<PAGE>
File Nos. 333-29337,811-08257
As filed with the Securities and Exchange Commission on April 25, 2000
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. / /
Post-Effective Amendment No. 11 /x/
and
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 13 /x/
(Check appropriate box or boxes)
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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)
-----------------------------
Copy to:
David S. Goldstein, 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.
It Is Proposed That this Filing Will Become Effective (check appropriate box)
/ / Immediately upon Filing Pursuant to Paragraph (b) of Rule 485
/x/ on April 28, 2000 Pursuant to Paragraph (b) of Rule 485
/ / 60 Days after Filing Pursuant to Paragraph (a)(1) of Rule 485
/ / on (Date) Pursuant to Paragraph (a)(1) of Rule 485
/ / 75 Days after Filing Pursuant to Paragraph (a)(2) of Rule 485
/ / on April 28, 2000 Pursuant to Paragraph (a)(2) of Rule 485
If appropriate, check the following box:
/ / This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
This post-effective amendment includes an updated prospectus only for those
series of Registrant (the shares of) which are currently offered to the public
and for the following two new Series the shares of which are being registered
herewith: Premier Research Equity Fund and and Premier International Equity
Fund. The Small-Cap Growth Equity Fund and the High Yield Fund, each a series of
Registrant (the shares of) which are not currently being offered to the public,
remain registered and unaffected by this post-effect amendment. This post-effect
amendment is not intended to update or amend the stand alone propectus for the
International Equity Fund.
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Prospectus GE Institutional Funds
April 28, 2000
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Equity Funds
U.S. Equity Fund
S&P 500 Index Fund
Value Equity Fund
Mid-Cap Growth Fund
Mid-Cap Value Equity Fund
Small-Cap Value Equity Fund
International Equity Fund
Europe Equity Fund
Emerging Markets Fund
Premier Funds
Premier Growth Equity Fund
Premier Research Equity Fund
Premier International Equity Fund
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Income Funds
Income Fund
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Asset Allocation Funds
Strategic Investment Fund
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Money Market Funds
Money Market Fund
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Like all mutual funds, the Funds' shares have not been approved or disapproved
by the Securities and Exchange Commission, nor has the Securities and Exchange
Commission passed upon the accuracy or adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
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[LOGO]
We bring good things to life.
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Contents
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GE Institutional
Funds Prospectus
Equity Funds 3
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U.S. Equity Fund 4
S&P 500 Index Fund 6
Value Equity Fund 8
Mid-Cap Growth Fund 10
Mid-Cap Value Equity Fund 12
Small-Cap Value Equity Fund 14
International Equity Fund 16
Europe Equity Fund 18
Emerging Markets Fund 20
Premier Growth Equity Fund 22
Premier Research Equity Fund 23
Premier International Equity Fund 24
Income Funds 25
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Income Fund 26
Asset Allocation Funds 28
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Strategic Investment Fund 29
Money Market Funds 31
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Money Market Fund 32
Fund Expenses 34
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More on Strategies and Risks 38
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Important Definitions 38
More on Investment Strategies 41
More on Risks 46
Other Risk Considerations 49
About the Investment Adviser 50
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Investment Adviser
and Administrator 50
About the Funds' Portfolio Managers 51
About the Sub-Advisers 54
Prior Performance Information 56
How to Invest 68
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Investment Choices 68
Opening an Account 68
How to Buy Shares 68
Eligible Investors 69
Eligibility Requirements 69
How to Redeem Shares 70
How to Exchange Shares 71
Signature Guarantees 71
Distribution and Shareholder
Service Fees 71
Dividends, Capital Gains and
Other Tax Information 74
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Calculating Share Value 76
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Financial Highlights 77
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Additional information regarding GE Institutional Funds is contained in the
Statement of Additional Information dated April 28, 2000, which is incorporated
by reference into (legally forms a part of) this Prospectus.
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Equity Funds GE Institutional 3
Fund Prospectus
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An investment in an Equity Fund is not a deposit of any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. An investment in an Equity Fund is subject to risk, including
possible loss of principal invested.
Equity funds generally invest in equity securities. Equity securities may
include common stocks, preferred securities, depositary receipts, convertible
securities and rights and warrants of U.S. and foreign companies. Stocks
represent an ownership interest in a corporation. Equity funds have more
potential for capital growth than other funds, but they have greater risk.
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4 GE Institutional
Fund Prospectus
Equity Funds
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U.S. Equity
Fund
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Investment
Objective:
Long-term
growth of
capital.
The Strategy
The U.S. Equity Fund invests primarily in equity securities of U.S. companies.
The portfolio managers use a Multi-Style(R) investment strategy that combines
growth and value investment management styles. As a result, the portfolio has
characteristics similar to the Standard & Poor's 500 Composite Stock Index,
including capital appreciation and income. Stock selection is key to the
performance of the Fund.
Through fundamental company research, the portfolio managers seek to identify
securities of large companies with characteristics such as:
o attractive valuations
o financial strength
o high quality management focused on generating shareholder value
The Fund also may invest to a lesser extent in foreign securities and debt
securities. The portfolio managers may use various investment techniques to
adjust the Fund's investment exposure, but there is no guarantee that these
techniques will work.
The Risks
The principal risks of investing in the Fund are stock market risk and style
risk (mid-cap company risk). To the extent that the portfolio managers invest in
foreign securities or debt securities, the Fund would be subject to foreign
exposure risk, interest rate risk and credit risk.
If you would like additional information regarding the Fund's investment
strategies and risks, including a description of the terms in bold type, please
refer to "More on Strategies and Risks" later in this Prospectus.
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5
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Fund Performance
The bar chart and table opposite illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to a common measure of
performance.
The bar chart illustrates how the Fund's performance varies from year to year
over the periods shown. During the periods presented in the bar chart, the
Fund's highest return for a quarter was 19.90% for the quarter ended December
31, 1998. The Fund's lowest return for a quarter was -10.08% for the quarter
ended September 30, 1998. The Fund's year-to-date return was 2.10% as of March
31,2000.
The table opposite illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of the Standard & Poor's 500
Composite Stock Index (S&P 500 Index(R)). The table reflects the impact of the
Fund's expenses and assumes that you sold your shares at the end of each period.
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Prior Performance Information
Prior performance information of GE Asset Management, the Fund's investment
adviser, can be found under "Prior Performance Information" later in this
Prospectus.
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Calendar Year Total Returns
Investment Class Shares*
[BAR CHART]
24% 20%
1998 1999
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Average Annual Total Return
(as of December 31, 1999)
Since
1 Year Inception**
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U.S. Equity Fund
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Investment Class 19.78% 22.30%
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S&P 500 Index 21.07% 24.73%
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Both the bar chart and table assume reinvestment of dividends and distributions.
As with all mutual funds, past performance is not an indication of future
performance.
* As of the date of this Prospectus, Service Class shares have no operating
history and therefore performance information is not available. Service Class
shares of the Fund pay a shareholder service and distribution fee, which would
lower their returns.
** Inception date (commencement of operations) of the Fund: November 25, 1997;
S&P 500 Index returns are not available from the Fund's Inception date and
therefore are calculated from the month end nearest the Fund's Inception date,
which in this case is December 1, 1997.
All mutual funds use a standard formula to calculate total return. Total return
measures the price change in a share assuming the reinvestment of all dividend
income and capital gain distributions.
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6 GE Institutional
Funds Prospectus
Equity Funds
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S&P 500 Index Fund
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Investment Objective: Growth of capital and accumulation of income that
corresponds to the investment return of the Standard & Poor's 500 Composite
Stock Index.
The S&P 500 Index Fund invests primarily in equity securities of companies
contained in the Standard & Poor's 500 Composite Stock Index (S&P 500
Index(R)).* The portfolio manager seeks to replicate the return of the S&P 500
Index while holding transaction costs low and minimizing portfolio turnover. The
portfolio manager attempts to achieve a correlation between its total return and
that of the S&P 500 Index of at least .95, without taking expenses into account.
The portfolio manager uses a passive management approach to select a
representative group of stocks within the S&P 500 Index. The portfolio manager
also may use statistical selection to determine which securities within the
Index to purchase or sell for the Fund. The Fund generally will not hold all the
securities that comprise the Index and, in some cases, the Fund's weightings in
particular industry segments represented in the Index may differ significantly
from those of the Index.
The Fund also may invest to a lesser extent in debt securities, foreign
securities and other securities that are not in the S&P 500 Index. Except for
debt securities, which are used to manage cash flows, all securities held by the
Fund are acquired to fulfill its investment objective. The portfolio managers
may use various investment techniques to adjust the Fund's investment exposure,
but there is no guarantee that these techniques will work. The Fund will not
adopt a temporary defensive strategy in times of declining stock prices and
therefore you will bear the risk of such declines.
The Risks
The principal risks of investing in the Fund are stock market risk and the risk
that the Fund's return may not correlate exactly with that of the S&P 500 Index.
To the extent that the portfolio managers invest in foreign securities and debt
securities, the Fund would be subject to foreign exposure risk, interest rate
risk and credit risk.
If you would like additional information regarding the Fund's investment
strategies and risks, including a description of the terms in bold type, please
refer to "More on Strategies and Risks" later in this Prospectus.
* "Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500" and
"500" are trademarks of the The McGraw-Hill Companies, Inc. and have been
licensed for use by GE Asset Management Incorporated. The S&P 500 Index Fund is
not sponsored, endorsed, sold or promoted by Standard & Poor's, and Standard &
Poor's makes no representation regarding the advisability of investing in the
Fund. Please see the Statement of Additional Information for additional
disclaimers and liabilities regarding Standard & Poor's.
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7
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Fund Performance
The bar chart and table opposite illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to a common measure of
performance.
The bar chart illustrates how the Fund's performance varies from year to year
over the periods shown. During the periods presented in the bar chart, the
Fund's highest return for a quarter was 21.50% for the quarter ended December
31, 1998. The Fund's lowest return for a quarter was -9.81% for the quarter
ended September 30, 1998. The Fund's year-to-date return was 3.01% as of March
31, 2000.
The table opposite illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of the S&P 500 Index(R). The
table reflects the impact of the Fund's expenses and assumes that you sold your
shares at the end of each period.
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Calendar Year Total Returns
Investment Class Shares*
[BAR CHART]
1998 29%
1999 21%
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Average Annual Total Return
(as of December 31, 1999)
Since
1 Year Inception**
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S&P 500 Index Fund
Investment Class 21.18% 25.04%
S&P 500 Index 21.07% 24.73%
Both the bar chart and table assume reinvestment of dividends and distributions.
As with all mutual funds, past performance is not an indication of future
performance.
* As of the date of this Prospectus, Service Class shares have no operating
history and therefore performance information is not available. Service Class
shares of the Fund pay a shareholder service and distribution fee, which would
lower their returns.
** Inception date (commencement of operations) of the Fund: November 25, 1997:
S&P 500 Index returns are not available from the Fund's Inception date and
therefore are calculated from the month end nearest the Fund's Inception date,
which in this case is December 1, 1997.
All mutual funds use a standard formula to calculate total return. Total return
measures the price change in a share assuming the reinvestment of all dividend
income and capital gain distributions.
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8 GE Institutional
Funds Prospectus
Equity Funds
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Value Equity Fund
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Investment Objective: Long-term growth of capital and future income.
The Strategy
The Value Equity Fund invests primarily in equity securities of large U.S.
companies that the portfolio manager believes are undervalued by the market but
have solid growth prospects. A company may be undervalued for reasons such as
market overreaction to recent company, industry or economic problems. Stock
selection is key to the performance of the Fund.
The portfolio manager seeks to identify securities of companies with
characteristics such as:
o low prices in relation to their peers and the overall market
o the potential for long-term earnings growth
o above-average dividend yields
o expectation of income in future periods
o strong management
o financial strength
o attractive upside potential and limited downside risk
The Fund also may invest to a lesser extent in foreign securities and debt
securities. The portfolio manager may use various investment techniques to
adjust the Fund's investment exposure, but there is no guarantee that these
techniques will work.
The Risks
The principal risks of investing in the Fund are stock market risk and style
risk (value investing risk). To the extent that the portfolio manager invests in
foreign securities or debt securities, the Fund would be subject to foreign
exposure risk, interest rate risk and credit risk.
If you would like additional information regarding the Fund's investment
strategies and risks, including a description of the terms in bold type, please
refer to "More on Strategies and Risks" later in this Prospectus.
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Fund Background
Because the Fund is new, it does not have any performance history. Performance
information will be included in the Fund's next available annual or semi-annual
report.
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Prior Performance Information
Prior performance information of GE Asset Management, the Fund's investment
adviser, can be found under "Prior Performance Information" later in this
Prospectus.
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9
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10 GE Institutional
Funds Prospectus
Equity Funds
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Mid-Cap Growth Fund
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Investment Objective: Long-term growth of capital.
The Strategy
The Mid-Cap Growth Fund invests primarily in equity securities of mid-cap
companies that the portfolio manager believes have above-average growth
potential. The Fund defines a mid-cap company as one with a market
capitalization within the capitalization range of the Standard & Poor's MidCap
400 Stock Index. As of December 31, 1999, the market capitalization of companies
in the index ranged from $165 million to $37 billion. The portfolio manager will
not sell a stock merely because the market capitalization of a company in the
portfolio moves above or below the maximum or minimum capitalization of the
index. Stock selection is key to the performance of the Fund.
The portfolio manager seeks to identify securities of growth companies with
characteristics such as:
o above-average revenue and earnings growth
o attractive products or services
o financial strength
o strong competitive positions within their industries
o high quality management focused on generating shareholder value
o reasonable valuation
The Fund also may invest to a lesser extent in securities with capitalizations
outside the mid-cap range, foreign securities and debt securities. The portfolio
manager may use various investment techniques to adjust the Fund's investment
exposure, but there is no guarantee that these techniques will work.
The Risks
The principal risks of investing in the Fund are stock market risk and style
risk (growth investing risk and mid-cap company risk). To the extent that the
portfolio manager invests in foreign securities or debt securities, the Fund
would be subject to foreign exposure risk, interest rate risk and credit risk.
If you would like additional information regarding the Fund's investment
strategies and risks, including a description of the terms in bold type, please
refer to "More on Strategies and Risks" later in this Prospectus.
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<PAGE>
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11
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Fund Performance
The bar chart and table opposite illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to a common measure of
performance.
The bar chart illustrates how the Fund's performance varies from year to year
over the periods shown. During the periods presented in the bar chart, the
Fund's highest return for a quarter was 22.79% for the quarter ended December
31,1999. The Fund's lowest return for a quarter was -18.25% for the quarter
ended September 30, 1998. The Fund's year-to-date return was 9.02% as of March
31, 2000.
The table opposite illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of the Standard & Poor's
MidCap 400 Stock Index (S&P MidCap Index). The table reflects the impact of the
Fund's expenses and assumes that you sold your shares at the end of each period.
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Calendar Year Total Returns
Investment Class Shares*
[BAR CHART]
1998 5%
1999 18%
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Average Annual Total Return
(as of December 31, 1999)
Since
1 Year Inception**
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Mid-Cap Growth Fund
Investment Class 18.36% 11.43%
S&P MidCap Index 14.77% 18.23%
Both the bar chart and table assume reinvestment of dividends and distributions.
As with all mutual funds, past performance is not an indication of future
performance.
* As of the date of this Prospectus, Service Class shares have no operating
history and therefore performance information is not available. Service Class
shares of the Fund pay a shareholder service and distribution fee, which would
lower their returns.
** Inception date (commencement of operations) of the Fund: November 25, 1997:
S&P MidCap Index returns are not available from the Fund's Inception date and
therefore are calculated from the month end nearest the Fund's Inception date,
which in this case is December 1, 1997.
All mutual funds use a standard formula to calculate total return. Total return
measures the price change in a share assuming the reinvestment of all dividend
income and capital gain distributions.
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12 GE Institutional
Funds Prospectus
Equity Funds
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Mid-Cap Value Equity Fund
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Investment Objective: Long-term growth of capital.
The Strategy
The Mid-Cap Value Equity Fund invests primarily in equity securities of mid-cap
companies that the portfolio manager believes are undervalued by the market and
have above-average growth potential. The dollar weighted median market
capitalization of the companies in the Fund's portfolio will fall within the
mid-cap range defined by the Morningstar rating agency, between $1.7 and $10.7
billion as of December 31, 1999. The Fund's market capitalization is calculated
in accordance with the Morningstar rating agency's trimmed median formula. The
portfolio manager also invests in companies that are considered "special
situation companies" where due to management turnaround, corporate or asset
restructuring or significantly undervalued assets, their securities may not have
performed well in the recent past but appear to have potential for significant
future earnings growth. Stock selection is key to the performance of the Fund.
The Fund is value oriented and seeks to identify undervalued companies where a
catalyst exists to recognize value or improve a company's profitability.
Examples of these catalysts are:
o new management
o industry consolidation
o company restructuring
o change in the company's fundamentals
The Fund also may invest to a lesser extent in foreign securities and debt
securities. The portfolio manager may use various investment techniques to
adjust the Fund's investment exposure, but there is no guarantee that these
techniques will work.
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The Risks
The principal risks of investing in the Fund are stock market risk and style
risk (value investing risk and mid-cap company risk). To the extent that the
portfolio manager invests in foreign securities or debt securities, the Fund
would be subject to foreign exposure risk, interest rate risk and credit risk.
If you would like additional information regarding the Fund's investment
strategies and risks, including a description of the terms in bold type, please
refer to "More on Strategies and Risks" later in this Prospectus.
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<PAGE>
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13
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Fund Performance
The bar chart and table opposite illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to a common measure of
performance.
The bar chart illustrates how the Fund's performance varies from year to year
over the periods shown. During the period presented in the bar chart, the Fund's
highest return for a quarter was 14.13% for the quarter ended June 30, 1999. The
Fund's lowest return for a quarter was -9.99% for the quarter ended September
30, 1999. The Fund's year-to-date return was -0.46% as of March 31, 2000.
The table opposite illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of the Standard & Poor's
MidCap 400 Stock Index (S&P MidCap Index). The table reflects the impact of the
Fund's expenses and assumes that you sold your shares at the end of each period.
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Prior Performance Information
Prior performance information of Jon Bosse, the Fund's portfolio manager, can be
found under "Prior Performance Information" later in this Prospectus.
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Calendar Year Total Returns
Investment Class Shares*
[BAR CHART]
1999 10%
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Average Annual Total Return
(as of December 31, 1999)
Since
1 Year Inception**
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Mid-Cap Value Equity
Investment Class 9.57% 9.54%
S&P MidCap Index 14.77% 14.77%
Both the bar chart and table assume reinvestment of dividends and distributions.
As with all mutual funds, past performance is not an indication of future
performance.
* As of the date of this Prospectus, Service Class shares have no operating
history and therefore performance information is not available. Service Class
shares of the Fund pay a shareholder service and distribution fee, which would
lower their returns.
** Inception date (commencement of operations) of the Fund: December 31, 1998.
All mutual funds use a standard formula to calculate total return. Total return
measures the price change in a share assuming the reinvestment of all dividend
income and capital gain distributions.
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14 GE Institutional
Funds Prospectus
Equity Funds
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Small-Cap Value Equity Fund
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Investment Objective: Long-term growth of capital.
The Strategy
The Small-Cap Value Equity Fund invests primarily in equity securities of
small-cap companies that the portfolio managers believe are undervalued by the
market but have solid growth prospects. A company may be undervalued for reasons
such as market overreaction to recent company, industry or economic problems.
The Fund defines a small-cap company as one with a market capitalization within
the capitalization range of the Russell 2000 Index. As of December 31, 1999 the
market capitalization of companies in the index ranged from $10 million to
$13.04 billion. The portfolio managers will not sell a stock merely because the
market capitalization of a company in the portfolio moves above or below the
maximum or minimum capitalization of the index. Stock selection is key to the
performance of the Fund.
The portfolio managers seek to identify securities of companies with
characteristics such as:
o high quality management
o attractive products or services
o appropriate capital structure
o strong competitive positions in their industries
o management focused on generating shareholder value
The Fund also may invest to a lesser extent in securities with capitalizations
outside the small-cap range, debt securities and foreign securities. The
portfolio managers may use various investment techniques to adjust the Fund's
investment exposure, but there is no guarantee that these techniques will work.
The Risks
The principal risks of investing in the Fund are stock market risk and style
risk (value investing risk and small-cap company risk). To the extent that the
portfolio managers invest in foreign securities or debt securities, the Fund
would be subject to foreign exposure risk, interest rate risk and credit risk.
If you would like additional information regarding the Fund's investment
strategies and risks, including a description of the terms in bold type, please
refer to "More on Strategies and Risks" later in this Prospectus.
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<PAGE>
---------
15
- --------------------------------------------------------------------------------
Fund Performance
The bar chart and table opposite illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to a common measure of
performance.
The bar chart illustrates how the Fund's performance varies from year to year
over the periods shown. During the period presented in the bar chart, the Fund's
highest return for a quarter was 22.66% for the quarter ended June 30, 1999. The
Fund's lowest return for a quarter was -15.86% for the quarter ended March 31,
1999. The Fund's year-to-date return was 10.64% as of March 31, 2000.
The table opposite illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of the Russell 2000 Index. The
table reflects the impact of the Fund's expenses and assumes that you sold your
shares at the end of each period.
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Calendar Year Total Returns
Investment Class Shares*
[BAR CHART]
1999 17%
- --------------------------------------------------------------------------------
Average Annual Total Return
(as of December 31, 1999)
Since
1 Year Inception**
------ -----------
Small-Cap Value Equity
Investment Class 16.69% 14.02%
Russell 2000 Index 21.09% 15.32%
Both the bar chart and table assume reinvestment of dividends and distributions.
As with all mutual funds, past performance is not an indication of future
performance.
* As of the date of this Prospectus, Service Class shares have no operating
history and therefore performance information is not available. Service Class
shares of the Fund pay a shareholder service and distribution fee, which would
lower their returns.
** Inception date (commencement of operations) of the Fund: August 1, 1998:
Russell 2000 Index returns are not available from the Fund's Inception date and
therefore are calculated from the month end nearest the Fund's Inception date,
which in this case is August 1, 1998.
All mutual funds use a standard formula to calculate total return. Total return
measures the price change in a share assuming the reinvestment of all dividend
income and capital gain distributions.
- --------------------------------------------------------------------------------
<PAGE>
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16 GE Institutional
Funds Prospectus
Equity Funds
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International Equity Fund
- -------------------
Investment Objective: Long-term growth of capital.
The Strategy
The International Equity Fund invests primarily in equity securities of
companies located in developed and developing countries other than the United
States. The portfolio managers focus on companies that they expect will grow
faster than relevant markets and whose security price does not fully reflect
their potential for growth. Under normal circumstances, the Fund's assets are
invested in foreign securities of companies representing at least three
different countries. Stock selection is key to the performance of the Fund.
The portfolio managers seek to identify securities of growth companies with
characteristics such as:
o low prices relative to their long-term cash earnings potential
o potential for significant improvement in the company's business
o financial strength
o sufficient liquidity
The Fund also may invest to a lesser extent in debt securities. The Fund may
invest in securities of companies located in the United States. The portfolio
managers may use various investment techniques to adjust the Fund's investment
exposure, but there is no guarantee that these techniques will work.
The Risks
The principal risks of investing in the Fund are stock market risk, foreign
exposure risk, style risk (growth investing risk) and emerging markets risk. To
the extent that the portfolio managers invest in debt securities, the Fund would
be subject to interest rate risk and credit risk.
If you would like additional information regarding the Fund's investment
strategies and risks, including a description of the terms in bold type, please
refer to "More on Strategies and Risks" later in this Prospectus.
- --------------------------------------------------------------------------------
<PAGE>
---------
17
- --------------------------------------------------------------------------------
Fund Performance
The bar chart and table opposite illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to a common measure of
performance.
The bar chart illustrates how the Fund's performance varies from year to year
over the periods shown. During the periods presented in the bar chart, the
Fund's highest return for a quarter was 21.83% for the quarter ended December
31, 1999. The Fund's lowest return for a quarter was -17.74% for the quarter
ended September 30, 1998. The Fund's year-to-date return was 3.88% as of March
31, 2000.
The table opposite illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of the Morgan Stanley Capital
International Europe Australasia Far East Index (MSCI EAFE Index). The table
reflects the impact of the Fund's expenses and assumes that you sold your shares
at the end of each period.
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Prior Performance Information
Prior performance information of GE Asset Management, the Fund's investment
adviser, can be found under "Prior Performance Information" later in this
Prospectus.
- --------------------------------------------------------------------------------
Calendar Year Total Returns
Investment Class Shares*
[BAR CHART]
1998 17%
1999 32%
- --------------------------------------------------------------------------------
Average Annual Total Return
(as of December 31, 1999)
Since
1 Year Inception**
------ -----------
International Equity Fund
Investment Class 31.85% 24.62%
MSCI EAFE Index 26.96% 22.92%
Both the bar chart and table assume reinvestment of dividends and distributions.
As with all mutual funds, past performance is not an indication of future
performance.
* As of the date of this Prospectus, Service Class shares have no operating
history and therefore performance information is not available. Service Class
shares of the Fund pay a shareholder service and distribution fee, which would
lower their returns.
** Inception date (commencement of operations) of the Fund: November 25, 1997;
MSCI EAFE Index returns are not available from the Fund's Inception date and
therefore are calculated from the month end nearest the Fund's Inception date,
which in this case is December 1, 1997.
All mutual funds use a standard formula to calculate total return. Total return
measures the price change in a share assuming the reinvestment of all dividend
income and capital gain distributions.
- --------------------------------------------------------------------------------
<PAGE>
- -------------------
18 GE Institutional
Funds Prospectus
Equity Funds
- --------------------------------------------------------------------------------
Europe Equity Fund
- -------------------
Investment Objective: Long-term growth of capital.
Developed European countries currently include:
Austria
Belgium
Denmark
Finland
France
Germany
Greece
Ireland
Italy
Luxembourg
The Netherlands
Norway
Portugal
Spain
Sweden
Switzerland
United Kingdom
The Strategy
The Europe Equity Fund invests primarily in equity securities of issuers located
in developed European countries. The portfolio managers focus on countries that
are expected to grow faster than relevant markets and whose security price does
not fully reflect their potential for growth. Under normal circumstances, the
Fund's assets are invested in foreign securities of companies representing at
least three different countries. Stock selection is key to the performance of
the Fund.
The portfolio managers seek to identify securities of growth companies with
characteristics such as:
o low prices relative to their long-term cash earnings potential
o potential for significant improvement in the company's business
o financial strength
o sufficient liquidity
The Fund may also invest to a lesser extent in securities of companies
representing European emerging market countries, developed or emerging countries
outside of Europe (including the United States), and debt securities. European
emerging market countries currently include the Czech Republic, Poland, Hungary,
Turkey, Russia and other former republics of the Soviet Union. The portfolio
managers may use various investment techniques to adjust the Fund's investment
exposure, but there is no guarantee that these techniques will work.
The Risks
The principal risks of investing in the Fund are stock market risk, foreign
exposure risk and style risk (mid-cap company risk and growth investing risk).
To the extent that the portfolio managers invest in securities of emerging
market countries and debt securities, the Fund would be subject to emerging
markets risk, interest rate risk and credit risk.
Because the Fund targets a single region, investors should expect the Fund to be
more volatile than a more geographically diversified equity fund. Fund
performance is closely tied to economic and political conditions within Europe.
If you would like additional information regarding the Fund's investment
strategies and risks, including a description of the terms in bold type, please
refer to "More on Strategies and Risks" later in this Prospectus.
- --------------------------------------------------------------------------------
Fund Background
Because the Fund is new, performance information is included in the Fund's
annual report dated September 30, 1999.
- --------------------------------------------------------------------------------
<PAGE>
---------
19
- --------------------------------------------------------------------------------
[This page intentionally left blank.]
- --------------------------------------------------------------------------------
<PAGE>
- -------------------
20 GE Institutional
Funds Prospectus
Equity Funds
- --------------------------------------------------------------------------------
Emerging Markets Fund
- -------------------
Investment Objective: Long-term growth of capital.
The Emerging Markets Fund invests primarily in equity securities of issuers
located in emerging market countries. The portfolio managers focus on companies
that are expected to grow faster than relevant markets and whose security price
does not fully reflect their potential for growth. Under normal circumstances,
the Fund's assets are invested in foreign securities of companies representing
at least three different countries. The portfolio managers consider which
emerging market countries in which to invest based on certain factors, including
investment restrictions, tax barriers, local market cycles, economic outlook for
growth, currency exchange rates and the political environment. The portfolio
managers consider the following factors in determining whether an issuer is
located in an emerging market country: country of organization, primary
securities trading market, location of assets, or country where the issuer
derives at least half of its revenues and profits.
An emerging market 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
listed in the Morgan Stanley Capital International Emerging Markets Index.
Emerging market countries are located in regions such as Asia, Latin America,
the Middle East, Southern Europe, Eastern Europe (including the former republics
of the Soviet Union and the Eastern Bloc) and Africa.
The portfolio managers seek to identify securities of growth companies with
characteristics such as:
o low prices relative to their long-term cash earnings potential
o potential for significant improvement in the company's business
o financial strength
o sufficient liquidity
The Fund may also invest to a lesser extent in securities of companies located
in countries other than emerging market countries (including the United States)
and debt securities. The portfolio managers may use various investment
techniques to adjust the Fund's investment exposure, but there is no guarantee
that these techniques will work.
The Risks
The principal risks of investing in the Fund are stock market risk, foreign
exposure risk, emerging markets risk and style risk (growth investing risk and
small-cap company risk). To the extent that the portfolio managers invest in
debt securities, the Fund would be subject to interest rate risk, and credit
risk.
If you would like additional information regarding the Fund's investments
strategies and risks, including a description of the terms in bold type, please
refer to "More on Strategies and Risks" later in this Prospectus.
- --------------------------------------------------------------------------------
<PAGE>
---------
21
- --------------------------------------------------------------------------------
Fund Performance
The bar chart and table opposite illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to a common measure of
performance.
The bar chart illustrates how the Fund's performance varies from year to year
over the periods shown. During the periods presented in the bar chart, the
Fund's highest return for a quarter was 47.27% for the quarter ended December
31, 1999. The Fund's lowest return for a quarter was -27.56% for the quarter
ended September 30, 1998. The Fund's year-to-date return was 9.12% as of March
31, 2000.
The table opposite illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of the Morgan Stanley Emerging
Markets Free Index (MSCI EMF Index). The table reflects the impact of the Fund's
expenses and assumes that you sold your shares at the end of each period.
- --------------------------------------------------------------------------------
Prior Performance Information
Prior performance information of GE Asset Management, the Fund's investment
adviser, can be found under "Prior Performance Information" later in this
Prospectus.
- --------------------------------------------------------------------------------
Calendar Year Total Returns
Investment Class Shares*
[BAR CHART]
1998 -20%
1999 108%
- --------------------------------------------------------------------------------
Average Annual Total Return
(as of December 31, 1999)
Since
1 Year Inception**
------ -----------
Emerging Markets Fund
Investment Class 108.29% 28.71%
MSCI EMF Index 66.41% 12.26%
Both the bar chart and table assume reinvestment of dividends and distributions.
As with all mutual funds, past performance is not an indication of future
performance.
* As of the date of this Prospectus, Service Class shares have no operating
history and therefore performance information is not available. Service Class
shares of the Fund pay a shareholder service and distribution fee, which would
lower their returns.
** Inception date (commencement of operations) of the Fund: November 25, 1997;
MSCI EMF Index returns are not available from the Fund's Inception date and
therefore are calculated from the month end nearest the Fund's Inception date,
which in this case is December 1, 1997.
All mutual funds use a standard formula to calculate total return. Total return
measures the price change in a share assuming the reinvestment of all dividend
income and capital gain distributions.
- --------------------------------------------------------------------------------
<PAGE>
- -------------------
22 GE Institutional
Funds Prospectus
Equity Funds
- --------------------------------------------------------------------------------
Premier Growth Equity Fund
- -------------------
Investment Objective: Long-term growth of capital and future income.
The Strategy
The Premier Growth Equity Fund invests primarily in a limited number of equity
securities of large- and medium-sized companies that the portfolio manager
believes have above-average growth histories and/or growth potential. The
portfolio manager chooses equity securities from a number of industries based on
the merits of individual companies. Stock selection is key to the performance of
the Fund.
The portfolio manager seeks to identify stocks of growth companies with
characteristics such as:
o above-average annual growth rates
o financial strength
o leadership in their respective industries
o high quality management focused on generating shareholder value
The Fund also may invest to a lesser extent in foreign securities and debt
securities. The portfolio managers may use various investment techniques to
adjust the Fund's investment exposure, but there is no guarantee that these
techniques will work.
The Risks
The principal risks of investing in the Fund are stock market risk,
diversification risk and style risk (growth investing risk and mid-cap company
risk). To the extent that the portfolio managers invest in foreign securities or
debt securities, the Fund would be subject to foreign exposure risk, interest
rate risk and credit risk.
If you would like additional information regarding the Fund's investment
strategies and risks, including a description of the terms in bold type, please
refer to "More on Strategies and Risks" later in this Prospectus.
- --------------------------------------------------------------------------------
Fund Background
Because the Fund is new, it does not have any performance history. Performance
information will be included in the Fund's next available annual or semi-annual
report.
- --------------------------------------------------------------------------------
Prior Performance Information
Prior performance information of GE Asset Management, the Fund's investment
adviser, can be found under "Prior Performance Information" later in this
Prospectus.
- --------------------------------------------------------------------------------
<PAGE>
---------
23
- --------------------------------------------------------------------------------
Premier Research Equity Fund
- -------------------
Investment Objective: Long-term growth of capital and future income.
The Strategy
The Premier Research Equity Fund invests primarily in a limited number of equity
securities of large- and medium-sized companies located in the United States.
The portfolio managers select equity securities based on the recommendations of
a team of analysts. Each analyst is dedicated to particular industries. The
portfolio managers select securities from the industry analyst's recommendations
while keeping the Fund's sector weighting consistent with that of the S&P 500
Index. Stock selection is key to the performance of the Fund.
The portfolio managers seek to identify stocks of companies with characteristics
such as:
o above-average annual growth rates
o financial strength
o attractive valuations
o leadership in their respective industries
o high quality management focused on generating shareholder value
The Fund also may invest to a lesser extent in foreign securities and debt
securities. The portfolio managers may use various investment techniques to
adjust the Fund's investment exposure, but there is no guarantee that these
techniques will work.
The Risks
The principal risks of investing in the Fund are stock market risk,
diversification risk and style risk (mid-cap company risk). To the extent that
the portfolio managers invest in foreign securities or debt securities, the Fund
would be subject to foreign exposure risk or interest rate risk and credit risk.
If you would like additional information regarding the Fund's investment
strategies and risks, including a description of the terms in bold type, please
refer to "More on Strategies and Risks" later in this Prospectus.
- --------------------------------------------------------------------------------
Fund Background
Because the Fund is new, it does not have any performance history. Performance
information will be included in the Fund's next available annual or semi-annual
report.
- --------------------------------------------------------------------------------
Prior Performance
Prior performance information of GE Asset Management, the Fund's investment
adviser, can be found under "Prior Performance Information" later in this
Prospectus.
- --------------------------------------------------------------------------------
<PAGE>
- -------------------
24 GE Institutional
Funds Prospectus
Equity Funds
- --------------------------------------------------------------------------------
Premier International Equity Fund
- -------------------
Investment Objective: Long-term growth of capital.
The Strategy
The Premier International Equity Fund invests primarily in a limited number of
equity securities of companies located in developed and developing countries
other than the United States. The portfolio manager focuses on companies that he
expects will grow faster than relevant markets and whose security price does not
fully reflect their potential for growth. Under normal circumstances, the Fund's
assets are invested in foreign securities of companies representing at least
three different countries. Stock selection is key to the performance of the
Fund.
The portfolio manager seeks to identify securities of growth companies with
characteristics such as:
o low prices relative to their long-term cash earnings potential
o potential for significant improvement in the company's business
o financial strength
o sufficient liquidity
The Fund also may invest to a lesser extent in debt securities. The Fund may
invest in securities of companies located in the United States. The portfolio
manager may use various investment techniques to adjust the Fund's investment
exposure, but there is no guarantee that these techniques will work.
The Risks
The principal risks of investing in the Fund are stock market risk, foreign
exposure risk, style risk (mid-cap company risk and growth investing risk),
diversification risk and emerging markets risk. To the extent that the portfolio
manager invests in debt securities, the Fund would be subject to interest rate
risk and credit risk.
If you would like additional information regarding the investment strategies and
risks, including a description of the terms in bold type, associated with this
Fund, please refer to "More on Strategies and Risks" later in this Prospectus.
- --------------------------------------------------------------------------------
Fund Background
Because the Fund is new, it does not have any performance history. Performance
information will be included in the Fund's next available annual or semi-annual
report.
- --------------------------------------------------------------------------------
Prior Performance
Prior performance information of GE Asset Management, the Fund's investment
adviser, can be found under "Prior Performance Information" later in this
Prospectus.
- --------------------------------------------------------------------------------
<PAGE>
------------------------
Income Funds 25
- --------------------------------------------------------------------------------
An investment in an Income Fund is not a deposit of any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. An investment in an Income Fund is subject to risk, including
possible loss of principal invested.
Income funds generally invest in debt securities. Debt securities are bonds and
other securities that are used by issuers to borrow money from investors.
Holders of debt securities have a higher priority claim to assets than do equity
holders. Typically, the debt issuer pays the investor a fixed, variable or
floating rate of interest and must repay the borrowed amount at maturity. Some
debt securities, such as zero coupon bonds, are sold at a discount from their
face values instead of paying interest.
- --------------------------------------------------------------------------------
<PAGE>
- -------------------
26 GE Institutional
Funds Prospectus
Equity Funds
- --------------------------------------------------------------------------------
Income Fund
- -------------------
Investment Objective: Maximum income consistent with prudent investment
management and the preservation of capital.
The Strategy
The Income Fund invests primarily in a variety of investment-grade debt
securities, such as mortgage-backed securities, corporate bonds, U.S. Government
securities, and money market instruments. The Fund normally has a weighted
average maturity of approximately five to ten years.
The portfolio managers seek to identify debt securities with characteristics
such as:
o attractive yields and prices
o the potential for capital appreciation
o reasonable credit quality
The Fund also may invest to a lesser extent in asset-backed securities and
foreign securities. The portfolio managers may use various investment techniques
to adjust the Fund's investment exposure, but there is no guarantee that these
techniques will work.
The Fund's investment strategy may result in a high portfolio turnover rate,
which may cause the Fund to experience increased transaction costs and
shareholders to incur increased taxes on their investment in the Fund.
The Risks
The principal risks of investing in the Fund are interest rate risk, credit risk
and prepayment risk. To the extent that the portfolio managers invest in foreign
securities, the Fund would be subject to foreign exposure risk. Certain
portfolio securities are derivative securities that carry derivative securities
risk.
If you would like additional information regarding the Fund's investment
strategies and risks, including a description of the terms in bold type, please
refer to "More on Strategies and Risks" later in this Prospectus.
- --------------------------------------------------------------------------------
<PAGE>
---------
27
- --------------------------------------------------------------------------------
Fund Performance
The bar chart and table opposite illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to a common measure of
performance.
The bar chart illustrates how the Fund's performance varies from year to year
over the periods shown. During the periods presented in the bar chart, the
Fund's highest return for a quarter was 3.57% for the quarter ended September
30, 1998. The Fund's lowest return for a quarter was -1.11% for the quarter
ended June 30, 1999. The Fund's year-to-date return was 2.05% as of March 31,
2000.
The table opposite illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of the Lehman Brothers
Aggregate Bond Index (LB Aggregate Bond Index). The table reflects the impact of
the Fund's expenses and assumes that you sold your shares at the end of each
period.
- --------------------------------------------------------------------------------
Prior Performance Information
Prior performance information of GE Asset Management, the Fund's investment
adviser, can be found under "Prior Performance Information" later in this
Prospectus.
- --------------------------------------------------------------------------------
Calendar Year Total Returns
Investment Class Shares*
[BAR CHART]
1998 8%
1999 -1%
- --------------------------------------------------------------------------------
Average Annual Total Return
(as of December 31, 1999)
Since
1 Year Inception**
------ -----------
Income Fund
Investment Class -1.29% 3.83%
LB Aggregate Bond Index -0.83% 4.16%
Both the bar chart and table assume reinvestment of dividends and distributions.
