GE INVESTMENT FUNDS INC, 485APOS, 1997-07-11

GE INVESTMENT FUNDS INC
485APOS, 1997-07-11

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As filed with the Securities and Exchange Commission on July 11, 1997

REGISTRATION NO. 2-91369
REGISTRATION NO. 811-4041

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Post-Effective Amendment No. 19

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 20

GE INVESTMENTS FUNDS, INC.
(formerly, Life of Virginia Series Fund, Inc.)
3003 Summer Street
Stamford, Connecticut 06905
(Address of Principal Executive Offices)

Registrant's Telephone Number
(203) 326-4040

Matthew J. Simpson
Secretary
GE Investments Funds, Inc.
3003 Summer Street
Stamford, Connecticut 06905
(Name and Address of Agent for Service)

Copy to:
Stephen E. Roth
Sutherland, Asbill & Brennan, LLP
1275 Pennsylvania Avenue, NW
Washington, DC 20004-2404

------------------------------

It is proposed that this filing will become effective:

___ immediately upon filing pursuant to paragraph (b)

___ on May 1, 1997 pursuant to paragraph (b)

___ 60 days after filing pursuant to paragraph (a)

___ on ________ pursuant to paragraph (a) of Rule 485

_X_ 75 days after filing pursuant to paragraph (a)(2) of Rule 485

___ on ________ pursuant to paragraph (a)(2) of Rule 485

---------------------------------

Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the Registrant
has registered an indefinite amount of securities. The Registrant filed the
24f-2 Notice for the period ended December 31, 1996 on February 28, 1997.

<PAGE>

CROSS REFERENCE SHEET

<TABLE>
<CAPTION>
Item No. of
Form N1-A Caption
- --------- -------

<S> <C>
Part A Prospectus
- ------ ----------

1.................. Cover Page

2.................. Not Applicable

3.................. Financial Highlights

4.................. GE Investments Funds, Inc.; Investment Objectives and Policies; Investment Practices

5.................. Management of the Company

5A................. Not Applicable

6.................. GE Investments Funds, Inc., Dividends, Distributions and Taxes; Additional Information

7.................. Purchase and Redemption of Fund Shares

8.................. Purchase and Redemption of Fund Shares

9.................. Additional Information

Part B Statement of Additional Information
- ------ -----------------------------------

10................. Cover Page

11................. Table of Contents

12................. General Information

13................. General Information; Investment Practices and Restrictions; Appendix A; Appendix B

14................. Management of the Company

15................. General Information; Management of the Fund Additional Information

16................. Management of the Fund; Additional Information

17................. Portfolio Transactions and Brokerage

18................. Dividends and Distributions; Additional Information

19................. Determination of Net Asset Value; Purchase and Redemption of Fund Shares

20................. Dividends, Distributions and Taxes (prospectus)

21................. Purchase and Redemption of Fund Shares (prospectus)

22................. Not Applicable

23................. Financial Statements

</TABLE>

<PAGE>

PART A
PROSPECTUS

<PAGE>

GE INVESTMENTS FUNDS, INC.

3003 Summer Street
Stamford, Connecticut 06905
(203) 326-4040

GE Investments Funds, Inc. is an open-end, management investment company
consisting of eleven separate investment portfolios or funds (the, "Funds"),
each of which has different investment objectives. These are summarized on the
next page.

Shares of the Funds are only available through the purchase of certain variable
annuity and variable life insurance contracts issued by The Life Insurance
Company of Virginia, Great Northern Insured Annuity Corporation and other life
insurance companies.

This Prospectus concisely sets forth information about the Funds that a
prospective investor ought to know before investing. Please read the Prospectus
thoroughly and retain it for future reference. A Statement of Additional
Information, dated August ___, 1997, containing additional information about the
Funds, has been filed with the Securities and Exchange Commission. The Statement
may be obtained without charge by sending a written request to GE Investments
Funds, Inc. at the above address or calling the telephone number shown. The
Statement of Additional Information is incorporated into this Prospectus by
reference.

Investments in the Funds are not deposits or obligations of, or guaranteed or
endorsed by, any bank or other insured depository institution, and are not
insured by the Federal Deposit Insurance Corporation or any other government
agency. An investment in any of the Funds involves investment risk including
possible loss of principal.

THESE SECURITIES 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.

September ___, 1997

<PAGE>

S&P500 Index Fund has the investment objective of providing long-term growth of
capital and accumulation of income that corresponds to the investment return of
the Standard & Poor's 500 Composite Stock Price Index through investment in
common stocks comprising that Index.

Government Securities Fund has the investment objective of seeking high current
income and protection of capital through investment in intermediate and
long-term debt instruments issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.

Money Market Fund has the investment objective of providing the highest level of
current income as is consistent with high liquidity and safety of principal by
investing in various types of good quality money market securities. An
investment in the Money Market Fund is neither insured nor guaranteed by the
U.S. Government and no one can assure that the Fund will maintain a stable net
asset value of $1 per share.

Total Return Fund has the investment objective of providing the highest total
return, composed of current income and capital appreciation, as is consistent
with prudent investment risk. It seeks to achieve its objective by investing in
common stocks, bonds and money market instruments.

International Equity Fund has the investment objective of providing long-term
growth of capital. The Fund seeks to achieve its objective by investing
primarily in foreign equity and equity-related securities.

Real Estate Securities Fund has the investment objective of providing maximum
total return through current income and capital appreciation. The Fund seeks to
achieve this objective by investing primarily in equity and debt securities of
U.S. issuers that are principally engaged in or related to the real estate
industry including those that own significant real estate assets. The Fund does
not invest directly in real estate.

Global Income Fund has the investment objective of high total return,
emphasizing current income and, to a lesser extent, capital appreciation. The
Fund seeks to achieve these objectives by investing primarily in foreign and
domestic income-bearing debt securities and other foreign and domestic
income-bearing instruments.

Value Equity Fund has the investment objective of providing long-term growth of
capital. The Fund seeks to achieve this objective by investing primarily in
common stock and other equity securities that are undervalued by the market at
the time of purchase and offer above-average potential for capital growth.

