosgrove
President
ATTEST:
/s/ Jeanne La Porta
- -------------------------------
STATE STREET BANK AND TRUST COMPANY
BY: /s/ Ronald E. Logue
--------------------------------
Executive Vice President
Ronald E. Logue
ATTEST:
/s/ S. Cesso
- -------------------------------
13
<PAGE>
STATE STREET BANK & TRUST COMPANY
FUND SERVICE RESPONSIBILITIES*
Service Performed Responsibility
- ----------------- --------------
Bank Fund
---- ----
1. Receives orders for the purchase X
of Shares.
2. Issue Shares and hold Shares in X
Shareholders accounts.
3. Receive redemption requests. X
4. Effect transactions 1-3 above X
directly with broker-dealers.
5. Pay over monies to redeeming X
Shareholders.
6. Effect transfers of Shares. X
7. Prepare and transmit dividends X
and distributions.
8. Issue Replacement Certificates. N/A
9. Reporting of abandoned property. X
10. Maintain records of account. X
11. Maintain and keep a current and X
accurate control book for each
issue of securities.
12. Mail proxies. X
13. Mail Shareholder reports. X
14. Mail prospectuses to current X
Shareholders.
15. Withhold taxes on U.S. resident X
and non-resident alien accounts.
14
<PAGE>
Service Performed Responsibility
- ----------------- --------------
Bank Fund
---- ----
16. Prepare and file U.S. Treasury X
Department forms.
17. Prepare and mail account and X
confirmation statements for
Shareholders.
18. Provide Shareholder account X
information.
19. Blue sky reporting. X
* Such services are more fully described in Section 1.2 (a), (b) and (c) of
the Agreement.
GE INSTITUTIONAL FUNDS
BY: /s/ Michael J. Cosgrove
---------------------------------
ATTEST:
/s/ Jeanne La Porta
- ------------------------------
STATE STREET BANK AND TRUST COMPANY
BY: /s/ Ronald E. Logue
---------------------------------
Ronald E. Logue
Executive Vice President
ATTEST:
/s/ S. Cesso
- ------------------------------
15
<PAGE>
SCHEDULE A
GE INSTITUTIONAL FUNDS
Emerging Markets Fund
International Equity Fund
Mid-Cap Growth Fund
Value Equity Fund
Premier Growth Equity Fund
U.S. Equity Fund
S&P 500 Index Fund
Strategic Investment Fund
Income Fund
Money Market Fund
16
Exhibit 99.B-10
S U T H E R L A N D, A S B I L L & B R E N N A N LLP
Atlanta o Austin o New York o Washington
1275 Pennsylvania Avenue, N.W. Tel: (202) 383-0100
Washington, DC 20004-1404 Fax: (202) 637-3593
November 6, 1997
Board of Trustees
GE Institutional Funds
3003 Summer Street
Stamford, CT 06905
RE: Registration Statements on Form N-1A
(File Nos. 333-29337, 811-08257)
-------------------------------------
Trustees:
We have acted as counsel to GE Institutional Funds (the "Trust"), a
business trust organized under the laws of the State of Delaware, in connection
with its registration as an open-end management investment company under the
Investment Company Act of 1940, as amended, and in connection with its
registration of an indefinite number of shares of beneficial interest in the
Trust (the "Shares") under the Securities Act of 1933, as amended (the "1933
Act"). In this connection, we have prepared the initial registration statement
and pre-effective amendment number one to the registration statement filed by
you and pre-effective amendment number two to the registration statement to be
filed by you with the Securities and Exchange Commission on Form N-1A (File Nos.
333-29337, 811-08257) (collectively, the "registration statements"). We also are
familiar with the actions taken by you by unanimous written consent on August
29, 1997 and at the board of trustees meeting on September 10, 1997 in
connection with the authorization, issuance and sale of the Shares.
We have examined such Trust records, certificates and other documents and
reviewed such questions of law as we have considered necessary or appropriate
for purposes of this opinion. In our examination of such materials, we have
assumed the genuineness of all signatures and the conformity to the original
documents of all copies submitted to us. As to certain questions of fact
material to our opinion, we have relied upon statements of officers of the Trust
and upon representations of the Trust made in the registration statements.