As with all mutual funds, past performance is not an indication of future
performance.
* As of the date of this Prospectus, Service Class shares have no operating
history and therefore performance information is not available. Service Class
shares of the Fund pay a shareholder service and distribution fee, which would
lower their returns.
** Inception date (commencement of operations) of the Fund: November 21, 1997;
LB Aggregate Bond Index returns are not available from the Fund's Inception date
and therefore are calculated from the month end nearest the Fund's Inception
date, which in this case is December 1, 1997.
All mutual funds use a standard formula to calculate total return. Total return
measures the price change in a share assuming the reinvestment of all dividend
income and capital gain distributions.
- --------------------------------------------------------------------------------
<PAGE>
- -----------------------------------------------
28 GE Institutional Asset Allocation Funds
Funds Prospectus
- --------------------------------------------------------------------------------
An investment in an Asset Allocation Fund is not a deposit of any bank and is
not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other agency. An investment in an Asset Allocation Fund is subject to risk,
including possible loss of principal invested.
Asset allocation funds are designed to meet the needs of investors who prefer to
have their asset allocation decisions made by professional money managers. They
provide an investor with a means to diversify by investing in a core portfolio
that typically holds both equity securities and debt securities. Although an
investor may achieve the same level of diversification by buying individual
Equity or Income Funds, an asset allocation fund presents a diversification
alternative within one fund. An investor should not expect capital appreciation
or current income levels comparable to funds for which either capital
appreciation or current income is their sole objective.
- --------------------------------------------------------------------------------
<PAGE>
------------
29
- --------------------------------------------------------------------------------
Strategic Investment Fund The Strategy
- --------------------
Investment Objective: Maximum total return.
The Strategic Investment Fund invests primarily in a combination of equity
securities and investment-grade debt securities. The portfolio managers follow
an asset allocation process established by GE Asset Management's Asset
Allocation Committee to diversify holdings across asset classes. The Fund
adjusts its weightings among U.S. equity securities, debt securities and foreign
securities based on the relative attractiveness of the asset classes. The Fund
invests in equity securities principally for their capital appreciation
potential and debt securities principally for their income potential. Within
each asset class, the portfolio managers use active security selection to choose
securities based on the merits of individual issuers.
The portfolio managers seek to identify equity securities of companies with
characteristics such as:
o strong earnings growth
o attractive prices
o a presence in successful industries
o high quality management
The portfolio managers seek to identify debt securities with characteristics
such as:
o attractive yields and prices
o the potential for capital appreciation
o reasonable credit quality
The portion of the Fund invested in debt securities normally has a weighted
average maturity of approximately five to ten years.
The portfolio managers may use various investment techniques to adjust the
Fund's investment exposure, but there is no guarantee that these techniques will
work.
The Fund's asset allocation process may result in a high portfolio turnover
rate, which may cause the Fund to experience increased transaction costs and
shareholders to incur increased taxes on their investment in the Fund.
The Risks
The principal risks of investing in the Fund are stock market risk, foreign
exposure risk, interest rate risk, credit risk and prepayment risk. To the
extent the portfolio manager invests in high yield securities, the Fund would be
subject to high yield securities risk. Certain portfolio securities are
derivative securities that carry derivative securities risk.
If you would like additional information regarding the Fund's investment
strategies and risks, including a description of the terms in bold type, please
refer to "More on Strategies and Risks" later in this Prospectus.
- --------------------------------------------------------------------------------
Fund Background
Because the Fund is new, it does not have any performance history. Performance
information will be included in the Fund's next available annual or semi-annual
report.
- --------------------------------------------------------------------------------
Prior Performance Information
Prior performance information of GE Asset Management, the Fund's investment
adviser, can be found under "Prior Performance Information" later in this
Prospectus.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------
30
- --------------------------------------------------------------------------------
[This page intentionally left blank.]
- --------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------
GE Institutional Money 31
Funds Prospectus Market
Funds
- --------------------------------------------------------------------------------
Money market funds invest in short-term, high-quality debt securities. They seek
to provide stability of principal and regular income. The income provided by a
money market fund varies with interest rate movements.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------
32 GE Institutional
Funds Prospectus
Money
Market Funds
- --------------------------------------------------------------------------------
Money Market Fund
- --------------------
Investment Objective: High level of current income consistent with the
preservation of capital and maintenance of liquidity.
The Strategy
The Money Market Fund invests primarily in short-term, U.S. dollar-denominated
money market instruments. The Fund's investments may include U.S. government
securities, repurchase agreements, commercial paper, variable rate securities,
foreign securities and domestic and foreign bank deposits.
The Fund invests consistent with regulatory standards governing security
quality, maturity and portfolio diversification. For example, the portfolio
manager limits investments to high quality securities with maturities of up to
13 months and limits the average maturity to 90 days. The Fund may invest more
than 25% of its total assets in the banking services industry. Changes in
banking regulations or the economy can have a significant negative impact on the
banking industry.
All of the Fund's assets are rated in the two highest short-term rating
categories (or their unrated equivalents), and 95% of its assets are rated in
the highest rating category (or its unrated equivalent), by a nationally
recognized statistical rating organization. Additional information about the
money market securities in which the Fund may invest, including rating
categories, is contained in the statement of additional information.
The Risk
The principal risks of investing in the Fund are interest rate risk, credit risk
and foreign exposure risk.
An investment in the Fund is not a bank deposit and is not insured or guaranteed
by the Federal Deposit Insurance Corporation (FDIC) or any other government
agency. Although the Fund seeks to maintain a net asset value of $1.00 per
share, it is possible to lose money by investing in the Fund.
The Fund's yield will change due to movements in current short-term interest
rates and market conditions. A change in interest rates or default on the Fund's
investments could cause the Fund's share price to decline below $1.00.
If you would like additional information regarding the Fund's investment
strategies and risks, including a description of the terms in bold type, please
refer to "More on Strategies and Risks" later in this Prospectus.
- --------------------------------------------------------------------------------
<PAGE>
------------
33
- --------------------------------------------------------------------------------
Fund Performance
The bar chart and table opposite illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to a common measure of
performance.
The bar chart illustrates how the Fund's performance varies from year to year
over the periods shown. During the periods presented in the bar chart, the
Fund's highest return for a quarter was 1.36% for the quarter ended December 31,
1999. The Fund's lowest return for a quarter was 1.16% for the quarter ended
June 30, 1999. The Fund's seven day yield was 5.65% and the effective seven day
yield was 5.81% as of December 31, 1999. "Effective yield" reflects the
compounding effect of earnings on reinvested dividends. The Fund's year-to-date
return was 1.41% as of March 31, 2000.
The table opposite illustrates how the Fund's average annual returns for
different calendar periods compare to the return of the 90 Day Treasury Bill
Rate (90 Day T-Bill). The table reflects the impact of the Fund's expenses. It
assumes that you sold your shares at the end of each period.
- --------------------------------------------------------------------------------
Prior Performance Information
Prior performance information of GE Asset Management, the Fund's investment
adviser, can be found under "Prior Performance Information" later in this
Prospectus.
- --------------------------------------------------------------------------------
Calendar Year Total Returns
Investment Class Shares*
[BAR CHART]
1998 5%
1999 5%
- --------------------------------------------------------------------------------
Average Annual Total Return
(as of December 31, 1999)
Since
1 year Inception**
------ -----------
Money Market Fund
Investment Class 5.02% 5.22%
90 Day T-Bill 4.83% 4.88%
Both the bar chart and table assume reinvestment of dividends and distributions.
As with all mutual funds, past performance is not an indication of future
performance.
* As of the date of this Prospectus, Service Class shares have no operating
history and therefore performance information is not available. Service Class
shares of the Fund pay a shareholder service and distribution fee, which would
lower their returns.
** Inception Date (commencement of operations) of the Fund: December 2, 1997; 90
Day T-Bill returns are not available from the Fund's Inception date and
therefore are calculated from the month end nearest the Fund's Inception date,
which in this case is December 1, 1997.
All mutual Funds must use the same formula to calculate total return. Total
return measures the price change in a share assuming the reinvestment of all
dividend income and capital gain distributions.
- --------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------
34 GE Institutional Fund Expenses
Funds Prospectus
- --------------------------------------------------------------------------------
Shareholder Fees
The Funds impose no sales charge (load) on purchases or reinvested dividends,
contingent deferred sales charge, redemption fee or exchange fee.
The following table shows what it would cost you to invest in a Fund. Annual
fund operating expenses come out of a Fund's assets and are reflected in the
Fund's share price and dividends.
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses
(as a percentage of average net assets)
<TABLE>
<CAPTION>
Mid-Cap Small-Cap
U.S. S&P 500 Value Mid-Cap Value Value
Equity Index Equity Growth Equity Equity
Fund Fund Fund Fund Fund Fund
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Management Fees
Investment and Service Class .55%* .15% .55%* .55%* .65%* .70%*
- -------------------------------------------------------------------------------------------------------
Distribution and Service (12b-1) Fees
Investment Class None None None None None None
Service Class** .25% .25% .25% .25% .25% .25%
- -------------------------------------------------------------------------------------------------------
Other Expenses
Investment and Service Class None None None None None None
- -------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses
Investment Class .55% .15% .55% .55% .65% .70%
Service Class .80% .40% .80% .80% .90% .95%
- -------------------------------------------------------------------------------------------------------
</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 "About the Investment Adviser."
** The .25% shareholder servicing and distribution fee is intended to
compensate GE Asset Management, or enable GE Asset Management to
compensate other persons, for expenditures made on behalf of each Fund.
The nature of the services provided to, and the advisory and administration fee
paid by, each Fund are described under "About the Investment Adviser." 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 GE
Institutional Funds' independent Trustees, shareholder servicing and
distribution fees, brokerage fees, and expenses that are not normal operating
expenses of the Funds (such as extraordinary expenses, interest and taxes). For
the Funds that did not commence operations prior to September 30, 1999, "Other
Expenses" are based on estimated amounts for the current fiscal year. "Other
Expenses" include only Trustees' fees payable to GE Institutional Funds'
independent Trustees, brokerage fees, and expenses that are not normal operating
expenses of the Funds. This amount is less than .01%; therefore "Other Expenses"
are reflected as "None." Long-term shareholders of the Service Class shares may
pay more than the economic equivalent of the maximum front-end sales charge
currently permitted by the rules of the National Association of Securities
Dealers, Inc. governing investment company sales charges.
- --------------------------------------------------------------------------------
<PAGE>
------------
35
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Premier Premier Premier
International Europe Emerging Growth Research International Strategic Money
Equity Equity Markets Equity Equity Equity Income Investment Market
Fund Fund Fund Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees
Investment and Service Class .75%* .75%* 1.05%* .55%* .55%* .75%* .35%* .45%* .25%*
- ------------------------------------------------------------------------------------------------------------------------------------
Distribution and Service (12b-1) Fees
Investment Class None None None None None None None None None
Service Class** .25% .25% .25% .25% .25% .25% .25% .25% .25%
- ------------------------------------------------------------------------------------------------------------------------------------
Other Expenses
Investment and Service Class None None None None None None None None None
- ------------------------------------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses
Investment Class .75% .75% 1.05% .55% .55% .75% .35% .45% .25%
Service Class 1.00% 1.00% 1.30% .80% .80% 1.00% .60% .70% .50%
- ------------------------------------------------------------------------------------------------------------------------------------
</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 "About the Investment Adviser."
** The .25% shareholder servicing and distribution fee is intended to
compensate GE Asset Management, or enable GE Asset Management to
compensate other persons, for expenditures made on behalf of each Fund.
The nature of the services provided to, and the advisory and administration fee
paid by, each Fund are described under "About the Investment Adviser." 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 GE
Institutional Funds' independent Trustees, shareholder servicing and
distribution fees, brokerage fees, and expenses that are not normal operating
expenses of the Funds (such as extraordinary expenses, interest and taxes). For
the Funds that did not commence operations prior to September 30, 1999, "Other
Expenses" are based on estimated amounts for the current fiscal year. "Other
Expenses" include only Trustees' fees payable to GE Institutional Funds'
independent Trustees, brokerage fees, and expenses that are not normal operating
expenses of the Funds. This amount is less than .01%; therefore "Other Expenses"
are reflected as "None." Long-term shareholders of the Service Class shares may
pay more than the economic equivalent of the maximum front-end sales charge
currently permitted by the rules of the National Association of Securities
Dealers, Inc. governing investment company sales charges.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------
36 GE Institutional
Funds Prospectus
Fund Expenses
- --------------------------------------------------------------------------------
The Impact of Fund Expenses
This example is intended to help you compare the cost of investing in a Fund
with the cost of investing in other mutual funds. Although actual costs may be
higher or lower, you would pay the following expenses on a $10,000 investment,
assuming a 5% annual return and that the Fund's operating expenses remain the
same. This example also assumes the maximum advisory and administration fee
payable by a Fund. This fee for each Fund, except the S&P 500 Index Fund,
declines incrementally as the Fund's assets increase.
- --------------------------------------------------------------------------------
Example
You would pay the following
expenses on a $10,000 investment:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
U.S. Equity Fund:
Investment Class $ 56 $ 176 $ 307 $ 689
Service Class $ 82 $ 255 $ 444 $ 990
- --------------------------------------------------------------------------------
S&P 500 Index Fund:
Investment Class $ 15 $ 48 $ 85 $ 192
Service Class $ 41 $ 128 $ 224 $ 505
- --------------------------------------------------------------------------------
Value Equity Fund:
Investment Class $ 56 $ 176 $ 307 $ 689
Service Class $ 82 $ 255 $ 444 $ 990
- --------------------------------------------------------------------------------
Mid-Cap Growth Fund:
Investment Class $ 56 $ 176 $ 307 $ 689
Service Class $ 82 $ 255 $ 444 $ 990
- --------------------------------------------------------------------------------
Mid-Cap Value Equity Fund:
Investment Class $ 66 $ 208 $ 362 $ 810
Service Class $ 92 $ 287 $ 498 $1,108
- --------------------------------------------------------------------------------
Small-Cap Value Equity Fund:
Investment Class $ 72 $ 224 $ 390 $ 871
Service Class $ 97 $ 303 $ 525 $1,166
- --------------------------------------------------------------------------------
International Equity Fund:
Investment Class $ 77 $ 240 $ 417 $ 930
Service Class $ 102 $ 318 $ 552 $1,225
- --------------------------------------------------------------------------------
Europe Equity Fund:
Investment Class $ 77 $ 240 $ 417 $ 930
Service Class $ 102 $ 318 $ 552 $1,225
- --------------------------------------------------------------------------------
Emerging Markets Fund:
Investment Class $ 107 $ 334 $ 579 $1,283
Service Class $ 132 $ 412 $ 713 $1,568
- --------------------------------------------------------------------------------
Premier Growth Equity Fund:
Investment Class $ 56 $ 176 $ 307 $ 689
Service Class $ 82 $ 255 $ 444 $ 990
- --------------------------------------------------------------------------------
Premier Research Equity Fund:
Investment Class $ 56 $ 176 $ 307 $ 689
Service Class $ 82 $ 255 $ 444 $ 990
- --------------------------------------------------------------------------------
Premier International Equity Fund:
Investment Class $ 77 $ 240 $ 417 $ 930
Service Class $ 102 $ 318 $ 552 $1,225
- --------------------------------------------------------------------------------
Income Fund:
Investment Class $ 36 $ 113 $ 197 $ 443
Service Class $ 61 $ 192 $ 335 $ 750
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
------------
37
- --------------------------------------------------------------------------------
Example
You would pay the following
expenses on a $10,000 investment:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Strategic Investment Fund:
Investment Class $ 46 $144 $252 $567
Service Class $ 72 $224 $390 $871
- --------------------------------------------------------------------------------
Money Market Fund:
Investment Class $ 26 $ 80 $141 $318
Service Class $ 51 $160 $280 $628
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------
38 GE Institutional More on
Funds Prospectus Strategies
and Risks
- --------------------------------------------------------------------------------
Important Definitions
This section defines important terms that may be unfamiliar to an investor
reading about the Funds:
Asset-backed securities represent a participation in, or are secured by and
payable from, a stream of payments generated by particular assets, such as
credit card receivables or auto loans.
Bank deposits are cash, checks or drafts deposited in a financial institution
for credit to a customer's account. Banks differentiate between demand deposits
(checking accounts on which the customer may draw) and time deposits, which pay
interest and have a specified maturity or require 30 days' notice before
withdrawal.
Cash and cash equivalents are highly liquid and highly rated instruments such as
commercial paper and bank deposits.
Certificates of deposit include short-term debt securities issued by banks.
Commercial paper includes short-term debt securities issued by banks,
corporations and other borrowers.
Corporate bonds are debt securities issued by companies.
Convertible securities may be debt or equity securities that pay interest or
dividends or are sold at a discount and that may be converted on specified terms
into the stock of the issuer.
Debt obligations of supranational agencies are obligations of
multi-jurisdictional agencies that operate across national borders (e.g., the
World Bank).
Debt securities are bonds and other securities that are used by issuers to
borrow money from investors. Holders of debt securities have a higher priority
claim to assets than do equity holders. Typically, the debt issuer pays the
investor a fixed, variable or floating rate of interest and must repay the
borrowed amount at maturity. Some debt securities, such as zero coupon bonds,
are sold at a discount from their face values instead of paying interest.
Depositary receipts represent interests in an account at a bank or trust company
which holds equity securities. These interests may include American Depositary
Receipts (held at U.S. banks and traded in the United States), European
Depositary Receipts, Global Depositary Receipts or other similar instruments.
Derivative securities are securities whose values are based on other securities,
currencies or indices and include options (on stocks, indices, currencies,
futures contracts or bonds), forward currency exchange contracts, futures
contracts, swaps, interest-only and principal-only debt securities, certain
mortgage-backed securities like collateralized mortgage obligations (CMOs), and
structured securities.
Duration represents a mathematical calculation of the average life of a bond (or
portfolio of bonds) based on cash flows that serves as a useful measure of the
security's sensitivity to changes in interest rates. Each year of duration
approximates an expected one percent change in the bond's price for every one
percent change in the interest rate.
Equity securities may include common stocks, preferred securities, depositary
receipts, convertible securities, and rights and warrants of U.S. and foreign
companies. Stocks represent an ownership interest in a corporation.
Eurodollar deposits are deposits issued in U.S. dollars by foreign banks and
foreign branches of U.S. banks.
Floating and variable rate instruments are securities with floating or variable
rates of interest or dividend payments.
Foreign debt securities are issued by foreign corporations or governments. They
may include the following:
o Eurodollar Bonds, which are dollar-denominated securities issued outside the
U.S. by foreign corporations and financial institutions or by foreign branches
of U.S. corporations and financial institutions.
o Yankee Bonds, which are dollar-denominated securities issued by foreign
issuers in the U.S.
o Securities denominated in currencies other than U.S. dollars.
- --------------------------------------------------------------------------------
<PAGE>
------------
39
- --------------------------------------------------------------------------------
Foreign securities include interests in or obligations of entities located
outside of the United States. The determination of where an issuer of a security
is located will be made by reference to the country in which the issuer (i) is
organized, (ii) derives at least 50% of its revenues or profits from goods
produced or sold, investments made or services performed, (iii) has at least 50%
of its assets situated or (iv) has the principal trading market for its
securities. Foreign securities may be denominated in non-U.S. currencies and
traded outside the United States or may be in the form of depositary receipts.
Forward currency transactions involve agreements to exchange one currency for
another at a future date.
Futures are agreements to buy or sell a specific amount of a commodity,
financial instrument or index at a particular price and future date. Options on
Futures give 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.
Growth investing involves buying stocks with above-average growth rates.
Typically, growth stocks are the stocks of faster growing companies in more
rapidly growing sectors of the economy. Generally, growth stock valuation levels
will be higher than those of value stocks and the market averages.
High yield securities are debt securities of corporations, preferred stock and
convertible bonds and convertible preferred stock rated Ba through C by Moody's
or BB through D by S&P (or comparably rated by another nationally recognized
statistical rating organization) or, if not rated, are considered by portfolio
management to be of equivalent quality. High yield securities include bonds
rated below investment grade, sometimes called "junk bonds," and are considered
speculative by the major credit rating agencies.
Investment grade securities are rated Baa or better by Moody's and BBB or better
by S&P (or comparably rated by another nationally recognized statistical rating
organization), or, if not rated, are of similar quality to such securities.
Securities rated in the fourth highest grade have some speculative elements.
Maturity represents the date on which a debt security matures or when the issuer
must pay back the principal amount of the security.
Money market securities are short-term debt securities of the U.S. government,
banks and corporations. Certain Funds may invest in money market securities
through investments in the GEI Short-Term Investment Fund (Investment Fund). The
Investment Fund is advised by GE Asset Management, which charges no advisory fee
for such services.
Mortgage-backed securities include securities issued by the Government National
Mortgage Association (Ginnie Mae), the Federal National Mortgage Association
(Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) and other
government agencies and private issuers. They may also include collateralized
mortgage obligations which are derivative securities that are fully
collateralized by a portfolio of mortgages. Government stripped mortgage-related
securities are mortgage-backed securities that have been stripped into their
interest and principal components. They represent interests in distributions of
interest on or principal underlying mortgage-backed certificates. Mortgage
dollar rolls are transactions involving the sale of a mortgage-backed security
with a simultaneous contract (with the purchaser) to buy similar, but not
identical, securities at a future date.
Municipal obligations are 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. They include: (i) municipal leases, which pay interest
that is exempt from federal, and in certain cases, state, income tax; (ii)
participation interests in municipal obligations, which are proportionate,
undivided interests in municipal obligations; (iii) municipal obligation
components,
- --------------------------------------------------------------------------------
<PAGE>
- --------------------
40 GE Institutional
Funds Prospectus
More on Strategies
and Risks
- --------------------------------------------------------------------------------
which are municipal obligations that have been divided into two components (one
component pays interest at a rate adjusted periodically through an auction
process, the second pays the residual rate after the auction rate is deducted
from total interest payable); and (iv) custodial receipts on municipal
obligations, which evidence ownership of future interest payments, principal
payments, or both, on certain municipal obligations.
Preferred securities are classes of stock that pay dividends at a specified
rate. Dividends are paid on preferred stocks before they are paid on common
stocks. In addition, preferred stockholders have priority over common
stockholders as to the proceeds from the liquidation of a company's assets.
Purchasing and writing options are permitted investment strategies for certain
Funds. An option is the right to buy (i.e., a "call") or sell (i.e., a "put")
securities or other interests for a predetermined price on or before a fixed
date. An option on a securities index represents the option holder's right to
obtain from the seller, 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 securities index on the exercise date. An option
on a foreign currency represents the right to buy or sell a particular amount of
that currency for a predetermined price on or before a fixed date.
Repurchase agreements (repos) are used to invest cash on a short-term basis. A
seller (bank or broker-dealer) sells securities, usually government securities,
to the Fund, agreeing to buy them back at a designated price and time -- usually
the next day.
Restricted securities (which include Rule 144A Securities) may have contractual
restrictions on resale, or cannot be resold publicly until registered. Illiquid
Securities may be difficult or impossible to sell when a Fund wants to sell them
at a price at which the Fund values them. Certain restricted securities may be
illiquid. Rule 144A Securities are restricted securities that may be sold to
certain institutional purchasers under Rule 144A.
Reverse repurchase agreements involve selling securities held and concurrently
agreeing to repurchase the same securities at a specified price and future date.
Rights represent a preemptive right of stockholders to purchase additional
shares of a stock at the time of a new issuance, before the stock is offered to
the general public, allowing the stock-holder to retain the same ownership
percentage after the new stock offering.
Short sales against the box involve selling short securities actually owned or
otherwise covered at all times during the period the short position is open.
Structured and indexed securities are securities whose principal and/or interest
rate is determined by reference to changes in the value of one or more specific
currencies, interest rates, commodities, indices or other financial indicators.
U.S. Government securities are issued or guaranteed as to principal or interest
by the U.S. Government or one of its agencies or instrumentalities. Some U.S.
Government securities are backed by the full faith and credit of the federal
government. Other U.S. Government securities are backed by the issuer's right to
borrow from the U.S. Treasury and some are backed only by the credit of the
issuing organization. All U.S. Government securities are considered highly
creditworthy.
Value investing involves buying stocks that are out of favor and/or undervalued
in comparison to their peers and/or their prospects for growth. Generally, value
stock valuation levels are lower than those of growth stocks.
Variable Rate Securities carry interest rates that may be adjusted periodically
to market rates. Interest rate adjustments could increase or decrease the income
generated by the securities.
Various investment techniques are utilized by a Fund to increase or decrease its
exposure to changing security prices, interest rates, currency exchange rates,
commodity prices or other factors that affect security values.
- --------------------------------------------------------------------------------
<PAGE>
------------
41
- --------------------------------------------------------------------------------
For certain Funds, these techniques may involve derivative securities and
transactions such as buying and selling options and futures contracts, entering
into currency exchange contracts or swap agreements and purchasing indexed
securities. These techniques are designed to adjust the risk and return
characteristics of a Fund's portfolio of investments and are not used for
leverage. No Fund is under any obligation to use any of these techniques at any
given time or under any particular economic condition. To the extent that a Fund
employs these techniques, the Fund would be subject to derivative securities
risk.
Weighted average maturity represents the length of time in days or years until
the average security in a money market or bond fund will mature or be redeemed
by its issuer. The average maturity is weighted according to the dollar amounts
invested in the various securities in the fund. This measure indicates a fund's
sensitivity to changes in interest rates. In general, the longer a fund's
average weighted maturity, the more its share price will fluctuate in response
to changing interest rates.
Warrants are securities that are usually issued together with a bond or
preferred stock, that permit the holder to buy a proportionate amount of common
stock at a specified price that is usually higher than the stock price at the
time of issue.
When-issued and delayed delivery Securities are securities that are purchased or
sold for delivery and payment at a future date, i.e., beyond normal settlement
date.
Zero coupon obligations pay no interest to their holders prior to maturity.
Instead, interest is paid in a lump sum at maturity. They are purchased at a
discount from par value, and generally are more volatile than other fixed income
securities.
- --------------------------------------------------------------------------------
More on Investment Strategies
In addition to each Fund's principal investment strategies described earlier in
this Prospectus, a Fund is permitted to use other securities and investment
strategies in pursuit of its investment objective. No Fund is under any
obligation to use any of these techniques or strategies at any given time or
under any particular economic condition. Certain instruments and investment
strategies may expose the Funds to other risks and considerations, which are
discussed later in this Prospectus or in the Funds' Statement of Additional
Information (SAI).
Holding Cash and Temporary Defensive Positions: Under normal circumstances, each
Fund may hold cash and/or money market securities (i) pending investment, (ii)
for cash management purposes, and (iii) to meet operating expenses. A Fund
(other than the S&P 500 Index Fund) may from time to time take temporary
defensive positions when the portfolio manager believes that adverse market,
economic, political or other conditions exist. In these circumstances, the
portfolio manager may (i) without limit hold cash and/or invest in money market
instruments, or (ii) restrict the securities markets in which a Fund's assets
are invested by investing those assets in securities markets deemed to be
conservative in light of the Fund's investment objective and strategies. The
Funds, other than the Money Market Fund, may invest in money market instruments
directly or indirectly through investment in the GEI Short-Term Investment Fund
(Investment Fund). The Investment Fund is advised by GE Asset Management, which
charges no advisory fee to the Investment Fund. To the extent that a Fund, other
than the Money Market Fund, holds cash or invests in money market instruments,
it may not achieve its investment objective.
The following tables summarize some of the investment techniques that may be
employed by a Fund. Certain techniques and limitations may be changed at the
discretion of GE Asset Management. Percentage figures refer to the percentage of
a Fund's assets that may be invested in accordance with the indicated technique.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------
42 GE Institutional
Funds Prospectus
More on Strategies
and Risks
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Purchasing Purchasing
Reverse Restricted Structured and Writing and Writing
Repurchase Repurchase and Illiquid and Indexed Securities Securities
Borrowing Agreements Agreements Securities Securities Options Index Options
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. Equity Fund 33 1/3% Yes Yes Yes No Yes Yes
- --------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index Fund 33 1/3% Yes Yes Yes No Yes Yes
- --------------------------------------------------------------------------------------------------------------------------------
Value Equity Fund 33 1/3% Yes Yes Yes No Yes Yes
- --------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Growth Fund 33 1/3% Yes Yes Yes No Yes Yes
- --------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Value Equity Fund 33 1/3% Yes Yes Yes Yes Yes Yes
- --------------------------------------------------------------------------------------------------------------------------------
Small-Cap Value Equity Fund 33 1/3% Yes Yes Yes No Yes Yes
- --------------------------------------------------------------------------------------------------------------------------------
International Equity Fund 33 1/3% Yes Yes Yes No Yes Yes
- --------------------------------------------------------------------------------------------------------------------------------
Europe Equity Fund 33 1/3% Yes Yes Yes Yes Yes Yes
- --------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Fund 33 1/3% Yes Yes Yes No Yes Yes
- --------------------------------------------------------------------------------------------------------------------------------
Premier Growth Equity Fund 33 1/3% Yes Yes Yes No Yes Yes
- --------------------------------------------------------------------------------------------------------------------------------
Premier Research Equity Fund 33 1/3% Yes Yes Yes No Yes Yes
- --------------------------------------------------------------------------------------------------------------------------------
Premier International Equity
Fund 33 1/3% Yes Yes Yes No Yes Yes
- --------------------------------------------------------------------------------------------------------------------------------
Income Fund 33 1/3% Yes Yes Yes Yes Yes Yes
- --------------------------------------------------------------------------------------------------------------------------------
Strategic Investment Fund 33 1/3% Yes Yes Yes Yes Yes Yes
- --------------------------------------------------------------------------------------------------------------------------------
Money Market Fund 33 1/3% Yes Yes No No No No
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
<PAGE>
------------
43
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Maximum
Futures and Forward Options Investment
Options on Currency on Foreign in Debt
Futures Transactions Currencies Securities
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Equity Fund Yes Yes Yes 35%
- ----------------------------------------------------------------------------------------------------
S&P 500 Index Fund Yes Yes Yes 35%
- ----------------------------------------------------------------------------------------------------
Value Equity Fund Yes Yes Yes 35%
- ----------------------------------------------------------------------------------------------------
Mid-Cap Growth Fund Yes Yes Yes 35% (maximum of
25% in BBB by S&P,
Baa by Moody's or
equivalent)
- ----------------------------------------------------------------------------------------------------
Mid-Cap Value Equity Fund Yes Yes Yes 35%
- ----------------------------------------------------------------------------------------------------
Small-Cap Value Equity Fund No No No 35%
- ----------------------------------------------------------------------------------------------------
International Equity Fund Yes Yes Yes 35%
- ----------------------------------------------------------------------------------------------------
Europe Equity Fund Yes Yes Yes 35%
- ----------------------------------------------------------------------------------------------------
Emerging Markets Fund Yes Yes Yes 35% (maximum of
25% in BBB by S&P,
Baa by Moody's or
equivalent)
- ----------------------------------------------------------------------------------------------------
Premier Growth Equity Fund Yes Yes No 35%
- ----------------------------------------------------------------------------------------------------
Premier Reseach Equity Fund Yes Yes No 35%
- ----------------------------------------------------------------------------------------------------
Premier International Equity Fund Yes Yes Yes 35%
- ----------------------------------------------------------------------------------------------------
Income Fund Yes Yes Yes 100% (maximum of
25% in BBB by S&P
or Baa by Moody's or
equivalent)
- ----------------------------------------------------------------------------------------------------
Strategic Investment Fund Yes Yes Yes 100% (maximum of
25% in BBB by S&P
or Baa by Moody's or
equivalent)
- ----------------------------------------------------------------------------------------------------
Money Market Fund No No No 100%
- ----------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------
Maximum
Investment in Maximum When-Issued
Below-Investment Investment and Delayed
Grade Debt in Foreign Delivery
Securities Securities Securities
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Equity Fund 5% 15%* Yes
- -------------------------------------------------------------------------------------
S&P 500 Index Fund 5% 35%* Yes
- -------------------------------------------------------------------------------------
Value Equity Fund 5% 25%* Yes
- -------------------------------------------------------------------------------------
Mid-Cap Growth Fund 10% in BB or B by 35%* Yes
S&P or Ba or B by
Moody's or equivalent
- -------------------------------------------------------------------------------------
Mid-Cap Value Equity Fund 15% in securities 15%* Yes
rated BBB or below
by S&P or Baa or
below by Moody's or
equivalent
- -------------------------------------------------------------------------------------
Small-Cap Value Equity Fund 10% 10%* Yes
- -------------------------------------------------------------------------------------
International Equity Fund 5% 100% Yes
- -------------------------------------------------------------------------------------
Europe Equity Fund 15% 100% Yes
- -------------------------------------------------------------------------------------
Emerging Markets Fund 10% in BB or B by 100% Yes
S&P or Ba or B by
Moody's or equivalent
- -------------------------------------------------------------------------------------
Premier Growth Equity Fund 5% 25%* Yes
- -------------------------------------------------------------------------------------
Premier Reseach Equity Fund 5% 25%* Yes
- -------------------------------------------------------------------------------------
Premier International Equity Fund 5% 100% Yes
- -------------------------------------------------------------------------------------
Income Fund 10% in BB or B by
S&P or Ba or B by 35%* Yes
Moody's or equivalent
- -------------------------------------------------------------------------------------
Strategic Investment Fund 10% in BB or B by 30%* Yes
S&P or Ba or B by
Moody's or equivalent
- -------------------------------------------------------------------------------------
Money Market Fund None 25%* Yes
- -------------------------------------------------------------------------------------
</TABLE>
* This limitation excludes ADRs, and securities of a foreign issuer with a class
of securities reqistered with the Securities and Exchange Commission and listed
on a U.S. national securities exchange or traded on the Nasdaq National Market
or the Nasdaq Small-Cap Market.
- --------------------------------------------------------------------------------
<PAGE>
- ----------------------
44 GE Institutional
Funds Prospectus
More on Strategies
and Risks
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Debt Securities Floating and Participation
Lending Obligations of of Other Variable Interests in
Portfolio Rule 144A Supranational Depositary Investment Municipal Rate Municipal
Securities Securities Agencies Receipts Funds Leases Instruments Obligations
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Equity Fund Yes Yes Yes Yes No No No* No
- ------------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index Fund Yes Yes Yes Yes Yes No No* No
- ------------------------------------------------------------------------------------------------------------------------------------
Value Equity Fund Yes Yes Yes Yes Yes No No* No
- ------------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Growth Fund Yes Yes Yes Yes Yes No No* No
- ------------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Value Equity Fund Yes Yes Yes Yes Yes No No* No
- ------------------------------------------------------------------------------------------------------------------------------------
Small-Cap Value Equity Fund Yes Yes Yes Yes Yes No No* No
- ------------------------------------------------------------------------------------------------------------------------------------
International Equity Fund Yes Yes Yes Yes Yes No No* No
- ------------------------------------------------------------------------------------------------------------------------------------
Europe Equity Fund Yes Yes Yes Yes Yes No Yes No
- ------------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Fund Yes Yes Yes Yes Yes No No* No
- ------------------------------------------------------------------------------------------------------------------------------------
Premier Growth Equity Fund Yes Yes Yes Yes Yes No No* No
- ------------------------------------------------------------------------------------------------------------------------------------
Premier Research Equity Fund Yes Yes Yes Yes Yes No No* No
- ------------------------------------------------------------------------------------------------------------------------------------
Premier International
Equity Fund Yes Yes Yes Yes Yes No No* No
- ------------------------------------------------------------------------------------------------------------------------------------
Income Fund Yes Yes Yes Yes Yes No Yes No
- ------------------------------------------------------------------------------------------------------------------------------------
Strategic Investment Fund Yes Yes Yes Yes Yes Yes Yes Yes
- ------------------------------------------------------------------------------------------------------------------------------------
Money Market Fund Yes Yes Yes No No No Yes No
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* This limitation excludes commercial paper and notes with variable and floating
rates of interest.
- --------------------------------------------------------------------------------
<PAGE>
------------
45
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Mortgage Government
Custodial Related Stripped Asset Backed Short
Zero Municipal Receipts on Securities, Mortgage Securities and Mortgage Sales
Coupon Obligations Municipal including Related Receivable-Backed Dollar Against
Obligations Components Obligations CMOs Securities Securities Rolls the Box
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Equity Fund Yes No No No No No No No
- ------------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index Fund No No No No No No No No
- ------------------------------------------------------------------------------------------------------------------------------------
Value Equity Fund No No No No No No No Yes
- ------------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Growth Fund No No No No No No No Yes
- ------------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Value Equity Fund Yes No No No No No No Yes
- ------------------------------------------------------------------------------------------------------------------------------------
Small-Cap Value Equity Fund No No No No No No No Yes
- ------------------------------------------------------------------------------------------------------------------------------------
International Equity Fund No No No No No No No Yes
- ------------------------------------------------------------------------------------------------------------------------------------
Europe Equity Fund No No No No No No No Yes
- ------------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Fund No No No No No No No Yes
- ------------------------------------------------------------------------------------------------------------------------------------
Premier Growth Equity Fund No No No No No No No No
- ------------------------------------------------------------------------------------------------------------------------------------
Premier Research Equity Fund No No No No No No No No
- ------------------------------------------------------------------------------------------------------------------------------------
Premier International
Equity Fund No No No No No No No Yes
- ------------------------------------------------------------------------------------------------------------------------------------
Income Fund Yes No No Yes Yes Yes Yes No
- ------------------------------------------------------------------------------------------------------------------------------------
Strategic Investment Fund Yes Yes Yes Yes Yes Yes Yes No
- ------------------------------------------------------------------------------------------------------------------------------------
Money Market Fund No No No No No No No No
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
- ----------------------
46 GE Institutional
Funds Prospectus
More on Strategies
and Risks
- --------------------------------------------------------------------------------
More on Risks
Like all mutual funds, investing in the GE Institutional Funds involves risk
factors and special considerations. A Fund's risk is defined primarily by its
principal investment strategies, which are described earlier in this Prospectus.
Investments in a Fund are not insured against loss of principal. As with any
mutual fund, there can be no assurance that a Fund will achieve its investment
objective. Investing in shares of a Fund should not be considered a complete
investment program. The share value of the Equity Funds, the Income Fund and the
Asset Allocation Fund will rise and fall. Although the Money Market Fund seeks
to preserve the value of your investment at $1.00 per share, it is possible to
lose money by investing in the Fund.
One of your most important investment considerations should be balancing risk
and return. Different types of investments tend to respond differently to shifts
in the economic and financial environment. So, diversifying your investments
among different asset classes -- such as stocks, bonds and cash -- and within an
asset class -- such as small-cap and large-cap stocks -- can help you manage
risk and achieve the results you need to comfortably reach your financial goals.
The primary risks of particular investments are summarized below. For more
information about the risks associated with the Funds, please see the SAI, which
is incorporated by reference into this Prospectus.
Credit Risk: The price of a bond is affected by the issuer's or counterparty's
credit quality. Changes in financial condition and general economic conditions
can affect the ability to honor financial obligations and therefore lower credit
quality. Lower quality bonds are generally more sensitive to these changes than
higher quality bonds. Even within securities considered investment grade,
differences exist in credit quality and some investment grade debt securities
may have speculative characteristics. A security's price may be adversely
affected by the market's opinion of the security's credit quality level even if
the issuer or counterparty has suffered no degradation in ability to honor the
obligation.
Derivative Securities Risk: A Fund's use of various investment techniques to
increase or decrease its exposure to changing security prices, interest rates,
currency exchange rates, commodity prices, or other factors that affect security
values may involve derivative securities and contracts. Derivative securities
and contracts (securities and contracts whose values are based on other
securities, currencies or indices) include option contracts (on stocks, indices,
currencies, futures contracts or bonds), forward currency exchange contracts,
futures contracts, currency and interest rate swap contracts and structured
securities. Derivative securities and contracts may be used as a direct
investment or as a hedge for a Fund's portfolio or a portion of a portfolio.
Hedging involves using a security or contract to offset investment risk. Hedging
may include reducing the risk of a position held in a portfolio. Hedging and
other investment techniques also may be used to increase a Fund's exposure to a
particular investment strategy. If the portfolio manager's judgment of market
conditions proves incorrect or the strategy does not correlate well with a
Fund's investments, the use of derivatives could result in a loss regardless of
whether the intent was to reduce risk or increase return and may increase a
Fund's volatility. In addition, in the event that non-exchange traded
derivatives are used, these derivatives could result in a loss if the
counterparty to the transaction does not perform as promised. A Fund is not
obligated to pursue any hedging strategy. In addition, hedging techniques may
not be available, may be too costly to be used effectivily or may be unable to
be used for other reasons. These investments may be considered speculative.