Income Fund has the investment objective of providing maximum income consistent
with prudent investment managment and preservation of capital. The Fund seeks to
achieve this objective by investing primarily in income-bearing debt securities
and other income-bearing instruments.

U.S. Equity Fund has the investment objective of providing long-term growth of
capital. The Fund seeks to achieve this objective by investing primarily in
equity securities of U.S. companies.

Premier Growth Equity Fund has the investment objective of providing long-term
growth of capital as well as future (rather than current) income. The Fund seeks
to achieve its objective by investing primarily in growth-oriented equity
securities.

2
<PAGE>

TABLE OF CONTENTS

Page
----

<S> <C>
GE Investments Funds, Inc. 4

Financial Highlights 5

Investment Objectives and Policies 14

S&P 500 Index Fund 14
Government Securities Fund 16
Money Market Fund 17
Total Return Fund 18
International Equity Fund 18
Real Estate Securities Fund 19
Global Income Fund 21
Value Equity Fund 22

Income Fund 22
U.S. Equity Fund 23
Premier Growth Equity Fund 24

Investment Practices 25

Lending of Portfolio Securities 25
Money Market Instruments 25
When Issued and Delayed Delivery Securities 25
Repurchase Agreements 26
Reverse Repurchase Agreements 26
Foreign Investments and Currency 26
Debt Securities 30
Writing Covered Call and Put Options and Purchasing Call and Put Options 32
Financial Futures Contracts and Options on Such Contracts 34
Restricted Securities and Other Illiquid Investments 35
Borrowing 35
Real Estate Investment Trusts 36
Other Investment Companies 36

Determination of Net Asset Value 36

Purchase and Redemption of Fund Shares 36

Dividends, Distributions and Taxes 37

Dividends and Distributions 37
Taxes 37

Management of the Company 38

Board of Directors 38
Investment Adviser 38
Investment Sub-Advisers 40
Compensation of Advisers 41
Portfolio Managers 41

Additional Information 42

Capital Stock 42
Contract Owner Voting Rights 42
Plan Participant Voting Rights 43
Annual Reports 43
Inquiries 43
Custodian, Transfer and Dividend Paying Agent 43
Legal Matters 43

</TABLE>
<PAGE>

GE INVESTMENTS FUNDS, INC.

GE Investments Funds, Inc. (the "Company") (formerly, Life of Virginia Series
Funds, Inc.) is an open-end management investment company incorporated under the
laws of the Commonwealth of Virginia on May 14, 1984. The Company consists of
eleven separate investment portfolios (the "Funds" or a "Fund"), each of which
is, in effect, a separate mutual fund. The Company issues a separate class of
capital stock for each Fund representing fractional undivided interests in that
Fund. An investor, by investing in a Fund, becomes entitled to a pro-rata share
of all dividends and distributions arising from the net income and capital gains
on the investments of that Fund. Likewise, an investor shares pro-rata in any
losses of that Fund.

Pursuant to investment advisory agreements and subject to the authority of the
Company's board of directors, GE Investment Management Incorporated ("GEIM")
serves as the Company's investment adviser and administrator and conducts the
business and affairs of the Company. GEIM has engaged State Street Global
Advisors ("SSGA") as investment sub-adviser to provide day-to-day portfolio
management to the S&P 500 Index Fund; has engaged Seneca Capital Management,
L.L.C. ("Seneca") as the investment sub-adviser to provide day-to-day portfolio
management for the Real Estate Securities Fund; has engaged NWQ Investment
Management Company ("NWQ") as the investment sub-adviser to provide day-to-day
portfolio management to the Value Equity Fund; and has engaged GE Investments
(US) Limited ("GEIUS") to provide day-to-day portfolio management to the Global
Income Fund. (As used herein, "Adviser" shall refer to GEIM and, where
applicable, either SSGA, Seneca, NWQ or GEIUS in their respective roles.)

The Company currently offers each class of its capital stock to certain separate
accounts (the "Accounts") of The Life Insurance Company of Virginia ("Life of
Virginia"), Great Northern Insured Annuity Corporation ("GNA") or other life
insurance companies as funding vehicles for certain variable annuity contracts
and variable life insurance contracts ("variable contracts") issued by Life of
Virginia, GNA or such other life insurers through the Accounts. The Company does
not offer its stock directly to the general public. All but one of the Accounts
is registered as an investment company with the Securities and Exchange
Commission ("SEC") and a separate prospectus describing the particular Account
and variable contract being offered through that Account will accompany this
prospectus when shares of the Company are offered as a funding vehicle for such
contracts. The remaining Account is not registered as an investment company but
a separate disclosure document (rather than a prospectus) describing that
account and the variable contracts being offered through that Account will
accompany this prospectus when shares of the Company are offered as a funding
vehicle for such contracts. The Company may, in the future, offer any class of
its capital stock to other registered and unregistered separate accounts of Life
of Virginia or GNA (or their affiliates) supporting other variable annuity
contracts or variable life insurance contracts directly and to qualified pension
and retirement plans.

A potential for certain conflicts exists between the interests of variable
annuity contract owners and variable life insurance contract owners. A potential
for certain conflicts would also exist between the interests of any of these
investors and participants in a qualified pension and retirement plan that might
invest in the Funds. To the extent that such classes of investors are invested
in the same Fund when a conflict of interest arises that might involve the Fund,
one or more such classes of investors could be disadvantaged. The Company does
not currently foresee any such disadvantage to owners of variable contracts or
to plan participants. Nonetheless, the board of directors of the Company will
monitor the Funds for the existence of any irreconcilable material conflicts of
interest. If such a conflict affecting owners of variable contracts is
determined to exist, Life of Virginia, GNA or other life insurers investing in
the Company, will, to the extent reasonably practicable, take such action as is
necessary to remedy or eliminate the conflict. If such a conflict were to occur,
one or more of the Accounts might be required to withdraw its investments in one
or more Funds or it may substitute shares of one Fund for another. This might
force a Fund to sell its portfolio securities at a disadvantageous price.

<PAGE>

GE INVESTMENTS FUNDS, INC.
FINANCIAL HIGHLIGHTS

The table below provides selected data for each share of capital stock
outstanding for the periods indicated. The data for the most recent five years
has been audited by Ernst & Young LLP, independent auditors. The data should be
read in conjunction with the financial statements, related notes, and other
financial information included in the Statement of Additional Information.