<PAGE>
Board of Trustees
November 6, 1997
Page 2
Based upon the foregoing, we are of the opinion that the Shares, when
issued and sold in the manner described in the registration statements, will be
legally issued, fully paid and non-assessable.
We are attorneys licensed to practice only in the State of Georgia and the
District of Columbia.
We hereby consent to the reference to our name in the prospectuses and
statement of additional information filed as part of the registration
statements. In giving this consent, we do not admit that we are in the category
of persons whose consent is required under Section 7 of the 1933 Act.
Very truly yours,
SUTHERLAND, ASBILL & BRENNAN LLP
By: /s/ Stephen E. Roth
-----------------------------------------
Stephen E. Roth
Exhibit 99.B-11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Pre-Effective Amendment No. 2 to the Registration
Statement on Form N-1A (the "Registration Statement") of our report dated
October 15, 1997, relating to the Statement of Assets and Liabilities of the GE
Institutional Funds, as of October 9, 1997, which accompanies the Registration
Statement. We also consent to the reference to us under the heading "Independent
Accountants" in the Statement of Additional Information.
/s/ PRICE WATERHOUSE LLP
- ---------------------------------
PRICE WATERHOUSE LLP
Boston, Massachusetts
November 7, 1997
Exhibit 99.B13
GE INSTITUTIONAL FUNDS
PURCHASE AGREEMENT
GE Institutional Funds, a business trust organized under the laws of the
State of Delaware (the "Trust"), and General Electric Capital Assurance Company
("GECA"), a corporation organized under the laws of the State of Delaware, agree
as follows:
1. OFFER AND PURCHASE.
The Trust offers to GECA, and GECA agrees to purchase, the number and
amount of Investment Class shares and Service Class shares (together, the
"Shares") shown on the Schedule attached to this Agreement, of the Emerging
Markets Fund, International Equity Fund, Mid-Cap Growth Fund, Premier Growth
Equity Fund, Value Equity Fund, U.S. Equity Fund, S&P 500 Index Fund, Strategic
Investment Fund, Income Fund and Money Market Fund, each a series of the Trust.
GECA acknowledges receipt from the Trust of the Shares and the Trust
acknowledges receipt from GECA of an aggregate of $100,091.00 in full payment
for the Shares.
2. REPRESENTATION BY GECA.
GECA represents and warrants to the Trust that the Shares are being
acquired for investment purposes and not with a view to resale or further
distribution.
3. REDUCTION OF REDEMPTION PROCEEDS.
GECA agrees that, if any of the Shares are redeemed before five years after
the effective date of the Trust's Registration Statement, the proceeds of the
redemption will be reduced by the unamortized portion of the organization
expenses in the same proportion as the number of Shares being redeemed bears to
the number of initial shares of the Funds outstanding at the time of the
redemption.
4. FILING OF CERTIFICATE OF TRUST.
The Trust represents that a copy of its Certificate of Trust dated as of
May 23, 1997, as amended from time to time, is on file with the Secretary of
State of the State of Delaware. The Trust represents that a copy of its
Declaration of Trust dated as if August 29, 1997, as amended from time to time,
is maintained by the Trust.
5. LIMITATION OF LIABILITY.
The Trust and GECA agree that the obligations of the Trust under this
Agreement will not be binding upon any of the Trustees, shareholders, nominees,
officers, employees or agents,
-1-
<PAGE>
whether past, present or future, of the Trust, individually, but are binding
only upon the assets and property of the Trust. The execution and delivery of
this Agreement have been authorized by the Trustees of the Trust, and signed by
an authorized officer of the Trust, acting as such, and neither the
authorization by the Trustees nor the execution and delivery by the officer will
be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but will bind only the trust property of
the Trust. No series of the Trust will be liable for any claims against any
other series.
6. NO RIGHT OF ASSIGNMENT.
GECA's right under this Agreement to purchase the Shares is not assignable.
7. DATES.
This Agreement will become effective as of the date hereof.
IN WITNESS WHEREOF, the parties to this Agreement have executed this
Agreement as of the 8th day of October, 1997.