Diversification Risk: The Premier Funds may invest in securities of a limited
number of issuers to achieve a potentially greater investment return than a Fund
that invests in a larger number of issuers. As a result, price movements of a
single issuer's securities will have a greater impact on such Fund's net asset
value causing it to fluctuate more than that of a more widely diversified fund.
Emerging Markets Risk: Emerging market securities bear most foreign exposure
risks discussed below. In addition, there are greater risks involved in
investing in emerging markets than in developed foreign markets. Specifically,
- --------------------------------------------------------------------------------
<PAGE>
------------
47
- --------------------------------------------------------------------------------
the economic structures in emerging market countries are less diverse and mature
than those in developed countries, and their political systems are less stable.
Investments in emerging market countries may be affected by national policies
that restrict foreign investment. Emerging market countries may have less
developed legal structures, and the small size of their securities markets and
low trading volumes can make investments illiquid and more volatile than
investments in developed countries. As a result, a Fund investing in emerging
market countries may be required to establish special custody or other
arrangements before investing.
Foreign Exposure Risk: Investing in foreign securities, including depositary
receipts, or securities of U.S. entities with significant foreign operations,
involves additional risks which can affect a Fund's performance. Foreign
markets, particularly emerging markets, may be less liquid, more volatile and
subject to less government supervision than U.S. markets. There may be
difficulties enforcing contractual obligations, and it may take more time for
transactions to clear and settle in foreign countries than in the U.S. Less
information may be available about foreign issuers. The costs of buying and
selling foreign securities, including tax, brokerage and custody costs,
generally are higher than those involving domestic transactions. The specific
risks of investing in foreign securities include:
o Currency Risk: The values of foreign investments may be affected by changes in
currency rates or exchange control regulations. If the local currency gains
strength against the U.S. dollar, the value of the foreign security increases in
U.S. dollar terms. Conversely, if the local currency weakens against the U.S.
dollar, the value of the foreign security declines in U.S. dollar terms. U.S.
dollar-denominated securities of foreign issuers, including depositary receipts,
also are subject to currency risk based on their related investments.
o Political/Economic Risk: Changes in economic, tax or foreign investment
policies, government stability, war or other political or economic actions may
have an adverse effect on a Fund's foreign investments.
o Regulatory Risk: Foreign companies often are not subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements common to U.S. companies.
High Yield Securities Risk: Below investment-grade securities, sometimes called
"junk bonds," are considered speculative. These securities have greater risk of
default than higher rated securities. The market value of below investment-grade
securities is more sensitive to individual corporate developments and economic
changes than higher rated securities. The market for below investment-grade
securities may be less active than for higher rated securities, which can
adversely affect the price at which these securities may be sold. Less active
markets may diminish a Fund's ability to obtain accurate market quotations when
valuing the portfolio securities and calculating a Fund's net asset value. In
addition, a Fund may incur additional expenses if a holding defaults and a Fund
has to seek recovery of its principal investment.
Below investment-grade securities may also present risks based on payment
expectations. For example, these securities may contain redemption or call
provisions. If an issuer exercises these provisions in a declining interest rate
market the Fund would have to replace the security with a lower yielding
security resulting in a decreased return for investors.
Illiquid Securities Risk: Illiquid securities may be difficult to resell at
approximately the price they were valued in the ordinary course of business in
seven days or less. When investments cannot be sold readily at the desired time
or price, a Fund may have to accept a lower price or may not be able to sell the
security at all, or forego other investment opportunities, all of which may have
an impact on the Fund.
Interest Rate Risk: Bond prices generally rise when interest rates decline and
decline when interest rates rise. The longer the duration of a bond, the more a
change in interest rates affects the bond's price. Short-term and long-term
interest rates may not move the same amount and may not move in the same
direction.
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48 GE Institutional
Funds Prospectus
More on Strategies
and Risks
- --------------------------------------------------------------------------------
Prepayment Risk: Prices and yields of mortgage-backed securities assume the
securities will be redeemed at a given time. When interest rates decline,
mortgage-backed securities experience higher prepayments because the underlying
mortgages are repaid earlier than expected. A Fund's portfolio manager may be
forced to invest the proceeds from prepaid mortgage-backed securities at lower
rates, which results in a lower return for the Fund. When interest rates
increase, mortgage-backed securities experience lower prepayments because the
underlying mortgages may be repaid later than expected. This typically reduces
the value of the underlying securities.
Repurchase and Reverse Repurchase Agreements Risk: A Fund entering into a
repurchase agreement may suffer a loss if the other party to the transaction
defaults on its obligations and could be delayed or prevented from exercising
its rights to dispose of the underlying securities. The value of the underlying
securities might decline while the Fund seeks to assert its rights. The Fund
could incur additional expenses in asserting its rights or 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 at a higher price under the agreement.
Restricted Securities Risk: Restricted securities (including Rule 144A
securities) may be subject to legal restraints on resale and, therefore, are
typically less liquid than other securities. The prices received 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 same investor protection requirements as publicly traded
securities.
Stock Market Risk: Stock market risk is the risk that the value of equity
securities may decline. Stock prices change daily in response to company
activity and general economic and market conditions. Stock prices may decline in
value, even during periods when equity securities in general are rising, or may
not perform as well as the market in general. Additional stock market risks may
be introduced when a particular equity security is traded on a foreign market.
For more detail on the related risks involved in foreign markets, see Foreign
Exposure Risk.
Style Risk: Securities with different characteristics tend to shift in and out
of favor depending upon market and economic conditions as well as investor
sentiment. A Fund may underperform other funds that employ a different style. A
Fund also may employ a combination of styles that impact its risk
characteristics. Examples of different styles include growth and value
investing, as well as those focusing on large, medium, or small company
securities.
o Growth Investing Risk: Growth stocks may be more volatile than other stocks
because they are more sensitive to investor perceptions of the issuing company's
growth potential. Growth oriented funds will typically underperform when value
investing is in favor.
o Value Investing Risk: Undervalued stocks may not realize their perceived value
for extended periods of time or may never realize their perceived value. Value
stocks may respond differently to market and other developments than other types
of stocks. Value oriented funds will typically underperform when growth
investing is in favor.
o Mid-Cap Company Risk: Investments in securities of mid-cap companies entail
greater risks than investments in larger, more established companies. Mid-cap
companies tend to have more narrow product lines, more limited financial
resources and a more limited trading market for their stocks, as compared with
larger companies. As a result, their stock prices may decline significantly as
market conditions change.
o Small-Cap Company Risk: Investing in securities of small-cap companies may
involve greater risks than investing in larger, more established issuers.
Smaller companies may have limited product lines, markets or financial
resources. Their securities may trade less frequently and in more limited volume
than the securities of larger, more established companies. In addition, smaller
companies are typically subject to greater changes in earnings and business
- --------------------------------------------------------------------------------
<PAGE>
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49
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prospects than are larger companies. Consequently, the prices of small company
stocks tend to rise and fall in value more than other stocks. Although investing
in small-cap companies offers potential for above-average returns, the companies
may not succeed and their stock prices could decline significantly.
Other Risk Considerations
Institutional Investor Risk: 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 purchase
or withdrawal by a large investor may result in significant portfolio trading
expenses that are borne by other shareholders.
EURO Conversion: The introduction of the EURO, a new common currency in Europe,
may result in uncertainties for European companies and markets. Individual
issuers may suffer increased costs and decreased earnings. Market disruptions
may occur that could adversely affect the value of European securities and
currencies.
Year 2000: The inability of computer systems worldwide to process correctly
date-related information from before, on, and after January 1, 2000 could cause
difficulties for systems' users (the "Year 2000 Issue"). The impact of failures
by companies, markets, or governments of countries in which a Fund invests to
address effectively the Year 2000 Issue may be felt well after January 1, 2000
and may negatively impact a Fund's performance. In addition, a Fund could be
adversely affected if the computer systems used by GE Asset Management, its
sub-adviser or external service providers do not correctly process such
date-related information.
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<PAGE>
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50 GE Institutional About the
Funds Prospectus Investment
Adviser
- --------------------------------------------------------------------------------
Investment Advisor and Administrator
GE Asset Management Incorporated, located at 3003 Summer Street, P.O. Box 7900,
Stamford, Connecticut 06904, is the investment adviser and administrator of each
Fund. GE Asset Management is a wholly-owned subsidiary of General Electric
Company (GE) and a registered investment adviser. As of December 31, 1999, GE's
investment advisory firms oversaw $106.7 billion and managed individual and
institutional assets of $82.6 billion, of which more than $18.2 billion was
invested in mutual funds.
For many years, GE's tradition of ingenuity and customer focus has included
financial services. In the late 1920s, through a desire to promote the financial
well-being of its employees, GE began managing assets for its employee pension
plan. By the mid-1930s, GE pioneered some of the nation's earliest mutual funds,
the Elfun Funds -- to be followed years later by the GE Savings and Security
Program Funds. The success of these funds spurred growth; eventually GE expanded
its mutual fund offerings to include a wide variety of investment products
called the GE Family of Funds, created specifically for the general public.
GE Asset Management bases its investment philosophy on two enduring principles.
First, GE Asset Management believes that a disciplined, consistent approach to
investing can add value to an investment portfolio over the long term. Its
commitment to in-depth research, sound judgment and hard work provides investors
with an opportunity to take advantage of attractive investments around the
world. Second, GE Asset Management follows the same principles of integrity and
quality that have guided GE over the past century and have made it the
world-class company that it is today.
Each Fund pays GE Asset Management a combined fee for advisory and
administrative services that is accrued daily and paid 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, and the relevant
breakpoints, are stated in the schedule opposite (fees are expressed as an
annual rate) up to the maximum annual fee for investment management services.
For their services, GE Asset Management pays (out of the advisory fee that it
receives) SSGA, Palisade and NWQ monthly compensation in the form of an
investment sub-advisory fee. The fee is paid by GE Asset Management monthly and
is based upon the average daily net assets of the Fund that each sub-adviser
manages.
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Investment Management and Administration Fees:
Each Fund pays GE Asset Management an investment management fee. The fee is
accrued daily and paid monthly at the following rates:
Annual Rate
Name of Fund Average Daily Net Assets of Fund Percentage
- --------------------------------------------------------------------------------
U.S. Equity Fund First $25 million 0.55%
Value Equity Fund Next $25 million 0.45%
Mid-Cap Growth Fund Over $50 million 0.35%
Premier Growth Equity Fund
Premier Research Equity Fund
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S&P 500 Index Fund All Assets 0.15%
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Mid-Cap Value Equity Fund First $25 million 0.65%
Next $25 million 0.60%
Over $50 million 0.55%
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Small-Cap Value Equity Fund First $25 million 0.70%
Next $25 million 0.65%
Over $50 million 0.60%
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International Equity Fund First $25 million 0.75%
Europe Equity Fund Next $50 million 0.65%
Premier International
Equity Fund Over $75 million 0.55%
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Emerging Markets Fund First $50 million 1.05%
Over $50 million 0.95%
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Income Fund First $25 million 0.35%
Next $25 million 0.30%
Next $50 million 0.25%
Over $100 million 0.20%
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Strategic Investment Fund First $25 million 0.45%
Next $25 million 0.40%
Over $50 million 0.35%
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Money Market Fund First $25 million 0.25%
Next $25 million 0.20%
Next $50 million 0.15%
Over $100 million 0.10%
- --------------------------------------------------------------------------------
From time to time, GE Asset Management may waive or reimburse advisory or
administrative fees paid by a Fund.
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<PAGE>
---------
51
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About the Funds' Portfolio Managers
Eugene K. Bolton is a Director and Executive Vice President of GE Asset
Management. He manages the overall U.S. equity investments for GE Asset
Management. He leads a team of portfolio managers for the U.S. Equity Fund. He
has served in this capacity since the Fund's commencement. Mr. Bolton joined GE
Asset Management in 1984 as Chief Financial Officer and has been a portfolio
manager since 1986.
Christopher D. Brown is a Senior Vice President of GE Asset Management and a
co-portfolio manager of GE Premier Research Equity Fund. He has served in that
capacity since the Fund's commencement. Mr. Brown joined GE Asset Management in
1985 as a Vice President and U.S. Equity Analyst and has been a portfolio
manager since 1992.
David B. Carlson is a Senior Vice President of GE Asset Management. He is
portfolio manager for the Premier Growth Equity Fund and manages equity
investments for the Strategic Investment Fund. He has served in those capacities
since each Fund's commencement. Mr. Carlson joined GE Asset Management in 1982
as a Securities Analyst for Investment Operations. He became a Vice President
for Mutual Fund Portfolios in 1987 and a Senior Vice President in 1989.
Peter J. Hathaway is a Senior Vice President of GE Asset Management and
portfolio manager for the Value Equity Fund. Mr. Hathaway has served in that
capacity since the Fund's commencement and has over 36 years of investment
experience. He joined GE Asset Management in 1985 as a Vice President for
Pension Fund Portfolios. He became a Senior Vice President in 1987.
Brian Hopkinson is a Senior Vice President of GE Asset Management and portfolio
manager of GE Premier International Equity Fund. He has served in that capacity
since the Fund's commencement. Mr. Hopkinson joined the International Equities
Team at GE Asset Management in 1996 as a portfolio manager. Prior to joining GE
Asset Management, Mr. Hopkinson was a portfolio manager with Fiduciary Trust
Company International.
Ralph R. Layman is a Director and Executive Vice President of GE Asset
Management. He manages the overall international equity investments for GE Asset
Management. Mr. Layman leads a team of portfolio managers for the International
Equity Fund and the Emerging Markets Fund. He manages the international equity
investments for the Strategic Investment Fund. He has served in those capacities
since each Fund's commencement. Mr. Layman joined GE Asset Management in 1991 as
Executive Vice President for International Investments.
Robert A. MacDougall is a Director and Executive Vice President of GE Asset
Management. He manages the overall fixed income investments for GE Asset
Management. He leads a team of portfolio managers for the Income Fund and the
Money Market Fund. Mr. MacDougall also manages fixed income investments for the
Strategic Investment Fund. He has served in those capacities since each Fund's
commencement. Mr. MacDougall joined GE Asset Management in 1986 as Vice
President. He became a Senior Vice President of Fixed Income in 1993, a director
and Executive Vice President of Fixed Income in 1997.
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<PAGE>
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52 GE Institutional
Funds Prospectus
- --------------------------------------------------------------------------------
Richard L. Sanderson is a Senior Vice President of GE Asset Management and a
co-portfolio manager of GE Premier Research Equity Fund. He has served in that
capacity since the Fund's commencement. Mr. Sanderson joined GE Asset Management
in 1995 as a Vice President and Equity Analyst and was appointed Director of
Investment Research Domestic Equities in 1997. Prior to that time, Mr. Sanderson
was a Senior Analyst with Alliance Capital Management.
Michael J. Solecki is a Senior Vice President of GE Asset Management and
portfolio manager of the Europe Equity Fund. He has served in that capacity
since the Fund's commencement. Mr Solecki joined GE Asset Management in 1990 as
an International Equity Analyst. He became a Vice President for International
Equity Portfolios in 1996.
Ralph E. Whitman is a Senior Vice President of GE Asset Management and Portfolio
Manager of the Mid-Cap Growth Fund. He has served in that capacity since
December 1998. He joined GE Asset Management in 1987 as an Equity Analyst. He
became a Vice President for U.S. Equity Investments in 1995 and a Senior Vice
President for U.S. Equity Portfolios in 1998.
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53
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<PAGE>
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54 GE Institutional
Funds Prospectus
About the Investment
Adviser
- --------------------------------------------------------------------------------
About the Sub-Advisers
GE Asset Management believes that it has the responsibility to make the best
managers available to Fund shareholders at all times, whether that means
accessing GE Asset Management's wealth of internal talent or using external
talent (Sub-Advisers). When GE Asset Management feels the need to access
specialists outside, it carefully investigates and engages Sub-Advisers with
strong performance records and styles that match the investment objectives of
the Funds. GE Asset Management is proud to engage the following Sub-Advisers to
conduct the investment programs for the following Funds.
S&P 500 Index Fund
State Street Global Advisors (SSGA)
Two International Place
Boston, MA 02110
SSGA has served as the sub-adviser of S&P 500 Index Fund since its inception.
SSGA, a division of State Street Bank and Trust Company, is a wholly-owned
subsidiary of State Street Corporation, a publicly held bank holding company.
State Street managed more than $672.4 billion in assets as of December 31, 1999.
State Street 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.
The Fund is managed by a team of portfolio managers led by James B. May, CFA.
Mr. May is a Principal of State Street Global Advisors and a Senior Portfolio
Manager in the U.S. Passive Equity Group. He joined the firm in 1991. before
joining the U.S. Passive Equity Group, Mr. May worked in the firm's Passive U.S.
Equity Operations department as a Senior Analyst. He has been working in the
investment management field since 1989 when he joined State Street's Custody
operation.
Mr. May holds an MBA from Boston College and a BS in Finance from Bentley
College. He is a member of Boston Security Analysts Society and the Association
for Investment Management and Research (AIMR).
- --------------------------------------------------------------------------------
Small-Cap Value Equity Fund
Palisade Capital Management, L.L.C. (Palisade)
One Bridge Plaza
Fort Lee, NJ 07024
Palisade has a history of managing small-cap equity portfolios and for several
years has provided pension fund services to GE. The company has managed various
institutional and private accounts with total assets in excess of $2.1 billion
as of December 31, 1999. Palisade has managed the Small-Cap Value Equity Fund
since inception. Although Palisade has no previous experience managing mutual
fund portfolios, Palisade translates its experience from various institutional
and private accounts to mutual funds.
The Fund is managed by an investment advisory committee (Senior Investment
Committee) composed of the following members: Jack Feiler, Martin L. Berman,
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<PAGE>
---------
55
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Steven E. Berman and Richard Meisenberg. Mr. Feiler, Chief Investment Officer at
Palisade, has day-to-day responsibility for managing the Fund and works with the
Senior Investment Committee in developing and executing the Fund's investment
program. Mr. Feiler has more than 30 years of investment experience and has
served as the principal small-cap portfolio manager at Palisade since the
commencement of Palisade's operations in April 1995. Prior to joining Palisade,
Mr. Feiler was a Senior Vice President-Investments at Smith Barney from 1990 to
1995.
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Mid-Cap Value Equity Fund
NWQ Investment Management Company (NWQ)
2049 Century Park East - 4th Floor
Los Angeles, CA 90067
NWQ is a wholly-owned subsidiary of United Asset Management Corporation, a
company whose principal business is managing investments for institutional
clients through 50 operating subsidiaries and acquiring investment management
firms. NWQ is a manager of domestic investment portfolios for individual, union,
corporate, municipal, endowment and foundation clients with 17 years of
experience. As of November 30, 1999, NWQ had in excess of $6.4 billion of assets
under management.
Jon D. Bosse is the portfolio manager of the GE Mid-Cap Value Equity Fund and
has served in that capacity since the Fund's inception. Mr. Bosse has more than
13 years of investment experience and has held the position of Director of
Equity Research and Managing Director at NWQ since 1996. Prior to his joining
NWQ in 1996, he spent ten years with ARCO Investment Management Company where he
was director of equity research and managed a value-oriented portfolio. Previous
to this, he spent four years in the corporate finance department of ARCO. Mr.
Bosse is a Chartered Financial Analyst and a member of the Association for
Investment Management and Research and the Los Angeles Society of Financial
Analysts.
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<PAGE>
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56 GE Institutional
Funds Prospectus
About the Investment
Adviser
- --------------------------------------------------------------------------------
Prior Performance Information of GE Asset Management Incorporated
(Investment Adviser to the U.S. Equity Fund)
The bar chart and table opposite illustrate the performance of a composite of
certain private and mutual fund accounts ("Accounts") managed by GE Asset
Management, the investment adviser to the U.S. Equity Fund. For more information
about GE Asset Management, see "About the Investment Adviser." Each of the
Accounts included in the composite has objectives, policies and strategies
substantially similar to those of the Fund.
Unlike management of the private accounts included in the composite, GE Asset
Management's management of the U.S. Equity Fund is subject to certain regulatory
restrictions (e.g., limits on percentage of assets invested in a single issuer
and industry and requirements on distributing income to shareholders) that do
not apply to the private accounts. In addition, the Fund generally experiences
cash flows that are different from those of the private accounts. All of these
factors may adversely affect the performance of the Fund and cause it to differ
from that of the composite described opposite.
GE Asset Management composite results represent the performance of the Accounts,
net of the annual rate of total operating expenses of the U.S. Equity Fund; the
composite results do not represent the performance of the U.S. Equity Fund, and
should not be considered an indication of future performance of the Fund.
- --------------------------------------------------------------------------------
Calendar Year Total Return
[BAR CHART]
Composite(2) US Equity Fund(3) S&P 500 Index
------------ ----------------- -------------
1992 9% 8%
1993 11% 10%
1994 -2% 1%
1995 36% 37%
1996 22% 23%
1997 33% 33%
1998 23% 24% 29%
1999 20% 20% 21%
2000(1) 2% 2% 2%
- --------------------------------------------------------------------------------
Average Annual Total Return
(as of March 31, 2000)
Composite -- Composite -- U.S. Equity S&P 500
Period Investment Class(4) Service Class(2) Fund(3) Index
------------------- ---------------- ----------- -------
1 Year 16.10% 15.81% 15.73% 18.17%
3 Years 25.53% 25.22% -- 27.52%
5 Years 25.17% 24.87% -- 26.83%
Since 1/1/92 18.24% 17.95% -- 19.42%
(1) Represents performance from 1/1/00 through 3/31/00.
(2) The composite performance results shown reflect the deduction of the
annual rate of total operating expenses of the Fund - Service Class
shares.
(3) Represents the performance of U.S. Equity Fund - Investment Class shares.
As of the date of this Prospectus, Service Class shares have no operating
history and therefore performance information is not available. Service
Class shares of the Fund pay a shareholder service and distribution fee,
which would lower their returns. The Fund's Investment Class commenced
operations 11/25/97. Fund performance information is shown in the Calendar
Year Total Return Chart from January 1st of the year following its
inception. The Fund performance information is net of applicable fees and
other expenses. As with all mutual funds, past performance is not an
indication of future performance.
(4) The composite performance results shown reflect the deduction of the
annual rate of total operating expenses of the Fund - Investment Class
shares.
Note A. GE stock has been held in substantially all of the private accounts in
the composite since October 1996. GE stock is not actively traded by the private
accounts and is held at a weight substantially approximating the weight of GE in
the S&P500 Index, with quarterly rebalancing. GE stock is not held by any mutual
fund. Private accounts that do not hold GE stock and mutual funds in the
composite typically hold a GE substitute (a basket of securities that are
intended to represent, on a collective basis, the principal industries in which
GE conducts business).
Note B. The composite performance results shown reflect the deduction of the
annual rate of total operating expenses, including the maximum advisory and
administration fee, of the Fund; actual expenses of the Accounts may have been
more or less than those of the Fund. The composite results were not calculated
in accordance with SEC mandated mutual fund performance calculation methodology
and the use of such methodology could yield a different result. As of March 31,
2000, the total assets in the composite were $14.2 billion. The composite
performance is compared to the performance of the S&P 500 Index, which is a
composite of the price and dividend performance of 500 widely held U.S. stocks
recognized by many investors to be representative of the stock market in
general. The information provided above for the composite, the Fund and the
Index reflects the reinvestment of dividends and distributions.
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<PAGE>
-----------
57
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Prior Performance Information of GE Asset Management Incorporated
(Investment Adviser to the Value Equity Fund)
The bar chart and table opposite illustrate the performance of a composite of
certain private and mutual fund accounts ("Accounts") managed by GE Asset
Management, the investment adviser to the Value Equity Fund. For more
information about GE Asset Management, see "About the Investment Adviser." Each
of the Accounts included in the composite has objectives, policies and
strategies substantially similar to those of the Fund.
Unlike management of the private accounts included in the composite, GE Asset
Management's management of the Value Equity Fund will be subject to certain
regulatory restrictions (e.g., limits on percentage of assets invested in a
single issuer and industry and requirements on distributing income to
shareholders) that did not apply to the private accounts. In addition, the Fund
will likely experience cash flows different from those of the private accounts.
All of these factors may adversely affect the performance of the Fund and cause
it to differ from that of the composite described opposite.
GE Asset Management composite results represent the performance of the Accounts,
net of the annual rate of total operating expenses of the Value Equity Fund; the
composite results do not represent the performance of the Value Equity Fund, and
should not be considered an indication of future performance of the Fund.
- --------------------------------------------------------------------------------
Calendar Year Total Return(1)
[BAR CHART]
Composite(3) S&P 500/Barra Value Index
------------ -------------------------
1992 10% 11%
1993 14% 19%
1994 -1% -1%
1995 37% 37%
1996 22% 22%
1997 34% 30%
1998 26% 15%
1999 20% 13%
2000(2) 2% 0%
- --------------------------------------------------------------------------------
Average Annual Total Return(1)
(as of March 31, 2000)
Composite -- Composite -- S&P 500/Barra
Period Investment Class(4) Service Class(3) Value Index
------------------- ---------------- -------------
1 Year 16.88% 16.59% 9.86%
3 Years 26.08% 25.77% 18.28%
5 Years 25.82% 25.51% 20.75%
Since 1/1/92 19.36% 19.07% 17.05%
(1) No performance figures are shown for the Value Equity Fund because the Fund
commenced operations on February 2, 2000.
(2) Represents performance from 1/1/00 through 3/31/00.
(3) The composite performance results shown reflect the deduction of the annual
rate of total operating expenses of the Fund - Service Class shares.
(4) The composite performance results shown reflect the deduction of the annual
rate of total operating expenses of the Fund - Investment Class shares.
Note A. Performance results provided in the composite for the period from
January 1, 1992 to September 30, 1997 reflect the performance of a single
private account consisting only of General Electric Pension Trust assets. GE
stock has been held in substantially all of the private accounts in the
composite since October 1996. GE stock is not actively traded by the private
accounts and is held at a weight substantially approximating the weight of GE in
the S&P 500 Index, with quarterly rebalancing. GE stock is not held by any
mutual fund. Private accounts that do not hold GE stock and mutual funds in the
composite typically hold a GE substitute (a basket of securities that are
intended to represent, on a collective basis, the principal industries in which
GE conducts business).
Note B. The composite performance results shown reflect the deduction of the
annual rate of total operating expenses, including the maximum advisory and
administration fee, of the Fund; actual expenses of the Accounts may have been
more or less than those of the Fund. The composite results were not calculated
in accordance with SEC mandated mutual fund performance calculation methodology
and the use of such methodology could yield a different result. As of March 31,
2000, the total assets in the composite were $ 5.01 billion. The composite
performance is compared to the performance of the S&P 500/Barra Value Index,
which is a capitalization-weighted index of all of the stocks in the S&P 500
that have low price-to-book ratios. The information provided above for the
composite and the Index reflects the reinvestment of dividends and
distributions.
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<PAGE>
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58 GE Institutional
Funds Prospectus
About the Investment
Adviser
- --------------------------------------------------------------------------------
Prior Performance Information of GE Asset Management Incorporated
(Investment Adviser to the International Equity Fund)
The bar chart and table opposite illustrate the performance of a composite of
certain private and mutual fund accounts ("Accounts") managed by GE Asset
Management, the investment adviser to the International Equity Fund. For more
information about GE Asset Management, see "About the Investment Adviser." Each
of the Accounts included in the composite has objectives, policies and
strategies substantially similar to those of the Fund.
Unlike management of the private accounts included in the composite, GE Asset
Management's management of the International Equity Fund is subject to certain
regulatory restrictions (e.g., limits on percentage of assets invested in a
single issuer and industry and requirements on distributing income to
shareholders) that do not apply to the private accounts. In addition, the Fund
generally experiences cash flows that are different from those of the private
accounts. All of these factors may adversely affect the performance of the Fund
and cause it to differ from that of the composite described opposite.
GE Asset Management composite results represent the performance of the Accounts,
net of the annual rate of total operating expenses of the International Equity
Fund; the composite results do not represent the performance of the
International Equity Fund, and should not be considered an indication of future
performance of the Fund.
- --------------------------------------------------------------------------------
Calendar Year Total Return
[BAR CHART]
Composite(2) International Equity Fund(3) MSCI EAFE Index
------------ ---------------------------- ---------------
1990 -16% -23%
1991 8% 12%
1992 -5% -12%
1993 39% 33%
1994 0% 8%
1995 12% 11%
1996 14% 6%
1997 7% 2%
1998 17% 17% 20%
1999 32% 32% 27%
2000(1) 4% 4% 0%
- --------------------------------------------------------------------------------
Average Annual Total Return
(as of March 31, 2000)
Composite -- Composite -- International MSCI EAFE
Period Investment Class(4) Service Class(2) Equity Fund(3) Index
------------------- ---------------- -------------- ---------
1 Year 32.73% 32.40% 32.27% 25.10%
3 Years 19.61% 19.32% -- 16.31%
5 Years 17.16% 16.87% -- 12.39%
10 Years 11.57% 11.30% -- 9.39%
Since 8/1/89 10.60% 10.32% -- 6.98%
(1) Represents performance from 1/1/00 through 3/31/00.
(2) The composite performance results shown reflect the deduction of the
annual rate of total operating expenses of the Fund - Service Class
shares.
(3) Represents the performance of International Equity Fund - Investment Class
shares. As of the date of this Prospectus, Service Class shares have no
operating history and therefore performance information is not available.
Service Class shares of the Fund pay a shareholder service and
distribution fee, which would lower their returns. The Fund's Investment
Class commenced operations 11/25/97. Fund performance information is shown
in the Calendar Year Total Return Chart from January 1st of the year
following its inception. The Fund performance information is net of
applicable fees and other expenses. As with all mutual funds, past
performance is not an indication of future performance.
(4) The composite performance results shown reflect the deduction of the
annual rate of total operating expenses of the Fund - Investment Class
shares.
Note A. The composite performance results shown reflect the deduction of the
annual rate of total operating expenses, including the maximum advisory and
administration fee, of the Fund; actual expenses of the Accounts may have been
more or less than those of the Fund. The composite results were not calculated
in accordance with SEC mandated mutual fund performance calculation methodology
and the use of such methodology could yield a different result. As of March 31,
2000, the total assets in the composite were $10.2 billion. The composite
performance is compared to the performance of the MSCI EAFE Index, which is a
composite of foreign securities traded in 22 developed markets in Europe,
Australasia, and Far East. The information provided above for the composite, the
Fund and the Index reflects the reinvestment of dividends and distributions.
- --------------------------------------------------------------------------------
<PAGE>
-----------
59
- --------------------------------------------------------------------------------
Prior Performance Information of GE Asset Management Incorporated
(Investment Adviser to the Emerging Markets Fund)
The bar chart and table opposite illustrate the performance of a composite of
certain private and mutual fund accounts ("Accounts") managed by GE Asset
Management, the investment adviser to the Emerging Markets Fund. For more
information about GE Asset Management, see "About the Investment Adviser." Each
of the Accounts included in the composite has objectives, policies and
strategies substantially similar to those of the Fund.
Unlike management of the private accounts included in the composite, GE Asset
Management's management of the Emerging Markets Fund is subject to certain
regulatory restrictions (e.g., limits on percentage of assets invested in a
single issuer and industry and requirements on distributing income to
shareholders) that do not apply to the private accounts. In addition, the Fund
generally experiences cash flows that are different from those of the private
accounts. All of these factors may adversely affect the performance of the Fund
and cause it to differ from that of the composite described opposite.
GE Asset Management composite results represent the performance of the Accounts,
net of the annual rate of total operating expenses of the Emerging Markets Fund;
the composite results do not represent the performance of the Emerging Markets
Fund, and should not be considered an indication of future performance of the
Fund.
- --------------------------------------------------------------------------------
Calendar Year Total Return
[BAR CHART]
Composite(3) Emerging Markets Fund(4) MSCI EMF Index
------------ ------------------------ --------------
1996(1) -1% -4%
1997 -13% -12%
1998 -20% -20% -25%
1999 110% 108% 66%
2000(2) 10% 9% 2%
- --------------------------------------------------------------------------------
Average Annual Total Return
(as of March 31, 2000)
Composite -- Composite -- Emerging MSCI
Period Investment Class(5) Services Class(3) Markets Fund(4) EMF Index
------------------- ----------------- --------------- ---------
1 Year 99.32% 98.85% 95.89% 51.59%
3 Years 15.13% 14.85% -- 1.23%
Since 7/1/96 13.16% 12.88 -- 2.02%
(1) Represents performance from 7/1/96 through 12/31/96.
(2) Represents performance from 1/1/00 through 3/31/00.
(3) The composite performance results shown reflect the deduction of the
annual rate of total operating expenses of the Fund - Service Class
shares.
(4) Represents the performance of Emerging Markets Fund - Investment Class
shares. As of the date of this Prospectus, Service Class shares have no
operating history and therefore performance information is not available.
Service Class shares of the Fund pay a shareholder service and
distribution fee, which would lower their returns. The Fund's Investment
Class commenced operations 11/25/97. Fund performance information is shown
in the Calendar Year Total Return Chart from January 1st of the year
following its inception. The Fund performance information is net of
applicable fees and other expenses. As with all mutual funds, past
performance is not an indication of future performance.
(5) The composite performance results shown reflect the deduction of the
annual rate of total operating expenses of the Fund - Investment Class
shares.
Note A. The composite performance results shown reflect the deduction of the
annual rate of total operating expenses, including the maximum advisory and
administration fee, of the Fund; actual expenses of the Accounts may have been
more or less than those of the Fund. The composite results were not calculated
in accordance with SEC mandated mutual fund performance calculation methodology
and the use of such methodology could yield a different result. As of March 31,
2000, the total assets in the composite were $1.2 billion. The composite
performance is compared to the performance of the MSCI Emerging Markets Free
Index, which is a composite of securities available to non-domestic investors
traded in 25 emerging markets. The information provided above for the composite,
the Fund and the Index reflects the reinvestment of dividends and distributions.
- --------------------------------------------------------------------------------
<PAGE>
- ------------------------
60 GE Institutional
Funds Prospectus
About the Investment
Adviser
- --------------------------------------------------------------------------------
Prior Performance Information of GE Asset Management Incorporated
(Investment Adviser to the Premier Growth Equity Fund)
The bar chart and table opposite illustrate the performance of a composite of
certain private and mutual fund accounts ("Accounts") managed by GE Asset
Management, the investment adviser to the Premier Growth Equity Fund. For more
information about GE Asset Management, see "About the Investment Adviser." Each
of the Accounts included in the composite has objectives, policies and
strategies substantially similar to those of the Fund.
Unlike management of the private accounts included in the composite, GE Asset
Management's management of the Premier Growth Equity Fund will be subject to
certain regulatory restrictions (e.g., limits on percentage of assets invested
in a single issuer and industry and requirements on distributing income to
shareholders) that did not apply to the private accounts. In addition, the Fund
will likely experience cash flows different from those of the private accounts.
All of these factors may adversely affect the performance of the Fund and cause
it to differ from that of the composite described opposite.
GE Asset Management composite results represent the performance of the Accounts,
net of the annual rate of total operating expenses of the Premier Growth Equity
Fund; the composite results do not represent the performance of the Premier
Growth Equity Fund, and should not be considered an indication of future
performance of the Fund.
- --------------------------------------------------------------------------------
Calendar Year Total Return
[BAR CHART]
Composite(2) Premier Growth Equity Fund(3) S&P 500 Index
------------ ----------------------------- -------------
1997 27% 33%
1998 36% 29%
1999 36% 21%
2000(1) 4% 2% 4%
- --------------------------------------------------------------------------------
Average Annual Total Return(1)
(as of March 31, 2000)
Composite -- Composite -- S&P 500
Period Investment Class(4) Service Class(2) Index
------------------- ---------------- -------
1 Year 29.96% 29.64% 18.17%
3 Years 36.86% 36.52% 27.52%
Since 1/1/97 31.70% 31.38% 26.15%
(1) Represents performance from 1/1/00 through 3/31/00.
(2) The composite performance results shown reflect the deduction of the
annual rate of total operating expenses of the Fund - Service Class
shares.
(3) Represents the performance of the Premier Growth Equity Fund - Investment
Class shares. As of the date of this Prospectus, Service Class shares have
no operating history and therefore performance information is not
available. Service Class shares of the Fund pay a shareholder service and
distribution fee, which would lower their returns. The Fund's Investment
Class commenced operations 10/31/99. Fund performance information is shown
in the Calendar Year Total Return Chart from January 1st of the year
following its inception. The Fund performance information is net of
applicable fees and other expenses. As with all mutual funds, past
performance is not an indication of future performance.
(4) The composite performance results shown reflect the deduction of the
annual rate of total operating expenses of the Fund - Investment Class
shares.
Note A. The composite performance results shown reflect the deduction of the
annual rate of total operating expenses, including the maximum advisory and
administration fee, of the Fund; actual expenses of the Accounts may have been
more or less than those of the Fund. The composite results were not calculated
in accordance with SEC mandated mutual fund performance calculation methodology
and the use of such methodology could yield a different result. As of March 31,
2000, the total assets in the composite were $323 million. The composite
performance is compared to the performance of the S&P 500 Index, which is a
composite of the price and dividend performance of 500 widely held U.S. stocks
recognized by many investors to be representative of the stock market in
general. The information provided above for the composite and the Index reflects
the reinvestment of dividends and distributions.
- --------------------------------------------------------------------------------
<PAGE>
-----------
61
- --------------------------------------------------------------------------------
Prior Performance Information of GE Asset Management Incorporated
(Investment Adviser to the Premier Research Equity Fund)
The bar chart and table opposite illustrate the performance of a composite of
certain private accounts ("Accounts") managed by GE Asset Management, the
investment adviser to the Premier Research Equity Fund. For more information
about GE Asset Management, see "About the Investment Adviser." Each of the
Accounts included in the composite has objectives, policies and strategies
substantially similar to those of the Fund.
Unlike management of the Accounts, GE Asset Management's management of the
Premier Research Equity Fund is subject to certain regulatory restrictions
(e.g., limits on percentage of assets invested in a single issuer and industry
and requirements on distributing income to shareholders) that do not apply to
the private accounts. In addition, the Fund generally experiences cash flows
that are different from those of the private accounts. All of these factors may
adversely affect the performance of the Fund and cause it to differ from that of
the composite described opposite.
GE Asset Management composite results represent the performance of the Accounts,
net of the annual rate of total operating expenses of the Premier Research
Equity Fund. The composite results do not represent the performance of the
Premier Research Equity Fund, and should not be considered an indication of
future performance of the Fund.
- --------------------------------------------------------------------------------
Calendar Year Total Return(1)
[BAR CHART]
Composite(4) S&P 500 Index
------------ -------------
1998(2) 12% 20%
1999 20% 21%
2000(3) 1% 2%
- --------------------------------------------------------------------------------
Average Annual Total Return(1)
(as of March 31, 2000)
Composite -- Composite -- S&P 500
Period Investment Class(5) Service Class(4) Index
------------------- ---------------- -------
1 Year 14.86% 14.58% 18.17%
Since 7/1/98 19.35% 19.05% 19.00%
(1) No performance figures are shown for the Premier Research Equity Fund
because the Fund has no operating history as of the date of this
Prospectus.
(2) Represents performance from 7/1/98 through 12/31/98.
(3) Represents performance from 1/1/00 through 3/31/00.
(4) The composite performance results shown reflect the deduction of the
annual rate of total operating expenses of the Fund - Service Class
shares.
(5) The composite performance results shown reflect the deduction of the
annual rate of total operating expenses of the Fund - Investment Class
Shares.
Note A. The composite performance results shown reflect the deduction of the
annual rate of total operating expenses, including the maximum advisory and
administration fee, of the Fund; actual expenses of the Accounts may have been
more or less than those of the Fund. The composite results were not calculated
in accordance with SEC mandated mutual fund performance calculation methodology
and the use of such methodology could yield a different result. As of March 31,
2000, the total assets in the composite were $1.11 billion. The composite
performance is compared to the performance of the S&P 500 Index, which is a
composite of the price and dividend performance of 500 widely held U.S. stocks
recognized by many investors to be representative of the stock market in
general. The information provided above for the composite, and the Index
reflects the reinvestment of dividends and distributions.