<TABLE>
<CAPTION>
S&P 500 INDEX
FUND +
- -----------------------------------------------------------------------------------------------------------------------------

1/1 to 1/1 to 1/1 to 1/1 to 1/1 to 1/1 to
12/30/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91
-------- -------- -------- -------- -------- --------

<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 20.99 $ 15.72 $ 15.99 $ 17.04 $ 16.21 $ 12.75

Net investment income .78 .27 .22 .31 .35 .30
Net realized and unrealized gain
(loss) on investments 4.36 5.41 (.23) 2.16 1.01 4.08
--------- --------- --------- --------- --------- ---------
Income (loss) from operations 5.14 5.68 (.01) 2.47 1.36 4.38
Distributions to shareholders from:
Net investment income (.77) (.27) (.22) (.31) (.35) (.30)
Net realized gain (10.22) (.14) (.04) (3.21) (.17) (.61)
Tax return of capital .-- .-- .-- .-- (.01) (.01)
--------- --------- --------- --------- --------- ---------
(10.99) (.41) (.26) (3.52) (.53) (.92)
--------- --------- --------- --------- --------- ---------

Increase (decrease) in net asset value** (5.85) 5.27 (.27) (1.05) .83 3.46
--------- --------- --------- --------- --------- ---------

Net asset value at end of period $ 15.14 $ 20.99 $ 15.72 $ 15.99 $ 17.04 $ 16.21
========= ========= ========= ========= ========= =========

Total Return 24.51% 36.14% (0.06%) 14.52% 8.39% 34.43%
========= ========= ========= ========= ========= =========

RATIOS:

Ratio of expenses to
average net assets* .48% .66% .75% .87% 1.03% 1.08%

Ratio of net investment income to
average net assets* 1.91% 1.98% 2.22% 2.00% 2.24% 2.28%

Portfolio turnover 63.06% 14.58% 4.31% 73.43% 9.72% 35.87%

Average Commission Rate Paid $.05 N/A N/A N/A N/A N/A

NET ASSETS AT END OF PERIOD $35,522,152 $66,016,840 $23,929,572 $8,276,765 $5,178,316 $4,429,044

</TABLE>
- ----------

+ Prior to May 1, 1993, this Fund was titled Common Stock Portfolio. Between
May 1, 1993 and April 29, 1997, this Fund was titled Common Stock Index
Fund.

* In 1994, the S&P 500 Index Fund received an expense reimbursement from its
investment adviser. Absent this reimbursement, the ratio of expenses to
average net assets and the ratio of net investment income to average net
assets would have been 1.10% and 1.90%, respectively, for 1994.

** Due to the significant increase in shares issued to the Aon Savings Plan in
1995 and 1994 and the significant decrease in shares in 1996 related to
redemptions by Aon Savings Plan, the net changes in the 1994 and 1995 Net
Asset Value per share as calculated in accordance with the requirements of
Form N-1A are not commensurate with the Statement of Changes in Net Assets.

5
<PAGE>

S&P 500 INDEX FUND+
--------------------------------------------------------------

1/1 to 1/1 to 1/1 to 1/1 to
12/31/90 12/31/89 12/31/88 12/31/87
-------- -------- -------- --------

<S> <C> <C> <C> <C>
Net asset value at beginning of period $ 14.67 $ 12.33 $ 10.28 $ 12.66

Net investment income .41 .34 .32 .24
Net realized and unrealized gain (loss)
on investments (1.91) 2.81 2.05 (1.04)
--------- --------- ---------- ----------
Income (loss) from operations (1.50) 3.15 2.37 (.80)
Distributions to shareholders from:
Net investment income (.41) (.34) (.32) (.78)
Net realized gain .-- (.46) .-- (.80)
Tax return of capital (.01) (.01) .-- .--
--------- --------- ---------- ----------
(.42) (.81) (.32) (1.58)
--------- --------- ---------- ----------
Increase (decrease) in net asset value (1.92) 2.34 2.05 (2.38)
--------- --------- ---------- ----------
Net asset value at end of period $ 12.75 $ 14.67 $ 12.33 $ 10.28
========= ========= ========== ==========

Total Return (10.22%) 25.72% 23.05% (6.32%)
========= ========= ========== ==========

RATIOS:
Ratio of operating expenses to
average net assets 1.06% 1.20% 1.35% 1.42%

Ratio of net investment income to
average net assets 2.99% 2.67% 2.53% 2.03%

Portfolio turnover 57.06% 36.94% 186.43% 105.43%

Average Commission Rate Paid N/A N/A N/A N/A

NET ASSETS AT END OF PERIOD $3,154,412 $3,430,460 $2,126,551 $1,839,227

</TABLE>

- ----------

+ Prior to May 1, 1993, this Fund was titled Common Stock Portfolio.

6
<PAGE>

GE INVESTMENTS FUNDS, INC.

FINANCIAL HIGHLIGHTS, CONTINUED

GOVERNMENT SECURITIES
FUND +
-------------------------------------------------------------------------------------

1/1 to 1/1 to 1/1 to 1/1 to 1/1 to 1/1 to
12/30/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91
-------- -------- -------- -------- -------- --------

<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 10.48 $ 9.51 $ 10.49 $ 10.54 $ 10.54 $ 9.60

Net investment income 1.01 .49 .42 .45 .69 .75
Net realized and unrealized gain
(loss) on investments (.87) 1.13 (.98) .50 .06 .99
---------- ---------- ---------- ---------- --------- ---------
Income from investment operations .14 1.62 (.56) .95 .75 1.74
Distributions to shareholders from:
Net investment income (1.02) (.49) (.42) (.45) (.69) (.75)
Net realized gain (.04) (.16) .-- (.54) (.05) (.04)
Tax return of capital .-- .-- .-- (.01) (.01) (.01)
---------- ---------- ---------- ---------- --------- ---------
(1.06) (.65) (.42) (1.00) (.75) (.80)
---------- ---------- ---------- ---------- --------- ---------