GE INSTITUTIONAL FUNDS
By: /s/ Michael J. Cosgrove
-----------------------------------
Name: Michael J. Cosgrove
Title: President
ATTEST:
/s/ Jeanne LaPorta
- ------------------------------
Jeanne LaPorta
GENERAL ELECTRIC CAPITAL ASSURANCE COMPANY
By: /s/ Greg E. Deavens
-----------------------------------
Name: Greg E. Deavens
Title: Vice President-Finance
ATTEST:
/s/ Jeffrey Condit
- ------------------------------
Jeffrey Condit
-2-
<PAGE>
SCHEDULE
<TABLE>
<CAPTION>
Amount of Amount of Price
Name of Fund Investment Class Shares Service Class Shares per Share Total
- ------------ ----------------------- -------------------- --------- -----
<S> <C> <C> <C> <C>
Emerging Markets Fund 1,000 1 $10.00 $ 10,010
International Equity Fund 1,000 1 $10.00 $ 10,010
Mid-Cap Growth 1,000 1 $10.00 $ 10,010
Premier Growth Equity Fund 1,000 1 $10.00 $ 10,010
Value Equity Fund 1,000 1 $10.00 $ 10,010
U.S. Equity Fund 1,000 1 $10.00 $ 10,010
S&P 500 Index Fund 1,000 1 $10.00 $ 10,010
Strategic Investment Fund 1,000 1 $10.00 $ 10,010
Income Fund 1,000 1 $10.00 $ 10,010
Money Market Fund 10,000 1 $ 1.00 $ 10,001
--------
Total $100,091
</TABLE>
-3-
Exhibit 99.B15
GE INSTITUTIONAL FUNDS
SHAREHOLDER SERVICING AND DISTRIBUTION PLAN
This Shareholder Servicing and Distribution Plan ("Plan") is adopted by GE
Institutional Funds, a business trust organized under the laws of the State of
Delaware (the "Trust"), with respect to each of the Emerging Markets Fund,
International Equity Fund, Mid-Cap Growth Fund, Premier Growth Equity Fund,
Value Equity Fund, U.S. Equity Fund, S&P 500 Index Fund, Strategic Investment
Fund, Income Fund, Money Market Fund and any other investment fund offered by
the Trust in the future that adopts this Plan (individually, a "Covered Fund"
and collectively, the "Covered Funds"), pursuant to Rule 12b-1 (the "Rule")
under the Investment Company Act of 1940, as amended (the "1940 Act"). Each of
the Covered Funds has two classes of shares of beneficial interest ("Shares"),
designated as the Investment Class and the Service Class, respectively. This
Plan is intended to describe the shareholder servicing and distribution services
to be provided by GE Investment Management Incorporated ("GEIM"), a corporation
organized under the laws of the State of Delaware, and/or any distributor of the
Covered Funds' Shares (the "Distributor") in connection with the distribution of
the Service Class Shares. Those services will be provided as set out below,
subject to the following terms and conditions:
SECTION 1. AMOUNT OF PAYMENTS.
(a) The Trust will pay GEIM, with respect to the Service Class Shares of
each Covered Fund, for shareholder and distribution-related services provided to
that class of Shares, an annual fee of .25% of the value of the average daily
net assets of the Covered Fund attributable to the Service Class Shares (the
"Service and Distribution Fee").
(b) The Service and Distribution Fee to be paid with respect to the Covered
Funds under this Plan will be calculated daily and paid monthly by the Trust
with respect to the Service Class Shares of the Covered Funds at the annual rate
indicated above.
SECTION 2. SERVICES PAYABLE UNDER THE PLAN.