- --------------------------------------------------------------------------------
<PAGE>
- ------------------------
62 GE Institutional
Funds Prospectus
About the Investment
Adviser
- --------------------------------------------------------------------------------
Prior Performance Information of GE Asset Management Incorporated
(Investment Adviser to the Premier International Equity Fund)
The bar chart and table opposite illustrate the performance of a single private
account ("Account") managed by GE Asset Management, the investment adviser to
the Premier International Equity Fund. For more information about GE Asset
Management, see "About the Investment Adviser." The Account has objectives,
policies and strategies substantially similar to those of the Fund.
Unlike management of the Account, GE Asset Management's management of the
Premier International Equity Fund is subject to certain regulatory restrictions
(e.g., limits on percentage of assets invested in a single issuer and industry
and requirements on distributing income to shareholders) that do not apply to
the Account. In addition, the Fund generally experiences cash flows that are
different from those of the Account. All of these factors may adversely affect
the performance of the Fund and cause it to differ from that of the Account
described opposite.
GE Asset Management results represent the performance of the Account, net of the
annual rate of total operating expenses of the Premier International Equity
Fund. The Account results do not represent the performance of the Premier
International Equity Fund, and should not be considered an indication of future
performance of the Fund.
- --------------------------------------------------------------------------------
Calendar Year Total Return(1)
[BAR CHART]
Account(3) MSCI EAFE Index
------------ ---------------
1998 22% 20%
1999 29% 27%
2000(2) 6% 0%
- --------------------------------------------------------------------------------
Average Annual Total Return(1)
(as of March 31, 2000)
Account -- Account -- MSCI EAFE
Period Investment Class(4) Service Class(3) Index
------------------- ---------------- ---------
1 Year 33.73% 33.41% 25.10%
Since 1/1/98 25.92% 25.62% 20.52%
(1) No performance figures are shown for the Premier International Equity Fund
because the Fund has no operating history as of the date of this
Prospectus.
(2) Represents performance from 1/1/00 through 3/31/00
(3) The Account performance results shown reflect the deduction of the annual
rate of total operating expenses of the Fund - Service Class shares.
(4) The Account performance results shown reflect the deduction of the annual
rate of total operating expenses of the Fund - Investment Class shares.
Note A. The Account performance results shown reflect the deduction of the
annual rate of total operating expenses, including the maximum advisory and
administration fee, of the Fund; actual expenses of the Account may have been
more or less than those of the Fund. The composite results were not calculated
in accordance with SEC mandated mutual fund performance calculation methodology
and the use of such methodology could yield a different result. As of March 31,
2000, the total assets in the composite were $85 million. The Account
performance is compared to the performance of the MSCI EAFE Index, which is a
composite of foreign securities traded in 22 developed nations in Europe,
Australia, Asia and the Far East. The information provided above for the Account
and the Index reflects the reinvestment of dividends and distributions.
- --------------------------------------------------------------------------------
<PAGE>
-----------
63
- --------------------------------------------------------------------------------
Prior Performance Information of GE Asset Management Incorporated
(Investment Adviser to the Income Fund)
The bar chart and table opposite illustrate the performance of a composite of
certain private and mutual fund accounts ("Accounts") managed by GE Asset
Management, the investment adviser to the Income Fund. For more information
about GE Asset Management, see "About the Investment Adviser." Each of the
Accounts included in the composite has objectives, policies and strategies
substantially similar to those of the Fund.
Unlike management of the private accounts included in the composite, GE Asset
Management's management of the Income Fund is subject to certain regulatory
restrictions (e.g., limits on percentage of assets invested in a single issuer
and industry and requirements on distributing income to shareholders) that do
not apply to the private accounts. In addition, the Fund generally experiences
cash flows that are different from those of the private accounts. All of these
factors may adversely affect the performance of the Fund and cause it to differ
from that of the composite described opposite.
GE Asset Management composite results represent the performance of the Accounts,
net of the annual rate of total operating expenses of the Income Fund; the
composite results do not represent the performance of the Income Fund, and
should not be considered an indication of future performance of the Fund.
- --------------------------------------------------------------------------------
Calendar Year Total Return
[BAR CHART]
Lehman Brothers
Composite(3) Income Fund(4) Aggregate Bond Index
------------ -------------- --------------------
1992(1) 8% 9%
1993 9% 10%
1994 -3% -3%
1995 18% 18%
1996 4% 4%
1997 10% 10%
1998 8% 8% 9%
1999 -1% -1% -1%
2000(2) 2% 2% 2%
- --------------------------------------------------------------------------------
Lehman Brothers
Composite -- Composite -- Income Aggregate
Period Investment Class(5) Service Class(3) Fund (4) Bond Index
------------------- ---------------- -------- ----------
1 Year 1.44% 1.18% 1.32% 1.88%
3 Years 6.40% 6.14% -- 6.70%
5 Years 7.03% 6.76% -- 7.14%
Since 4/1/92 6.88% 6.61% -- 7.01%
(1) Represents performance from 4/1/92 through 12/31/92.
(2) Represents performance from 1/1/00 through 3/31/00.
(3) The composite performance results shown reflect the deduction of the
annual rate of total operating expenses of the Fund - Service Class
shares.
(4) Represents the performance of Income Fund - Investment Class shares. As of
the date of this Prospectus, Service Class shares have no operating
history and therefore performance information is not available. Service
Class shares of the Fund pay a shareholder service and distribution fee,
which would lower their returns. The Fund's Investment Class commenced
operations 11/21/97. Fund performance information is shown in the Calendar
Year Total Return Chart from January 1st of the year following its
inception. The Fund performance information is net of applicable fees and
other expenses. As with all mutual funds, past performance is not an
indication of future performance.
(5) The composite performance results shown reflect the deduction of the
annual rate of total operating expenses of the Fund - Investment Class
shares.
Note A. The composite performance results shown reflect the deduction of the
annual rate of total operating expenses, including the maximum advisory and
administration fee, of the Fund; actual expenses of the Accounts may have been
more or less than those of the Fund. The composite results were not calculated
in accordance with SEC mandated mutual fund performance calculation methodology
and the use of such methodology could yield a different result. As of March 31,
2000, the total assets in the composite were $12.15 billion. The composite
performance is compared to the performance of the Lehman Brothers Aggregate Bond
Index, which is a composite of short-, medium- and long-term bond performance
and is widely recognized as a barometer of the bond market in general. The
information provided above for the composite and the Index reflects the
reinvestment of dividends and distributions.
<PAGE>
- ------------------------
64 GE Institutional
Funds Prospectus
About the Investment
Adviser
- --------------------------------------------------------------------------------
Prior Performance Information of GE Asset Management Incorporated
(Investment Adviser to the Strategic Investment Fund)
The bar chart and table opposite illustrate the performance of a composite of
certain mutual fund accounts ("Accounts") managed by GE Asset Management, the
investment adviser to the Strategic Investment Fund. For more information about
GE Asset Management, see "About the Investment Adviser." Each of the Accounts
included in the composite has objectives, policies and strategies substantially
similar to those of the Fund.
GE Asset Management composite results represent the performance of the Accounts,
net of the annual rate of total operating expenses of the Strategic Investment
Fund; the composite results do not represent the performance of the Strategic
Investment Fund, and should not be considered an indication of future
performance of the Fund.
- --------------------------------------------------------------------------------
Calendar Year Total Return(1)
[BAR CHART]
Strategic
Composite(3) Investment Fund(4) Composite Index(4)
------------ ------------------ ------------------
1992(1) 12% 10%
1993 9% 10%
1994 -1% 0%
1995 27% 30%
1996 14% 15%
1997 18% 24%
1998 17% 21%
1999 13% 12%
2000(2) 3% 3% 2%
- --------------------------------------------------------------------------------
Average Annual Total Return
(as of March 31, 2000)
Lehman Brothers
Composite -- Composite -- S&P 500 Aggregate
Period Investment Class(6) Service Class(5) Index Bond Index
------------------- ---------------- ------- ---------------
1 Year 13.14% 12.86% 18.17% 1.88%
3 Years 17.39% 17.10% 27.52% 6.70%
5 Years 17.13% 16.84% 26.83% 7.14%
Since 4/1/92 14.06% 13.78% 20.47% 7.01%
(1) Represents performance from 4/1/92 through 12/31/92.
(2) Represents performance from 1/1/00 through 3/31/00.
(3) The composite performance results shown reflect the deduction of the
annual rate of total operating expenses of the Fund - Service Class
shares.
(4) Represents the performance of the Strategic Investment Fund - Investment
Class Shares. As of the date of this Prospectus, Service Class shares have
no operating history and therefore performance information is not
available. Service Class shares of the Fund pay a shareholder service and
distribution fee, which would lower their returns. The Fund's Investment
Class commenced operations 10/31/99. Fund performance information is shown
in the Calendar Year Total Return Chart from January 1st of the year
following its inception. The Fund performance information is net of
applicable fees and other expenses. As with all mutual funds, past
performance is not an indication of future performance.
(5) The Composite Index return is a blended return composed of 60% S&P 500
Index and 40% Lehman Brothers Aggregate Bond Index.
(6) The composite performance results shown reflect the deduction of the
annual rate of total operating expenses of the Fund - Investment Class
shares.
Note A. The composite performance results shown reflect the deduction of the
annual rate of total operating expenses, including the maximum advisory and
administration fee, of the Fund; actual expenses of the Accounts may have been
more or less than those of the Fund. The composite results were not calculated
in accordance with SEC mandated mutual fund performance calculation methodology
and the use of such methodology could yield a different result. As of March 31,
2000, the total assets in the composite were $549 million. The composite
performance is compared to the performance of the S&P 500 Index and the Lehman
Brothers Aggregate Bond Index, S&P 500 Index is a composite of the price and
dividend performace of 500 widely held U.S. stocks recognized by many investors
to be representative of the stock market in general. Lehman Brothers Aggregate
Bond Index is a composite of short-, medium- and long-term bond performance and
is widely recognized as a barometer of the bond market in general. The
information provided above for the composite and the Index reflects the
reinvestment of dividends and distributions.
- --------------------------------------------------------------------------------
<PAGE>
---------
65
- --------------------------------------------------------------------------------
Prior Performance Information of GE Asset Management Incorporated
(Investment Adviser to the Money Market Fund)
The bar chart and table opposite illustrate the performance of a composite of
certain private and mutual fund accounts ("Accounts") managed by GE Asset
Management, the investment adviser to the Money Market Fund. For more
information about GE Asset Management, see "About the Investment Adviser." Each
of the Accounts included in the composite has objectives, policies and
strategies substantially similar to those of the Fund.
Unlike management of the private accounts included in the composite, GE Asset
Management's management of the Money Market Fund is subject to certain
regulatory restrictions (e.g., limits on percentage of assets invested in a
single issuer and industry and requirements on distributing income to
shareholders) that do not apply to the private accounts. In addition, the Fund
generally experiences cash flows that are different from those of the private
accounts. All of these factors may adversely affect the performance of the Fund
and cause it to differ from that of the composite described opposite.
GE Asset Management composite results represent the performance of the Accounts,
net of the annual rate of total operating expenses of the Money Market Fund; the
composite results do not represent the performance of the Money Market Fund, and
should not be considered an indication of future performance of the Fund.
- --------------------------------------------------------------------------------
Calendar Year Total Return
[BAR CHART]
Composite(2) Money Market Fund(3) 90-day Treasury Bill
------------ -------------------- ---------------------
1992(1) 2% 3%
1993 3% 3%
1994 4% 4%
1995 6% 6%
1996 5% 5%
1997 5% 5%
1998 5% 5% 5%
1999 5% 5% 5%
2000(2) 1% 1% 1%
- --------------------------------------------------------------------------------
Average Annual Total Return
(as of March 31, 2000)
<TABLE>
<CAPTION>
Composite -- Composite -- 90-day
Period Investment Class(5) Service Class(4) Money Market Fund(4) Treasury Bill
------------------- ---------------- -------------------- -------------
<S> <C> <C> <C> <C>
1 Year 5.45% 5.19% 5.26% 5.15%
3 Years 5.37% 5.11% -- 5.02%
5 Years 5.41% 5.15% -- 5.14%
Since 4/1/92 4.79% 4.53% -- 4.64%
</TABLE>
(1) Represents performance from 4/1/92 through 12/31/92.
(2) Represents performance from 1/1/00 through 3/31/00.
(3) The composite performance results shown reflect the deduction of the
annual rate of total operating expenses of the Fund - Service Class
shares.
(4) Represents the performance of Money Market Fund - Investment Class shares.
As of the date of this Prospectus, Service Class shares have no operating
history and therefore performance information is not available. Service
Class shares of the Fund pay a shareholder service and distribution fee,
which would lower their returns. The Fund's Investment Class commenced
operations 12/2/97. Fund performance information is shown in the Calendar
Year Total Return Chart from January 1st of the year following its
inception. The Fund performance information is net of applicable fees and
other expenses. As with all mutual funds, past performance is not an
indication of future performance. Although the Money Market Fund attempts
to maintain a stable $1.00 per share value, there is no guarantee it will
be able to do so. It is possible to lose money investing in the Money
Market Fund. Shares of the Money Market Fund are not FDIC insured.
(5) The composite performance results shown reflect the deduction of the
annual rate of total operating expenses of the Fund - Investment Class
shares.
Note A. The composite performance results shown reflect the deduction of the
annual rate of total operating expenses, including the maximum advisory and
administration fee, of the Fund; actual expenses of the Accounts may have been
more or less than those of the Fund. The composite results were not calculated
in accordance with SEC mandated mutual fund performance calculation methodology
and the use of such methodology could yield a different result. As of March 31,
2000, the total assets in the composite were $3 billion. The composite
performance is compared to the performance of the 90-day Treasury Bill which is
the average return on three month U.S. Treasury Bills. The information provided
above for the composite, the Fund and the Index reflects the reinvestment of
dividends and distributions.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------
66 GE Institutional
Funds Prospectus
About the Investment
Adviser
- --------------------------------------------------------------------------------
Prior Performance Information of Jon Bosse
(Portfolio Manager of the Mid-Cap Value Equity Fund)
The bar chart and table opposite illustrate the performance of a composite of
certain private and mutual fund accounts ("Accounts") managed by Jon Bosse, the
portfolio manager primarily responsible for the day-to-day management of the
Mid-Cap Value Equity Fund.
Each of the Accounts included in the composite has objectives, policies and
strategies substantially similar to those of the Fund. The Accounts were managed
by Mr. Bosse while he was employed with NWQ Investment Management Company
("NWQ"), the sub-adviser of the Fund, since October 1996 and during his previous
employment with ARCO Investment Management Company ("ARCO") since January 1990.
As is the case with the Fund, Mr. Bosse was primarily responsible for management
of the Accounts and no other person had a significant role in achieving the
performance described.
Unlike management of the private accounts included in the composite, Mr. Bosse's
management of the Mid-Cap Value Equity Fund is subject to certain regulatory
restrictions (e.g., limits on percentage of assets invested in a single issuer
and industry and requirements on distributing income to shareholders) that do
not apply to the private accounts. The Fund also incurs certain operating
expenses that are not borne by the private accounts. In addition, the Fund
generally experiences cash flows that are different from those of the private
accounts. All of these factors may adversely affect the performance of the Fund
and cause it to differ from that of the composite described opposite.
- --------------------------------------------------------------------------------
<PAGE>
---------
67
- --------------------------------------------------------------------------------
Calendar Year Total Return
[BAR CHART]
S&P Mid-Cap Mid-Cap Value
400 Index Equity Fund(2) Composite
----------- -------------- ---------
1990 -5% 1%
1991 50% 54%
1992 12% 30%
1993 14% 20%
1994 -4% 9%
1995 31% 39%
1996 19% 29%
1997 32% 35%
1998 19% 8%
1999 15% 10% 18%
2000(1) 0% 0% 12%
The Portfolio Manager composite results represent the performance of the
Accounts, net of fees and other expenses, not the performance of the Mid-Cap
Value Equity Fund, and should not be considered an indication of future
performance of the Fund.
Average Annual Total Return
(as of March 31, 2000)
Mid-Cap Value S&P Mid-Cap
Period Composite Equity Fund(1) 400 Index
--------- -------------- -----------
1 Year 11.48% 7.77% 38.09%
3 Years 19.51% -- 27.39%
5 Years 23.32% -- 24.06%
Since 1/1/90 22.54% -- 18.23%
(1) Represents performance from 1/1/00 through 3/31/00.
(2) Represents the performance of Mid-Cap Value Equity Fund - Investment Class
Shares. As of the date of this Prospectus, Service Class shares have no
operating history and therefore performance information is not available.
Service Class shares of the Fund pay a shareholder service and
distribution fee which would lower their returns. The Fund's Investment
Class commenced operations 12/31/98. Fund performance information is shown
in the Calendar Year Total Return Chart from January 1st of the year
following its inception. The Fund performance information is net of fees
and expenses. As with all mutual funds, past performance is not an
indication of future performance. NWQ believes that the difference in
performance between the Mid-Cap Value Equity Fund and the composite for
the 1 Year period shown above is attributable to differences in certain
security holdings and security weightings due to the earlier inception
date of the composite as compared to the Fund.
Note A. Performance results provided in the composite for the period from
January 1, 1990 to August 31, 1996 reflect the performance of a single private
account managed by Mr. Bosse ("ARCO Account") while he was employed as a
portfolio manager at ARCO. Performance results provided in the composite for the
month of September 1996 reflect the performance during that month of the
portfolio of securities held in the ARCO Account at August 31, 1996 (when Mr.
Bosse ceased managing the ARCO Account), assuming that no changes in the
portfolio were made through the end of the month and dividend income from the
portfolio securities was received. Because no actual portfolio of securities was
managed during this one month period, performance results for September 1996
should be considered hypothetical. Composite performance results from October 1,
1996 (when Mr. Bosse commenced employment at NWQ and purchased for an NWQ
private account substantially the same portfolio of securities held in the ARCO
Account at August 31, 1996), reflect the performance of Accounts managed by Mr.
Bosse while employed with NWQ. The performance results of the ARCO private
account, including the hypothetical performance for September 1996, have been
adjusted to reflect the maximum investment management fee of 1% per year that is
applicable to the NWQ private accounts.
Note B. As of March 31, 2000 the total assets in the composite was $571 million.
The composite performance is compared to the performance of the S&P Mid-Cap 400
Index, which is an unmanaged index of 400 domestic stocks selected for market
size, liquidity and industry group representation. The information provided
above for the composite, the Fund and the Index reflect the reinvestment of
dividends and distributions. Unlike the Index performance information, however,
the performance of the composite is net of applicable fees and other expenses.
Expenses of the Mid-Cap Value Equity Fund are expected to differ from those of
the Accounts. The composite results were not calculated in accordance with SEC
mandated mutual fund performance calculation methodology and the use of such
methodology could yield a different result.
- --------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------
68 GE Institutional How To Invest
Funds Prospectus
- --------------------------------------------------------------------------------
GE Institutional
Funds Prospectus
How to Invest
Investment Choices
The GE Institutional Funds are designed primarily for institutional investors,
such as corporations, foundations, endowments and trusts that manage various
types of employee benefit plans as well as charitable, religious and educational
institutions. The Funds offer two classes of shares - Service Class and
Investment Class.
The Service Class and the Investment Class are identical except that the Service
Class shares bear a 0.25% shareholder servicing and distribution fee under plan
adopted pursuant to Rule 12b-1 ("12b-1 fee"), which requires fees be paid out of
the assets of the class. The 12b-1 fee is intended to pay for the cost of
promoting the Service Class shares and servicing your shareholder account.
Opening an Account
Investors must open an account before purchasing Fund shares. Investors may open
an account by submitting an account application to the Distributor, the transfer
agent or a broker-dealer, financial institution or investment adviser that has
entered into a sales agreement with the Distributor ("Authorized Firms").
Investors may obtain an account application by calling the Funds at (800)
493-3042 or by writing to the Funds at:
GE Institutional Funds
P.O. Box 120065
Stamford, CT 06912-0065
For overnight package delivery, send to:
GE Institutional Funds
c/o National Financial Data Services Inc.
330 West 9th Street
Kansas City, MO 64105
How to Buy Shares
Once an account has been opened, an investor may purchase Fund shares from the
Distributor or through an Authorized Firm. The Authorized Firm will be
responsible for transmitting the investor's order to the transfer agent.
Investors should contact their Authorized Firm for 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].
Requests received in good order will be executed at the net asset value next
calculated after receipt of an investment or transaction instructions. Purchase
and redemption orders are executed only on days when the NYSE is open for
trading. If the NYSE closes early, the deadlines for purchase and redemption
orders will be accelerated to the earlier closing time.
- --------------------------------------------------------------------------------
<PAGE>
---------
69
- --------------------------------------------------------------------------------
Eligible Investors
The Distributor offers Fund shares to certain investors that meet the
eligibility requirements described below. The GE Institutional Funds are
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. GE
Institutional Funds 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, broker-dealers, investment
advisers, 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) ("457 Plans"), 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 GE Institutional Funds (or affiliated persons of such persons).
- --------------------------------------------------------------------------------
Eligibility Requirements
Full-Service Defined Contribution Plan Investors: A full-service defined
contribution plan may invest in the GE Institutional Funds so long as it has
invested at least $100 million in one or more investment portfolios or accounts
that are advised by GE Asset Management and/or GEIC. A full service defined
contribution plan is a defined contribution plan that receives recordkeeping,
administration, investment education and communication services provided or paid
by GE Financial Assurance Holdings, Inc. or its subsidiaries. A full-service
defined contribution plan generally must individually meet the minimum
investment requirements and will not be considered a related investor of any
other investor in the GE Institutional Funds.
If the value of an investor's investment falls below the required amount for
more than 120 days because of redemptions (and not because of market
fluctuations or exchanges), the Distributor may, in its sole discretion, refuse
to sell additional Fund shares to such investor (other than reinvestment of
dividends and capital gains distributions).
457 Defined Contribution Plan Investors: A 457 Plan that is a defined
contribution plan that does not receive record keeping, administration,
investment education and communication services provided or paid by GE Financial
Assurance Holdings, Inc. or its subsidiaries may invest in the GE Institutional
Funds if such investor has at least $300 million of plan assets at the time of
initial investment in one or more of the Funds. A 457 Plan investor of this type
must individually meet the eligibility requirements and will not be considered a
related investor of any other investor in the GE Institutional Funds.
All Other Investors: The minimum initial investment in each Fund is $35 million
for each investor or group of related investors. There is no minimum investment
requirement for subsequent purchases.
The minimum investment requirement is waived for each investor or group of
related investors so long as such person or group has invested at least $100
million in one or more investment portfolios or accounts that are advised by GE
Asset Management and/or GEIC.
The minimum investment requirement is waived for up to three years from the date
of initial purchase of Fund shares for certain investors or groups of related
investors having (i) at least $100 million of investment assets within six
months from the date of the initial purchase of Fund shares, provided they
invest in only one Fund, (ii) at least $200 million of investment assets within
six months from the date of the initial purchase of Fund shares, provided they
invest in no more than two Funds, and (iii) at least $500 million of investment
assets within six months from the date of the initial purchase of Fund shares,
for which they may invest in any number of Funds.
For a bank, insurance company, broker-dealer, investment adviser or other
financial intermediary establishing an omnibus account for investment in the
Funds by its clients, the amount of investment assets is determined either by
(i) aggregating Client Assets (defined below) over which it has investment
dis-
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<PAGE>
- --------------------
70 GE Institutional
Funds Prospectus
How To Invest
- --------------------------------------------------------------------------------
cretion or (ii) aggregating Client Assets of any institution described under
"Eligible Investors" which are managed by it on a non-discretionary basis or for
which it (or its affiliates) provides recordkeeping, shareholder servicing or
other administrative services. "Client Assets" means the assets of any client of
a financial intermediary that has invested in the Trust.
If the value of an investor's (or a group of related investors') investment in a
Fund or other investment portfolios falls below the required amount for more
than 120 days because of redemptions (and not because of market fluctuations or
exchanges) or if an investor (or group of related investors) fail to meet the
minimum investment requirements within the specified time period, the
Distributor may, in its sole discretion, refuse to sell additional Fund shares
to such investor (other than reinvestment of dividends and capital gains
distributions).
For those investors who intend to meet the minimum investment requirements
within three years of the date of initial purchase, the Distributor may refuse
to sell to such investor additional Fund shares (other than reinvestment of
dividends and capital gains distributions), if such investor has not satisfied
the $35 million minimum investment requirement within three years, even if the
investor had the applicable amount of investment assets within the initial
six-month period.
Related Investors: Related investors are investors that are affiliated persons
of each other within the meaning of the 1940 Act. Common trust funds and
collective trust funds of the same bank (or of affiliated banks) are considered
related investors of each other and their bank(s). Likewise, separate accounts
of the same insurance company (or of affiliated insurance companies) are related
investors of each other and their insurance company or companies and clients
whose assets are managed on a discretionary basis by the same bank, insurance
company, investment adviser or broker-dealer are related investors of their
manager. The Distributor also may treat institutional clients of a financial
intermediary whose assets are managed on a non-discretionary basis or who are
otherwise served by the intermediary (or its affiliate) as related investors of
their manager or service provider where Fund shares are held by that
intermediary in an omnibus account for its clients.
Purchases in-Kind: Investors may purchase shares in amounts of $5 million or
more with either cash or investment securities acceptable to the appropriate
Fund. The Funds' Distributor would inform you of the securities acceptable to
the Fund. The securities would be accepted by the Fund at their market value in
return for Fund shares of equal value. The Funds reserve the right to require
the Distributor to suspend the offering of shares of the Emerging Markets Fund
or International Equity Fund for cash in amounts greater than $5 million and of
the other non-money market Funds in amounts above $10 million.
How to Redeem Shares
An investor may redeem all or a portion of the shares on any day that the Fund
is open for business. Redemption requests received in good order on that day
will be effected at the net asset value next determined after the close of
regular trading on the NYSE. Redemption requests received in proper form after
the close of business of the NYSE will be effected at the net asset value as
next determined. Investors must specify the class of shares to be redeemed if
they hold both Service Class and Investment Class shares of a Fund.
If You Invested With an Investment Professional: Shares purchased with the
assistance of an investment professional may be redeemed either by the
investment professional or the shareholder of record. Please see your account
statement for the telephone number of your investment professional. Or call
Shareholder Services directly at (800) 493-3042.
Redemptions by Mail
If an investor is the shareholder of record, it may redeem shares by written
redemption request. Your written request should:
o state the Fund to be redeemed, share class, number of shares or specific
dollar amount
o state your account number
o be signed by an authorized person exactly as registered
o contain a signature guarantee for redemptions of more than $50,000 that are:
- --------------------------------------------------------------------------------
<PAGE>
---------
71
- --------------------------------------------------------------------------------
1. mailed to a different address from that on record
2. paid to someone other than the shareholder of record
3. to be wired to a financial institution or
4. to be mailed to an address that was changed within the past 30 days
Mail your request to the appropriate address:
GE Institutional Funds
P.O. Box 120065
Stamford, CT 06912-0065
For overnight package delivery, send to:
GE Institutional Funds
c/o National Financial Data Services Inc.
330 West 9th Street
Kansas City, MO 64105
Redemptions in Kind
Large redemptions that exceed $250,000 or 1% of a Fund's assets may be
considered detrimental to the Fund's existing shareholders. Therefore, the Fund
may require that you take a "distribution in kind" upon redemption and may give
you portfolio securities instead of cash proceeds. Such Fund portfolio
securities will have to be sold through a broker and you may incur transaction
costs when you sell them. The Funds will redeem shares in kind at your request.
How to Exchange Shares
You may exchange shares of one GE Institutional Fund for the same class of
another GE Institutional Fund or for a different class of the same or another GE
Institutional Fund. Exchanges are permitted provided that the acquired Fund is
an investment option available to the investor requesting the exchange and the
investor meets the minimum investment requirement. The Funds may terminate the
exchange privilege upon 60 days written notice to shareholders.
An exchange for the same class of another GE Institutional Fund is a sale and
purchase of shares for tax purposes. You may have a taxable gain or loss when
you exchange your shares. You may exchange shares by writing the Funds at the
appropriate address listed above.
- --------------------------------------------------------------------------------
Signature Guarantees
All signature guarantees must be executed by a commercial bank, trust company,
broker, dealer credit union, national securities exchange or registered
association, clearing agency or savings association. The Funds may require
additional information for redemptions made by corporations, executors,
administrators, trustees, guardians or persons utilizing a power of attorney. A
redemption request will not be deemed received in good order until GE
Institutional Funds has received all information typically required to assure
the security of a particular account.
Distribution and Shareholder Service Fees
12 b-1 Plan
GE Institutional Funds 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, GE Institutional Funds will
pay GE Asset Management, 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. The annual
fees payable with respect to the Service Class shares of a Fund are intended to
compensate GE Asset Management, or enable GE Asset Management to compensate
other persons ("Service Providers"), for providing ongoing service and/or
maintenance of the accounts of shareholders of the Fund ("Shareholder Services")
and to compensate GE Asset Management, or enable GE Asset Management 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").
Because these fees are paid out of a Fund's assets on an on-going basis, over
time, these fees will increase the cost of your investment and may cost you more
than paying other types of sales charges.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------
72 GE Institutional
Funds Prospectus
- --------------------------------------------------------------------------------
Special Compensation Arrangements
GE Asset Management may pay, out of its own resources, financial services firms
that sell Investment Class Shares or provide shareholder services. GE Asset
Management may also pay, out of its own resources, extra compensation to
financial services firms that sell Service Class Shares or provide shareholder
services.
- --------------------------------------------------------------------------------
<PAGE>
---------
73
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(This page intentionally left blank.)
- --------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------
74 GE Institutional Dividends, Capital Gains
Funds Prospectus and Other Tax Information
- --------------------------------------------------------------------------------
Most GE Institutional Funds pay dividends from net investment income and from
net capital gains once each year. Dividends and capital gain distributions will
be automatically reinvested in your account. There are no fees or charges to
reinvest dividends.
The Funds are subject to a 4% excise tax on undistributed net investment income
and net capital gains. To avoid this tax, the Funds may pay dividends from net
investment income and net capital gains more frequently.
As a result of the different service fees applicable to the Funds' classes,
dividends and distributions for each class will differ.
- --------------------------------------------------------------------------------
Fund Distribution Schedule
- --------------------------------------------------------------------------------
U.S. Equity Fund o Dividends are typically declared and
paid annually.
S&P 500 Index Fund
o Short-term and long-term capital gains,
Value Equity Fund if any, are typically declared and paid
annually.
Mid-Cap Growth Fund
Mid-Cap Value Equity Fund
Small-Cap Value Equity Fund
International Equity Fund
Europe Equity Fund
Emerging Markets Fund
Premier Equity Fund
Premier Research Equity Fund
Premier International Equity Fund
Strategic Investment Fund
- --------------------------------------------------------------------------------
Income Fund o Dividends are declared daily and
paid monthly.
Money Market Fund
o Short-term and long-term capital
gains, if any, are typically declared
and paid annually.
- --------------------------------------------------------------------------------
<PAGE>
---------
75
- --------------------------------------------------------------------------------
Taxes
Tax issues can be complicated. We suggest you see your investment professional
or tax advisor for any questions you may have.
Except for investments in tax-deferred accounts, you generally will owe taxes on
amounts distributed to you. Dividends and distributions from net investment
income and short-term capital gains are taxed as ordinary income. Long-term
capital gains are taxed at the long-term capital gains rate. Distributions
generally will be taxed in the same manner whether they are received in cash or
reinvested.
In addition, if you sell or redeem Fund shares, you generally will realize a
capital gain or loss, which will be long-term or short-term, depending upon how
long you held those shares. If you exchange shares for the same class of another
GE Institutional Fund, the exchange will be treated as a sale and purchase of
shares for tax purposes.
Tax Statement
You will receive an annual statement summarizing your dividend and capital gains
distributions. Please consult a tax advisor if you have questions about your
specific tax situation.
Backup Withholding
If you do not provide complete and certified taxpayer identification
information, each Fund is obligated by law to withhold 31% of Fund
distributions.
- --------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------
76 GE Institutional Calculating Share Value
Funds Prospectus
- --------------------------------------------------------------------------------
Fund shares are sold at net asset value (NAV). The NAV of each share class is
calculated at the close of regular trading on the New York Stock Exchange
(NYSE), normally 4:00 p.m. Eastern time, each day the NYSE is open for trading.
The NAV per share class for Funds (other than the Money Market Fund) is
determined by adding the value of the Fund's investments, cash, and other assets
attributable to that class, subtracting its liabilities, and then dividing the
result by the number of that class' outstanding shares.
A Fund's portfolio securities are valued most often on the basis of market
quotations. Foreign securities are valued on the basis of quotations from the
primary market in which they are traded. Some debt securities are valued using
dealers and pricing services. Municipal bond valuations are based on prices
supplied by a qualified municipal pricing service. The prices are composed of
the mean average of the bid and ask prices on the secondary market. All
portfolio securities of the Money Market Fund and any short-term securities held
by any other Fund with remaining maturities of sixty days or less are valued on
the basis of amortized cost. A Fund's written or purchased options are valued at
the last sales price of the day. If no sales occurred, the options are valued at
the last traded bid price. The value of the portfolio securities held by each
Fund may change on days when shareholders will not be able to purchase or redeem
the Fund's shares.
If quotations are not readily available for any security, or if the value of a
security has been materially affected by events occurring after the closing of a
market, the security may be valued by using procedures approved by a Fund's
Board of Trustees that they believe accurately reflects "fair value."
- --------------------------------------------------------------------------------
<PAGE>
------------------------------------------
Financial Highlights GE Institutional 77
Funds Prospectus
- --------------------------------------------------------------------------------
The financial highlights tables that follow are intended to help you understand
a Fund's financial performance for the fiscal years ended September 30, unless
otherwise noted. Certain information reflects financial results for a single
Fund Investment Class share.
The total returns in the table represent the rate that an investor would have
earned or lost on an investment in the Fund (assuming reinvestment of all
dividends and distributions). Fiscal year end information has been audited by
PricewaterhouseCoopers LLP, whose report, along with the Funds' financial
statements, are included in the Fund's Annual Report, which is available upon
request.