Increase (decrease) in net asset value* (.92) .97 (.98) (.05) .-- .94
---------- ---------- ---------- ---------- --------- ---------

Net asset value at end of period $ 9.56 $ 10.48 $ 9.51 $ 10.49 $ 10.54 $ 10.54
========== ========== ========== ========== ========= =========

Total Return 1.34% 17.08% (5.34%) 8.96% 7.13% 18.16%
========== ========== ========== ========== ========= =========

RATIOS:

Ratio of expenses to average net assets .67% .74% .81% .86% .99% .97%

Ratio of net investment income to
average net assets 5.64% 5.92% 5.44% 5.41% 6.69% 7.73%

Portfolio turnover 322.07% 130.64% 565.65% 112.86% 14.43% 23.24%

NET ASSETS AT END OF PERIOD $13,771,450 $23,708,181 $12,598,072 $7,884,928 $5,053,246 $4,444,984

</TABLE>
- ----------

+ Prior to May 1, 1993, this Fund was titled Bond Portfolio.

* Due to the significant increase in shares issued to the Aon Savings Plan in
1995 and 1994 and the significant decrease in shares in 1996 related to
redemptions by Aon Savings Plan, the net changes in the 1994 and 1995 Net
Asset Value per share as calculated in accordance with the requirements of
Form N-1A are not commensurate with the Statement of Changes in Net Assets.

7
<PAGE>

GOVERNMENT SECURITIES
FUND+
- ---------------------------------------------------------------------------------------------------------------------------

1/1 to 1/1 to 1/1 to 1/1 to
12/31/90 12/31/89 12/31/88 12/31/87
-------- -------- -------- --------

<S> <C> <C> <C> <C>
Net asset value at beginning of period $ 9.76 $ 9.58 $ 10.09 $ 11.50

Net investment income .64 .74 .90 .66
Net realized and unrealized gain (loss)
on investments (.15) .31 (.15) (.53)
--------- --------- ---------- ---------
Income from investment operations .49 1.05 .75 .13
Distributions to shareholders from:
Net investment income (.64) (.74) (1.26) (1.43)
Net realized gain .-- (.12) .-- (.11)
Tax return of capital (.01) (.01) .-- .--
--------- --------- ---------- ---------
(.65) (.87) (1.26) (1.54)
--------- --------- ---------- ---------
Increase (decrease) in net asset value (.16) .18 (.51) (1.41)
--------- --------- ---------- ---------
Net asset value at end of period $ 9.60 $ 9.76 $ 9.58 $ 10.09
========= ========= ========== =========

Total Return 5.05% 10.85% 7.83% 1.13%
========= ========= ========== =========

RATIOS:
Ratio of expenses to average net assets .96% 1.13% 1.07% 1.08%

Ratio of net investment income to average net assets 7.78% 7.95% 7.67% 7.51%

Portfolio turnover 56.62% 80.30% 177.76% 10.79%

NET ASSETS AT END OF PERIOD $3,701,835 $3,463,916 $2,933,506 $3,175,326

</TABLE>
- ----------

+ Prior to May 1, 1993, this Fund was titled Bond Portfolio.

8
<PAGE>

GE INVESTMENTS FUNDS, INC.

FINANCIAL HIGHLIGHTS, CONTINUED

MONEY MARKET
FUND
- ---------------------------------------------------------------------------------------------------------------------------

1/1 to 1/1 to 1/1 to 1/1 to 1/1 to 1/1 to
12/30/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91
-------- -------- -------- -------- -------- --------

<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 10.36 $ 10.17 $ 10.08 $ 10.04 $ 10.00 $ 9.96

Net investment income .56 .60 .29 .25 .31 .53
Net realized and unrealized gain
(loss) on investments .-- .-- .09 (.01) .-- .--
--------- --------- --------- --------- --------- --------
Income from operations .56 .60 .38 .24 .31 .53
Distributions to shareholders from:
Net investment income (.54) (.41) (.29) (.20) (.26) (.49)
Net realized gain .-- .-- .-- .-- .-- .--
Tax return of capital .-- .-- .-- .-- (.01) .00
--------- --------- --------- --------- --------- --------
(.54) (.41) (.29) (.20) (.27) (.49)
--------- --------- --------- --------- --------- --------

Increase (decrease) in net asset value** .02 .19 .09 .04 .04 .04
--------- --------- --------- --------- --------- --------

Net asset value at end of period $ 10.38 $ 10.36 $ 10.17 $ 10.08 $ 10.04 $ 10.00
========= ========= ========= ========= ======= =======

Total Return 5.41% 5.90% 3.77% 2.39% 3.10% 5.32%
========= ========= ========= ========= ======= =======

RATIOS:

Ratio of expenses to average net assets* .15% .23% .42% .75% .75% .75%

Ratio of net investment income to
average net assets* 5.29% 5.74% 4.04% 2.53% 3.06% 5.43%

Portfolio turnover N/A N/A N/A N/A N/A N/A

NET ASSETS AT END OF PERIOD $113,262,769 $63,083,360 $33,528,739 $9,904,184 $5,845,136 $4,092,986

</TABLE>
- ----------

* Effective July 1, 1994, the investment adviser agreed to waive a portion of
the advisory fee for the Money Market Fund. Absent this waiver, the ratio
of expenses to average net assets and the ratio of net investment income to
average net assets would have been .70% and 3.76%, respectively, for 1994,
.63% and 5.34%, respectively, for 1995 and .55% and 4.89%, respectively,
for 1996.