(a) The Service and Distribution Fee payable with respect to the Service
Class Shares of a Covered Fund is intended to compensate GEIM, or enable GEIM to
compensate other persons ("Service Providers"), for providing ongoing servicing
and/or maintenance of the accounts of shareholders of the Covered Fund
("Shareholder Services") and to compensate GEIM, or enable GEIM to compensate
Service Providers, including any Distributor of Shares of the Covered Fund, for
providing services that are primarily intended to result in, or that are
primarily attributable to, the sale of Service Class Shares of the Covered Fund
("Selling Services"). "Shareholder Services" as used in this Plan means all
forms of shareholder liaison services, including, among other things, providing
record and/or beneficial holders of Service Class shares of a Covered Fund with
one or more of the following: (i) information on their investments; (ii) general
information regarding investing in mutual funds; (iii) periodic newsletters
containing materials relating to the Covered Fund or to investments in general
in
-1-
<PAGE>
mutual funds; (iv) periodic financial seminars designed to assist in the
education of shareholders with respect to mutual funds generally and the Covered
Fund specifically; (v) access to a telephone inquiry center relating to the
Covered Fund; (vi) sub-accounting and sub-account maintenance, servicing and
transaction processing and (vii) other similar services not otherwise required
to be provided by the Trust's custodian or transfer agent. "Selling Services" as
used in this Plan include, but are not limited to: the printing and distribution
to prospective investors in the Covered Fund of prospectuses and statements of
additional information that are used in connection with sales of Service Class
Shares of the Covered Fund; the preparation, including printing, and
distribution of sales literature and media advertisements relating to the
Service Class Shares of the Covered Fund; and distributing Service Class Shares
of the Covered Fund. In providing compensation for Selling Services in
accordance with this Plan, GEIM is expressly authorized: (i) to make, or cause
to be made, payments reflecting an allocation of overhead and other office
expenses related to the distribution of the Service Class Shares of a Covered
Fund; (ii) to make, or cause to be made, payments, or to provide for the
reimbursement of expenses of, persons who provide support services in connection
with the distribution of the Service Class Shares of the Covered Fund; and (iii)
to make, or cause to be made, payments to financial intermediaries who have sold
Service Class Shares of the Covered Fund.
(b) Payments under this Plan are not tied exclusively to the expenses for
shareholder servicing and distribution expenses actually incurred by GEIM or any
Service Provider, and the payments may exceed expenses actually incurred by GEIM
and/or a Service Provider.
SECTION 3. APPROVAL OF PLAN.
(a) SHAREHOLDER APPROVAL. Neither the Plan nor any related agreements will
take effect, and no fee will be payable in accordance with Section 1 of the
Plan, with respect to the Service Class Shares until the Plan has been approved
by a vote of at least a majority of the outstanding voting securities
represented by the Service Class. The Plan will be deemed to have been approved
with respect to the Service Class so long as a majority of the outstanding
voting securities of the Service Class votes for the approval of the Plan,
notwithstanding that: (i) the Plan has not been approved by a majority of the
outstanding voting securities represented by the Investment Class or (ii) the
Plan has not been approved by a majority of the outstanding voting securities of
the Covered Fund.
(b) TRUSTEE APPROVAL. Neither this Plan nor any related agreements will
take effect with respect to the Service Class Shares of a Covered Fund until
approved by (i) a majority vote of the full Board of Trustees of the Trust and
(ii) those Trustees who are not interested persons of the Trust and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreements related to it (the "Independent Trustees"), cast in person at a
meeting called for the purpose of voting on this Plan and the related
agreements.
-2-
<PAGE>
SECTION 4. CONTINUANCE OF PLAN.
This Plan will continue in effect with respect to the Service Class Shares
of a Covered Fund from year to year so long as its continuance is specifically
approved annually by vote of the Trust's Board of Trustees in the manner
described in Section 3(b) above. The Trust's Board of Trustees will evaluate the
appropriateness of this Plan with respect to the Service Class Shares and its
payment terms on a continuing basis and in doing so will consider all relevant
factors, including the types and extent of Shareholder Services and Selling
Services provided by GEIM and/or Service Providers and amounts GEIM and/or
Service Providers receive under this Plan.
SECTION 5. TERMINATION.
This Plan may be terminated with respect to the Service Class Shares of a
Covered Fund at any time, by vote of a majority of the Independent Trustees or
by a vote of a majority of the outstanding voting securities of the Service
Class.
SECTION 6. AMENDMENTS.
This Plan may not be amended with respect to the Service Class Shares to
increase materially the amount of the fees described in Section 1 above without
approval of the shareholders of the Service Class as contemplated in Section
3(a) above. In addition, all material amendments to this Plan must be approved
in the manner described in Section 3(b) above.
SECTION 7. SELECTION OF CERTAIN TRUSTEES.
While this Plan is in effect with respect to the Service Class Shares of a
Covered Fund, the selection and nomination of the Trust's Trustees who are not
interested persons of the Trust will be committed to the discretion of the
Trustees then in office who are not interested persons of the Trust.
SECTION 8. WRITTEN REPORTS.