- --------------------------------------------------------------------------------
U.S. Equity Fund
<TABLE>
<CAPTION>
=============================================================================================
Years ended September 30 9/30/99 9/30/98*
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Inception date -- 11/25/97
- ---------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.62 $10.00
- ---------------------------------------------------------------------------------------------
Income (Loss) from Investment Operations:
Net Investment Income (Loss) 0.11 0.11
- ---------------------------------------------------------------------------------------------
Net Gains (Losses) on Investments (both realized and unrealized) 2.84 0.52
- ---------------------------------------------------------------------------------------------
Total Income (Loss) From Investment Operations 2.95 0.63
- ---------------------------------------------------------------------------------------------
Less Distributions:
Dividends (from net investment income) 0.13 0.01
- ---------------------------------------------------------------------------------------------
Distributions (from capital gains) 0.25 --
- ---------------------------------------------------------------------------------------------
Total Distributions 0.38 0.01
- ---------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.19 $10.62
- ---------------------------------------------------------------------------------------------
Total Return (a) 28.27% 6.28%
- ---------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands) $160,980 $114,553
- ---------------------------------------------------------------------------------------------
Ratio of Net Investment Income (Loss) to Average Net Assets** 0.92% 1.21%
- ---------------------------------------------------------------------------------------------
Ratio of Net Expenses to Average Net Assets** 0.41% 0.42%
- ---------------------------------------------------------------------------------------------
Portfolio Turnover Rate 45% 29%
- ---------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
- --------------------
78 GE Institutional
Funds Prospectus
Financial Highlights
- --------------------------------------------------------------------------------
S&P 500 Index Fund
<TABLE>
<CAPTION>
==========================================================================================
Years ended September 30 9/30/99 9/30/98*
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Inception date -- 11/25/97
- ------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.85 $10.00
- ------------------------------------------------------------------------------------------
Income (Loss) from Investment Operations:
Net Investment Income (Loss) 0.18 0.14
- ------------------------------------------------------------------------------------------
Net Gains (Losses) on Investments (both realized and unrealized) 2.88 0.72
- ------------------------------------------------------------------------------------------
Total Income (Loss) From Investment Operations 3.06 0.86
- ------------------------------------------------------------------------------------------
Less Distributions:
Dividends (from net investment income) 0.17 0.01
- ------------------------------------------------------------------------------------------
Distributions (from capital gains) -- --
- ------------------------------------------------------------------------------------------
Total Distributions 0.17 0.01
- ------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.74 $10.85
- ------------------------------------------------------------------------------------------
Total Return (a) 28.41% 8.63%
- ------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands) $26,359 $20,186
- ------------------------------------------------------------------------------------------
Ratio of Net Investment Income (Loss) to Average Net Assets** 1.35% 1.57%
- ------------------------------------------------------------------------------------------
Ratio of Net Expenses to Average Net Assets** 0.15% 0.15%
- ------------------------------------------------------------------------------------------
Portfolio Turnover Rate 7% 1%
- ------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Mid-Cap Growth Fund
<TABLE>
<CAPTION>
==========================================================================================
Years ended September 30 9/30/99 9/30/98*
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Inception date -- 11/25/97
- ------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $8.87 $10.00
- ------------------------------------------------------------------------------------------
Income (Loss) from Investment Operations:
Net Investment Income (Loss) 0.05 0.04
- ------------------------------------------------------------------------------------------
Net Gains (Losses) on Investments (both realized and unrealized) 1.29 (1.16)
- ------------------------------------------------------------------------------------------
Total Income (Loss) From Investment Operations 1.34 (1.12)
- ------------------------------------------------------------------------------------------
Less Distributions:
Dividends (from net investment income) 0.05 0.01
- ------------------------------------------------------------------------------------------
Distributions (from capital gains) -- --
- ------------------------------------------------------------------------------------------
Total Distributions 0.05 0.01
- ------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.16 $8.87
- ------------------------------------------------------------------------------------------
Total Return (a) 15.19% (11.25)%
- ------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands) $15,313 $13,208
- ------------------------------------------------------------------------------------------
Ratio of Net Investment Income (Loss) to Average Net Assets** 0.53% 0.53%
- ------------------------------------------------------------------------------------------
Ratio of Net Expenses to Average Net Assets** 0.55% 0.55%
- ------------------------------------------------------------------------------------------
Portfolio Turnover Rate 52% 14%
- ------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
---------
79
- --------------------------------------------------------------------------------
Mid-Cap Value Equity Fund
================================================================================
Years ended September 30 9/30/99***
- --------------------------------------------------------------------------------
Inception date 12/31/98
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.00
- --------------------------------------------------------------------------------
Income (Loss) from Investment Operations:
Net Investment Income (Loss) 0.08
- --------------------------------------------------------------------------------
Net Gains (Losses) on Investments (both realized and unrealized) (0.17)
- --------------------------------------------------------------------------------
Total Income (Loss) From Investment Operations (0.09)
- --------------------------------------------------------------------------------
Less Distributions:
Dividends (from net investment income) --
- --------------------------------------------------------------------------------
Distributions (from capital gains) --
- --------------------------------------------------------------------------------
Total Distributions --
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $9.91
- --------------------------------------------------------------------------------
Total Return (a) (0.90)%
- --------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands) $10,182
- --------------------------------------------------------------------------------
Ratio of Net Investment Income (Loss) to Average Net Assets** 1.00%
- --------------------------------------------------------------------------------
Ratio of Net Expenses to Average Net Assets** 0.65%
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 18%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Small-Cap Value Equity Fund
<TABLE>
<CAPTION>
===========================================================================================
Years ended September 30 9/30/99 9/30/98*
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Inception date -- 8/3/98
- -------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $8.91 $10.00
- -------------------------------------------------------------------------------------------
Income (Loss) from Investment Operations:
Net Investment Income (Loss) 0.01 0.02
- -------------------------------------------------------------------------------------------
Net Gains (Losses) on Investments (both realized and unrealized) 1.23 (1.11)
- -------------------------------------------------------------------------------------------
Total Income (Loss) From Investment Operations 1.24 (1.09)
- -------------------------------------------------------------------------------------------
Less Distributions:
Dividends (from net investment income) 0.03 --
- -------------------------------------------------------------------------------------------
Distributions (from capital gains) -- --
- -------------------------------------------------------------------------------------------
Total Distributions 0.03 --
- -------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.12 $8.91
- -------------------------------------------------------------------------------------------
Total Return (a) 13.98% (10.90)%
- -------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands) $10,287 $9,056
- -------------------------------------------------------------------------------------------
Ratio of Net Investment Income (Loss) to Average Net Assets** 0.13% 1.68%
- -------------------------------------------------------------------------------------------
Ratio of Net Expenses to Average Net Assets** 0.70% 0.70%
- -------------------------------------------------------------------------------------------
Portfolio Turnover Rate 216% 19%
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------
80 GE Institutional
Funds Prospectus
Financial Highlights
- --------------------------------------------------------------------------------
International Equity Fund
<TABLE>
<CAPTION>
===========================================================================================
Years ended September 30 9/30/99 9/30/98*
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Inception date -- 11/25/97
- -------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.06 $10.00
- ------------------------------------------------------------------------------------------
Income (Loss) from Investment Operations:
Net Investment Income (Loss) 0.09 0.14(b)
- ------------------------------------------------------------------------------------------
Net Gains (Losses) on Investments (both realized and unrealized) 2.81 (0.07)(b)
- ------------------------------------------------------------------------------------------
Total Income (Loss) From Investment Operations 2.90 0.07
- ------------------------------------------------------------------------------------------
Less Distributions:
Dividends (from net investment income) 0.12 0.01
- ------------------------------------------------------------------------------------------
Distributions (from capital gains) 0.35 --
- ------------------------------------------------------------------------------------------
Total Distributions 0.47 0.01
- ------------------------------------------------------------------------------------------
Net Asset Value, End of Period $12.49 $10.06
- ------------------------------------------------------------------------------------------
Total Return (a) 29.50% 0.66%
- ------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands) $197,974 $114,414
- ------------------------------------------------------------------------------------------
Ratio of Net Investment Income (Loss) to Average Net Assets** 0.99% 1.72%
- ------------------------------------------------------------------------------------------
Ratio of Net Expenses to Average Net Assets** 0.62% 0.64%
- ------------------------------------------------------------------------------------------
Portfolio Turnover Rate 50% 53%
- ------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Europe Equity Fund
================================================================================
Years ended September 30 9/30/99**
- --------------------------------------------------------------------------------
Inception date 1/29/99
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.00
- --------------------------------------------------------------------------------
Income (Loss) from Investment Operations:
Net Investment Income (Loss) 0.11
- --------------------------------------------------------------------------------
Net Gains (Losses) on Investments (both realized and unrealized) (0.14)
- --------------------------------------------------------------------------------
Total Income (Loss) From Investment Operations (0.03)
- --------------------------------------------------------------------------------
Less Distributions:
Dividends (from net investment income) --
- --------------------------------------------------------------------------------
Distributions (from capital gains) --
- --------------------------------------------------------------------------------
Total Distributions --
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $9.97
- --------------------------------------------------------------------------------
Total Return (a) (0.30)%
- --------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands) $10,080
- --------------------------------------------------------------------------------
Ratio of Net Investment Income (Loss) to Average Net Assets** 1.78%
- --------------------------------------------------------------------------------
Ratio of Net Expenses to Average Net Assets** 0.75%
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 49%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
---------
81
- --------------------------------------------------------------------------------
Emerging Markets Fund
<TABLE>
<CAPTION>
===========================================================================================
Years ended September 30 9/30/99 9/30/98*
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Inception date -- 11/25/97
- ------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $6.78 $10.00
- ------------------------------------------------------------------------------------------
Income (Loss) from Investment Operations:
Net Investment Income (Loss) 0.01 0.07
- ------------------------------------------------------------------------------------------
Net Gains (Losses) on Investments (both realized and unrealized) 4.70 (3.26)
- ------------------------------------------------------------------------------------------
Total Income (Loss) From Investment Operations 4.71 (3.19)
- ------------------------------------------------------------------------------------------
Less Distributions:
Dividends (from net investment income) 0.01 0.03
- ------------------------------------------------------------------------------------------
Distributions (from capital gains) -- --
- ------------------------------------------------------------------------------------------
Return of Capital 0.01 --
- ------------------------------------------------------------------------------------------
Total Distributions 0.02 0.03
- ------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.47 $6.78
- ------------------------------------------------------------------------------------------
Total Return (a) 69.62% (31.96)%
- ------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands) $8,592 $5,063
- ------------------------------------------------------------------------------------------
Ratio of Net Investment Income (Loss) to Average Net Assets** 0.12% 0.82%
- ------------------------------------------------------------------------------------------
Ratio of Net Expenses to Average Net Assets** 1.05% 1.05%
- ------------------------------------------------------------------------------------------
Portfolio Turnover Rate 79% 77%
- ------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Income Fund
<TABLE>
<CAPTION>
==========================================================================================
Years ended September 30 9/30/99 9/30/98*
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Inception date -- 11/21/97
- ------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.39 $10.00
- ------------------------------------------------------------------------------------------
Income (Loss) from Investment Operations:
Net Investment Income (Loss) 0.55 0.51
- ------------------------------------------------------------------------------------------
Net Gains (Losses) on Investments (both realized and unrealized) (0.62) 0.39
- ------------------------------------------------------------------------------------------
Total Income (Loss) From Investment Operations (0.07) 0.90
- ------------------------------------------------------------------------------------------
Less Distributions:
Dividends (from net investment income) 0.57 0.51
- ------------------------------------------------------------------------------------------
Distributions (from capital gains) 0.18 --
- ------------------------------------------------------------------------------------------
Total Distributions 0.75 0.51
- ------------------------------------------------------------------------------------------
Net Asset Value, End of Period $9.57 $10.39
- ------------------------------------------------------------------------------------------
Total Return (a) (0.72)% 9.21%
- ------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands) $95,381 $71,444
- ------------------------------------------------------------------------------------------
Ratio of Net Investment Income (Loss) to Average Net Assets** 5.80% 5.81%
- ------------------------------------------------------------------------------------------
Ratio of Net Expenses to Average Net Assets** 0.30% 0.31%
- ------------------------------------------------------------------------------------------
Portfolio Turnover Rate 227% 323%
- ------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
- --------------------
82 GE Institutional
Funds Prospectus
Financial Highlights
- --------------------------------------------------------------------------------
Money Market Fund
<TABLE>
<CAPTION>
===========================================================================================
Years ended September 30 9/30/99 9/30/98*
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Inception date -- 12/2/97
- ------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $1.00 $1.00
- ------------------------------------------------------------------------------------------
Income (Loss) from Investment Operations:
Net Investment Income (Loss) 0.05 0.04
- ------------------------------------------------------------------------------------------
Net Gains (Losses) on Investments (both realized and unrealized) -- --
- ------------------------------------------------------------------------------------------
Total Income (Loss) From Investment Operations 0.05 0.04
- ------------------------------------------------------------------------------------------
Less Distributions:
Dividends (from net investment income) 0.05 0.04
- ------------------------------------------------------------------------------------------
Distributions (from capital gains) -- --
- ------------------------------------------------------------------------------------------
Total Distributions 0.05 0.04
- ------------------------------------------------------------------------------------------
Net Asset Value, End of Period $1.00 $1.00
- ------------------------------------------------------------------------------------------
Total Return (a) 4.92% 4.53%
- ------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands) $5,736 $7,012
- ------------------------------------------------------------------------------------------
Ratio of Net Investment Income (Loss) to Average Net Assets** 4.81% 5.33%
- ------------------------------------------------------------------------------------------
Ratio of Net Expenses to Average Net Assets** 0.25% 0.25%
- ------------------------------------------------------------------------------------------
Portfolio Turnover Rate N/A N/A
- ------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Notes to Financial Highlights
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains. Periods less than one year
are not annualized.
(b) As a result of the timing of purchases and sales of Fund shares, per share
amounts do not accord with aggregate amounts appearing in Statement of
Changes.
* Information is for the period from Inception date through September 30,
1998.
** Annualized for periods less than one year.
*** Information is for the period from Inception date through September 30,
1999.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
[This page intentionally left blank.]
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
[This page intentionally left blank.]
- --------------------------------------------------------------------------------
<PAGE>
GE Institutional
Funds Prospectus
- --------------------------------------------------------------------------------
If you wish to know more
You will find additional information about the GE Institutional Funds in the
following documents:
Annual/Semi-Annual Reports to Shareholders: These reports detail the Funds'
actual investments as of the report date. Reports include performance numbers
and a discussion of market conditions and investment strategies that
significantly affected Fund performance during the Funds' last fiscal year.
Statement of Additional Information (SAI): The SAI contains additional
information about the Funds and their investment strategies and policies and is
incorporated by reference (legally considered part of the prospectus). The SAI
is on file with the Securities and Exchange Commission (SEC).
You may visit the SEC's Internet Website (http://www.sec.gov) to view the
Annual/Semi-Annual Reports, the SAI and other information about the GE
Institutional Funds. Also, you can obtain copies of this information, after
paying a duplication fee, by sending your request electronically to the
following e-mail address: [email protected], or in writing to the SEC's Public
Reference Section, Washington, D.C. 20549-0102. You may review and copy
information about the Funds, including the SAI, at the SEC's Public Reference
Room in Washington, D.C. To find out more about the Public Reference Room, call
the SEC at 1-202-942-8090.
- --------------------------------------------------------------------------------
GE Institutional Funds
You may obtain a free copy of the SAI or the Funds' annual/semi-annual report
and make shareholder inquiries by contacting:
GE Investment Distributors, Inc.
P.O. Box 7900
3003 Summer Street
Stamford, CT 06904
Telephone 1-800-493-3042
Website http://www.ge.com/mutualfunds
- --------------------------------------------------------------------------------
Investment Adviser
GE Asset Management Incorporated
P.O. Box 7900
3003 Summer Street
Stamford, CT 06904
- --------------------------------------------------------------------------------
Transfer Agent and Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02101
- --------------------------------------------------------------------------------
Distributor
GE Investment Distributors, Inc.
777 Long Ridge Road, Building B
Stamford, CT 06927
Investment Company Act file number: 811-08257
- --------------------------------------------------------------------------------
GE-INSTPRO-1
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
April 28, 2000
GE INSTITUTIONAL FUNDS
3003 Summer Street, Stamford, Connecticut 06905
For information, call (800) 242-0134
* U.S. Equity Fund
* S&P 500 Index Fund
* Value Equity Fund
* Mid-Cap Growth Fund
* Mid-Cap Value Equity Fund
* Small-Cap Value Equity Fund
* International Equity Fund
* Europe Equity Fund
o Emerging Markets Fund
o Premier Growth Equity Fund
o Premier Research Equity Fund
o Premier International Equity Fund
* Income Fund
* Strategic Investment Fund
* Money Market Fund
* High Yield Fund
* Small-Cap Growth Equity Fund
This Statement of Additional Information ("SAI") supplements the
information contained in the current Prospectuses of GE Institutional Funds (the
"Trust") dated April 28, 2000 (the "Prospectuses"), and should be read in
conjunction with the relevant Prospectus. This SAI, although not a prospectus,
is incorporated in its entirety by reference into the Prospectuses. Copies of
the Prospectuses describing each series of the Trust listed above ("Funds") may
be obtained without charge by calling the Trust at the telephone number listed
above.
The Trust's financial statements for the fiscal year ended September 30,
1999, and the Auditor's Reports thereon, are incorporated herein by reference to
the Trust's Annual Report dated September 30, 1999. The Annual Report 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. Terms that are defined in the
Prospectuses shall have the same meanings in this SAI.
<PAGE>
Table of Contents
Page
----
INVESTMENT STRATEGIES AND RISKS................................................1
INVESTMENT RESTRICTIONS.......................................................39
MANAGEMENT OF THE TRUST.......................................................45
COMPENSATION TABLE............................................................48
PURCHASE, REDEMPTION AND EXCHANGE OF SHARES...................................55
NET ASSET VALUE...............................................................59
DIVIDENDS, DISTRIBUTIONS AND TAXES............................................61
THE FUNDS' PERFORMANCE........................................................64
PRINCIPAL STOCKHOLDERS........................................................69
FUND HISTORY AND ADDITIONAL INFORMATION.......................................76
FINANCIAL STATEMENTS..........................................................79
DESCRIPTION OF RATINGS.......................................................A-1
iii
<PAGE>
INVESTMENT STRATEGIES AND RISKS
The Prospectuses discuss the investment objectives and principal
investment strategies of the following diversified open-end funds: the U.S.
Equity Fund, the S&P 500 Index Fund,(1) the Value Equity Fund, the Mid-Cap
Growth Fund, the Mid-Cap Value Equity Fund (the "Mid-Cap Value Fund"), the
Small-Cap Value Equity Fund (the "Small-Cap Value Fund"), the International
Equity Fund (the "International Fund"), the Europe Equity Fund, the Emerging
Markets Fund, the Premier Growth Equity Fund (the "Premier Growth Fund"), the
Premier Research Equity Fund ("Premier Research Fund"), the Premier
International Equity Fund ("Premier International Fund"), the Income Fund, the
Strategic Investment Fund (the "Strategic Fund"), and the Money Market Fund. The
High Yield Fund and the Small-Cap Growth Equity Fund (the "Small-Cap Growth
Fund"), each an additional series of the Trust, are not currently being offered
by the Trust.
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. In pursuing its objective, the Fund, under
normal conditions, will invest at least 65% of its assets in equity securities.
- ---------------------------
(1) The S&P 500 Index Fund is not sponsored, endorsed, sold or promoted by
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("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.
1
<PAGE>
S&P 500 Index Fund
The investment objective of the S&P 500 Index Fund is growth of capital
and accumulation of income that corresponds to the investment return of the
Standard and Poor's 500 Composite Stock Index. The Fund seeks to achieve this
objective by investing in common stocks comprising that Index.
Value Equity Fund
The investment objective of the Value Equity Fund is long-term growth of
capital and future income. The Fund seeks to achieve its objective by investing
primarily in equity securities of companies with large sized market
capitalizations that GE Asset Management Incorporated ("GE Asset 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 invests 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 U.S. and foreign companies.
Mid-Cap Growth Fund
The investment objective of the Mid-Cap Growth Fund is long-term growth of
capital. The Fund seeks to achieve this objective by investing primarily in the
equity securities of companies with medium-sized market capitalizations
("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.
Mid-Cap Value Equity Fund
The investment objective of the Mid-Cap Value Equity Fund is long-term
growth of capital. In seeking its investment objective, the Fund invests
primarily in equity securities of mid-cap companies that the portfolio manager
believes are undervalued by the market and have above-average growth potential.
Small-Cap Value Equity Fund
The investment objective of the Small-Cap Value Equity Fund is long-term
growth of capital. The Fund seeks to achieve its investment objective by
investing, under normal market conditions, at least 65% of its assets in a
portfolio of equity securities of small-capitalization companies traded on U.S.
securities exchanges or in the U.S. over-the-counter market.
International Equity Fund
The investment objective of the International Equity Fund is long-term
growth of capital. The Fund seeks to achieve its objective by investing
primarily in foreign equity securities. The
2
<PAGE>
Fund may invest in securities of companies and governments located in developed
and developing countries outside the United States. The 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
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 GE Asset Management to have a potential for superior growth in sales and
earnings.
Europe Equity Fund
The investment objective of the Europe Equity Fund is long-term growth of
capital. In seeking its investment objective, the Fund invests, under normal
conditions, at least 65% of its total assets in equity securities of companies
located in developed European countries.
Emerging Markets Fund
The investment objective of the Emerging Markets Fund is long-term growth
of capital. In seeking its investment objective, the Fund invests, under normal
conditions, at least 65% of its total assets in equity securities of issuers
that are located in emerging market countries.
Premier Growth Equity Fund
The investment objective of the Premier Growth Equity Fund is long-term
growth of capital and future 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.
Premier Research Equity Fund
The investment objective of the Premier Research Fund is long-term growth
of capital and future income. The Fund seeks to achieve this objective through
investment primarily in a limited number equity securities which, under normal
market conditions, will represent at least 65% of the Fund's assets.
Premier International Equity Fund
The investment objective of the Premier International Fund is long-term
growth of capital, which the Fund seeks to achieve by investing primarily in
foreign equity securities. The Fund, under normal conditions, invests at least
65% of its assets in a limited number of equity securities.
3
<PAGE>
Income Fund
The investment objective of the Income Fund is maximum income consistent
with prudent investment management and the preservation of capital. Capital
appreciation with respect to the Fund's portfolio securities may occur but is
not an objective of the Fund.
Strategic Investment Fund
The investment objective of the Strategic Investment Fund is maximum total
return. In seeking its objective, the Fund follows an asset allocation strategy
that provides diversification across a range of asset classes and contemplates
shifts among them from time to time.
GE Asset Management has broad latitude in selecting the classes of
investments to which the Strategic Investment Fund's assets are committed.
Although the 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, GE Asset Management anticipates
that at most times the Fund will be invested in a combination of equity and debt
instruments.
Money Market Fund
The investment objective of the Money Market Fund is a high level of
current income consistent with the preservation of capital and the maintenance
of liquidity. In seeking its objective, the Fund invests in the following U.S.
dollar denominated, short-term money market instruments: (i) Government
Securities (defined below); (ii) debt obligations of banks, savings and loan
institutions, insurance companies and mortgage bankers; (iii) commercial paper
and notes, including those with floating or variable 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.
High Yield Fund
The investment objective of the High Yield Fund is to maximize total
return, consistent with the preservation of capital and prudent investment
management. In seeking to achieve its investment objective, the Fund will invest
primarily in high yield securities (including bonds rated below investment
grade, sometimes called "junk bonds").
Small-Cap Growth Equity Fund
The investment objective of the Small-Cap Growth Equity Fund is long-term
growth of capital. The Fund seeks to achieve its objective by investing
primarily in equity securities of companies with small-sized market
capitalizations that GE Asset Management believes have the potential for
above-average growth.
4
<PAGE>
* * *
Supplemental information 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 is provided below.
Some or all of the Funds may invest in the types of instruments and engage
in the types of strategies described in detail below. A Fund will not purchase
all of the following types of securities or employ all of the following
strategies unless doing so is consistent with its investment objective.
5
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Purchasing Purchasing
Reverse Restricted and Structured and and Writing and Writing
Repurchase Repurchase Illiquid Indexed Securities Securities
Borrowing Agreements Agreements Securities Securities Options Index Options
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. Equity Fund 33 1/3 % Yes Yes Yes No Yes Yes
- ------------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index Fund 33 1/3 % Yes Yes Yes No Yes Yes
- ------------------------------------------------------------------------------------------------------------------------------------
Value Equity Fund 33 1/3 % Yes Yes Yes No Yes Yes
- ------------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Growth Fund 33 1/3 % Yes Yes Yes No Yes Yes
- ------------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Value Equity 33 1/3 % Yes Yes Yes Yes Yes Yes
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Small-Cap Value 33 1/3 % Yes Yes Yes No Yes Yes
Equity Fund
- ------------------------------------------------------------------------------------------------------------------------------------
International Equity 33 1/3 % Yes Yes Yes No Yes Yes
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Europe Equity Fund 33 1/3 % Yes Yes Yes Yes Yes Yes
- ------------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Fund 33 1/3 % Yes Yes Yes No Yes Yes
- ------------------------------------------------------------------------------------------------------------------------------------
Premier Growth Equity 33 1/3 % Yes Yes Yes No Yes Yes
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Premier Research 33 1/3 % Yes Yes Yes No Yes Yes
Equity Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Premier International 33 1/3 % Yes Yes Yes No Yes Yes
Equity Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Income Fund 33 1/3 % Yes Yes Yes Yes Yes Yes
- ------------------------------------------------------------------------------------------------------------------------------------
Strategic Investment 33 1/3 % Yes Yes Yes Yes Yes Yes
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Money Market Fund 33 1/3 % Yes Yes No No No No
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Maximum
Investment in Maximum When-Issued
Futures and Forward Options on Maximum Below-Investment Investment and Delayed
Options on Currency Foreign Investment in Grade Debt in Foreign Delivery
Futures Transactions Currencies Debt Securities Securities Securities Securities
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. Equity Fund Yes Yes Yes 35% 5% 15%* Yes
- ------------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index Fund Yes Yes Yes 35% 5% 35%* Yes
- ------------------------------------------------------------------------------------------------------------------------------------
Value Equity Fund Yes Yes Yes 35% 5% 25%* Yes
- ------------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Growth Fund Yes Yes Yes 35% (maximum 10% in BB or 35%* Yes
of 25% in BBB B by S&P or
by S&P, Baa Ba or B by
by Moody's Moody's or
or equivalent) equivalent
- ------------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Value Equity Yes Yes Yes 35% 15% in 15%* Yes
Fund securities
rated BBB or
below by S&P
or Baa or
below by
Moody's or
equivalent
- ------------------------------------------------------------------------------------------------------------------------------------
Small-Cap Value No No No 35% 10% 10%* Yes
Equity Fund
- ------------------------------------------------------------------------------------------------------------------------------------
International Equity Yes Yes Yes 35% 5% 100% Yes
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Europe Equity Fund Yes Yes Yes 35% 15% 100% Yes
- ------------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Fund Yes Yes Yes 35% (maximum 10% in BB or 100% Yes
of 25% in BBB B by S&P or
by S&P, Baa Ba or B by
by Moody's or Moody's or
equivalent) equivalent
- ------------------------------------------------------------------------------------------------------------------------------------
Premier Growth Yes Yes No 35% 5% 25%* Yes
Equity Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Premier Research Yes Yes No 35% 5% 25%* Yes
Equity Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Premier International Yes Yes Yes 35% 5% 100% Yes
Equity Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Income Fund Yes Yes Yes 100% (maximum 10% in BB or 35%* Yes
of 25% in BBB B by S&P or
by S&P or Baa Ba or B by
by Moody's or Moody's or
equivalent) equivalent
- ------------------------------------------------------------------------------------------------------------------------------------
Strategic Investment Yes Yes Yes 100% (maximum 10% in BB or 30%* Yes
Fund of 25% in BBB B by S&P or
by S&P or Baa Ba or B by
by Moody's or Moody's or
equivalent) equivalent
- ------------------------------------------------------------------------------------------------------------------------------------
Money Market Fund No No No 100% None 25%* Yes
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* This limitation excludes ADRs, and securities of a foreign issuer
with a class of securities registered with the Securities and
Exchange Commission and listed on a U.S. national securities
exchange or traded on the Nasdaq National Market or the Nasdaq
Small-Cap Market.
7
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Debt Securities of Participation
Lending Obligations of Other Floating and Interests in
Portfolio Rule 144A Supranational Depositary Investment Municipal Variable Rate Municipal
Securities Securities Agencies Receipts Funds Leases Instruments Obligations
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Equity Fund Yes Yes Yes Yes No No No* No
- ------------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index Fund Yes Yes Yes Yes Yes No No* No
- ------------------------------------------------------------------------------------------------------------------------------------
Value Equity Fund Yes Yes Yes Yes Yes No No* No
- ------------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Growth Fund Yes Yes Yes Yes Yes No No* No
- ------------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Value Yes Yes Yes Yes Yes No No* No
Equity Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Small-Cap Value Yes Yes Yes Yes Yes No No* No
Equity Fund
- ------------------------------------------------------------------------------------------------------------------------------------
International Yes Yes Yes Yes Yes No No* No
Equity Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Europe Equity Fund Yes Yes Yes Yes Yes No Yes No
- ------------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Yes Yes Yes Yes Yes No No* No
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Premier Growth Yes Yes Yes Yes Yes No No* No
Equity Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Premier Research Yes Yes Yes Yes Yes No No* No
Equity Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Premier Yes Yes Yes Yes Yes No No* No
International
Equity Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Income Fund Yes Yes Yes Yes Yes No Yes No
- ------------------------------------------------------------------------------------------------------------------------------------
Strategic Yes Yes Yes Yes Yes Yes Yes Yes
Investment Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Money Market Fund Yes Yes Yes No No No Yes No
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Excludes commercial paper and notes with variable and floating rates
of interest.
8
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Mortgage Government Asset-Backed
Custodial Related Stripped Securities and Short
Zero Municipal Receipts on Securities, Mortgage Receivable- Mortgage Sales
Coupon Obligations Municipal including Related Backed Dollar Against
Obligations Components Obligations CMOs Securities Securities Rolls the Box
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Equity Fund Yes No No No No No No No
- ------------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index Fund No No No No No No No No
- ------------------------------------------------------------------------------------------------------------------------------------
Value Equity Fund No No No No No No No Yes
- ------------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Growth Fund No No No No No No No Yes
- ------------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Value Equity Fund Yes No No No No No No Yes
- ------------------------------------------------------------------------------------------------------------------------------------
Small-Cap Value Equity Fund No No No No No No No Yes
- ------------------------------------------------------------------------------------------------------------------------------------
International Equity Fund No No No No No No No Yes
- ------------------------------------------------------------------------------------------------------------------------------------
Europe Equity Fund No No No No No No No Yes
- ------------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Fund No No No No No No No Yes
- ------------------------------------------------------------------------------------------------------------------------------------
Premier Growth Equity Fund No No No No No No No No
- ------------------------------------------------------------------------------------------------------------------------------------
Premier Research Equity Fund No No No No No No No No
- ------------------------------------------------------------------------------------------------------------------------------------
Premier International No No No No No No No Yes
Equity Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Income Fund Yes No No Yes Yes Yes Yes No
- ------------------------------------------------------------------------------------------------------------------------------------
Strategic Investment Fund Yes Yes Yes Yes Yes Yes Yes No
- ------------------------------------------------------------------------------------------------------------------------------------
Money Market Fund No No No No No No No No
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
Money Market Fund Investments. 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 SAI 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 (i) any two NRSROs that have issued ratings with respect to a security or
class of debt obligations of an issuer or (ii) one NRSRO, if only one NRSRO has
issued such a rating at the time that the Fund acquires the security. Currently,
five organizations are NRSROs: S&P, Moody's Investors Service, Inc. ("Moody's"),
Fitch Investors Service, Inc., Duff and Phelps, Inc. and Thomson BankWatch Inc.
A discussion of the ratings categories is contained in the appendix to this SAI.
By limiting its investments to Eligible Securities, the 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 Government Securities and except to
the extent permitted under rules adopted by the Securities and Exchange
Commission ("SEC") under the 1940 Act. In addition, the Fund may not invest more
than 5% of its total assets in Eligible Securities that have not received the
highest short-term rating for debt obligations 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 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 (i) 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 (ii) 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 GE Asset Management in accordance with procedures established by the
Trust's Board of Trustees (the "Board"). The 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 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 or traded on the
Nasdaq National Market or the Nasdaq SmallCap Market. The Fund will maintain a
dollar-weighted average portfolio maturity of 90 days or less. The assets of the
Fund are valued on the basis of amortized cost, as described below under "Net
Asset Value." The Fund also may hold liquid Rule 144A Securities (see
"Restricted and Other Illiquid Securities").
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Money Market Instruments. The types of money market instruments in which
each Fund, other than the Money Market Fund, may invest directly or indirectly
through its investment in the GEI Short-Term Investment Fund (the "Investment
Fund"), described below, are as follows: (i) securities issued or guaranteed by
the U.S. Government or one of its agencies or instrumentalities ("Government
Securities"), (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 supranational entities,
(vi) debt securities issued by foreign issuers and (vii) repurchase agreements.
Each Fund, other than the Money Market Fund, may also invest in the
Investment Fund, an investment fund created specifically to serve as a vehicle
for the collective investment of cash balances of the Funds (other than the
Money Market Fund) and other accounts advised by GE Asset Management. The
Investment Fund invests exclusively in the money market instruments described in
(i) through (vii) above. The Investment Fund is advised by GE Asset Management.
No advisory fee is charged by GE Asset Management to the Investment Fund, nor
will a Fund incur any sales charge, redemption fee, distribution fee or service
fee in connection with its investments in the Investment Fund. Each Fund, other
than the Money Market Fund, may invest up to 25% of its assets in the Investment
Fund.
Each of the Funds may invest in the following types of Government
Securities: debt obligations of varying maturities issued by the U.S. Treasury
or issued or guaranteed by the Federal Housing Administration, Farmers Home
Administration, Export-Import Bank of the United States, Small Business
Administration, Government National Mortgage Association ("GNMA"), General
Services Administration, Central Bank for Cooperatives, Federal Farm Credit
Banks Funding Corporation, Federal Home Loan Banks, Federal Home Loan Mortgage
Corporation ("FHLMC"), Federal Intermediate Credit Banks, Federal Land Banks,
Federal National Mortgage Association ("FNMA"), Federal Deposit Insurance
Corporation, Maritime Administration, Tennessee Valley Authority, District of
Columbia Armory Board, Student Loan Marketing Association and Resolution Trust
Corporation. Direct obligations of the U.S. Treasury include a variety of
securities that differ in their interest rates, maturities and dates of
issuance. Certain of the Government Securities that may be held by the Funds are
instruments that are supported by the full faith and credit of the United
States, whereas other Government Securities that may be held by the Funds are
supported by the right of the issuer to borrow from the U.S. Treasury or are
supported solely by the credit of the instrumentality. Because the U.S.
Government is not obligated by law to provide support to an instrumentality that
it sponsors, a Fund will invest in obligations issued by an instrumentality of
the U.S. Government only if the Investment Manager(2) determines that the
instrumentality's credit risk does not make its securities unsuitable for
investment by the Fund.
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(2) As used in this SAI, the term "Investment Manager" shall refer to GE Asset
Management, the Funds' investment adviser and administrator, Palisade Capital
Management, L.L.C., the sub-investment adviser to the Small-Cap Value Fund,
State Street Global Advisors, the investment sub-adviser to the S&P 500 Index
Fund, or NWQ Investment Management Company, the sub-adviser to the Mid-Cap Value
Fund, as applicable.
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Each Fund, other than the Money Market Fund, may invest in money market
instruments issued or guaranteed by foreign governments or by any of their
political subdivisions, authorities, agencies or instrumentalities. Money market
instruments held by a Fund, other than the Money Market Fund, may be rated no
lower than A-2 by S&P or Prime-2 by Moody's or the equivalent from another
NRSRO, or if unrated, must be issued by an issuer having an outstanding
unsecured debt issue then rated within the three highest categories. A
description of the rating systems of Moody's and S&P is contained in the
Appendix. At no time will the investments of a Fund, other than the Money Market
Fund, in bank obligations, including time deposits, exceed 25% of the value of
the Fund's assets.
Temporary Defensive Positions. During periods when the Investment Manager
believes there are unstable market, economic, political or currency conditions
domestically or abroad, the Investment Manager may assume, on behalf of a Fund,
a temporary defensive posture and (i) without limitation hold cash and/or invest
in money market instruments, or (ii) restrict the securities markets in which
the Fund's assets will be invested by investing those assets in securities
markets deemed by the Investment Manager to be conservative in light of the
Fund's investment objective and policies. Under normal circumstances, each Fund
may invest a portion of its total assets in cash and/or money market instruments
for cash management purposes, pending investment in accordance with the Fund's
investment objective and policies and to meet operating expenses. To the extent
that a Fund, other than the Money Market Fund, holds cash or invests in money
market instruments, it may not achieve its investment objective. For temporary
defensive purposes, the Premier Growth Equity Fund may invest in fixed income
securities without limitation.
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 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.
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: (i) 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 (ii) maintain
assets within the state in an amount equal to a specified percentage of the
aggregate amount of liabilities of the foreign bank payable
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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.
Debt Instruments. A debt instrument held by a Fund will be affected by
general changes in interest rates that will in turn result in increases or
decreases in the market value of those obligations. The market value of debt
instruments in a Fund's portfolio can be expected to vary inversely to changes
in prevailing interest rates. In periods of declining interest rates, the yield
of a Fund holding a significant amount of debt instruments will tend to be
somewhat higher than prevailing market rates, and in periods of rising interest
rates, the Fund's yield will tend to be somewhat lower. In addition, when
interest rates are falling, money received by such a Fund from the continuous
sale of its 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.
Ratings as Investment Criteria. The ratings of NRSROs such as S&P or
Moody's represent the opinions of those organizations as to the quality of
securities that they rate. Although these ratings, which are relative and
subjective and are not absolute standards of quality, are used by the Investment
Manager as initial criteria for the selection of portfolio securities on behalf
of the Funds, the Investment Manager also relies upon its own analysis to
evaluate potential investments.
Subsequent to its purchase by a Fund, an issue of securities may cease to
be rated or its rating may be reduced below the minimum required for purchase by
the Fund. Although neither event will require the sale of the securities by a
Fund, other than the Money Market Fund, the Investment Manager will consider the
event in its determination of whether the Fund should continue to hold the
securities. In the event the rating of a security held by the Money Market Fund
falls below the minimum acceptable rating or the issuer of the security
defaults, the Money Market Fund will dispose of the security as soon as
practicable, unless the Board determines that disposal of the security would not
be in the best interests of the Money Market Fund. To the extent that a 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 investment objectives and policies.
Certain Investment Grade Debt Obligations. Although obligations rated BBB
by S&P or Baa by Moody's are considered investment grade, they may be viewed as
being subject to greater risks than other 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 Debt Securities. Certain Funds are authorized to invest in
securities rated lower than investment grade (sometimes referred to as "junk
bonds"). Low-rated and comparable unrated securities (collectively referred to
as "low-rated" securities) likely have quality and protective characteristics
that, in the judgment of a rating organization, are
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outweighed by large uncertainties or major risk exposures to adverse conditions,
and are predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the obligation.
Securities in the lowest rating categories may be in default or may present
substantial risks of default.
The market values of certain low-rated securities tend to be more
sensitive to individual corporate developments and changes in economic
conditions than higher-rated securities. In addition, low-rated securities
generally present a higher degree of credit risk. Issuers of low-rated
securities are often highly leveraged and may not have more traditional methods
of financing available to them, so that their ability to service their debt
obligations during an economic downturn or during sustained periods of rising
interest rates may be impaired. The risk of loss due to default by these issuers
is significantly greater because 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 in the payment of principal or interest on its portfolio
holdings. The existence of limited markets for low-rated securities may diminish
the Trust's ability to obtain accurate market quotations for purposes of valuing
the securities held by a Fund and calculating the Fund's net asset value.
Repurchase and Reverse Repurchase Agreements. Each Fund may engage in
repurchase agreement transactions with respect to instruments in which the Fund
is authorized to invest. The Funds may engage in repurchase agreement
transactions with certain member banks of the Federal Reserve System and with
certain dealers listed on the Federal Reserve Bank of New York's list of
reporting dealers. Under the terms of a typical repurchase agreement, which is
deemed a loan for purposes of the Investment Company Act of 1940, as amended
("1940 Act"), a Fund would acquire an underlying obligation for a relatively
short period (usually from one to seven days) subject to an obligation of the
seller to repurchase, and the Fund to resell, the obligation at an agreed-upon
price and time, thereby determining the yield during the Fund's holding period.
This arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The value of the securities
underlying a repurchase agreement of a Fund are monitored on an ongoing basis by
the Investment Manager to ensure that the value is at least equal at all times
to the total amount of the repurchase obligation, including interest. The
Investment Manager also monitors, on an ongoing basis to evaluate potential
risks, the creditworthiness of those banks and dealers with which a Fund enters
into repurchase agreements.
Each Fund may engage in reverse repurchase agreements, subject to their
investment restrictions. A reverse repurchase agreement, which is considered a
borrowing by a Fund, involves a sale by the Fund of securities that it holds
concurrently with an agreement by the Fund to repurchase the same securities at
an agreed upon price and date. A Fund uses the proceeds of reverse repurchase
agreements to provide liquidity to meet redemption requests and to make cash
payments of dividends and distributions when the sale of the Fund's securities
is considered to be disadvantageous. Cash, Government Securities or other liquid
assets equal in value to a Fund's obligations with respect to reverse repurchase
agreements are segregated and maintained with the Trust's custodian or
designated sub-custodian.
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A Fund entering into a repurchase agreement will bear a risk of loss in
the event that 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. The Fund will be, in particular, subject to the risk
of a possible decline in the value of the underlying securities during the
period in which the Fund seeks to assert its right to them, the risk of
incurring expenses associated with asserting those rights and the risk of losing
all or a 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, a 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.
Restricted and Other Illiquid Securities. Each Fund, other than the Money
Market Fund, may invest up to 10% of its assets in restricted securities.
Restricted securities are securities that are subject to contractual or legal
restrictions on transfer, excluding for purposes of this restriction, Rule 144A
Securities that have been determined to be liquid by the Board based upon the
trading markets for the securities. In addition, each Fund, other than the Money
Market Fund, may invest up to 15% of its assets in "illiquid securities"; the
Money Market Fund may not, under any circumstance, invest in illiquid
securities. 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. Illiquid securities that are
held by a Fund may take the form of options traded over-the-counter, repurchase
agreements maturing in more than seven days, certain mortgage related securities
and securities subject to restrictions on resale that the Investment Manager has
determined are not liquid under guidelines established by the Board.
Restricted securities may be less liquid than publicly traded securities.
Although these securities may be resold in privately negotiated transactions,
the prices realized from these sales could be less than those originally paid by
a Fund. In addition, companies whose securities are not publicly traded are not
subject to the disclosure and other investor protection requirements that may be
applicable if their securities were publicly traded. A Fund's investments in
illiquid securities are subject to the risk that should the Fund desire to sell
any of these securities when a ready buyer is not available at a price that the
Investment Manager deems representative of their value, the value of the Fund's
net assets could be adversely affected.
Rule 144A Securities. Each of the Funds may purchase Rule 144A Securities.
Certain Rule 144A Securities may be considered illiquid and therefore subject to
a Fund's limitation on the purchase of illiquid securities, unless the Board
determines on an ongoing basis that an adequate trading market exists for the
Rule 144A 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. The Board has established standards and
procedures for determining the
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liquidity of a Rule 144A Security and monitors the Investment Manager's
implementation of the standards and procedures. The ability to sell to qualified
institutional buyers under Rule 144A is a recent development and the Investment
Manager cannot predict how this market will develop.
When-Issued and Delayed-Delivery Securities. To secure prices or yields
deemed advantageous at a particular time, a Fund may purchase securities on a
when-issued or delayed-delivery basis, in which case, delivery of the securities
occurs beyond the normal settlement period; no payment for or delivery of the
securities is made by, and no income accrues to, the Fund, however, prior to the
actual delivery or payment by the other party to the transaction. Each Fund will
enter into when-issued or delayed-delivery transactions for the purpose of
acquiring securities 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 under which the issuance of the securities depends on the
occurrence of a subsequent event, such as approval of a merger, corporate
reorganization or debt restructuring. Cash or other liquid assets in an amount
equal to the amount of each Fund's when-issued or delayed-delivery purchase
commitments will be segregated with the Trust's custodian, or with a designated
subcustodian, in order to avoid or limit any leveraging effect that may arise in
the purchase of a security pursuant to such a commitment.
Securities purchased on a when-issued or delayed-delivery basis may expose
a Fund to risk because the securities may experience fluctuations in value prior
to their delivery. Purchasing securities on a when-issued or delayed- delivery
basis can involve the additional risk that the return available in the market
when the delivery takes place may be higher than that applicable at the time of
the purchase. This characteristic of when-issued and delayed-delivery securities
could result in exaggerated movements in a Fund's net asset value.
When a Fund engages in when-issued or delayed-delivery securities
transactions, it relies on the selling party to consummate the trade. Failure of
the seller to do so may result in the Funds incurring a loss or missing an
opportunity to obtain a price considered to be advantageous.
Warrants. Because a warrant, which is a security permitting, but not
obligating, its holder to subscribe for another security, does not carry with it
the right to dividends or voting rights with respect to the securities that the
warrant holder is entitled to purchase, and because a warrant does not represent
any rights to the assets of the issuer, 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. The investment by a Fund in warrants valued at the lower of
cost or market, may not exceed 5% of the value of the Fund's net assets.
Warrants acquired by a Fund in units or attached to securities may be deemed to
be without value.
Smaller Capitalization Companies. Investing in securities of small- and
medium-capitalization companies may involve greater risks than investing in
larger, more established issuers. Such smaller capitalization companies may have
limited product lines, markets or financial resources and their securities may
trade less frequently and in more limited volume than
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the securities of larger or more established companies. In addition, these
companies are typically subject to a greater degree of changes in earnings and
business prospects than are larger, more established issuers. As a result, the
prices of securities of smaller capitalization companies may fluctuate to a
greater degree than the prices of securities of other issuers. Although
investing in securities of smaller capitalization companies offers potential for
above-average returns, the risk exists that the companies will not succeed and
the prices of the companies' shares could significantly decline in value.