9
<PAGE>

MONEY MARKET
FUND
- ---------------------------------------------------------------------------------------------------------------------------

1/1 to 1/1 to 1/1 to 1/1 to
12/31/90 12/31/89 12/31/88 12/31/87
-------- -------- -------- --------

<S> <C> <C> <C> <C>
Net asset value at beginning of period $ 10.18 $ 9.94 $ 10.20 $ 10.55

Net investment income .73 .86 .68 .57
Net realized and unrealized gain(loss)
on investments .01 .-- .01 .--
------- ------- ------- -------
Income from operations .74 .86 .69 .57
Distributions to shareholders from:
Net investment income (.94) (.62) (.94) (.92)
Net realized gain (.01) .-- (.01) .--
Tax return of capital (.01) .-- .-- .--
------- ------- ------- -------
(.96) (.62) (.95) (.92)
------- ------- ------- -------
Increase (decrease) in net asset value (.22) .24 (.26) (.35)
------- ------- ------- -------
Net asset value at end of period $ 9.96 $ 10.18 $ 9.94 $ 10.20
======= ======= ======= =======

Total Return 7.28% 8.67% 6.76% 5.40%
======= ======= ======= =======

RATIOS:
Ratio of expenses to average net assets .75% .75% .75% .87%

Ratio of net investment income to average
net assets 7.02% 8.43% 6.68% 5.78%

Portfolio turnover N/A N/A N/A N/A

NET ASSETS AT END OF PERIOD $3,464,661 $3,686,068 $2,376,022 $4,141,864

</TABLE>

10
<PAGE>

GE INVESTMENTS FUNDS, INC.
FINANCIAL HIGHLIGHTS, CONTINUED

TOTAL RETURN
FUND
- --------------------------------------------------------------------------------------------------------------------------------

1/1 to 1/1 to 1/1 to 1/1 to 1/1 to 1/1 to
12/30/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91
-------- -------- -------- -------- -------- --------

<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 15.93 $ 13.40 $ 13.59 $ 13.00 $ 12.62 $ 10.59

Net investment income 1.02 .41 .35 .42 .44 .43
Net realized and unrealized gain
(loss) on investments .67 3.34 (.01) 1.35 .51 2.47
---------- ---------- --------- --------- --------- ---------
Income (loss) from investment operations 1.69 3.75 .34 1.77 .95 2.90
Distributions to shareholders from:
Net investment income (1.02) (.42) (.35) (.41) (.44) (.43)
Net realized gain (3.87) (.80) (.18) (.76) (.12) (.43)
Tax return of capital .-- .-- .-- (.01) (.01) (.01)
---------- ---------- --------- --------- --------- ---------
(4.89) (1.22) (.53) (1.18) (.57) (.87)
---------- ---------- --------- --------- --------- ---------

Increase (decrease) in net asset value* (3.20) 2.53 (.19) .59 .38 2.03
---------- ---------- --------- --------- --------- ---------

Net asset value at end of period $ 12.73 $ 15.93 $ 13.40 $ 13.59 $ 13.00 $ 12.62
========== ========== ========= ========= ========= =========

Total Return 10.60% 28.07% 2.54% 13.67% 7.53% 27.45%
========== ========== ========= ========= ========= =========

RATIOS:

Ratio of expenses to average net assets .60% .65% .77% .85% .98% 1.11%

Ratio of net investment income to
average net assets 2.73% 3.42% 4.00% 3.80% 4.13% 4.39%

Portfolio turnover 144.02% 105.56% 66.92% 48.12% 12.46% 32.58%

Average Commission Rate Paid $.06 N/A N/A N/A N/A N/A

NET ASSETS AT END OF PERIOD $27,814,028 $70,507,093 $34,708,256 $12,609,407 $7,247,897 $4,608,823

</TABLE>
- ----------

11
<PAGE>

TOTAL RETURN
FUND
- ----------------------------------------------------------------------------------------------------------------

1/1 to 1/1 to 1/1 to 1/1 to
12/31/90 12/31/89 12/31/88 12/31/87
-------- -------- -------- --------

<S> <C> <C> <C> <C>
Net asset value at beginning of period $ 11.60 $ 10.42 $ 9.29 $ 11.19

Net investment income .55 .51 .39 .31
Net realized and unrealized gain (loss)
on investments (1.00) 1.51 1.28 (.90)
--------- --------- --------- ---------
Income (loss) from investment operations (.45) 2.02 1.67 (.59)
Distributions to shareholders from:
Net investment income (.56) (.51) (.39) (.94)
Net realized gain .-- (.32) (.15) (.37)
Tax return of capital .-- (.01) .-- .--
--------- --------- --------- ---------
(.56) (.84) (.54) (1.31)
--------- --------- --------- ---------
Increase (decrease) in net asset value (1.01) 1.18 1.13 (1.90)
--------- --------- --------- ---------
Net asset value at end of period $ 10.59 $ 11.60 $ 10.42 $ 9.29
========= ========= ========= =========

Total Return (3.85%) 19.51% 17.98% (5.27%)
========= ========= ========= =========

RATIOS:
Ratio of expenses to average net assets 1.10% 1.28% 1.35% 1.50%

Ratio of net investment income to
average net assets 4.81% 4.54% 3.97% 3.04%

Portfolio turnover 41.80% 48.94% 96.15% 81.80%

Average Commission Rate Paid N/A N/A N/A N/A

NET ASSETS AT END OF PERIOD $2,937,613 $3,065,217 $2,301,744 $1,569,825

</TABLE>

12
<PAGE>

GE INVESTMENTS FUNDS, INC.

FINANCIAL HIGHLIGHTS, CONTINUED

The table below provides selected data for each share of capital stock
outstanding for the periods indicated. The data for the most recent two years
has been audited by Ernst & Young LLP, independent auditors. The data should be
read in conjunction with the financial statements, related notes, and other
financial information included in the Statement of Additional Information.

INTERNATIONAL EQUITY REAL ESTATE SECURITIES
FUND FUND
-------------------------- -------------------------
1/1 to 5/1 to 1/1 to 5/1 to
12/30/96 12/31/95 12/30/96 12/31/95
------- ------- ------- -------

<S> <C> <C> <C> <C>
Net asset value at beginning of period $10.47 $ 10.00 $11.05 $ 10.00

Net investment income .03 .20 .64 .46
Net realized and unrealized gain on investments 1.01 .47 3.36 1.23
------ ------- ------ -------
Income from investment operations 1.04 .67 4.00 1.69
Distributions to shareholders from:
Net investment income (.03) (.20) (.65) (.46)
Net realized gain (.65) .-- (.29) (.18)
------ ------- ------ -------

(.68) (.20) (.94) (.64)
------ ------- ------ -------

Increase in net asset value .36 .47 3.06 1.05
------ ------- ------ -------
Net asset value at end of period $10.83 $ 10.47 $14.11 $ 11.05
====== ======= ====== =======

Total Return 9.91% 6.70%* 36.24% 17.00%*
====== ======= ====== =======

RATIOS:
Ratio of expenses to average net assets** 1.50% 1.54%* 1.07% 1.31%*

Ratio of net investment income to average net assets** .23% .44%* 5.90% 6.85%*

Portfolio turnover 149.72% 58.11% 30.36% 54.43%

Average Commission Rate Paid $ .03 N/A $ .06 N/A

NET ASSETS AT END OF PERIOD $17,643,845 $15,347,782 $24,533,248 $13,428,877

</TABLE>

- ----------

* Amounts have been determined on an annualized basis.