In each year during which this Plan remains in effect with respect to a
Covered Fund, any person authorized to direct the disposition of monies paid or
payable by the Trust with respect to the Covered Fund pursuant to the Plan or
any related agreement will prepare and furnish to the Trust's Board of Trustees,
and the Board will review, at least quarterly, written reports, complying with
the requirements of the Rule, which set out the amounts expended under this Plan
and the purposes for which those expenditures were made.
SECTION 9. PRESERVATION OF MATERIALS.
The Trust will preserve copies of this Plan, any agreement relating to this
Plan and any report made pursuant to Section 8 above, for a period of not less
than six years (the first two years in an easily accessible place) from the date
of this Plan, the agreement or the report.
-3-
<PAGE>
SECTION 10. MEANING OF CERTAIN TERMS.
As used in this Plan, the terms "interested person" and "majority of the
outstanding voting securities" will be deemed to have the same meaning that
those terms have under the 1940 Act and the rules and regulations under the 1940
Act, subject to any exemption that may be granted to the Trust under the 1940
Act by the Securities and Exchange Commission.
SECTION 11. FILING OF CERTIFICATE OF TRUST.
The Trust represents that a copy of its Certificate of Trust, dated as of
May 23, 1997, as amended from time to time, is on file with the Secretary of
State of the State of Delaware.
SECTION 12. LIMITATION OF LIABILITY.
The obligations of the Trust under this Plan will not be binding upon any
of the Trustees, shareholders, nominees, officers, employees or agents, whether
past, present or future, of the Trust, individually, but are binding only upon
the assets and property of the Trust, as provided in the Trust's Declaration of
Trust, dated as of August 29, 1997 (the "Declaration of Trust"). The execution
and delivery of this Plan have been authorized by the Trustees of the Trust, and
signed by an authorized officer of the Trust, acting as such, and neither the
authorization by the Trustees nor the execution and delivery by the officer will
be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but will bind only the trust property of
the Trust as provided in the Declaration of Trust. No Covered Fund will be
liable for any claims against any other Covered Fund.
SECTION 13. DATE OF EFFECTIVENESS.
This Plan has been executed by the Trust with respect to the Covered Funds
as of the 16th day of October, 1997 and will become effective with respect
to the Service Class Shares of a Covered Fund as of the date on which interests
in the Service Class Shares are first offered to or held by the public.
GE INSTITUTIONAL FUNDS
By: /s/ Michael J. Cosgrove
-------------------------------
Name: Michael J. Cosgrove
Title: President
-4-
Exhibit 99.B18
Rule 18f-3(d)
MULTIPLE CLASS PLAN FOR GE INSTITUTIONAL FUNDS
I. INTRODUCTION
GE Institutional Funds (the "Trust") is a business trust established under
Delaware law. The Trust's Declaration of Trust provides for the Trust to issue
shares of beneficial interest in an unlimited number of series, with each series
representing a fractional undivided interest in a separate designated investment
portfolio (a "Fund"). The Declaration of Trust also provides that the shares of
each series, or of certain designated series, may be divided into various
classes that vary as permitted by Rule 18f-3 under the Investment Company Act of
1940, as amended (the "1940 Act").
This Multiple Class Plan ("Plan") is adopted by the Trust pursuant to Rule
18f-3(d) of the 1940 Act, with respect to each of the Funds listed on Schedule A
(each, a "Participant Fund" and collectively, the "Participant Funds").
Each series of shares related to the Participant Funds is divided into two
classes of shares of beneficial interest ("Shares"), designated as the
Investment Class and the Service Class, respectively. Shares of the Participant
Funds are distributed pursuant to a system (the "Multiple Distribution System")
in which each class of Shares represents interests in the same portfolio of
investments of the Participant Fund and has the same rights, preferences, voting
powers, restrictions and limitations, except as outlined below.
II. DISTRIBUTION ARRANGEMENTS AND SERVICE FEES
Classes of Shares have the following service and distribution fee
arrangements:
A. Service Class Shares
Service Class Shares are offered by the Participant Funds with a
Shareholder Servicing and Distribution Plan adopted pursuant to Rule 12b-1 under
the 1940 Act ("Rule 12b-1 Plan") providing for a shareholder servicing and
distribution fee at an annual rate of .25% of the value of the average daily net
assets of the Participant Fund attributable to the Service Class Shares. Such
fee will be calculated daily and paid monthly by the Trust.