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. 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 comparable to those applicable to U.S. companies. The
values of foreign investments are affected by changes in currency rates or
exchange control regulations, restrictions or prohibitions on the repatriation
of foreign currencies, application of foreign tax laws, including withholding
taxes, changes in governmental administration or economic or monetary policy (in
the United States or abroad) or changed circumstances in dealings between
nations. Costs are also incurred in connection with conversions between various
currencies. In addition, foreign brokerage commissions are generally higher than
those charged in the United States and foreign securities markets may be less
liquid, more volatile and less subject to governmental supervision than in the
United States. Investments in foreign countries could be affected by other
factors not present in the United States, including expropriation, confiscatory
taxation, lack of uniform accounting and auditing standards, limitations on the
use or removal of funds or other assets (including the withholding of
dividends), and potential difficulties in enforcing contractual obligations, and
could be subject to extended clearance and settlement periods.
Certain Funds may invest in securities of foreign issuers in the form of
ADRs and European Depositary Receipts ("EDRs"), which are sometimes referred to
as Continental Depositary Receipts ("CDRs"). ADRs are publicly traded on
exchanges or over-the-counter in the United States and are issued through
"sponsored" or "unsponsored" arrangements. In a sponsored ADR arrangement, the
foreign issuer assumes the obligation to pay some or all of the depositary's
transaction fees, whereas under an unsponsored arrangement, the foreign issuer
assumes no obligations and the depositary's transaction fees are paid directly
by the ADR holders. In addition, less information is available in the United
States about an unsponsored ADR than about a sponsored ADR. Each of these Funds
may invest in ADRs through both sponsored and unsponsored arrangements. EDRs and
CDRs are generally issued by foreign banks and evidence ownership of either
foreign or domestic securities.
The recent introduction of a single European currency, the EURO, for
participating European countries in the Economic and Monetary Union
("Participating Countries") presents unique risks and uncertainties for
investors in those countries, including (i) the creation of suitable clearing
and settlement payment schemes for the EURO; (ii) the legal treatment of
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outstanding financial contracts after January 1, 1999 that refer to existing
currencies rather than the EURO; (iii) the fluctuation of the EURO relative to
non-EURO currencies during the transition period from January 1, 1999 to
December 31, 2000 and beyond; and (iv) whether the interest rate, tax and labor
regimes of the Participating Countries will converge over time. Further, the
conversion of the currencies of other Economic and Monetary Union countries,
such as the United Kingdom, and the admission of other countries, including
Central and Eastern European countries, to the Economic and Monetary Union could
adversely affect the EURO. These or other factors may cause market disruptions
and could adversely affect the value of European securities and currencies held
by the Funds.
Currency Exchange Rates. A Fund's share value may change significantly
when the currencies, other than the U.S. dollar, in which the Fund's portfolio
investments are denominated, strengthen or weaken against the U.S. dollar.
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.
Investing in Developing Countries. Investing in securities issued by
companies located in developing countries involves not only the risks described
above with respect to investing in foreign securities, but also other risks,
including exposure to economic structures that are generally less diverse and
mature than, and to political systems that can be expected to have less
stability than, those of developed countries. 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 typically small size of the markets for securities issued by
companies located in developing countries and the possibility of a low or
nonexistent volume of trading in those securities may also result in a lack of
liquidity and in price volatility of those securities.
Lending Portfolio Securities. Each Fund is authorized to lend its
portfolio securities to well-known and recognized U.S. and foreign brokers,
dealers and banks. These loans, if and when made, may not exceed 30% of a Fund's
assets taken at value. The Fund's loans of securities will be collateralized by
cash, letters of credit or Government Securities. Cash or instruments
collateralizing a Fund's loans of securities are segregated and maintained at
all times with the Trust's custodian, or with a designated sub-custodian, in an
amount at least equal to the current market value of the loaned securities. In
lending securities, a Fund will be subject to risks, which, like those
associated with other extensions of credit, include possible loss of rights in
the collateral should the borrower fail financially.
If a Fund loans its portfolio securities, it will adhere to the following
conditions whenever its portfolio securities are loaned: (i) the Fund must
receive at least 100% cash collateral or equivalent securities from the
borrower; (ii) the borrower must increase the collateral whenever the market
value of the securities loaned rises above the level of the collateral; (iii)
the Fund
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must be able to terminate the loan at any time; (iv) 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; (v)
the Fund may pay only reasonable custodian fees in connection with the loan; and
(vi) 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 Board 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."
Securities of Other Investment Companies. Certain Funds may invest in
investment funds that invest principally in securities in which the Fund is
authorized to invest. Currently, under the 1940 Act, a Fund may hold securities
of another investment company in amounts which (i) do not exceed 3% of the total
outstanding voting stock of such company, (ii) do not exceed 5% of the value of
the Fund's total assets and (iii) 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. Investments by a Fund (other than the Money Market Fund) in the
Investment Fund are not considered an investment in another investment company
for purposes of this restriction. To the extent a Fund invests in other
investment companies, the Fund's shareholders will incur certain duplicative
fees and expenses, including investment advisory fees.
Purchasing Put and Call Options on Securities. Each Fund, other than the
Money Market Fund, may purchase put and call options that are traded on a U.S.
or foreign securities exchange or in the over-the-counter market. A Fund may
utilize up to 10% of its assets to purchase put options on portfolio securities
and may do so at or about the same time that it purchases the underlying
security or at a later time. By buying a put, a Fund will seek to limit its risk
of loss from a decline in the market value of the security until the put
expires. Any appreciation in the value of the underlying security, however, will
be partially offset by the amount of the premium paid for the put option and any
related transaction costs. A Fund may utilize up to 10% of its assets to
purchase call options on portfolio securities. Call options may be purchased by
a Fund in order to acquire the underlying securities for a price that avoids any
additional cost that would result from a substantial increase in the market
value of a security. A Fund may also purchase call options to increase its
return at a time when the call is expected to increase in value due to
anticipated appreciation of the underlying security. Prior to their expirations,
put and call options may be sold by a Fund in closing sale transactions, which
are sales by the Fund, prior to the exercise of options that it has purchased,
of options of the same series. Profit or loss from the sale will depend on
whether the amount received is more or less than the premium paid for the option
plus the related transaction costs. 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 a Fund. In
addition, the premiums paid by a Fund in purchasing options on securities,
options on securities indices, options on foreign currencies and options on
futures contracts will not exceed 20% of the Fund's net assets.
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Covered Option Writing. Each Fund, other than the Money Market Fund, may
write covered put and call options on securities. A Fund will realize fees
(referred to as "premiums") for granting the rights evidenced by the options. A
put option embodies the right of its purchaser to compel the writer of the
option to purchase from the option holder an underlying security at a specified
price at any time during the option period. In contrast, a call option embodies
the right of its purchaser to compel the writer of the option to sell to the
option holder an underlying security at a specified price at any time during the
option period.
The Funds with option-writing authority will write only options that are
covered. A call option written by a Fund will be deemed covered (i) 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, (ii) 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, (iii) 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 (iv) if at
the time the call is written, an amount of cash, Government Securities 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 (i) if, at the time the put is written, an
amount of cash, Government Securities 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 (ii) 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 realize, through the receipt of premiums, a greater
return 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 will normally 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. In the case of call options, these exercise
prices are referred to as "in-the-money," "at-the-money" and "out-of-the-money,"
respectively.
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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.
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 permitting its sale or
the writing of a new option on the security prior to the outstanding option's
expiration). To effect a closing purchase transaction, a Fund would purchase,
prior to the holder's exercise of an option that the Fund has written, 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. 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. The Investment Manager expects that the Funds will write options,
other than those on Government Securities, only on national securities
exchanges. Options on Government Securities 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, for example, 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.
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. In addition to writing covered put and call options to generate current
income, a Fund may enter into options transactions as hedges to reduce
investment risk, generally by making an investment expected to move in the
opposite direction of a portfolio position. A hedge is designed to offset a loss
on a portfolio position with a gain on the hedge
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position; at the same time, however, a properly correlated hedge will result in
a gain on the portfolio's position being offset by a loss on the hedge position.
A Fund will engage in hedging transactions only when deemed advisable by
the Investment Manager. Successful use by a Fund of options will depend on the
Investment Manager's ability to predict correctly movements in the direction of
the securities underlying the option used as a hedge. Losses incurred in hedging
transactions and the costs of these transactions will affect a Fund's
performance.
Securities Index Options. In seeking to hedge all or a portion of its
investments, each Fund, other than the Money Market Fund, may purchase and write
put and call options on securities indices listed on U.S. or foreign securities
exchanges or traded in the over-the-counter market, which indices include
securities held in the Fund's portfolio. The Funds with such option writing
authority may write only covered options. A Fund may also use securities index
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. Options on
securities indexes are generally similar to options on specific securities.
Unlike options on securities, however, options on securities indices do not
involve the delivery of an underlying security; the option in the case of 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. A Fund
may purchase and write put and call options on securities indexes or securities
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 securities index fluctuates with changes in the market values of
the securities included in the index. Securities 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 securities indices differ from
options on securities. Unlike a securities option, which contemplates the right
to take or make delivery of securities at a specified price, an option on a
securities index gives the holder the right to receive a cash "exercise
settlement amount" equal to (i) 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 underlying index on the date of exercise,
multiplied by (ii) a fixed "index multiplier." Receipt of this cash amount will
depend upon the closing level of the securities 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
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securities index options prior to expiration by entering into a closing
transaction on an exchange or it may allow the option to expire unexercised.
The effectiveness of purchasing or writing securities 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 securities 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
security, 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 prices in the market
generally or, in the case of certain indices, in an industry or market segment,
rather than movements in the price of a particular security. As a result,
successful use by a Fund of options on securities indices is subject to the
Investment Manager's ability to predict correctly movements in the direction of
the 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 securities.
Securities index options are subject to position and exercise limits and
other regulations imposed by the exchange on which they are traded. The ability
of a Fund to engage in closing purchase transactions with respect to securities
index options depends on 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 some future
date, for some options. No assurance can be given that a closing purchase
transaction can be effected when the Investment Manager desires that a Fund
engage in such a transaction.
Over-the-Counter ("OTC") Options. Certain 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
may result in
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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 and Related Options. Each Fund, other than the Small-Cap Value
Fund and the 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 exchange or board of trade approved by the Commodity Futures
Trading Commission or in the over-the-counter market. If entered into, these
transactions will be made solely for the purpose of hedging 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.
An interest rate futures contract provides for the future sale by one
party and the purchase by the other party of a specified amount of a particular
financial instrument (debt security) at a specified price, date, time and place.
Financial futures contracts are contracts that 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. A municipal bond index futures contract is based on an index of
long-term, tax-exempt municipal bonds and a corporate bond index futures
contract is based on an index of corporate bonds. Stock index futures contracts
are based on indices that reflect the market value of common stock of the
companies included in the indices. An index futures contract is an agreement
pursuant to which two parties agree 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. 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.
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 staff of the SEC is
that a Fund's long and short positions in futures contracts as well as put and
call options on futures written by it must be collateralized with cash or other
liquid assets and segregated with the Trust's custodian or a designated
sub-custodian or "covered" in a manner similar to that for covered options on
securities.
No consideration is paid or received by a Fund upon trading a futures
contract. Upon entering into a futures contract, cash, short-term Government
Securities or other U.S. dollar-
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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 that 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.
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.
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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. Losses incurred in hedging transactions and the costs of
these transactions will affect a Fund's performance.
Forward Currency Transactions. Each Fund, other than the Small-Cap Value
Fund, and the Money Market Fund, may hold currencies to meet settlement
requirements for foreign securities and each Fund, other than the Premier Fund,
the Small-Cap Value Fund, the Mid-Cap Value Fund, and the Money Market Fund, may
engage in currency exchange transactions to protect against uncertainty in the
level of future exchange rates between a particular foreign currency and the
U.S. dollar or between foreign currencies in which the Fund's securities are or
may be denominated. No Fund will enter into forward currency transactions for
speculative purposes.
Forward currency contracts are agreements to exchange one currency for
another at a future date. The date (which may be any agreed-upon fixed number of
days in the future), the amount of currency to be exchanged and the price at
which the exchange will take place will be negotiated and fixed for the term of
the contract at the time that a Fund enters into the contract. Forward currency
contracts (i) are traded in a market conducted directly between currency traders
(typically, commercial banks or other financial institutions) and their
customers, (ii) generally have no deposit requirements and (iii) 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
the Trust's custodian or a designated sub-custodian in an amount at all times
equal to or exceeding the Fund's commitment with respect to the contracts.
Upon maturity of a forward currency contract, a Fund may (i) pay for and
receive the underlying currency, (ii) negotiate with the dealer to roll over the
contract into a new forward currency contract with a new future settlement date
or (iii) negotiate with the dealer to terminate the forward contract into an
offset with the currency trader providing for the Fund's paying or receiving the
difference between the exchange rate fixed in the contract and the then current
exchange rate. The Trust may also 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 the Investment Manager. 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.
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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 Code for a given year.
In entering into forward currency contracts, a Fund will be subject to a
number of risks and special considerations. The market for forward currency
contracts, for example, may be limited with respect to certain currencies. The
existence of a limited market may in turn restrict the 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 Investment Manager's special
skills and experience with respect to those instruments and will usually depend
upon the Investment Manager's ability 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 ability to dispose of a Fund's positions in forward currency contracts
depends on the availability of active markets in those instruments, and the
Investment Manager cannot predict the amount of trading interest that may exist
in the future in forward currency contracts. 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. Each Fund, other than the Premier Fund, the
Mid-Cap Value Fund, the Small-Cap Value Fund and the Money Market Fund, may
purchase and write put and call options on foreign currencies for the purpose of
hedging against declines in the U.S. dollar value of foreign currency
denominated securities and against increases in the U.S. dollar cost of
securities to be acquired by the Fund. The Funds with such option writing
authority may write only covered options. No Fund will enter into a transaction
involving options on foreign currencies for speculative purposes. Options on
foreign currencies to be written or purchased by a Fund are traded on U.S. or
foreign exchanges or in the over-the-counter market. The Trust will
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limit the premiums paid on a Fund's options on foreign currencies to 5% of the
value of the Fund's total assets.
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 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
counter party 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
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.
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.
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 (i)
other complex foreign political and economic factors, (ii) lesser availability
of data on which to make trading decisions than in the United States, (iii)
delays in a Fund's ability to act upon economic events occurring in foreign
markets during non-business hours in the United States, (iv) the imposition of
different exercise and settlement terms and procedures and margin requirements
than in the United States and (v) lesser trading volume.
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Structured and Indexed Securities. Certain Funds may also invest in
structured and indexed securities, the value of which is linked to currencies,
interest rates, commodities, indexes or other financial indicators ("reference
instruments"). The interest rate or the principal amount payable at maturity or
redemption may be increased or decreased depending on changes in the value of
the reference instrument. Structured or indexed securities may be positively or
negatively indexed, so that appreciation of the reference instrument may produce
an increase or a decrease in interest rate or value at maturity of the security.
In addition, the change in the interest rate or value at maturity of the
security may be some multiple of the change in value of the reference
instrument. Thus, in addition to the credit risk of the security's issuer, the
Funds will bear the market risk of the reference instrument.
Mortgage Related Securities. Certain Funds may invest in mortgage related
securities which represent pools of mortgage loans assembled for sale to
investors by various governmental agencies, such as GNMA, by government related
organizations, such as FNMA and FHLMC, as well as by private issuers, such as
commercial banks, savings and loan institutions, mortgage bankers and private
mortgage insurance companies.
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.
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. 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 FNMA and 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
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instruments whose principal or interest payments may vary or whose terms to
maturity may be shorter than previously customary. The Investment Manager
assesses new types of mortgage related securities as they are developed and
offered to determine their appropriateness for investment by the relevant Fund.
Several risks are associated with mortgage related securities generally.
The monthly cash inflow from the underlying loans, for example, may not be
sufficient to meet the monthly payment requirements of the mortgage related
security. Prepayment of principal by mortgagors or mortgage foreclosures will
shorten the term of the underlying mortgage pool for a mortgage related
security. Early returns of principal will affect the average life of the
mortgage related securities remaining in these Funds. The occurrence of mortgage
prepayments is affected by factors including the level of interest rates,
general economic conditions, the location and age of the mortgage and other
social and demographic conditions. In periods of rising interest rates, the rate
of prepayment tends to decrease, thereby lengthening the average life of a pool
of mortgage related securities. Conversely, in periods of falling interest rates
the rate of prepayment tends to increase, thereby shortening the average life of
a pool. Reinvestment of prepayments may occur at higher or lower interest rates
than the original investment, thus affecting the yield of these Funds. Because
prepayments of principal generally occur when interest rates are declining, the
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, although those
other fixed income securities may have a comparable risk of decline in market
value in periods of rising interest rates. To the extent that these Funds
purchase 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 mortgage related securities ("ARMs") have interest rates
that reset at periodic intervals, thereby allowing certain Funds to participate
in increases in interest rates through periodic adjustments in the coupons of
the underlying mortgages, resulting in both higher current yields and lower
price fluctuation than would be the case with more traditional long-term debt
securities. Furthermore, if prepayments of principal are made on the underlying
mortgages during periods of rising interest rates, these Funds generally will be
able to reinvest these amounts in securities with a higher current rate of
return. None of these Funds, however, will benefit from increases in interest
rates to the extent that interest rates rise to the point at which they cause
the current yield of ARMs to exceed the maximum allowable annual or lifetime
reset limits (or "caps") for a particular mortgage. In addition, fluctuations in
interest rates above these caps could cause ARMs to behave more like long-term
fixed rate securities in response to extreme movements in interest rates. As a
result, during periods of volatile interest rates, these Funds' net asset values
may fluctuate more than if they did not purchase ARMs. Moreover, during periods
of rising interest rates, changes in the coupon of the adjustable rate mortgages
will slightly lag changes in market rates, creating the potential for some
principal loss for shareholders who redeem their shares of these Funds before
the interest rates on the underlying mortgages are adjusted to reflect current
market rates.
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Collateralized mortgage related securities ("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
these Funds invest, the investment may be subject to a greater or lesser risk of
prepayment than other types of mortgage related securities.
Mortgage related securities may not be readily marketable. To the extent
any of these securities are not readily marketable in the judgment of the
Investment Manager, each of these Funds limits its investments in these
securities, together with other illiquid instruments, to not more than 15% of
the value of its net assets.
Supranational Agencies. Each Fund may invest up to 10% of its assets in
debt obligations of supranational agencies such as: 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
supranational agencies are not considered Government Securities and are not
supported, directly or indirectly, by the U.S. Government.
Municipal Obligations. The term "Municipal Obligations" as used in the
Prospectuses and this SAI 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.
Opinions relating to the validity of Municipal Obligations and to the
exemption of interest on them from Federal income taxes are rendered by bond
counsel to the respective issuers at the time of issuance. Neither the Trust nor
the Investment Manager will review the proceedings relating to the issuance of
Municipal Obligations or the basis for opinions of counsel. The Strategic Fund
may invest without limit in debt obligations that are repayable out of revenues
generated from economically related projects or facilities or debt obligations
whose
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issuers are located in the same state. Sizable investments in these obligations
could involve an increased risk to the Funds should any of the related projects
or facilities experience financial difficulties.
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.
Even though Municipal Obligations are interest-bearing investments that
promise a stable flow of income, 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.
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
the Investment Manager 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 the
Investment Manager 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. If any laws are enacted that would reduce the availability of
Municipal Obligations for investment by the Tax-Exempt Fund so as to affect the
Fund's shareholders adversely, the Trust will reevaluate the Fund's investment
objective and policies and might submit possible changes in the Fund's structure
to the Fund's shareholders for their consideration. If legislation were enacted
that would treat a type of Municipal Obligation as taxable for Federal income
tax purposes, the Trust would treat the security as a permissible taxable money
market instrument for the Fund within the applicable limits set forth in the
Prospectuses.
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. Interest payments on qualifying municipal leases are exempt from
Federal income taxes and state income taxes within the state of issuance.
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
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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: (i) the frequency of
trades and quotes; (ii) the number of dealers willing to purchase or sell the
security; (iii) the willingness of dealers to undertake to make a market; (iv)
the nature of the marketplace trades; and (v) the likelihood that the obligation
will continue to be marketable based on the credit quality of the municipality
or relevant obligor.
Municipal leases held by a Fund will be considered illiquid securities
unless the Board determines on an ongoing basis that the leases are readily
marketable. An unrated municipal lease with a non-appropriation risk that is
backed by an irrevocable bank letter of credit or an insurance policy issued by
a bank or insurer deemed by the Investment Manager to be of high quality and
minimal credit risk, will not be deemed to be illiquid solely because the
underlying municipal lease is unrated, if the Investment Manager determines that
the lease is readily marketable because it is backed by the letter of credit or
insurance policy.
Municipal leases that a Fund may acquire will be both rated and unrated.
Rated leases that may be held by a Fund include those rated investment grade at
the time of investment or those issued by issuers whose senior debt is rated
investment grade at the time of investment. A Fund may acquire unrated issues
that the Investment Manager deems to be comparable in quality to rated issues in
which a Fund is authorized to invest. A determination that an unrated lease
obligation is comparable in quality to a rated lease obligation and that there
is a reasonable likelihood that the lease will not be canceled will be subject
to oversight and approval by the Board.
To limit the risks associated with municipal leases, a Fund will invest no
more than 5% of its total assets in those leases. In addition, a Fund will
purchase lease obligations that contain non-appropriation clauses when the lease
payments will commence amortization of principal at an early date resulting in
an average life of five years or less for the lease obligation.
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The Strategic Fund intends to invest in Municipal Obligations of a broad
range of issuers, consistent with prudent regional diversification. Investors in
certain states may be subject to state taxation on all or a portion of the
income and capital gains produced by such securities.
Floating and Variable Rate Instruments. Certain Funds may invest in
floating and variable rate instruments. Income securities may provide for
floating or variable rate interest or dividend payments. The floating or
variable rate may be determined by reference to a known lending rate, such as a
bank's prime rate, a certificate of deposit rate or the London InterBank Offered
Rate (LIBOR). Alternatively, the rate may be determined through an auction or
remarketing process. The rate also may be indexed to changes in the values of
interest rate or securities indexes, currency exchange rate or other
commodities. Variable and floating rate securities tend to be less sensitive
than fixed rate securities to interest rate changes and to have higher yields
when interest rates increase. However, during periods of rising interest rates,
changes in the interest rate of an adjustable rate security may lag changes in
market rates. The amount by which the rates paid on an income security may
increase or decrease may be subject to periodic or lifetime caps. 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.
Floating and variable rate income securities include securities whose
rates vary inversely with changes in market rates of interest. Such securities
may also pay a rate of interest determined by applying a multiple to the
variable rate. The extent of 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.
Certain Funds 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 are obligations that permit a 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, a 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 a Fund will meet the quality criteria established by the Investment
Manager for the purchase of Municipal Obligations. The Investment Manager
considers on an ongoing basis the creditworthiness of the issuers of the
floating and variable rate demand obligations in the relevant Fund's portfolio.
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Participation Interests. Certain Funds may purchase from financial
institutions participation interests in certain Municipal Obligations. 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 a Fund, the participation interest will be backed by an irrevocable
letter of credit or guarantee of a bank that the Board has determined meets
certain quality standards, or the payment obligation otherwise will be
collateralized by Government Securities. A 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 a
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. A Fund will invest no more than 5% of the value of its
total assets in participation interests.
Zero Coupon Obligations. Certain Funds may invest in zero coupon
obligations. Zero coupon securities generally pay no cash interest (or dividends
in the case of preferred stock) to their holders prior to maturity. Accordingly,
such securities usually are issued and traded at a deep discount from their face
or par value and generally are subject to greater fluctuations of market value
in response to changing interest rates than securities of comparable maturities
and credit quality that pay cash interest (or dividends in the case of preferred
stock) on a current basis. Although each of these Funds will receive no payments
on its zero coupon securities prior to their maturity or disposition, it will be
required for federal income tax purposes generally to include in its dividends
each year an amount equal to the annual income that accrues on its zero coupon
securities. Such dividends will be paid from the cash assets of the Fund, from
borrowings or by liquidation of portfolio securities, if necessary, at a time
that the Fund otherwise would not have done so. To the extent these Funds are
required to liquidate thinly traded securities, the Funds may be able to sell
such securities only at prices lower than if such securities were more widely
traded. The risks associated with holding securities that are not readily
marketable may be accentuated at such time. To the extent the proceeds from any
such dispositions are used by these Funds to pay distributions, each of those
Funds will not be able to purchase additional income-producing securities with
such proceeds, and as a result its current income ultimately may be reduced.
The Strategic Fund and the High Yield Fund may each invest up to 10% of
its assets in zero coupon Municipal Obligations. Zero coupon Municipal
Obligations are generally divided into two categories: "Pure Zero Obligations,"
which are those that 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
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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. Certain Funds 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. A
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 decrease as the Auction
Component's rate increases. 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.
Custodial Receipts. Certain Funds may acquire custodial receipts or
certificates underwritten by securities dealers or banks that evidence ownership
of future interest payments, principal payments, or both, on certain Municipal
Obligations. The underwriter of these certificates or receipts typically
purchases Municipal Obligations and deposits the obligations in an irrevocable
trust or custodial account with a custodian bank, which then issues receipts or
certificates that evidence ownership of the periodic unmatured coupon payments
and the final principal payment on the obligations. Custodial 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 custodial receipt a 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 those rights as may exist
against the underlying issuers. Thus, in the event the underlying issuer fails
to pay principal and/or interest when due, a 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. In addition, in the
event that the trust or custodial account in which the underlying security has
been deposited is determined to be an association taxable as a corporation,
instead of a non-taxable entity, the yield on the underlying security would be
reduced in recognition of any taxes paid.
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Government Stripped Mortgage Related Securities. Certain Funds may invest
in government stripped mortgage related securities 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 issued by GNMA,
FNMA or FHLMC. The certificates underlying the government stripped mortgage
related securities represent all or part of the beneficial interest in pools of
mortgage loans. These Funds 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 the Investment Manager 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
securities held by these Funds.
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 these
Funds' not fully recovering their initial investment in an interest-only
government stripped mortgage related security. Under current market conditions,
these Funds expect that investments in government stripped mortgage related
securities will consist primarily of interest-only securities. The sensitivity
of an interest-only security that represents the interest portion of a
particular class, as opposed to the interest portion of an entire pool, to
interest rate fluctuations, may be increased because of the characteristics of
the principal portion to which they relate. Government stripped mortgage related
securities are currently traded in an over-the-counter market maintained by
several large investment banking firms. No assurance can be given that these
Funds will be able to effect a trade of a government stripped mortgage related
security at a desired time. These Funds will acquire government stripped
mortgage related securities only if a secondary market for the securities exists
at the time of acquisition. Except for government stripped mortgage related
securities based on fixed rate FNMA and FHLMC mortgage certificates that meet
certain liquidity criteria established by the Board, the Trust treats government
stripped mortgage related securities as illiquid and will limit each of these
Funds' investments in these securities, together with other illiquid
investments, to not more than 15% of its net assets.
Asset-Backed and Receivable-Backed Securities. Certain Funds may invest in
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" ("CARs(Service Mark)") and
interests in pools of credit card receivables. CARs(Service Mark) 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.
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Payments of principal and interest on CARs(Service Mark) 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 CARs(Service Mark) may be affected by early
prepayment of principal on the underlying vehicle sales contracts. If the letter
of credit is exhausted, these Funds 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, because of depreciation, damage or
loss of a vehicle, because of the application of Federal and state bankruptcy
and insolvency laws or other factors. As a result, certificate holders may
experience delays in payment if the letter of credit is exhausted. Consistent
with each of these Funds' investment objective and policies and subject to the
review and approval of the Board, these Funds may also invest in other types of
asset-backed and receivable-backed securities.
Mortgage Dollar Rolls. Certain Funds may, with respect to up to 25% of
their total assets, enter into mortgage "dollar rolls" in which the Fund sells
securities for delivery in the current month and simultaneously contracts with
the same counterparty to repurchase similar (same type, coupon and maturity) but
not identical securities on a specified future date. The Fund loses the right to
receive principal and interest paid on the securities sold. However, the Fund
would benefit to the extent of any price received for the securities sold and
the lower forward price for the future purchase (often referred to as the
"drop") or fee income plus the interest earned on the cash proceeds of the
securities sold until the settlement date of the forward purchase. Unless such
benefits exceed the income, capital appreciation and gain or loss due to
mortgage repayments that would have been realized on the securities sold as part
of the mortgage dollar roll, the use of this technique will diminish the
investment performance of the Fund compared with what such performance would
have been without the use of mortgage dollar rolls. The Fund will hold and
maintain in a segregated account until the settlement date cash or liquid assets
in an amount equal to the forward purchase price. The benefits derived from the
use of mortgage dollar rolls may depend upon the Investment Manager's ability to
predict correctly mortgage prepayments and interest rates. There is no assurance
that mortgage dollar rolls can be successfully employed.
For financial reporting and tax purposes, each of these Funds proposes to
treat mortgage dollar rolls as two separate transactions: one involving the
purchase of a security and a separate transaction involving a sale. The Funds do
not currently intend to enter into mortgage dollar rolls that are accounted for
as a financing.
Short Sales Against the Box. Certain Funds may sell securities "short
against the box." Whereas a short sale is the sale of a security a Fund does not
own, a short sale is "against the box" if at all times during which 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.
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WEBs and Other Index-related Securities. Each of the International Fund,
the Emerging Markets Fund and the 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.
INVESTMENT RESTRICTIONS
Each Fund is subject to fundamental and non-fundamental investment
policies and limitations. Under the 1940 Act, fundamental investment policies
and limitations may not be changed without the vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the Fund.
The following policies and limitations supplement those described in the
Prospectuses and this SAI. 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 Government Securities) 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
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of the issuer, except that (a) up to 25% of the value of the total assets of
each non-money market Fund may be invested without regard to this limitation,
and (b) the Money Market Fund may hold more than 5% of its total assets in the
securities of an issuer to the extent permitted by Rule 2a-7 under the 1940 Act.
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
Government Securities 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. 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.
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.
40
<PAGE>
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 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.
Notes to Investment Restrictions
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 the
Investment Manager, subject to review by the Board. Transactions on domestic
stock exchanges and some foreign
41
<PAGE>
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 many foreign exchanges, commissions are fixed and
may be higher than for securities traded on U.S. exchanges. Generally, no stated
commissions are 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.
Government Securities generally will be purchased on behalf of a Fund from
underwriters or dealers, although certain newly issued Government Securities may
be purchased directly from the U.S. Treasury or from the issuing agency or
instrumentality.
The following table shows the total amount of brokerage commissions paid
by each Fund during the fiscal periods ended September 30, 1999 and September
30, 1998. The Trust commenced operations in November 1997; accordingly, no Fund
paid commissions to broker-dealers prior to the fiscal period ended September
30, 1998.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Total Commissions for Fiscal Year Total Commissions for Fiscal
Fund Ended September 30, 1999 Period Ended September 30, 1998
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Equity Fund $127,820 $146,766
- -------------------------------------------------------------------------------------------------
S&P 500 Index Fund $1,651 $12,381
- -------------------------------------------------------------------------------------------------
Premier Growth Fund N/A N/A
- -------------------------------------------------------------------------------------------------
Value Equity Fund N/A N/A
- -------------------------------------------------------------------------------------------------
Mid-Cap Growth Fund $17,379 $27,664
- -------------------------------------------------------------------------------------------------
Mid-Cap Value Fund $21,261 N/A
- -------------------------------------------------------------------------------------------------
Small-Cap Value Fund $98,908 N/A
- -------------------------------------------------------------------------------------------------
International Equity Fund $414,804 $311,499
- -------------------------------------------------------------------------------------------------
Europe Equity Fund $37,628 N/A
- -------------------------------------------------------------------------------------------------
Emerging Markets Fund $47,611 $60,902
- -------------------------------------------------------------------------------------------------
Strategic Investment Fund N/A N/A
- -------------------------------------------------------------------------------------------------
</TABLE>
In selecting brokers or dealers to execute securities transactions on
behalf of a Fund, the Investment Manager seeks the most favorable terms
available under the circumstances ("best execution"). In assessing the overall
terms available to ensure best execution for any transaction, the Investment
Manager 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 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 GE
Asset Management relating to each Fund authorizes the Investment Manager, 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
42
<PAGE>
Section 28(e) of the Securities Exchange Act of 1934) provided to the Fund
and/or other accounts over which the Investment Manager or its affiliates
exercise investment discretion. The fees under the investment advisory agreement
relating to a Fund will not be reduced by reason of the Fund's receiving
brokerage and research services. Such broker-dealers may provide analyses and
reports regarding issuers, industries, economic trends, portfolio strategy, and
may effect securities transactions and perform certain functions related
thereto. In addition, such services may include advice concerning the
advisability of investing in, purchasing or selling securities and the
availability of particular securities or buyers or sellers of securities. The
research services received from broker-dealers that execute transactions on
behalf of a Fund may be useful to the Investment Manager in servicing that Fund
as well as all of the Investment Manager's accounts and not all of these
services may be used in connection with the particular Fund or Funds generating
the commissions. Consistent with limits established by the Federal Securities
Laws, a Fund may pay a broker-dealer commissions for agency transactions that
exceed the amount of commissions charged by other broker-dealers in recognition
of their research and execution services. In addition, subject to the overall
policy of best execution, the Investment Manager may consider sales of Fund
shares in selecting brokers or dealers to execute securities transactions on
behalf of a Fund.
The following table shows the dollar amount of brokerage commissions paid
to firms that provided research and execution services and the approximate
dollar amount of transactions involved during the fiscal period ended September
30, 1999. Funds that are not listed paid no brokerage commissions to firms that
provided such services.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Total Amount of Transactions to
Commissions Paid to Firms for Firms for Brokerage and Research
Fund Brokerage and Research Services Services
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Equity Fund $16,985 $16,852,543
- ------------------------------------------------------------------------------------------------------
S&P 500 Index Fund -- --
- ------------------------------------------------------------------------------------------------------
Premier Growth Fund -- --
- ------------------------------------------------------------------------------------------------------
Value Equity Fund -- --
- ------------------------------------------------------------------------------------------------------
Mid-Cap Growth Fund $865 $544,986
- ------------------------------------------------------------------------------------------------------
Mid-Cap Value Fund $442 $199,217
- ------------------------------------------------------------------------------------------------------
Small-Cap Value Fund -- --
- ------------------------------------------------------------------------------------------------------
International Equity Fund $19,146 $11,177,206
- ------------------------------------------------------------------------------------------------------
Europe Equity Fund $560 $312,039
- ------------------------------------------------------------------------------------------------------
Emerging Markets Fund $579 $198,393
- ------------------------------------------------------------------------------------------------------
Strategic Investment Fund N/A --
- ------------------------------------------------------------------------------------------------------
</TABLE>
The Board 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 Government
Securities, during the existence of any underwriting or selling group relating
to the
43
<PAGE>
security of which any affiliate of the Fund or the Investment Manager is a
member, except to the extent permitted under rules, interpretations or
exemptions of the SEC.
The Investment Manager may select broker-dealers who are affiliated with
the Trust or the Investment Manager. All brokerage transaction commissions paid
to affiliates will be fair and reasonable to the shareholders.
Certain of the Funds' investment strategies may result in the Fund having
a higher portfolio turnover rate. Higher portfolio turnover rates may cause a
Fund to experience increased transaction costs, brokerage expenses and other
acquisition costs, and shareholders to incur increased taxes on their investment
in a Fund. The Investment Manager 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. Variations in portfolio
turnover rates may be due to fluctuations in shareholder purchase, exchange and
redemption transactions, market conditions or changes in the Investment
Manager's outlook. 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 higher brokerage commissions.
The following table provides the portfolio turnover rates for each of the
Funds for the fiscal periods ended September 30, 1999 and September, 30, 1998.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Portfolio Turnover for Fiscal Year Portfolio Turnover for Fiscal Period
Fund ended September 30, 1999 ended September 30, 1998*
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Equity Fund 45% 29%
- -----------------------------------------------------------------------------------------------------------
S&P 500 Index Fund 7% 1%
- -----------------------------------------------------------------------------------------------------------
Mid-Cap Growth Fund 52% 14%
- -----------------------------------------------------------------------------------------------------------
Mid-Cap Value Fund 18% N/A
- -----------------------------------------------------------------------------------------------------------
Small-Cap Value Fund 216% 19%
- -----------------------------------------------------------------------------------------------------------
International Equity Fund 50% 53%
- -----------------------------------------------------------------------------------------------------------
Europe Equity Fund 49% N/A
- -----------------------------------------------------------------------------------------------------------
Emerging Markets Fund 79% 77%
- -----------------------------------------------------------------------------------------------------------
Income Fund 227% 323%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* Information is from inception date through September 30, 1998.
44
<PAGE>
MANAGEMENT OF THE TRUST
Trustees and Officers
The Board of Trustees oversees the business affairs of the Trust. 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 GE Asset
Management.
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. Each person named as a Trustee also may
serve in a similar capacity for other Funds advised by GE Asset Management. 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. The business
address of each Trustee and executive officer who is an "interested person" (as
defined in the 1940 Act) is 3003 Summer Street, Stamford, Connecticut 06905.
45
<PAGE>
<TABLE>
<CAPTION>
Position(s) 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 and Age 50. President, Asset Management, GE Investment
President Services Group of GE Financial Assurance Holdings, Inc.
("GEFA"), an indirect wholly-owned subsidiary of
General Electric Company ("GE"), since February 1997;
Executive Vice President - Mutual Funds of GE Asset
Management, a wholly-owned subsidiary of GE that is
registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, since
March 1993; Director of GE Asset Management since 1988;
from 1988 until 1993, Mr. Cosgrove served as Executive
Vice President - Finance and Administration of GE Asset
Management; Chairman of the Board, Chief-Executive
Officer and President of GE Investment Distributors,
Inc., a registered broker-dealer, since 1993; Chairman
of the Board and Chief Executive Officer of GE
Investment Retirement Services, Inc., since 1998.
Alan M. Lewis* Trustee and Executive Vice Age 53. Executive Vice President, General Counsel and
President Secretary of GE Asset Management since 1988.
John R. Costantino Trustee Age 53. Managing Director, Walden Partners, Ltd.,
150 East 58th Street consultants and investors, since August 1992;
New York, NY 10055 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
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
Position(s) Held Age and Principal Occupation(s)
Name and Address With Trust During Past Five Years
---------------- ---------- ----------------------
<S> <C> <C>
service subsidiary of HPA, since 1991; Director, Lancit
Media Productions, Ltd., a children's and family
television film and videotape production company, since
1995.
William J. Lucas Trustee Age 52. Vice President and Treasurer of Fairfield
Fairfield University University since 1983.
North Benson Road
Fairfield, CT 06430
Robert P. Quinn Trustee Age 63. Retired since 1983 from Salomon Brothers Inc;
45 Shinnecock Road Director, GP Financial Corp., a holding company, since
Quogue, NY 11959 1994; Director, The Greenpoint Savings Bank, a
financial institution, since 1987.
Michael Tansley Treasurer Age 35. Manager of Fund Administration at GE Asset
Management since May 1998; from 1990 to May 1998, Mr.
Tansley held various progressive positions leading to
senior manager in July 1996, in the Investment Company
Services Group of Pricewaterhouse-Coopers LLP (formerly
Price Waterhouse LLP).
Matthew J. Simpson Secretary Age 38. Vice President and General Counsel, Asset
Management Services group of GEFA since February 1997;
Vice President, Associate General Counsel and Assistant
Secretary of GE Asset Management since October 1992.
</TABLE>
No employee of 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 GE Asset Management, GEID,
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 Board attended by the Trustee and is reimbursed for expenses incurred in
connection with attendance at Board meetings.