** In 1995 and 1996, the International Equity Fund received an expense
reimbursement from the investment adviser. Absent this reimbursement, the
ratio of expenses to average net assets and the ratio of net investment
income to average net assets would have been 1.56% and .17% for 1996 and
2.17% and (.18%) for 1995, respectively.

** In 1995, the Real Estate Securities Fund received an expense reimbursement
from the investment adviser. Absent this reimbursement, the ratio of
expenses to average net assets and the ratio of net investment income to
average net assets would have been 1.61% and 6.55%, respectively.

13
<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

Each Fund has one or more investment objectives and related investment policies
and uses various investment practices to pursue these objectives and policies.
There can be no assurance that any of the Funds will achieve its investment
objective or objectives. Investors should not consider any one Fund alone to be
a complete investment program. All of the Funds are subject to the risk of
changing economic conditions, as well as the risk inherent in the ability of the
Adviser to make changes in the composition of the Fund in anticipation of
changes in economic, business, and financial conditions. As with any security, a
risk of loss is inherent in an investment in the shares of any of the Funds.

The different types of securities, investments, and investment practices used by
each Fund all have attendant risks of varying degrees. For example, with respect
to equity securities, there can be no assurance of capital appreciation and
there is a substantial risk of decline. With respect to debt securities, there
exists the risk that the issuer of a security may not be able to meet its
obligations on interest or principal payments at the time required by the
instrument. In addition, the value of debt instruments generally rises and falls
inversely with prevailing current interest rates. As described below, an
investment in certain of the Funds entails special additional risks as a result
of their ability to invest a substantial portion of their assets in either
foreign investments or real estate securities.

Certain types of investments and investment practices common to one or more
Funds are described in greater detail, including the risks of each, under
"Investment Practices" both in this prospectus and in the Statement of
Additional Information ("SAI"). The Funds are also subject to certain investment
restrictions that are described herein and under the caption "Investment
Restrictions" in the SAI.

Where the description of a Fund indicates that it invests primarily in certain
types of securities, this means that under normal circumstances it invests at
least 65% of its total assets in such securities. Notwithstanding this, each of
the Funds other than the S&P 500 Index Fund may, for temporary defensive
purposes, invest 100% of its total assets in money market instruments of the
type described under the caption "Investment Practices - Money Market
Instruments" (hereinafter, "general money market instruments"). Where debt
security ratings are discussed herein, each rating category includes unrated
securities that a Fund's Adviser determines is comparable to securities rated in
that category. See "Debt Securities" in this prospectus.

The investment objective or objectives of each Fund are fundamental and may not
be changed without the approval of a majority of the outstanding voting shares
of capital stock of the class related to that Fund. A majority means the lesser
of (1) 67% of the Fund's outstanding shares present at a meeting of shareholders
if more than 50% of the outstanding shares are present in person or by proxy, or
(2) more than 50% of the Fund's outstanding shares. Certain investment
restrictions described in the SAI also are fundamental and cannot be changed
without shareholder approval. In contrast, certain other investment
restrictions, also described in the SAI, as well as the investment policies of
each Fund are not fundamental and may be changed by the Company's board of
directors without shareholder approval.

S&P 500 Index Fund

Standard & Poor's ("Standard & Poor's" or "S&P"1) chooses the 500 common stocks
comprising the S&P 500 Index on the basis of market values, industry
diversification and other factors. Most of the common stocks in the S&P 500
Index are issued by 500 of the largest companies, in terms of the aggregate
market value of their outstanding stock, and such companies are generally listed
on the New York Stock Exchange. Additional common stocks that are not among the
500 largest market value stocks are included in the S&P 500 Index for
diversification purposes. S&P may, from time to time, add common stocks to, or
delete common stocks from, the S&P 500 Index.

- ----------

1 "Standard & Poor's"(R), "S&P"(R), and "S&P 500"(R) are trademarks of the
McGraw-Hill Companies, Inc. and have been licensed for use. The S&P 500
Index Fund is not sponsored, endorsed, sold or promoted by S&P, and S&P
makes no representation or warranty, express or implied, to the investors
in this 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 results to be obtained by the Fund, or by 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.

14
<PAGE>

The S&P 500 Index Fund attempts to achieve its objective by replicating the
total return of the S&P 500 Index. To the extent that it can do so consistent
with the pursuit of its investment objective, it attempts to keep transaction
costs low and minimize portfolio turnover. To achieve its investment objective,
the S&P 500 Index Fund purchases equity securities that reflect, as a group, the
total investment return of the S&P 500 Index. Like the S&P 500 Index, the S&P
500 Index Fund will hold both dividend paying and non-dividend paying common
stocks comprising the S&P 500 Index.

Active portfolio management strategies are not used in making investment
decisions for the S&P 500 Index Fund. Rather, the Adviser utilizes a passive
investment management approach. From time to time the Adviser also may
supplement this passive approach by using statistical selection techniques to
determine which securities to purchase or sell for the Fund in order to
replicate the investment return of the S&P 500 Index over a period of time.

The S&P 500 Index Fund may not invest in all the securities that comprise the
S&P 500 Index, and its holdings may differ by industry segment from the S&P 500
Index. The Fund may compensate for the omission from its portfolio of stocks
that are included in the S&P 500 Index, or for purchasing securities included in
the Index in proportions that are different from their weightings in the Index,
by purchasing securities that may or may not be included in the S&P 500 Index
but which have characteristics similar to the omitted securities (such as stocks
from the same or similar industry groups having similar market capitalizations
and other investment characteristics). In addition, from time to time,
adjustments may be made in the S&P 500 Index Fund's holdings due to changes in
the composition or weighting of issues comprising the S&P 500 Index.