This shareholder servicing and distribution fee is intended to compensate
GE Investment Management Incorporated ("GEIM"), or enable GEIM to compensate
other persons ("Service Providers"), for providing ongoing servicing and/or
maintenance of the accounts of shareholders of the Participant Fund and to
compensate GEIM, or enable GEIM to compensate Service Providers, including any
Distributor of Shares of the Participant Fund, for providing services that are
primarily intended to result in, or that are primarily attributable to, the sale
of Service Class Shares of the Participant Fund. The shareholder servicing and
distribution fee paid by the Service Class Shares will cause
<PAGE>
such Shares to have a higher expense ratio and lower return than Investment
Class Shares.
Notwithstanding the foregoing, the aggregate amounts of any asset-based
distribution and/or shareholder service fee imposed by the Trust must comply
with the Requirements of Section 2830 of the Conduct Rules of the National
Association of Securities Dealers, Inc. (the "NASD"), as amended from time to
time, and any other rules or regulations promulgated by the NASD or the
Securities and Exchange Commission applicable to mutual fund distribution and
service fees.
B. Investment Class Shares
Investment Class Shares are offered by the Participant Funds without the
imposition of a shareholder servicing and distribution fee.
C. Additional Classes of Shares
The Board of Trustees of the Institutional Trust has the authority to
create additional classes, or change existing classes, from time to time, in
accordance with Rule 18f-3 of the 1940 Act.
<PAGE>
III. INCOME AND EXPENSE ALLOCATION
Under the Multiple Distribution System, all expenses incurred by a
Participant Fund are allocated among the Service Class Shares and the Investment
Class Shares based on the net assets of the Participant Fund attributable to
each class, except that the Service Class' net asset value and expenses reflect
the expenses associated with its Rule 12b-1 Plan, including any costs associated
with obtaining shareholder approval of the Rule 12b-1 Plan (or an amendment to
the Rule 12b-1 Plan) and any Class Expenses incurred on a class basis. Class
Expenses are limited to the following:
(i) transfer agency fees as identified by the transfer agent as
being attributable to a specific class;
(ii) Blue Sky registration fees incurred by a class of Shares;
(iii) Securities and Exchange Commission registration fees incurred by
a class of Shares;
(iv) accounting, audit and tax expenses relating to a specific class;
(v) fees and other payments made to entities performing services for
a particular class, including account maintenance, dividend
disbursing or subaccounting services;
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(vi) the expenses of administrative personnel and services as
required to support the shareholders of a specific class;
(vii) litigation or other legal expenses relating solely to one class
of Shares;
(viii) Trustees' fees incurred as a result of issues relating to one
class of Shares; and
(ix) printing and postage expenses related to preparing and
distributing materials such as shareholder reports, prospectuses
and proxies to current shareholders.
Expenses of a Participant Fund allocated to a particular class of Shares of
that Participant Fund are borne on a pro rata basis by each outstanding Share of
that class.
Income, realized and unrealized capital gains and losses, and expenses that
are not allocated to a specific class, shall be allocated to each class of a
Participant Fund on the basis of the net asset value of that class in relation
to the net asset value of the Participant Fund.
IV. VOTING RIGHTS
Each class will have exclusive voting rights with respect to matters that
exclusively affect such class. For example, the Service Class shareholders will
have exclusive voting rights with respect to the 12b-1 Plan for the Service
Class Shares.
V. REDEMPTIONS
The value of Participant Fund Shares on certain redemptions may be more or
less than the shareholder's cost or basis, depending upon the Participant Fund's
net asset value at the time of redemption.
VI. DIVIDENDS
Dividends are calculated in the same manner for each class and declared and
paid on both classes of stock on the same days and at the same times.
All dividends and capital gain distributions, if any, with respect to a
particular class will be paid automatically in additional Shares of that class
at the net asset value per Share determined as of the next business day
following the record date.
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SCHEDULE A
Emerging Markets Fund
International Equity Fund
Mid-Cap Growth Fund
Premier Growth Equity Fund
Value Equity Fund
U.S. Equity Fund
S&P Index Fund
Strategic Investment Fund
Income Fund
Money Market Fund