47
<PAGE>
Trustees' Compensation
(for the fiscal year ended September 30, 1999)
COMPENSATION TABLE
- --------------------------------------------------------------------------------
Total Compensation from Investment
Total Compensation Companies Managed by GE Asset
Name of Trustee From the Trust Management
- --------------------------------------------------------------------------------
Michael J. Cosgrove None None+
- --------------------------------------------------------------------------------
Alan M. Lewis None None+
- --------------------------------------------------------------------------------
John R. Costantino $6,000 $25,000++
- --------------------------------------------------------------------------------
William J. Lucas $6,000 $25,000++
- --------------------------------------------------------------------------------
Robert P. Quinn $6,000 $25,000++
- --------------------------------------------------------------------------------
- -----------------------
+ As of September 30, 1999, Mr. Cosgrove served as Trustee or Director of four
investment companies advised by GE Asset Management and of eight investment
companies advised by GEIC. Mr. Lewis serves as Trustee of three investment
companies advised by GE Asset Management and eight investment companies advised
by GEIC. They are considered to be interested persons of each investment company
advised by GE Asset Management or GEIC, as defined under Section 2(a)(19) of the
1940 Act, and, accordingly, serve as Trustees thereof without compensation.
++ As of September 30, 1999, Messrs. Costantino, Lucas and Quinn served as
Trustees or Directors of four investment companies advised by GE Asset
Management and the compensation is for their services as Trustees or Directors
of these companies.
Investment Adviser and Administrator
GE Asset Management Incorporated (formerly GE Investment Management
Incorporated) serves as the Trust's investment adviser and administrator. GE
Asset Management 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. GE Asset Management, which was formed under the
laws of Delaware in 1988, is a wholly owned subsidiary of GE. GE is a highly
diversified conglomerate comprised of 12 global manufacturing and service sector
businesses. GE's businesses include aircraft engines, appliances, capital
services, lighting, medical systems, broadcasting, plastic manufacturing, power
systems, electrical distribution and control systems, industrial control
systems, information services and transportation systems. GE Asset Management
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 GE Asset Management provide 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 GE Asset Management and its predecessors have managed GE's
pension assets since 1927. As of
48
<PAGE>
December 31, 1999, GE's investment advisory firms oversaw $115.8 billion and
managed individual and institutional assets of $91.7 billion, of which more than
$18.2 billion was invested in mutual funds.
Personnel of each of the Funds, GE Asset Management, and GE Investment
Distributors, Inc., are subject to a code of ethics, pursuant to Rule 17j-1
under the 1940 Act, which establishes procedures for personal investing and
restricts certain transactions by persons subject to the code.
GE Asset Management Investment Advisory and Administration Agreements
The duties and responsibilities of GE Asset Management are specified in
investment advisory and administration agreements (each, an "Advisory Agreement"
and collectively, the "Advisory Agreements") between GE Asset Management and the
Trust on behalf of the respective Funds. Under each Advisory Agreement, GE Asset
Management, 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. GE Asset Management 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. GE Asset
Management provides the Trust with all executive, administrative, clerical and
other personnel necessary to operate each Fund, and pays salaries and other
employment-related costs of employing these persons. GE Asset Management
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. GE Asset Management, 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.
GE Asset Management 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 GE Asset Management 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.
Each Advisory Agreement provides that GE Asset Management may render
similar advisory and administrative services to other clients so long as when a
Fund or any other client served by GE Asset Management 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 GE Asset
Management to be equitable to the Fund. The Advisory Agreements also provide
that GE Asset Management shall not be liable for any error of judgment or
mistake of law or for
49
<PAGE>
any loss incurred by a Fund in connection with GE Asset Management'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 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 GE Asset Management 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.
Investment Advisory Fees
For its services to each Fund of the Trust, GE Asset Management receives a
monthly advisory and administrative fee. The fee is deducted daily from the
assets of each of the Funds and paid to GE Asset Management 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 fees payable to GE Asset Management are based on the average daily net
assets of each Fund at the following rates:
Average Daily Annual Rate
Name of Fund Net Assets of Fund Percentage (%)*
- ------------ ------------------ ---------------
U.S. Equity Fund First $25 million .55
Value Equity Fund Next $25 million .45
Mid-Cap Growth Fund Over $50 million .35
Premier Growth Equity Fund
Premier Research Equity Fund
S&P 500 Index Fund All assets .15
Mid-Cap Value Equity Fund First $25 million .65
Next $25 million .60
Over $50 million .55
Small-Cap Value Equity Fund First $25 million .70
Small-Cap Growth Equity Fund Next $25 million .65
Over $50 million .60
50
<PAGE>
Average Daily Annual Rate
Name of Fund Net Assets of Fund Percentage (%)*
- ------------ ------------------ ---------------
International Equity Fund First $25 million .75
Europe Equity Fund Next $50 million .65
Premier International Equity Fund Over $75 million .55
Emerging Markets Fund First $50 million 1.05
Over $50 million .95
Income Fund First $25 million .35
Next $25 million .30
Next $50 million .25
Over $100 million .20
Strategic Investment Fund First $25 million .45
High Yield Fund Next $25 million .40
Over $50 million .35
Money Market Fund First $25 million .25
Next $25 million .20
Next $50 million .15
Over $100 million .10
- -------------------------
* From time to time, GE Asset Management may waive 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.
The following table provides total management fees paid by each Fund for
the fiscal periods ended September 30, 1999 and September 30, 1998. The Trust
commenced operations in November 1997. Accordingly, no Fund paid investment
advisory and administrative fees prior to the fiscal period ended September 30,
1998.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Total Management Fees for Fiscal Total Management Fees for Fiscal
Fund Year ended September 30, 1999 Period ended September 30, 1998
- --------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Equity $596,183 $406,706
- --------------------------------------------------------------------------------------------
S&P 500 Index $38,140 $25,543
- --------------------------------------------------------------------------------------------
Premier Growth N/A N/A
- --------------------------------------------------------------------------------------------
Value Equity N/A N/A
- --------------------------------------------------------------------------------------------
Mid-Cap Growth $85,788 $67,792
- --------------------------------------------------------------------------------------------
Mid-Cap Value $51,327 N/A
- --------------------------------------------------------------------------------------------
Small-Cap Value $68,479 $9,766
- --------------------------------------------------------------------------------------------
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Total Management Fees for Fiscal Total Management Fees for Fiscal
Fund Year ended September 30, 1999 Period ended September 30, 1998
- --------------------------------------------------------------------------------------------
<S> <C> <C>
International Equity $915,623 $555,236
- --------------------------------------------------------------------------------------------
Europe Equity $48,474 N/A
- --------------------------------------------------------------------------------------------
Emerging Markets $73,879 $69,291
- --------------------------------------------------------------------------------------------
Income $227,814 $16,642
- --------------------------------------------------------------------------------------------
Strategic Investment N/A N/A
- --------------------------------------------------------------------------------------------
Money Market $17,307 $22,488
- --------------------------------------------------------------------------------------------
</TABLE>
Sub-Investment Advisers
Each Advisory Agreement permits GE Asset Management, 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 GE Asset
Management's responsibilities under the Advisory Agreement. In this event, GE
Asset Management remains responsible for ensuring that these entities perform
the services that each undertakes pursuant to a sub-advisory agreement. GE Asset
Management has engaged the following sub-advisers to manage certain of the
Funds.
S&P 500 Index Fund. GE Asset Management has retained State Street Global
Advisors ("SSGA"), a division of State Street Bank and Trust Company ("State
Street"), as 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. For SSGA's services, GE Asset Management (and not the Fund)
pays SSGA monthly compensation in the form of an investment sub-advisory fee.
The fee is paid by GE Asset Management 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.
Mid-Cap Value Fund. NWQ Investment Management ("NWQ"), located at 2049
Century Park East, Los Angeles, CA 90067, has been retained to act as
sub-investment adviser of the Mid-Cap Value Fund. NWQ is a wholly-owned
subsidiary of United Asset Management Corporation, a company whose principal
business is managing investments for institutional clients. Pursuant to the
sub-investment advisory agreement between NWQ and GE Asset Management, NWQ bears
all expenses in connection with the performance of its services as the Mid-Cap
Value Fund's sub-investment adviser. For its services as sub-investment adviser
to the Mid-Cap Value Fund, GE Asset Management (and not the Fund) pays NWQ a fee
equal to an annual rate of .45% of the first $50 million of the Fund's average
daily net assets and .375% of amounts thereafter.
Small-Cap Value Fund. Palisade Capital Management, L.L.C. ("Palisade"),
located at One Bridge Plaza, Fort Lee, New Jersey 07024, has been retained by GE
Asset Management to act as sub-investment adviser of the Small-Cap Value Fund.
Pursuant to the sub-investment advisory agreement between Palisade and GE Asset
Management, Palisade bears all expenses in
52
<PAGE>
connection with the performance of its services as the Small-Cap Value Fund's
sub-investment adviser. Although Palisade has no previous experience managing
mutual fund portfolios, Palisade has managed various institutional and private
accounts. For its services as sub-investment adviser to the Small-Cap Value
Fund, GE Asset Management (and not the Fund) pays Palisade a fee equal to an
annual rate of .35% of the first $200 million, .325% of the next $100 million
and .30% of amounts in excess of $300 million.
Sub-Advisory Agreements
SSGA, Palisade, and NWQ serve as sub-advisers to the S&P 500 Index Fund,
the Small-Cap Value Fund, and the Mid-Cap Value Fund, respectively, pursuant to
sub-advisory agreements with GE Asset Management (the "Sub-Advisory
Agreements"). Each of the Sub-Advisory Agreements is not assignable and may be
terminated without penalty by either the sub-adviser or GE Asset Management 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 Fund, on 60 days'
written notice to the sub-adviser. The Sub-Advisory Agreements provide that the
sub-adviser 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 Agreements also provide that the sub-adviser shall not be liable
for any error of judgment or mistake of law or for any loss incurred by the Fund
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 Sub-Advisory Agreement.
Securities Activities of the Investment Manager
Securities held by the Funds also may be held by other funds or separate
accounts for which the Investment Manager acts as an adviser. Because of
different investment objectives or other factors, a particular security may be
bought by the Investment Manager 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 the Investment Manager 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 the Investment Manager 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 the Investment Manager (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 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 the Investment Manager in the manner it considers
to be most equitable and consistent with its fiduciary obligations to the Trust
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and to such other funds or accounts. In some cases this procedure may adversely
affect the size the position obtainable for a Fund.
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 GE
Asset Management, 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 GE Asset Management, or enable GE Asset Management 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 GE Asset Management, or enable GE Asset Management 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 Bank and Trust Company ("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
subcustodians of assets owned by each Fund. For its custody services, State
Street receives monthly fees 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 subscriptions and redemptions.
Distributor
GE Investment Distributors, Inc. ("GEID"), located at 777 Long Ridge Road,
Building B, Stamford, Connecticut 06927, serves as the distributor of Fund
shares on a continuing best
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efforts basis. Michael J. Cosgrove, a member of the Trust's board of trustees,
is the Chairman of the board, Chief Executive Officer and President of GEID.
PURCHASE, REDEMPTION AND EXCHANGE OF SHARES
Purchases
Shares are offered to investors at the offering price, based on the NAV
next determined after receipt of an investment in good order by State Street
Bank and Trust Company, the Trust's custodian and transfer agent. The offering
price is equal to NAV, as described below.
GEID and other persons remunerated on the basis of sales of shares may
receive different levels of compensation for selling one class of shares over
another. In addition, trail commissions of up to 0.25% may be paid to authorized
broker-dealers, financial institutions or investment advisers which have entered
into sales agreements with GEID ("Authorized Firms") for providing on-going
services with respect to Service Class shares.
GEID offers shares of each class to certain investors that meet the
eligibility requirements described below. 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, broker-dealers, investment advisers, 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) ("457 Plans"), 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).
Eligibility Requirements
Full-Service Defined Contribution Plan Investors. A full-service defined
contribution play man invest in the GE Institutional Funds so long as it has
invested at least $100 million in one or more investment portfolios or accounts
that are advised by GE Asset Management. A full-service defined contribution
plan is a defined contribution plan that receives recordkeeping, administration,
investment education and communication services provided or paid by GE Financial
Assurance Holdings, Inc. or its subsidiaries. A full-service defined
contribution plan generally must individually meet the minimum investment
requirements and will not be considered a related investor of any other investor
in the GE Institutional Funds.
If the value of an investor's investment falls below the required amount
for more than 120 days because of redemptions (and not because of market
fluctuations or exchanges), the
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Distributor may, in its sole discretion, refuse to sell additional Fund shares
to such investor (other than reinvestment of dividends and capital gains
distributions).
457 Defined Contribution Plan Investors. A 457 Plan that is a defined
contribution plan that does not receive record keeping, administration,
investment education and communication services provided or paid by GE Financial
Assurance Holdings, Inc. or its subsidiaries may invest in the GE Institutional
Funds if such investor has at least $300 million of plan assets at the time of
initial investment in one or more of the Funds. A 457 Plan investor of this type
must individually meet the eligibility requirements and will not be considered a
related investor of any other investor in the GE Institutional Funds.
All Other Investors. The minimum initial investment in each Fund is $35
million for each investor or group of related investors. There is no minimum
investment requirement for subsequent purchases.
The minimum investment requirement is waived for each investor or group of
related investors so long as such person or group has invested at least $100
million in one or more investment portfolios or accounts that are advised by GE
Asset Management. The minimum investment requirement is waived for up to three
years from the date of initial purchase of Fund shares for certain investors or
groups of related investors having: (a) at least $100 million of investment
assets within six months from the date of the initial purchase of Fund shares,
provided they invest in only one Fund, (b) at least $200 million of investment
assets within six months from the date of the initial purchase of Fund shares,
provided they invest in no more than two Funds, and (c) at least $500 million of
investment assets within six months from the date of the initial purchase of
Fund shares, for which they may invest in any number of Funds.
For a bank, insurance company, broker-dealer, investment adviser or other
financial intermediary establishing an omnibus account for investment in the
Funds by its clients, the amount of investment assets is determined either by
(a) aggregating Client Assets (defined below) over which it has investment
discretion or (b) aggregating Client Assets of any institution described under
"Eligible Investors" in the Prospectuses which are managed by it on a
non-discretionary basis or for which it (or its affiliates) provides
recordkeeping, shareholder servicing or other administrative services. "Client
Assets" means the assets of any client of a financial intermediary that has
invested in the Trust.
If the value of an investor's (or a group of related investors')
investment in a Fund or other investment portfolios falls below the required
amount for more than 120 days because of redemptions (an not because of market
fluctuations or exchanges) or if an investor (or group of related investors)
fail to meet the minimum investment requirements within the specified time
period, GEID may, in its sole discretion refuse to sell additional Fund shares
to such investor (other than reinvestment of dividends and capital gains
distributions).
For those investors who intend to meet the minimum investment requirements
within three years of the date of initial purchase, GE Asset Management may
refuse to sell to such investor additional Fund shares (other than reinvestment
of dividends and capital gains
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distributions) if such investor has not satisfied the $35 million minimum
investment requirement within three years, even if the investor had the
applicable amount of investment assets within the initial six-month period.
Related Investors. Related investors are investors that are affiliated
persons of each other within the meaning of the 1940 Act. Common trust funds and
collective trust funds of the same bank (or of affiliated banks) are considered
related investors of each other and their bank(s). Likewise, separate accounts
of the same insurance company (or of affiliated insurance companies) are related
investors of each other and their insurance company or companies and clients
whose assets are managed on a discretionary basis by the same bank, insurance
company, investment adviser or broker-dealer are related investors of each other
and their manager. GEID also may treat institutional clients of a financial
intermediary whose assets are managed on a non-discretionary basis or who are
otherwise served by the intermediary (or its affiliate) as related investors of
their manager or service provider where Fund shares are held by that
intermediary in an omnibus account for its clients.
Purchases In-Kind. Investors may purchase 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 shares with investment securities should contact their Investment
Professional or GEID for information about which securities a particular Fund
will accept. The Trust reserves the right to require GEID to suspend the
offering of shares of the Emerging Markets Fund or International Fund for cash
in amounts above $5 million and of the other non-money market Funds in amounts
above $10 million.
How to Open an Account. Investors must establish an account before
purchasing shares, and may do so either by submitting an account application to
GEID or the transfer agent or through an Authorized Firm (defined below).
Investors may obtain an account application by telephoning the Trust at (800)
493-3042 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.
330 West 9th Street
Kansas City, MO 64105
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.
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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 GEID or through
brokers, dealers, financial institutions or investment advisers that have
entered into sales agreements with GEID ("Authorized Firms").
An investor may purchase shares through an Authorized Firm with the
assistance of a sales representative (an "Investment Professional"). The
Authorized Firm will be responsible for transmitting the investor's order
promptly to the transfer agent. Investors should contact their Investment
Professional for further instructions.
Investors also may purchase 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.
Redemptions
The right of redemption of shares of a Fund may be suspended or the date
of payment postponed (i) for any periods during which the NYSE is closed (other
than for customary weekend and holiday closings), (ii) 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 (iii) for such other periods as the SEC by order may permit for the
protection of the Fund's shareholders. A shareholder who pays for Fund shares by
personal check will receive the proceeds of a redemption of those shares when
the purchase check has been collected, which may take up to 15 days or more.
Shareholders who anticipate the need for more immediate access to their
investment should purchase shares with Federal funds or bank wire or by a
certified or cashier's check.
Distributions-in-Kind. If the Board 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 Trust'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 GE Asset
Management to be readily marketable. Shareholders receiving distributions in
kind of portfolio securities may incur brokerage commissions when subsequently
disposing of those securities.
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Exchange Privilege
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. 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 the same or another
Fund.
The exchange privilege described in the Prospectuses enables a shareholder
of a Fund to acquire shares in a Fund having a different investment objective
and policies when the shareholder believes that a shift between Funds is an
appropriate investment decision. 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 exchange, and such Fund may be legally sold in the
shareholder's state of residence, shares submitted for exchange are redeemed at
the then-current net asset value and the proceeds are immediately invested in
shares of the Fund being acquired. The Trust reserves the right to reject any
exchange request and may, upon 60 days' prior written notice to a Fund's
Shareholders, terminate the exchange privilege.
An exchange for the same class of another Fund is a sale and purchase of
shares for tax purposes. An investor may have a taxable gain or loss when he or
she exchanges shares.
NET ASSET VALUE
An exchange for the same class of another GE Institutional Fund is a sale
and purchase of shares for tax purposes. An investor may have a taxable gain or
loss when he or she exchanges shares.
The Trust will not calculate net asset value on days that 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 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 Board. In carrying out the Board's
valuation policies, GE Asset Management may consult with one or more independent
pricing services ("Pricing Service") retained by the Trust.
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Debt securities of U.S. issuers (other than Government Securities 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. The procedures of the Pricing
Service are reviewed periodically by GE Asset Management under the general
supervision and responsibility of the Board .
The valuation of the portfolio securities of the Money Market Fund is
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 adopted by the SEC. 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 calendar days or less, and invest only in "eligible
securities" as defined in the rule, which are determined by GE Asset Management
to present minimal credit risks. Pursuant to the rule, GE Asset Management 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 GE Asset Management 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
certain significant deviations 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 Board. In
the event the Board 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 must, in accordance with the rule, cause the
Fund to take such corrective action as the Board 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.
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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 elect to be treated as a "regulated
investment company" under Sub-Chapter M of the Code and to qualify as a
"regulated investment company" each year. If a Fund (i) qualifies as a regulated
investment company and (ii) 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 taxes 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 net long
term and short term capital gains for the 1-year period ending generally 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, (i) 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 securities 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 (ii) 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)(3)(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 securities or the securities of other
regulated investment companies).
Another requirement for qualification as a regulated investment company is
that each 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% Test").
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If for any taxable year a Fund does not qualify for the special Federal
income tax treatment afforded regulated investment companies, all of its taxable
income will be subject to Federal income tax at regular corporate rates (without
any deduction for distributions to its shareholders). In such event, dividend
distributions, including amounts derived from interest on tax-exempt
obligations, would be taxable to shareholders to the extent of current and
accumulated earnings and profits, and would be eligible for the dividends
received deduction for corporations in the case of corporate shareholders.
As of September 30, 1999, the following Funds have capital loss
carryforwards as indicated below. The capital loss carry over is available to
offset future realized capital gains to the extent provided in the Internal
Revenue Code and regulations thereunder. To the extent that these carryover
losses are used to offset future capital gains, it is probable that the gains so
offset will not be distributed to shareholders because they would be taxable as
ordinary income.
--------------------------------------------------------------------
Expiration Dates:
Fund Amount September 30,
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Emerging Markets Fund $375,590 2007
--------------------------------------------------------------------
Mid-Cap Growth Fund $475,601 2007
--------------------------------------------------------------------
Each Fund would cease to qualify for pass-through tax treatment under
Sub-chapter M if it is unable to comply with the diversification, qualifying
income or distribution requirements contained in Subchapter M of the Code. Each
such Fund also could be subject to a 4% excise tax if it fails to make certain
distributions.
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 International Fund, the Europe Equity Fund and the Emerging
Markets Fund each anticipates that it may qualify for and make this election in
most, but not necessarily all, of its taxable years. If a Fund were to make an
election, 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 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
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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 (i) could affect the
character, amount and timing of distributions to shareholders of a Fund, (ii)
could 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 (iii) 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, seeks 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 the Prospectuses. In 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
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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 the shareholder has provided a correct taxpayer
identification number and that the shareholder is not subject to "backup
withholding," then the shareholder may be subject to a 31% "backup withholding"
tax with respect to (i) taxable dividends and distributions from the Fund and
(ii) the proceeds of any redemptions of shares of the Fund (other than the Money
Market 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 a Fund or in advertising material. Additional information
regarding the manner in which performance figures are calculated is provided
below.
As of the date of this SAI, General Electric Assurance Capital Company
("GECA"), an indirect subsidiary of GE, owned 100% of the outstanding Service
Class shares of each of the Funds (other than the Europe Equity Fund and the
Small-Cap Value Fund). The shares were issued to GECA for providing the initial
seed capital to the Funds. Because the Service Class shares of each Fund lack an
operating history, no performance figures are provided below for those shares.
The performance figures for the Investment Class shares of certain Funds
are reflected below. These figures are net of fees and expenses attributable to
such shares of the Funds noted and assume changes in share price, reinvestment
of dividends and capital gains. Because the Investment Class shares of the Funds
do not pay a shareholder servicing and distribution fee, the performance figures
shown below for the Investment Class shares of the Funds noted can be expected
to be higher than the performance figures for the Service Class shares of the
corresponding Fund had such Service Class shares had an operating history. No
performance figures are shown below for the Investment Class shares of the
Premier Growth Fund, the Value Equity Fund, the Small-Cap Growth Fund, the High
Yield Fund and the Strategic Fund because each of these Funds lacks an operating
history as of the date of this SAI.
Yield for the Money Market Fund
The Trust may, from time to time, include the yield and effective yield of
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
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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 (i) determining the net
change in the value of a hypothetical pre-existing account in the Fund having a
balance of one share at the beginning of a seven-calendar-day period for which
yield is to be quoted, (ii) dividing the net change by the value of the account
at the beginning of the period to obtain the base period return, and (iii)
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 less a hypothetical charge reflecting deductions from
shareholder accounts, but does not include realized gains and losses or
unrealized appreciation and depreciation. In addition, the Trust may calculate a
compounded 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 seven-day current yield and effective seven-day yield, as of September
30, 1999, for the Investment Class shares of the Money Market Fund were 5.07%
and 5.19%, respectively.
30-day yield
From time to time, the Trust may advertise a Fund's 30-day yield. The
30-day yield figures are calculated for a Class or 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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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.
The 30-day yield for the period ended September 30, 1999 for the
Investment Class shares of the Income Fund was 6.28%.
Average Annual 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 Class from the beginning date of the measuring period to the ending date of
the period. The figure 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 in shares of the same Class. 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 "average annual total return" figures for the Funds described below
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
The ERV assumes the maximum applicable sales load is deducted from the
initial investment or redemption amount, in the case of CDSC, complete
redemption of the hypothetical investment at the end of the measuring period.
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The average annual total return for the Investment Class shares of each
Fund was as follows as of September 30, 1999:
Average Annual Return
Fund One Year Since Inception Inception Date
U.S. Equity Fund 28.27% 18.24% 11/25/97
S&P 500 Index Fund 28.41% 19.72% 11/25/97
Mid-Cap Growth Fund 15.19% 1.20% 11/25/97
Mid-Cap Value Fund - -0.90% 12/31/98
Small-Cap Value Fund 13.98% 1.34% 08/03/98
International Equity Fund 29.50% 15.41% 11/25/97
Europe Equity Fund - -0.30% 01/29/99
Emerging Markets Fund 69.62% 8.06% 11/25/97
Income Fund -0.72% 4.44% 11/21/97
Money Market Fund 4.92% 5.18% 12/02/97
Aggregate Total Return
The Trust may use "aggregate total return" figures in advertisements,
which represent 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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The "aggregate total return" figures for the Funds represent the
cumulative change in the value of an investment in a Class for the specified
period and 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 return figures are based on historical earnings and are not
intended to indicate future performance.
Distribution Rate
The Trust may advertise a Fund's distribution rate and/or effective
distribution rate. A Fund's distribution rate differs from yield and total
return and therefore is not intended to be a complete measure of performance.
A Fund's distribution rate measures dividends distributed for a specified
period. A Fund's distribution rate is computed by dividing the most recent
monthly distribution per share annualized by the current net asset value per
share. A 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. A 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 performance information included in the
Prospectuses 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 indices, including the Russell Index, S&P 500 Index, and the
Dow Jones Industrial Average or (c) other appropriate indices of investment
securities or with data developed by GE Asset Management derived from those
indices.
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<PAGE>
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
As of March 31, 2000, GECA, located at 6604 West Broad Street, Richmond,
Virginia 23230, an indirect subsidiary of GE, owned 19.60% of the outstanding
Investment Class shares of the Value Equity Fund, 77.45% of the outstanding
Investment Class shares of the Small-Cap Value Fund, and 100% of the outstanding
Service Class shares of each of the Funds (other than the Small-Cap Value Fund
and the Europe Equity Fund). First Colony Life Insurance Company, located at 700
Main Street, Lynchburg, Virginia 24505, an indirect subsidiary of GE, owned 100%
of the outstanding Investment Class shares of the Europe Equity Fund. Union
Fidelity Life Insurance Company, 601 Union Street, Suite 1400, Seattle,
Washington 98101, an indirect subsidiary of GE, owned 100% of the outstanding
Investment Class shares of the Mid-Cap Value Fund. The shares were issued in
exchange for providing the initial seed capital to these Funds.
In addition, as of that date, (i) Leaseway Transportation Corp. owned more
than 25% of the outstanding voting securities of the U.S. Equity Fund, Mid-Cap
Growth Fund, Emerging Markets Fund, Income Fund; (ii) AID Association for
Lutherans owned more than 25% of the outstanding voting securities of the
International Fund; (iii) GE Savings & Security Program owned more than 25% of
the outstanding voting securities of the International Fund; and (iv) GE Capital
Asset Maintenance Plan owned more than 25% of the outstanding voting securities
of the Premier Growth Fund and the Strategic Investment Fund. So long as the
above entities own more than 25% of the outstanding voting securities of the
Funds noted, they may be deemed to control these Funds, and may be able to
significantly influence the outcome of any shareholder vote. For purposes of
voting on matters submitted to shareholders, any person who owns more than 50%
of the outstanding shares of the Fund generally would be able to cast the
deciding vote.
The current Trustees and officers of each Fund, as a group, beneficially
owned less than 1% of each Fund's outstanding shares.
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<PAGE>
The following persons are the only persons known by the Trust to hold
beneficially more than 5% of the outstanding Investment Class shares of the
following Funds as of March 31, 2000:
<TABLE>
<CAPTION>
Amount of Ownership Percent of
Name and Address of Record Owner (In Shares) Class
-------------------------------- ----------- -----
<S> <C> <C>
U.S. Equity Fund (Investment Class)
Saxon & Co.
FBO Leaseway Transport
ABC Trust Institutional Service
200 Stevens Drive - Suite 260
Lester, PA 19113-1522 8,701,632.04 45.48%
Union Bank TR Nominee
FBO OC Tanner Retirement Plan
P.O. Box 85484
San Diego, CA 92186-5484 2,157,391.560 11.28%
Norwest Bank Minnesota NA
FBO GE Investments
#12806102
P.O. Box 1533
Minneapolis, MN 55480-1533 2,030,749.201 10.61%
State Street Bank & Trust Co. TTEE
Benchside & Co. - GE Cap Asset Maint.
Master Trust Client SER-W6C
1 Enterprise Drive
N. Quincy, MA 02171-2126 3,378,500.342 17.66%
</TABLE>
70
<PAGE>
<TABLE>
<CAPTION>
Amount of Ownership Percent of
Name and Address of Record Owner (In Shares) Class
-------------------------------- ----------- -----
<S> <C> <C>
S&P 500 Index Fund (Investment Class)
Montgomery Wards Retirement & Savings Plan
U/A 1/1/95
Attn.: Philip Dobias
535 W. Chicago Avenue, #11
Chicago, IL 60671-0001 7,331,216.994 78.20%
Saxon & Co.
FBO Leaseway Transport
ABC Trust Institutional Service
200 Stevens Drive - Suite 260
Lester, PA 19113-1522 1,808,646.84 19.26%
Premier Growth Equity (Investment Class)
State Street Bank & Trust Co. TTEE
Benchside & Co. - GE Cap Asset Maint.
Master Trust Client SER-W6C
1 Enterprise Drive
N. Quincy, MA 02171-2126 1,010,916.975 63.40%
Montgomery Wards Retirement & Savings Plan
U/A 1/1/95
Attn.: Philip Dobias
535 W. Chicago Avenue, #11
Chicago, IL 60671-0001 662,276.281 36.55%
Value Equity Fund (Investment Class)
Colonial Penn Insurance Company
Attn.: Jerry Fulps
601 Union Street, Suite 1400
Seattle, WA 98101-2341 1,000,000.000 32.85%
GEFA Holdings Inc.
Attn.: Jerry Fulps
601 Union Street, #14
Seattle, WA 98101-2341 1,000,000.000 32.85%
GE Capital Assurance
6604 West Broad Street
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Amount of Ownership Percent of
Name and Address of Record Owner (In Shares) Class
-------------------------------- ----------- -----
<S> <C> <C>
Richmond, VA 23230-1702 596,493.106 19.60%
Value Equity Fund (Investment Class - Cont.)
St. Francis Hospital
c/o William C. Armstrong CFO
100 Port Washington Blvd.
Roslyn, NY 11578-1348 315,847.372 10.38%
Mid-Cap Growth Fund (Investment Class)
Saxon & Co.
FBO Leaseway Transport
ABC Trust Institutional Service
200 Stevens Drive - Suite 260
Lester, PA 19113-1522 1,309,295.11 82.74%
Defined Benefit Plans Master Trust
Agreement between MRA Sys. Inc. &
State Street Bank & Trust
c/o Joe Mays
1 Newmann Way J-103
Evendale, OH 45215 141,401.612 8.94%
Mid-Cap Value Equity Fund (Investment Class)
Union Fidelity Life Insurance Company
Attn.: Jerry Fulps
601 Union Street
Suite 1400
Seattle, Washington 98101 1,038,724.04 100%
Small-Cap Value Fund (Investment Class)
GE Capital Assurance
2 Union Square, Suite 1400
601 Union Street
Seattle, WA 98101-2321 1,046,284.97 77.45%
First Colony Life Insurance
Defined Benefit Pension Plan
Attn.: Robert Tursky
</TABLE>
72
<PAGE>
<TABLE>
<CAPTION>
Amount of Ownership Percent of
Name and Address of Record Owner (In Shares) Class
-------------------------------- ----------- -----
<S> <C> <C>
P.O. Box 1280
Lynchburg, VA 24505-1280 304,700.042 22.55%
International Equity Fund (Investment Class)
AID Association for Lutherans
Ron Anderson Trustee
Attn: David J. Schnarsky
4321 N. Ballard Road
Appleton, WI 54919 7,974,309.55 31.49%
Saxon & Co.
FBO Leaseway Transport
ABC Trust Institutional Service
200 Stevens Drive - Suite 260
Lester, PA 19113-1522 3,212,606.503 12.68%
S&S International Trust Account
Attn: Mark Buccigross
3003 Summer Street
Stamford, CT 06905-4316 11,054,597.174 43.65%
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Amount of Ownership Percent of
Name and Address of Record Owner (In Shares) Class
-------------------------------- ----------- -----
<S> <C> <C>
Europe Equity Fund (Investment Class)
First Colony Life Insurance Company
601 Union Street, Suite 1400
Seattle, WA 98101 1,038,660.813 100%
Emerging Markets Fund (Investment Class)
Saxon & Co.
FBO Leaseway Transport
ABC Trust Institutional Service
200 Stevens Drive - Suite 260
Lester, PA 19113-1522 652,499.09 79.86%
Defined Benefit Plans Master Trust
Agreement between MRA Sys. Inc. &
State Street Bank & Trust
c/o Joe Mays
1 Newman Way J-103
Evendale, OH 45215 144,817.320 17.74%
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
Income Fund (Investment Class)
A-USA Life Insurance Co. Inc.
Attn.: Suzanne Montemurro
4 Manhattanville Rd
Purchase, NY 10577-2139 7,830,205.074 39.13%
Saxon & Co.
FBO Leaseway Transport
ABC Trust Institutional Services
200 Stevens Drive - Suite 260
Lester, PA 19113-1522 5,565,586.193 27.82%
Metal Trades
Branch Local 638 Pension Fund
c/o Kevin J. Driscoll
Steamfitters Ind Fund Office
5 Penn. Plaza
New York, NY 10001-1810 2,272,009.672 11.35%
GELCO Corp. DBA GE Capital Fleet Svc.
Norwest Bank N.A.
Attn.: Mutual Funds
510 Marquette, Suite 500
Minneapolis, MN 55402-1118 2,213,484.023 11.06%
Strategic Investment Fund (Investment Class)
State Street Bank & Trust Co. TTEE
Benchside & Co. - GE Cap Asset Maint.
Master Trust Client SER-W6C
1 Enterprise Drive
N. Quincy, MA 02171-2126 772,126.978 98.64%
Money Market Fund (Investment Class)
GE Investment Distributors Inc.
Attn.: Scott McGregor
777 Long Ridge Rd
Stamford, CT 06927-0001 2,012,918.420 53.62%
GE Financial Assurance
c/o Tom Casey CSIG
777 Long Ridge Rd
Stamford, CT 06902-1247 892,698.930 23.78%
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
Information Alliance Co.
Gary L. Kriechbaum
P.O. Box 2849
Pittsfield, MA 01202-2849 442,415.490 11.79%
First Colony Life Insurance
Defined Benefit Pension Plan
Attn: Robert Tursky
P.O. Box 1280
Lynchburg, VA 24505-1280 405,697.48 10.81%
</TABLE>
FUND HISTORY AND ADDITIONAL INFORMATION
The Trust is an open-end management investment company 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's Amended and Restated Declaration of Trust, dated July 24, 1998, as
amended from time to time (the "Declaration") 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, the Trustees have the
authority to create and classify shares of beneficial interest in separate
series, without further action by shareholders.
Currently, there are seventeen Funds in the Trust: the U.S. Equity Fund,
S&P 500 Index Fund, Premier Growth Fund, Premier Research Equity Fund, Premier
International Equity Fund, Value Equity Fund, Mid-Cap Growth Fund, International
Fund, Income Fund, Strategic Fund, Emerging Markets Fund and Money Market Fund
were established as series of the Trust on November 13, 1997. The Mid-Cap Value
Fund, Small-Cap Value Fund, High Yield Fund and Small-Cap Growth Fund were added
as series of the Trust on May 8, 1998. The Europe Equity Fund was added as a
series of the Trust on November 6, 1998. The Premier Research Equity Fund and
Premier International Equity Fund were added as series of the Trust on December
13, 1999. Additional series may be added in the future.
The Declaration 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 SAI, 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.
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<PAGE>
In the interest of economy and convenience, certificates representing
shares of a Fund are not physically issued. State Street maintains a record of
each shareholder's ownership of shares of a Fund.
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.
Unless otherwise required by the 1940 Act or the Declaration, 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.
Shareholder Liability. 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
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<PAGE>
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.
Voting. When 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, each Class has the same rights, privileges and preferences, except with
respect to: (i) the designation of each Class; (ii) the sales arrangement; (iii)
certain expenses allocable exclusively to each Class; and (iv) voting rights on
matters exclusively affecting a single Class. The Board 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 by the
Board.
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 all Funds vote as a
single class on all matters except (1) a matter affecting the interests of one
or more of the Funds or Classes of a Fund, in which case only shares of the
affected Funds or Classes would be entitled to vote, or (2) when the 1940 Act
requires the vote of an individual Fund. Normally, no meetings of shareholders
of the Funds will be held for the purpose of electing Trustees of the Trust
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.
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<PAGE>
Counsel. Sutherland Asbill & Brennan LLP, 1275 Pennsylvania Avenue, N.W.,
Washington, D.C. 20004-2415 serves as counsel for the Trust.
Independent Accountants. PricewaterhouseCoopers LLP, 160 Federal Street,
Boston, Massachusetts 02110, serves as independent accountants of the Trust.
FINANCIAL STATEMENTS
The Annual Report dated September 30, 1999, which either accompanies this
SAI or has previously been provided to the person to whom this SAI is being
sent, is incorporated herein by reference with respect to all information other
than the information set forth in the Letter to Shareholders included in the
Annual Report.
The Funds that are included in the Annual Report dated September 30, 1999
are the U.S. Equity Fund, the S&P 500 Index Fund, the Mid-Cap Growth Fund, the
Mid-Cap Value Equity Fund, the Small-Cap Value Equity Fund, the International
Fund, the Europe Fund, the Emerging Markets Fund, the Income Fund and the Money
Market Fund. The High Yield Fund and the Small-Cap Growth Equity Fund have not
yet commenced operations and have no assets as of the date of this SAI. The
remaining Funds did not have an operating history as of the date of the Annual
Report.
The Trust will furnish, without charge, a copy of the Financial Reports,
upon request to the Trust at P.O. Box 120065, Stamford, CT 06912-0065, (800)
242-0134.
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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 ICA
Limited or its affiliate ICA 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.
Thomson BankWatch Inc. employs the rating TAW-1 to indicate issues having
a very high degree of likelihood of timely payment. TAW-2 indicates a strong
degree of safety regarding timely payment, however, the relative degree of
safety is not as high as for issues rated TAW-1. While the rating TAW-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 TAW-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>
PART C
OTHER INFORMATION
Item 23. Exhibits
Exhibit No. Description of Exhibit
- ----------- ----------------------
(a)(1) Certificate of Trust is incorporated herein by reference
to Exhibit 1(a) 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 (the "Commission") on June 16, 1997
(Accession Number 0001010410-97-000104).
(a)(2) Amended and Restated Declaration of Trust is
incorporated herein by reference to Exhibit 1(b) to
post-effective amendment number two to the Registration
Statement filed with the Commission on July 24, 1998
(Accession Number 0001010410-98-000119).
(b) Inapplicable.
(c) Inapplicable.
(d)(1) Investment Advisory and Administration Agreement between
Registrant, on behalf of the Emerging Markets Fund, and
GE Investment Management Incorporated ("GEIM"), is
incorporated herein by reference to Exhibit 5(a) to
pre-effective amendment number two to the Registration
Statement, filed with the Commission on November 7, 1997
(Accession Number 0001010410-97-000161).
(d)(2) Investment Advisory and Administration Agreement between
Registrant, on behalf of the Premier Growth Equity Fund,
and GEIM, is incorporated herein by reference to Exhibit
5(b) to pre-effective amendment number two to the
Registration Statement, filed with the Commission on
November 7, 1997 (Accession Number
0001010410-97-000161).
(d)(3) Investment Advisory and Administration Agreement between
Registrant, on behalf of the Mid-Cap Growth Fund, and
GEIM, is incorporated herein by reference to Exhibit
5(c) to pre-effective amendment number two to the
Registration Statement, filed with the Commission on
November 7, 1997 (Accession Number
0001010410-97-000161).
<PAGE>
(d)(4) Investment Advisory and Administration Agreement between
Registrant, on behalf of the International Equity Fund,
and GEIM, is incorporated herein by reference to Exhibit
5(d) to pre-effective amendment number two to the
Registration Statement, filed with the Commission on
November 7, 1997 (Accession Number
0001010410-97-000161).
(d)(5) Investment Advisory and Administration Agreement between
Registrant, on behalf of the Value Equity Fund, and
GEIM, is incorporated herein by reference to Exhibit
5(e) to pre-effective amendment number two to the
Registration Statement, filed with the Commission on
November 7, 1997 (Accession Number
0001010410-97-000161).