The S&P 500 Index Fund will attempt to achieve a correlation between its total
return and that of the S&P 500 Index of at least 0.95, without taking expenses
into account. A correlation of 1.00 would indicate perfect correlation, which
would be achieved when the S&P 500 Index Fund's net asset value, including the
value of its dividends and capital gains distributions, increases or decreases
in exact proportion to changes in the S&P 500 Index. The Adviser monitors the
S&P 500 Index Fund's correlation to the S&P 500 Index and attempts to minimize
any "tracking error" (i.e., the statistical measure of the difference between
the investment results of the S&P 500 Index Fund and that of the S&P 500 Index).
However, brokerage and other transaction costs, as well as other S&P 500 Index
Fund expenses, in addition to potential tracking error, will tend to cause the
S&P 500 Index Fund's return to be lower than the return of the S&P 500 Index.
There can be no assurance as to how closely the S&P 500 Index Fund's performance
will correspond to the performance of the S&P 500 Index.

<PAGE>

The S&P 500 Index Fund will not invest more than 35% of its total assets in
stocks and other securities not included in the S&P 500 Index. In this regard,
the S&P 500 Index Fund may temporarily invest cash balances, pending withdrawals
or investments, in general money market instruments. Nevertheless, the S&P 500
Index Fund will not adopt a temporary defensive investment posture in times of
generally declining stock prices, and, therefore, investors will bear the risk
of such general stock market declines.

The S&P 500 Index Fund may write covered call and put options on individual
securities and stock indices and may purchase call and put options on such
securities and stock indices. In addition, the S&P 500 Index Fund may purchase
and sell stock index futures contracts and may write covered call and put
options and purchase call and put options on stock index futures contracts. The
Fund only makes such investments in connection with indices that correlate with
its investments.

Consistent with its investment objective, the S&P 500 Index Fund will primarily
use call and put options and futures contracts, as described above, to rapidly
invest cash balances and to hedge exposure to the S&P 500 Index in anticipation
of investing cash balances or expected cash flow into the Fund in appropriate
common stocks or in anticipation of liquidating appropriate common stocks to
meet expected redemption requests. See "Writing Covered Call and Put Options and
Purchasing Call and Put Options" and "Financial Futures Contracts and Options
Thereon" in this Prospectus for more information about these practices and their
risks.

Government Securities Fund

The Government Securities Fund has the investment objective of seeking high
current income and protection of capital through investment in intermediate and
long-term debt instruments issued or guaranteed by the U.S. Government, its
agencies or instrumentalities. The Government Securities Fund may also invest in
U.S. Government debt instruments having maturities of less than one year and in
other general money market instruments. The Government Securities Fund invests
at least 80% of its total assets, valued at the time of purchase, in U.S.
Government securities of various maturities. See "Debt Securities" in this
prospectus for more information about U.S. Government securities.

The Government Securities Fund may invest up to 50% of its net assets in
Government National Mortgage Association ("GNMA") certificates. Such securities
are (along with certain Federal National Mortgage Association and Federal Home
Loan Corporation securities in which the Government Securities Fund may invest)
securities whose scheduled monthly interest and principal payments relating to
mortgages in the pool are "passed through" to investors. GNMA and other similar
pass-through securities differ from conventional bonds in that principal is paid
back to the certificate holders over the life of the loan rather than at
maturity. As a result, the Government Securities Fund will receive scheduled
monthly payments of principal and interest on its GNMA and other similar
securities. In addition, the Government Securities Fund may receive unscheduled
principal payments representing prepayments on the underlying mortgages. All
payments and unscheduled prepayments of principal will be reinvested in the
Government Securities Fund in instruments consistent with the Government
Securities Fund's investment objectives. GNMA and other similar securities may
not be an effective means of "locking in" long-term interest rates due to the
need for the Government Securities Fund to reinvest scheduled and unscheduled
principal payments. At the time principal payments or prepayments are received
by the Government Securities Fund, prevailing interest rates may be higher or
lower than the current yield of GNMA and other similar pass-through securities
held by the Government Securities Fund.

The Government Securities Fund may write covered call and put options on debt
securities, in which it may invest, and may purchase call and put options on
such debt securities. In addition, the Government Securities Fund may purchase
and sell interest rate futures contracts and may write covered call options and
purchase call and put options on interest rate futures contracts. The Fund also
may lend portfolio securities, purchase securities on a when-issued or
delayed-delivery basis, invest in illiquid investments as well as in foreign
investments and zero coupon bonds. See "Investment Practices" in this prospectus
and in the SAI for more information about these practices and their risks.

The value of U.S. Government securities owned by the Government Securities Fund
will fluctuate in response to various market forces and will generally vary
inversely with prevailing current interest rates. Therefore, the value of an

16
<PAGE>

investment in the Government Securities Fund also will fluctuate. In this
regard, any government or agency guarantee of securities held in the Government
Securities Fund does not guarantee the value of an investment in the Fund.

Money Market Fund

The Money Market Fund has the investment objective of providing the highest
level of current income as is consistent with high liquidity and safety of
principal by investing in various types of good quality money market securities.
Such securities include:

1. Debt obligations issued by or guaranteed as to interest and principal by
the government of the United States or any agency or instrumentality
thereof ("U.S. Government securities"), (and related custody receipts).

2. Debt obligations of: (a) U.S. banks (including their foreign branches),
savings and loan institutions, mortgage banking institutions and insurance
companies and (b) foreign banks and U. S. branches (and other foreign
branches) of foreign banks.

3. Repurchase agreements with banks or government securities dealers, provided
that:

(a) at the time the repurchase agreement is entered into, and throughout
the duration of the repurchase agreement, the collateral has a market
value at least equal to the value of the repurchase agreement; and

(b) the collateral consists of U.S. Government securities or instruments
rated in the highest rating category by the requisite nationally
recognized statistical rating organizations ("NRSROs") (as defined
below).