(d)(6) Investment Advisory and Administration Agreement between
Registrant, on behalf of the U.S. Equity Fund, and GEIM,
is incorporated herein by reference to Exhibit 5(f) to
pre-effective amendment number two to the Registration
Statement, filed with the Commission on November 7, 1997
(Accession Number 0001010410-97-000161).
(d)(7) Investment Advisory and Administration Agreement between
Registrant, on behalf of the S&P 500 Index Fund, and
GEIM, is incorporated herein by reference to Exhibit
5(g) to pre-effective amendment number two to the
Registration Statement, filed with the Commission on
November 7, 1997 (Accession Number
0001010410-97-000161).
(d)(8) Investment Advisory and Administration Agreement between
Registrant, on behalf of the Strategic Investment Fund,
and GEIM, is incorporated herein by reference to Exhibit
5(h) to pre-effective amendment number two to the
Registration Statement, filed with the Commission on
November 7, 1997 (Accession Number
0001010410-97-000161).
(d)(9) Investment Advisory and Administration Agreement between
Registrant, on behalf of the Income Fund, and GEIM, is
incorporated herein by reference to Exhibit 5(i) to
pre-effective amendment number two to the Registration
Statement, filed with the Commission on November 7, 1997
(Accession Number 0001010410-97-000161).
C-2
<PAGE>
(d)(10) Investment Advisory and Administration Agreement between
Registrant, on behalf of the Money Market Fund, and
GEIM, is incorporated herein by reference to Exhibit
5(j) to pre-effective amendment number two to the
Registration Statement, filed with the Commission on
November 7, 1997 (Accession Number
0001010410-97-000161).
(d)(11) Investment Advisory and Administration Agreement between
Registrant, on behalf of the Small-Cap Growth Equity
Fund, and GEIM, is incorporated herein by reference to
Exhibit 5(k) to post-effective amendment number two to
the Registration Statement, filed with the Commission on
July 24, 1998 (Accession Number 0001010410-98-000119).
(d)(12) Investment Advisory and Administration Agreement between
Registrant, on behalf of the Small-Cap Value Equity
Fund, and GEIM, is incorporated herein by reference to
Exhibit 5(l) to post-effective amendment number two to
the Registration Statement, filed with the Commission on
July 24, 1998 (Accession Number 0001010410-98-000119).
(d)(13) Amended and Restated Investment Advisory and
Administration Agreement between Registrant, on behalf
of the Mid-Cap Value Equity Fund, and GEIM, is
incorporated herein by reference to Exhibit (d)(13) to
post-effective amendment number four to the Registration
Statement, filed with the Commission on January 27, 1999
(Accession Number 0000889812-99-000221).
(d)(14) Investment Advisory and Administration Agreement between
Registrant, on behalf of the High Yield Fund, and GEIM,
is incorporated herein by reference to Exhibit 5(n) to
post-effective amendment number two to the Registration
Statement, filed with the Commission on July 24, 1998
(Accession Number 0001010410-98-000119).
(d)(15) Investment Advisory and Administration Agreement between
Registrant, on behalf of the Europe Fund, and GEIM, is
incorporated herein by reference to Exhibit (d)(15) to
post-effective amendment number four to the Registration
Statement, filed with the Commission on January 27, 1999
(Accession Number 0000889812-99-000221).
(d)(16) Investment Advisory and Administration Agreement between
Registrant, on behalf of the Premier Research Equity
Fund, and GE Asset Management Incorporated. Filed
herewith.
(d)(17) Investment Advisory and Administration Agreement between
Registrant, on behalf of the Premier International
Equity Fund, and GE Asset Management Incorporated. Filed
herewith.
C-3
<PAGE>
(d)(16) Sub-Advisory Agreement between GEIM and State Street
Bank and Trust Company ("State Street"), through State
Street Global Advisors, Inc., is incorporated herein by
reference to Exhibit 5(k) to pre-effective amendment
number two to the Registration Statement, filed with the
Commission on November 7, 1997 (Accession Number
0001010410-97-000161).
(d)(17) Sub-Advisory Agreement between GEIM and Palisade Capital
Management, L.L.C. is incorporated herein by reference
to Exhibit 5(p) to post-effective amendment number two
to the Registration Statement, filed with the Commission
on July 24, 1998 (Accession Number
0001010410-98-000119).
(d)(18) Sub-Advisory Agreement between GEIM and NWQ Investment
Management Company is incorporated herein by reference
to Exhibit (d)(18) to post-effective amendment number
four to the Registration Statement, filed with the
Commission on January 27, 1999 (Accession Number
0000889812-99-000221).
(e)(1) Distribution Agreement between Registrant and GE
Investment Services Inc. is incorporated herein by
reference to Exhibit 6(a) to pre- effective amendment
number two to the Registration Statement, filed with the
Commission on November 7, 1997 (Accession Number
0001010410-97-000161).
(e)(2) Shareholder Servicing and Distribution Agreement between
Registrant and GEIM is incorporated herein by reference
to Exhibit 6(b) to pre-effective amendment number two to
the Registration Statement, filed with the Commission on
November 7, 1997 (Accession Number
0001010410-97-000161).
(f) Inapplicable.
(g) Custodian Contract is incorporated herein by reference
to the Form N-1A registration statement of GE
Investments Funds, Inc. (File Nos. 2-91369; 811-4041),
filed with the Commission on October 24, 1997 (Accession
Number 0001010410-97-000148).
C-4
<PAGE>
(h) Transfer Agency and Service Agreement between Registrant
and State Street is incorporated herein by reference to
Exhibit 9 to pre-effective amendment number two to the
Registration Statement, filed with the Commission on
November 7, 1997 (Accession Number
0001010410-97-000161).
(i) Opinion and Consent of Sutherland Asbill & Brennan LLP.
Filed herewith.
(j)(1) Consent of Sutherland Asbill & Brennan LLP. Filed
herewith.
(j)(2) Consent of PricewaterhouseCoopers LLP. Filed herewith.
(k) Inapplicable.
(l) Purchase Agreement between Registrant and General
Electric Capital Assurance Company is incorporated
herein by reference to Exhibit 13 to pre-effective
amendment number two to the Registration Statement,
filed with the Commission on November 7, 1997 (Accession
Number 0001010410-97-000161).
(m) Shareholder Servicing and Distribution Plan adopted
pursuant to Rule 12b-1 under the Investment Company Act
of 1940, as amended (the "1940 Act") is incorporated
herein by reference to Exhibit 15 to pre-effective
amendment number two to the Registration Statement,
filed with the Commission on November 7, 1997 (Accession
Number 0001010410-97-000161).
(n) Multiple Class Plan for Registrant adopted pursuant to
Rule 18f-3 under the 1940 Act is incorporated herein by
reference to Exhibit 18 to pre-effective amendment
number two to the Registration Statement, filed with the
Commission on November 7, 1997 (Accession Number
0001010410-97-000161).
C-5
<PAGE>
(p) (1) Code of Ethics of GE Asset Management Incorporated.
Filed herewith.
(p) (2) Code of Ethics of GE Institutional Funds is incorporated
herein by reference to Exhibit (p)(1) above.
(q) Power of Attorney is incorporated herein by reference to
Exhibit 99(o) to post-effective amendment number five to
the Registration Statement, filed with the Commission on
March 17, 1999 (Accession Number 0000889812-99-000857).
Item 24. Persons Controlled by or Under Common Control with Registrant
The list required by this Item 24 of persons controlled by or under common
control with Registrant, which includes the subsidiaries of General Electric
Company ("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, 2000 (the "Form 10-K"). Additional information
about persons controlled by or under common control with Registrant is
incorporated herein by reference to pages 10-16 of the Form 10-K, beginning
under the caption "GECS."
Item 25. Indemnification
As a Delaware business trust, the operations of Registrant are governed by
its Amended and Restated Declaration of Trust dated June 2, 1998 (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
nevertheless is 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
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<PAGE>
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 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 26. Business and Other Connections of Investment Adviser
Reference is made to "About the Investment Adviser" in the Prospectus
forming Part A, and "Management of the Trust" in the Statement of Additional
Information forming Part B, of this Registration Statement.
The list required by this Item 26 of officers and directors of GEAM, 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 herein by
reference to Schedules A and D of the Form ADV filed by GEAM pursuant to the
Investment Advisers Act of 1940, as amended (the "Advisers Act") (SEC File No.
801-31947).
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<PAGE>
The list required by this Item 26 of officers and directors of State
Street Global Advisors ("SSGA"), the investment sub-adviser to the S&P 500 Index
Fund, 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 herein by reference to Schedules A
and D of the Form ADV filed by SSGA pursuant to the Advisers Act (SEC File No.
801-49368).
The list required by this Item 26 of officers and directors of Palisade
Capital Management, L.L.C. ("Palisade"), the investment sub-adviser to the
Small-Cap Value Equity Fund, 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 herein by
reference to Schedules A and D of the Form ADV filed by Palisade pursuant to the
Advisers Act (SEC File No. 801-48401).
The list required by this Item 26 of officers and directors of NWQ
Investment Management Company ("NWQ"), the Mid-Cap Value Fund's sub-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 Form ADV filed by NWQ pursuant to the Advisers Act (SEC File No. 801-42159).
Item 27. Principal Underwriters
(a) GE Investment Distributors, Inc. ("GEID") also serves as distributor
for the investment portfolios of GE Institutional Funds, GE Funds, GE
Investments Funds, Inc. and GE LifeStyle Funds 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 27 with respect to each director
and officer of GEID is incorporated herein by reference to Schedule A of Form BD
filed by GEID pursuant to the Securities Exchange Act of 1934, as amended (SEC
File No. 8-45710).
(c) Inapplicable.
Item 28. 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; 777 Long Ridge Road, Stamford, Connecticut 06927;
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.
C-8
<PAGE>
Item 29. Management Services
Inapplicable.
Item 30. Undertakings
Inapplicable.
C-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, Registrant certifies that it
meets all of the requirements for effectiveness of this Amendment to the
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933,
as amended, and has duly caused this Amendment to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Stamford, State of
Connecticut on this 23rd day of April, 2000.
By: /s/ Michael J. Cosgrove
-----------------------------------
Michael J. Cosgrove
President and Chairman of the Board
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment to Registrant's 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 04/23/00
- ----------------------- Chairman of the Board
Michael J. Cosgrove (Chief Executive Officer)
/s/ John R. Costantino Trustee 04/23/00
- -----------------------
John R. Costantino*
/s/ Alan M. Lewis Trustee 04/23/00
- -----------------------
Alan M. Lewis
/s/ William J. Lucas Trustee 04/23/00
- -----------------------
William J. Lucas*
/s/ Robert P. Quinn Trustee 04/23/00
- -----------------------
Robert P. Quinn*
/s/ Michael Tansley Treasurer 04/23/00
- ----------------------- (Chief Financial and
Michael Tansley Accounting Officer)
* Signature affixed by Matthew J. Simpson pursuant to a power of
attorney dated December 9, 1998 and incorporated by reference to
Exhibit 99(o) to post-effective amendment number five to the
Registration Statement, filed with the Commission on March 17, 1999.
/s/ Matthew J. Simpson
----------------------
Matthew J. Simpson
<PAGE>
EXHIBIT INDEX
EX-99.(d)(16) Investment Advisory and Administration Agreement between
Registrant, on behalf of the Premier Research Equity Fund,
and GE Asset Management Incorporated
Ex-99.(d)(17) Investment Advisory and Administration Agreement between
Registrant, on behalf of the Premier International Equity
Fund, and GE Asset Management Incorporated
Ex-99.(i) Opinion and Consent of Sutherland Asbill & Brennan LLP
Ex-99(j)(1) Consent of Sutherland Asbill & Brennan LLP
Ex-99(j)(2) Consent of PricewaterhouseCoopers LLP
Ex-99(p)(1) Code of Ethics of GE Asset Managment Incorporated
<PAGE>
INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT
GE INSTITUTIONAL FUNDS
PREMIER RESEARCH EQUITY FUND
GE ASSET MANAGEMENT INCORPORATED
Agreement made as of March 16, 2000 between GE ASSET
MANAGEMENT INCORPORATED ("GEAM") and GE INSTITUTIONAL FUNDS (the "Trust") on
behalf of its Premier Research 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.
GEAM is a Delaware corporation registered as an investment
adviser under the Investment Advisers Act of 1940 (the "Advisers Act").
The Trust wishes to retain GEAM to serve as investment adviser
and administrator to the Fund and GEAM wishes to serve in this capacity.
Section 1. Appointment
The Trust hereby appoints GEAM as investment adviser and
administrator with respect to the Fund's assets for the period and on the terms
set forth in this Agreement. GEAM accepts this appointment and hereby agrees to
render the services herein set forth for the compensation herein provided.
Subject to the approval of the Trust's board of trustees (the
"Board") and to other applicable legal requirements, GEAM 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
GEAM's responsibilities listed herein.
Section 2. Services as Investment Adviser and Administrator
(a) Subject to the oversight and supervision of the Board,
GEAM agrees to provide a continuous investment program for the Fund's assets,
including investment research and management. GEAM will determine from time to
time what investments will be purchased, retained or sold by the Fund. GEAM will
place purchase and sale orders for the Fund's investments. GEAM 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").
<PAGE>
(b) The Trust has furnished or will furnish GEAM 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 GEAM with copies of any amendment or supplements thereto before or at
the time such amendments or supplements become effective. GEAM may rely on all
documents furnished to it by the Trust.
(c) Subject to the oversight and supervision of the Board,
GEAM 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) GEAM 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) GEAM 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, GEAM will, in selecting brokers or dealers to effect
transactions on behalf of the Fund select the best overall terms available. In
so doing, GEAM 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. GEAM may also consider
brokerage and research services provided to the Fund and /or other accounts over
which GEAM or its affiliates exercise investment discretion. The Trust
recognizes the desirability of GEAM's having access to supplemental investment
and market research and security and 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
GEAM, 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 GEAM's determining in good faith
that such commissions are reasonable in terms either of the particular
transaction or of the overall responsibility of GEAM to the Fund and its
-2-
<PAGE>
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 GEAM, 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.
GEAM 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. GEAM 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, GEAM 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
GEAM 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 GEAM, 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 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
invest-ments; fees and travel expenses of members of the Board or members of any
advisory board or committee who are not affiliated with GEAM, or any of its
affiliates; and expenses that are not normal operating expenses of the Fund
(such as extraordinary expenses, interest and taxes).
-3-
<PAGE>
Section 5. Compensation.
In consideration of services rendered and the expenses paid by
GEAM pursuant to this Agreement, the Trust will pay GEAM 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 GEAM 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 GEAM 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
GEAM's so acting, so long as that when the Fund and any Other Account served by
GEAM 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 GEAM to be equitable to the Fund and the Other Account. In addition,
the Trust understands and acknowledges that GEAM 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 GEAM 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 GEAM 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 GEAM 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
GEAM or any affiliate of GEAM to engage in and devote time and attention to
other businesses or to render services of whatever kind or nature.
-4-
<PAGE>
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 GEAM, by vote of
holders of a majority of the Fund's outstanding voting securities, as defined in
the 1940 Act, or by GEAM 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) GEAM will exercise its best judgment in rendering the
services described in this Agreement, except that GEAM 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
GEAM 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 GEAM, 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, GEAM even though paid by GEAM.
(b) The Trust and GEAM 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 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.
-5-
<PAGE>
Section 9. Miscellaneous.
The Trust recognizes that trustees, officers and employees of GEAM 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 GEAM or its affiliates may enter into distribution, investment advisory or
other agreements with such other corporations and trusts. If GEAM ceases to act
as the investment adviser to the Trust, the Trust agrees that, at GEAM'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 ASSET MANAGEMENT INCORPORATED
By: /s/ Alan M. Lewis
-----------------------------------
Name: Alan M. Lewis
Title: Executive Vice President
-6-
<PAGE>
INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT
GE INSTITUTIONAL FUNDS
PREMIER INTERNATIONAL EQUITY FUND
GE ASSET MANAGEMENT INCORPORATED
Agreement made as of March 16, 2000 between GE ASSET
MANAGEMENT INCORPORATED ("GEAM") and GE INSTITUTIONAL FUNDS (the "Trust") on
behalf of its Premier 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.
GEAM is a Delaware corporation registered as an investment
adviser under the Investment Advisers Act of 1940 (the "Advisers Act").
The Trust wishes to retain GEAM to serve as investment adviser
and administrator to the Fund and GEAM wishes to serve in this capacity.
Section 1. Appointment
The Trust hereby appoints GEAM as investment adviser and
administrator with respect to the Fund's assets for the period and on the terms
set forth in this Agreement. GEAM accepts this appointment and hereby agrees to
render the services herein set forth for the compensation herein provided.
Subject to the approval of the Trust's board of trustees (the
"Board") and to other applicable legal requirements, GEAM 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
GEAM's responsibilities listed herein.
Section 2. Services as Investment Adviser and Administrator
(a) Subject to the oversight and supervision of the Board,
GEAM agrees to provide a continuous investment program for the Fund's assets,
including investment research and management. GEAM will determine from time to
time what investments will be purchased, retained or sold by the Fund. GEAM will
place purchase and sale orders for the Fund's investments. GEAM 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").
<PAGE>
(b) The Trust has furnished or will furnish GEAM 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 GEAM with copies of any amendment or supplements thereto before or at
the time such amendments or supplements become effective. GEAM may rely on all
documents furnished to it by the Trust.
(c) Subject to the oversight and supervision of the Board,
GEAM 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) GEAM 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) GEAM 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, GEAM will, in selecting brokers or dealers to effect
transactions on behalf of the Fund select the best overall terms available. In
so doing, GEAM 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. GEAM may also consider
brokerage and research services provided to the Fund and /or other accounts over
which GEAM or its affiliates exercise investment discretion. The Trust
recognizes the desirability of GEAM's having access to supplemental investment
and market research and security and 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
GEAM, 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 GEAM's determining in good faith
that such commissions are reasonable in terms either of the particular
transaction or of the overall responsibility of GEAM to the Fund and its
-2-
<PAGE>
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 GEAM, 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.
GEAM 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. GEAM 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, GEAM 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
GEAM 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 GEAM, 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 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
invest-ments; fees and travel expenses of members of the Board or members of any
advisory board or committee who are not affiliated with GEAM, or any of its
affiliates; and expenses that are not normal operating expenses of the Fund
(such as extraordinary expenses, interest and taxes).
-3-
<PAGE>
Section 5. Compensation.
In consideration of services rendered and the expenses paid by
GEAM pursuant to this Agreement, the Trust will pay GEAM 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 $25 million .65
Over $50 million .55
For the purpose of determining fees payable to GEAM 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 GEAM 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
GEAM's so acting, so long as that when the Fund and any Other Account served by
GEAM 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 GEAM to be equitable to the Fund and the Other Account. In addition,
the Trust understands and acknowledges that GEAM 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 GEAM 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 GEAM 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 GEAM 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
GEAM or any affiliate of GEAM to engage in and devote time and attention to
other businesses or to render services of whatever kind or nature.
-4-
<PAGE>
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 GEAM, by vote of
holders of a majority of the Fund's outstanding voting securities, as defined in
the 1940 Act, or by GEAM 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) GEAM will exercise its best judgment in rendering the
services described in this Agreement, except that GEAM 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
GEAM 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 GEAM, 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, GEAM even though paid by GEAM.
(b) The Trust and GEAM 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 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.
-5-
<PAGE>
Section 9. Miscellaneous.
The Trust recognizes that trustees, officers and employees of GEAM 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 GEAM or its affiliates may enter into distribution, investment advisory or
other agreements with such other corporations and trusts. If GEAM ceases to act
as the investment adviser to the Trust, the Trust agrees that, at GEAM'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 ASSET MANAGEMENT INCORPORATED
By: /s/ Alan M. Lewis
-----------------------------------
Name: Alan M. Lewis
Title: Executive Vice President
-6-
<PAGE>
Board of Trustees
April 20, 2000
Page 1
[SUTHERLAND ASBILL & BRENNAN LLP LETTERHEAD]
April 20, 2000
Board of Trustees
GE Institutional Funds
3003 Summer Street
Stamford, CT 06905
Re: GE Institutional Funds
Post-Effective Amendment Number 11
File No. 333-29337
-----------------------------------
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 of an indefinite number of shares of beneficial interest
in the Premier Research Equity Fund and Premier International Equity Fund of the
Trust (the "Shares") under the Securities Act of 1933, as amended (the "1933
Act"). In this connection, we have reviewed post-effective amendment number ten
to the registration statement filed by you and post-effective amendment number
eleven to the registration statement to be filed by you with the Securities and
Exchange Commission on Form N-1A (File No. 333-29337) (the "registration
statement"). We also are familiar with the actions taken by you at the board of
trustees meeting on March 16, 2000 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 statement.
Based upon the foregoing, we are of the opinion that the Shares, when
issued and sold in the manner described in the registration statement, 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.
<PAGE>
Board of Trustees
April 20, 2000
Page 2
We hereby consent to the inclusion of this opinion as an exhibit to the
registration statement. 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.
Sincerely,
SUTHERLAND ASBILL & BRENNAN LLP
By: /s/ David S. Goldstein
-----------------------
David S. Goldstein
<PAGE>
Exhibit j(1)
[Letterhead of Sutherland Asbill & Brennan LLP]
April 24, 2000
Board of Trustees
GE Insitutional Funds
3003 Summer Street
Stamford, CT 06905
RE: GE Institutional Funds
File Nos. 333-29337, 811-08257
Gentlemen:
We consent to the reference to our firm under the heading
"Fund History and Additional Information -- Counsel" in the statement of
additional information included in Post- Effective Amendment No. 11 to the
Registration Statement on Form N-1A for GE Institutional Funds (File Nos.
333-29337, 811-08257). 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
Securities Act of 1933.
Sincerely,
SUTHERLAND ASBILL & BRENNAN LLP
By: /s/ David S. Goldstein
---------------------------
David S. Goldstein
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting part of this Post-Effective
Amendment No. 11 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated November 12, 1999, relating to the financial
statements and financial highlights appearing in the September 30, 1999 Annual
Report to the Shareholders of the GE Institutional Funds, which is also
incorporated by reference into the Registration Statement. We also consent to
the reference to us under the heading "Independent Accountants" in such
Statement of Additional Information and to the reference to us under the heading
"Financial Highlights" in such Prospectus.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 21, 2000
<PAGE>
- --------------------------------------------------------------------------------
POLICIES AND logo GE Asset Legal Operation Number
PROCEDURES Management 10.4J
- --------------------------------------------------------------------------------
Code of Ethics: Issued by: Executive Vice President,
INSIDER TRADING AND General Counsel & Secretary
SECURITIES TRANSACTIONS --------------------------------------
Effective Date: March 15, 1999
- --------------------------------------------------------------------------------
I. NEED FOR POLICY
GE Asset Management (GEAM) is committed to ensuring compliance with all laws and
General Electric Company (GE or the Company) Policy 20.13, Insider Trading and
Stock Tipping. In addition, as registered investment advisers, GEAM and their
employees have additional ethical and legal obligations which must be fulfilled
in order to maintain the confidence and trust of our clients and to protect the
assets entrusted to us.
The purpose of this Policy is to state the Company's requirement that all
employees comply fully with the laws prohibiting insider trading and tipping,
and to set forth additional requirements and guidelines relating to employee's
personal securities transactions. This Policy is designed to avoid even the
appearance of impropriety, but is not, however, intended to set legal standards
or to result in the imposition of criminal liability, or civil liability to
third parties, that would not otherwise exist in the absence of the Policy.
II. PENALTIES FOR VIOLATION
Disciplinary action, up to and including discharge, may be taken against
employees who violate this policy. Violation of the laws prohibiting insider
trading and tipping could both damage GEAM's reputation and subject the Company,
as a "controlling person under applicable securities laws, to significant civil
liability and fines. Additionally, employees violating the laws could face
individual criminal penalties.
III. INSIDER TRADING, TIPPING AND CONFIDENTIAL INFORMATION
It is the policy of GEAM that employees:
o Must not buy, sell or recommend or suggest that anyone else buy, sell, or
retain, the securities of any company (including GE) while in possession of
inside information regarding such company. This prohibition on insider
trading applies not only to your personal transactions, but also bars
trading for client accounts when in possession of insider information.
o Must not disclose inside information to anyone, inside or outside GEAM
(including family members), except to those who have a need to know such
information in order for GEAM to carry on its business properly and
effectively. Also, any permitted disclosure may only be made under
circumstances which make it reasonable to believe that the information will
not be misused or improperly disclosed by the recipient.
o Must use GEAM's confidential information solely for legitimate Company
purposes and must not improperly disclose such information.
o Must use and protect all confidential information received from others
strictly in accordance with the terms of the express or implied agreement
or understanding under which the information was received and with at least
the same degree of care that would be applied to comparable GEAM
confidential information.
Page 1 of 9
<PAGE>
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Code of Ethics: Issued by: Executive Vice President,
Logo INSIDER TRADING AND General Counsel & Secretary
SECURITIES TRANSACTIONS ------------------------------------------------
Number
Effective Date: March 15, 1999 10.4
- --------------------------------------------------------------------------------
o If an employee believes that they have come into possession of inside
information, it is recommended that they promptly discuss this information
with GEAM's General Counsel or other available member of the GEAM Legal
Operation. It will be the responsibility of the Legal Operation to
safeguard the confidentiality of this information and determine any
appropriate action, such as restricting trading in effected securities,
which needs to be taken.
IV. REQUIREMENTS FOR EMPLOYEES' SECURITIES TRANSACTIONS
GEAM employees are permitted to invest for their own account, provided that such
investment activity must always comply with applicable laws and regulations, and
must be carried out in a manner consistent with GEAM's policy. In addition,
personal securities transactions must avoid even the appearance of conflict of
interest. The procedures and guidelines which follow set forth reporting
obligations and additional rules of conduct which must be adhered to by GEAM's
employees working in GEAM's office facilities and any other persons who may be
determined by the management of GEAM to have potential access to current
portfolio trading information (i.e., knowledge of a purchase or sale of a
security within 15 days following its occurrence and/or knowledge of an intent
to make a purchase or sale of a security within 15 days prior to its
occurrence).
Pre-clearance and reporting of personal securities transactions and other rules
under this policy do not relieve employees from responsibility for compliance
with the proscriptions against insider trading ad tipping set forth above.
All requirements of this policy pertain to each employee's transactions AND
transactions of associated accounts ( Section IV (B) ).
IV. (A) CENTRALIZED BROKER/REPORTING REQUIREMENT
1. All employees are required to use a centralized broker designated by
GEAM. This requirement also applies to Associated Accounts. An employee
may request an exemption to this rule from the compliance Department if
special circumstances exist. All employees must authorize the
centralized broker to provide duplicate confirmations and monthly
statements to the Compliance Officer.
2. Duplicate confirmations and monthly statements are required for exempt
accounts, which are to be mailed directly to the Compliance Officer by
the broker.
3. Duplicate confirmations and monthly statements are required for all
other investments account not held with the centralized broker,
including dividend reinvestment plans (DRIP's), and "blind" managed
accounts.
4. Unaffiliated open-end mutual funds shares are exempt from pre-clearance
and reporting.
Page 2 of 9
<PAGE>
- --------------------------------------------------------------------------------
Code of Ethics: Issued by: Executive Vice President,
Logo INSIDER TRADING AND General Counsel & Secretary
SECURITIES TRANSACTIONS ------------------------------------------------
Number
Effective Date: March 15, 1999 10.4
- --------------------------------------------------------------------------------
IV. (B) TRADING AND PRE-CLEARANCE REQUIREMENTS
(Summary Guidelines and Checklist - Schedule A attached)
1. All employees must receive pre-clearance from the GEAM Trading Room
immediately-prior to engaging in a transaction involving any publicly
traded equity security (or any options or futures relating to such a
security). Pre-clearance must be obtained by receiving an approval log
number and may be obtained by e-mail. If clearance is not given, the
employee must NOT proceed with the transaction. The fact that clearance
is denied should be considered confidential information and must not be
disclosed.
2. All GEAM Employees are prohibited from investing in non-public
securities without the proper approval of the EVP of Private
Placements. Private Placement employees must receive pre-clearance from
the EVP of Private Placements immediately prior to engaging in any
transaction in a publicly traded security in GEAM's Private Placements
Portfolio or a security being considered as an addition to the Private
Placement Portfolio, in addition to pre-clearance with the Trading
Room.
3. Transactions in fixed income securities must be cleared by an
appropriate department portfolio manager (i.e. Taxable, Tax-Exempt)
immediately prior to engaging in a transaction. A pre-clearance log
number may be obtained in person or by calling the department. If
clearance is not given, the employee must NOT proceed with the
transaction. The fact that clearance is denied should be considered
confidential information and must not be disclosed.
4. Employees must provide the ticker, security name, and type of order
(market, limit, buy/sell) to the Trading Room and Clearing Managers.
Clearance will not be granted if there is a pending buy or sell order
for a managed account.
5. Transactions not effected the day clearance is granted must be
re-cleared. Clearance expires 24 hours after clearance is granted or at
the end of the business day on the Monday following a Friday request.
6. All transactions for the employee, his/her spouse, minor child, other
household members, accounts subject to your discretion and control
(e.g. custodial and trust accounts), other accounts in which you have a
beneficial interest and ability to influence transactions (e.g. joint
accounts, co-trustee accounts, partnerships, investment clubs,
associated accounts) must be pre-cleared in accordance with this
policy.
7. Employees are prohibited from participation in initial public offerings
(IPO's). Any purchases of new issues are allowed only in the secondary
markets.
8. Any employee directly participating in the decision or recommendation
to buy, sell, or retain a particular security must disclose to the
appropriate Executive Vice President any direct or indirect personal
ownership of the security or any affiliation (including any
directorships) with the issues which is the subject of the decision or
recommendation.
Page 3 of 9
<PAGE>
- --------------------------------------------------------------------------------
Code of Ethics: Issued by: Executive Vice President,
Logo INSIDER TRADING AND General Counsel & Secretary
SECURITIES TRANSACTIONS ------------------------------------------------
Number
Effective Date: March 15, 1999 10.4
- --------------------------------------------------------------------------------
9. No analyst or portfolio manager may buy or sell a security for his/her
own account within 7 calendar days before or after all transactions for
his/her assigned accounts have been completed for that security. The
client's interests must always take precedence even if it requires the
employee to delay taking action and suffer financial loss.
10. Portfolio managers are required to notify their managers in advance of
any personal transactions in excess of $25,000 or Yen equivalent in any
registered investment company or investment trust over which they have
discretionary trading authority. Mangers will maintain a written record
of such notification.
11. Orders placed with the Trading Room should be treated with the highest
degree of confidentially. Such orders should not be discussed with
anyone until they have been filled.
12. All information received by an employee as a result of the employee's
employment with GEAM is received in trust for GEAM's clients. Subject
to the restriction on insider trading and tipping, and any requirements
to keep such information confidential, it is the obligation of the
employee to make such information known to other analysts and portfolio
managers whose accounts might be interested in such information and not
to misappropriate such information for the employee's own financial
benefit.
13. Particular attention should be paid to transactions in thinly traded
issues where even small transactions for an employee's account might
affect the market. A similar concern attaches to trading in derivative
securities (options, futures, convertible bonds, etc.) where only a
small movement in a security's price may be significant due to
leverage.
14. In order to avoid the appearance of opportunistic trading in front of
transactions for GEAM accounts, employees should seek to avoid
day-trades and should be prepared to hold investments for a significant
interval. Employees shall not profit from the purchase and sale of the
same (or equivalent) securities within 60 calendar days.
15. No employee may solicit or accept any offer made by any person if as a
result the employee would be able to purchase or sell any security at a
price or under conditions more favorable than those offered to GEAM's
clients.
16. Employees are prohibited from selling any security short, except that
short sales may be made "against the box" (the individual already owns
the stock) for tax or hedging purposes with the approval of the
appropriate Executive Vice President.
17. Although GEAM employees may conduct trading for their own account
within the limits of the policy, trading during working hours should be
limited. Extensive trading that my affect on-the job performance may be
considered a violation of this policy and GEAM reserve the right to
restrict trading in such circumstances. In addition, GEAM reserve the
right to prohibit employees from trading in certain securities or
markets.
Page 4 of 9
<PAGE>
- --------------------------------------------------------------------------------
Code of Ethics: Issued by: Executive Vice President,
Logo INSIDER TRADING AND General Counsel & Secretary
SECURITIES TRANSACTIONS ------------------------------------------------
Number
Effective Date: March 15, 1999 10.4
- --------------------------------------------------------------------------------
IV. (C) TRANSACTIONS EXEMPT FROM PRE-CLEARANCE
The following transactions are not subject to the pre-clearance procedures:
o All open-end mutual fund shares
o Direct Obligations of the Japanese Government Securities, Postal
Deposits and other Japanese savings vehicles
o GE Interest Plus
o Dividend Re-Investment Programs
o "Blind" Managed Accounts
o GE S&S Program Transactions [401 (k) Plan]:
Contributions: Payroll deductions
Changes in contribution percentages
Changes in investment vehicle direction or percentages
Investment vehicle switches (transfers)
All Loan Activity
All Withdrawals
V. RESPONSIBILITY
1. The provisions of this Policy must be strictly observed by all
employees. An employee's actions with respect to matters governed by
this Policy are significant indications of the individual's judgement,
ethics, and competence.
2. Any actions in violation of this Policy will constitute an important
element in the evaluation of the employee for retention, assignment,
and promotion.
3. Violations of this Policy will be grounds for appropriate disciplinary
action. Disciplinary action may include disgorging of profits,
liquidation of holdings, suspension of trading privileges, and
discharge.
4. All Managers are required to take appropriate measures to ensure that
their employees understand and comply with this Policy. Managers shall
maintain educational programs, with the assistance of the Legal and
Compliance Operations, to familiarize employees with laws and
regulations governing insider trading or tipping, and the terms of the
policy statement.
5. All employees shall acknowledge in writing, when first assigned to GEAM
and annually thereafter, their commitment to comply with this Policy.
Page 5 of 9
<PAGE>
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Code of Ethics: Issued by: Executive Vice President,
Logo INSIDER TRADING AND General Counsel & Secretary
SECURITIES TRANSACTIONS ------------------------------------------------
Number
Effective Date: March 15, 1999 10.4
- --------------------------------------------------------------------------------
6. The Legal Operation and Finance and Administration shall be responsible
for the interpretation and enforcement of this Policy. Employees with
questions concerning whether conduct is consistent with the mandates of
this Policy shall consult the Legal Operation prior to engaging in such
conduct. Employees who believe any other employee is engaged in conduct
prohibited by this Policy, or that any other person or firm
representing GEAM is engaged in such conduct, will promptly report such
information to the appropriate level of management and the Legal
Operation. The Legal Operation in consultation with Finance and
Administration will promptly investigate the matter and take timely and
appropriate action.
7. Upon request, employees shall submit copies of brokerage account
statements, confirmations, and other related materials with respect to
their personal and associated accounts to be used to audit compliance
with these reporting and clearance procedures and with the
proscriptions against insider trading and tipping set forth above.
VI. DEFINITIONS
For purposes of this Policy:
o "Inside Information" means non-public information (i.e. information which
is not available to investors generally) that a reasonable investor would
consider to be important in deciding whether to buy, sell or retain a
security (e.g., stock; bond; option) including, for example, nonpublic
information relating to a pending merger, acquisition, disposition, joint
venture, contract award or termination, major lawsuit or claim, earnings
announcement or change in dividend policy, significant product development,
or the gain or loss of a significant customer or supplier. Any non-public
information may be inside information regardless or whether it is developed
internally or obtained from others (e.g., the issuer, current or
prospective customers, suppliers or business partners) and whether it
relates to GE or any other company or entity. Information is still
considered non-public until the market has had a reasonable time after
public announcement to assimilate and react to the information.
o "Confidential Information" means any non-public information concerning
GEAM's activities or developed by GEAM or received by GEAM under an express
or implied agreement or understanding that the information will be treated
in confidence or used only for a limited purpose, regardless of whether or
not it would be considered to be important by investors. Examples of
confidential information include stocks recommended for purchase or sale
for client accounts, details of financial transactions, and identity and
terms of customer accounts.
o "Associated Account" - The provisions of this Policy apply to transactions
in any personal account or "associated account". "Associated account" means
securities and futures accounts of the employee's (i) spouse, (ii) minor
children, (iii) other household members (iv) any other accounts subject to
an employees' discretion or control (e.g. custodial and trust accounts,
etc.), and (v) any other accounts in which the employee has a beneficial
interest and a substantial ability to influence transactions (e.g. joint
accounts, co-trustee accounts, partnerships, investment clubs).
Page 6 of 9
<PAGE>
- --------------------------------------------------------------------------------
Code of Ethics: Issued by: Executive Vice President,
Logo INSIDER TRADING AND General Counsel & Secretary
SECURITIES TRANSACTIONS ------------------------------------------------
Number
Effective Date: March 15, 1999 10.4
- --------------------------------------------------------------------------------
VII OMBUDSPERSON
To report possible violations of laws, regulations, or Company policies, you may
also write to the General Electric Corporate Ombudsperson at 3135 Easton
Turnpike, Fairfield, CT 06431 or call 1-800-227-5003.
Page 7 of 9
<PAGE>
- --------------------------------------------------------------------------------
Code of Ethics: Issued by: Executive Vice President,
Logo INSIDER TRADING AND General Counsel & Secretary
SECURITIES TRANSACTIONS ------------------------------------------------
Number
Effective Date: March 15, 1999 10.4
- --------------------------------------------------------------------------------
GE ASSET MANAGEMENT
Personal Trading Guidelines
Who Needs to Comply:
o All GEAM employees and household members for all accounts they have
discretion over (their own account and accounts they control for others)
What is Covered by Policy:
o All Stock, Bond, & Derivatives Transactions (excluding direct obligations
of the U.S. or Japanese Gov't)
o GE Stock including options (other than GE Savings & Security)
What is not Covered by Policy 10.4:
o Any Mutual Funds (except portfolio manager transactions in the funds they
manage)
o GE Savings & Security (i.e., switching, withdrawal & loans)
o Accounts in your name managed by others, in which you have no investment
discretion ("Blind" managed accounts)
Requirements:
o Do not trade on "inside" information
o Pre-clear all transactions
o Use Centralized Brokers
o No IPO's
o Hold securities for 60 days
Special Requirement for:
Portfolio Manager (including analysts)
o Do not trade in same security within 7 days of personal & business
portfolio
o Discuss and document personal transactions over $25,000 with your manager
prior to executing in the mutual funds you manage
Private Placement Employees
o Additional pre-clearance required by EVP-Private Placements (Don Torey)
This is meant as a summary only.
Please refer to the complete policy 10.4 for further explanation of the policy.
Any Questions call
Nora Machata (x-2080) or Alan Lewis (x-2313)
Page 8 of 9
<PAGE>
- --------------------------------------------------------------------------------
Code of Ethics: Issued by: Executive Vice President,
Logo INSIDER TRADING AND General Counsel & Secretary
SECURITIES TRANSACTIONS ------------------------------------------------
Number
Effective Date: March 15, 1999 10.4
- --------------------------------------------------------------------------------
Personal Trading Checklist
--------------------------
<TABLE>
<CAPTION>
Equity Trades Taxable Bond Trades
------------- -------------------
<S> <C>
o Call or e-mail the equity trading room (203 o Call Bob MacDougal (203-326-2387) to
-326-2420) and ask for pre-clearance. If they request pre-clearance. If Bob is not
do not grant pre-clearance, proceed no further. available call Kathy Brooks (203-326-2388).
If pre-clearance is not granted, proceed no
o If pre-clearance is granted, they will issue further.
a log number.
o If pre-clearance is granted, he/she will
o Execute the trade. issue a log number.
o Hold the security for a minimum of 60 days. o Execute the trade.
o Do not trade the security in your GEAM o Hold the security for a minimum of 60 days.
portfolio within 7 days of your personal trade.*
o Do not trade the security in your GEAM
portfolio within 7 days of your personal
trade.*
</TABLE>
Private Placements Personnel
----------------------------
o Call Don Torey (203-326-4060) to request pre-clearance. If Don is not
available call Mike Pastore (203-326-2312). If pre-clearance is not
granted, proceed no further.
o If pre-clearance is granted, he will issue a log number.
o Call or e-mail the trading room for an equity trade.
Mutual Funds, GE Savings & Security and "Blind" managed accounts
do not require preclearance
* Consult department head if changed circumstances make trade for GEAM
portfolio appropriate in less than 7 days.
Page 9 of 9