4. Commercial paper and other notes, including those with floating or variable
rates of interest.

5. Other short-term debt obligations issued or guaranteed by U.S. or foreign
corporations, state and municipal governments or other issuers.

6. Debt obligations issued or guaranteed by one or more foreign governments or
supranational entities, including any of their political subdivisions,
agencies or instrumentalities.

The Money Market Fund only invests in instruments denominated in U. S. dollars
that the Adviser, under the supervision of the board of directors of the Fund,
determines present minimal credit risks and are, at the time of acquisition:

1. rated in the two highest rating categories by at least two NRSROs (as
defined under Rule 2a-7, under the Investment Company Act of 1940 (the
"1940 Act"), or by only one NRSRO if only one NRSRO has issued a rating
with respect to the instrument ("requisite NRSROs"); or

2. in the case of an unrated instrument, determined by the Adviser under the
supervision of the board of directors to be of comparable quality to the
above; or

3. issued by an issuer that has received a rating of the type described in 1
above on other securities that are comparable in priority and security to
the instrument.

The Money Market Fund maintains 95% of its total assets in securities that are
rated in the highest category by the requisite NRSROs or unrated securities of
comparable investment quality. Of securities not rated in the highest category
(or not of comparable quality), the Fund does not invest more than the greater
of 1% of its total assets or $1 million in the securities of any single issuer.
Except as explained in the SAI, the Fund does not invest more than 5% of its
total assets (taken at amortized cost) in securities of any single issuer
(except U.S. Government securities or repurchase agreements collateralized by
such securities).

17
<PAGE>

The Money Market Fund invests only in instruments that have (or are considered
under Rule 2a-7 to have) remaining maturities of 13 months or less. The average
maturity of the Fund's portfolio securities based on their dollar value does not
exceed 90 days at the time of each investment. If the disposition of a fund
security results in a dollar-weighted average fund maturity in excess of 90
days, the Fund invests its available cash in such a manner as to reduce its
dollar-weighted average fund maturity to 90 days or less as soon as reasonably
practicable. The Fund attempts to maintain a constant net asset value per share
of $1.

The Money Market Fund also may lend portfolio securities and purchase securities
on a when-issued or delayed-delivery basis.

Total Return Fund

The Total Return Fund has the investment objective of providing the highest
total return, composed of current income and capital appreciation, as is
consistent with prudent investment risk. It attempts to achieve this objective
by investing in common stocks, bonds and money market instruments, the
proportion of each being continuously determined by the Adviser. This Fund
invests in common stocks and other equity securities including preferred stock,
securities convertible or exchangeable into common stock, rights and warrants,
foreign equity securities and securities of real estate investment trusts
("REITs"). This Fund also invests in general money market instruments, U.S.
Government securities, marketable domestic and foreign corporate debt
obligations, debt obligations of foreign governments and their agencies and
instrumentalities, floating rate and variable rate instruments, zero coupon
bonds, custody receipts, mortgage-backed and asset-backed securities (including
mortgage dollar rolls), municipal obligations, forward foreign currency exchange
contracts, currency and interest rate swaps, and structured or indexed
securities. See "Investment Practices" in this prospectus and in the SAI for
more information about these practices and their risks.

At least 60% of the value of any bonds held by this Fund will be rated within
the four highest grades by an NRSRO such as Standard and Poor's or Moody's. The
balance of the value of any bonds held by this Fund may be rated below those
four highest grades. If these lower-rated bonds are held in the Fund in
significant amounts, they will increase financial risk and income volatility. At
the current time, the Fund has a non-fundamental investment restriction limiting
the Fund's investment in these lower-rated debt securities to no more than 30%
of the Fund's total assets measured at the time of purchase. Lower-rated debt
securities and their attendant risks are described in "Investment Practices" in
this prospectus and in the SAI.

There are no percentage limitations on the types of securities in which the
Total Return Fund may invest. From time to time, the Fund may invest entirely in
equity securities, entirely in debt securities, entirely in money market
instruments, or in any combination of these types of securities. Consequently,
the Total Return Fund is subject to varying levels of market and financial risk
and current income volatility, and may at times be subject to very high levels
of market and financial risk and current income volatility. The portfolio
turnover rate for this Fund is generally higher than for other funds due to the
frequent fund transactions aimed at maximizing total return. This higher
portfolio turnover rate generates higher brokerage expenses; however, the gain
in total return will often more than offset the brokerage expense. It is not
anticipated that higher portfolio turnover will have any adverse tax
consequences.

The Total Return Fund also may lend securities and invest in repurchase
agreements, "when-issued" securities, securities issued on a delayed-delivery
basis, options on securities and currencies, options on securities indices,
financial futures contracts and options thereon, and illiquid investments. See
"Investment Practices" in this prospectus and the SAI.

International Equity Fund

18
<PAGE>

The International Equity Fund is intended for investors who can accept the risks
involved in investments in equity and equity-related securities of foreign
issuers, including securities denominated in foreign currencies. See "Foreign
Investments and Currency."

The Fund invests in the foreign securities of issuers located in at least 3
different countries other than the United States. The determination of where an
issuer of foreign securities is located is made by reference to the country in
which it (1) is organized, (2) derives at least 50% of its revenues or profits
from goods produced or sold, investments made or services performed, (3) has at
least 50% of its assets situated, or (4) has the principal trading market for
its securities (hereinafter, the "Country Identification Test"). Under certain
economic and business conditions the Fund may invest up to 35% of its total
assets in the securities of issuers located (or, in the case of the securities,
traded) in any one of the following countries: Australia, Canada, France, Japan,
the United Kingdom or Germany.

The equity and equity-related securities in which the International Equity Fund
invests are common stock, preferred stock, convertible debt obligations,
convertible preferred stock and warrants or other rights to acquire stock. The
Fund also may invest in securities of foreign issuers in the form of sponsored
and unsponsored American depository receipts ("ADRs"), European depository
receipts ("EDRs") (sometimes called continental depository receipts), and global
depository receipts ("GDRs") (colectively "depository receipts"). See "Foreign
Investments and Currency."

The International Equity Fund also may, under normal market conditions, invest
up to 35% of its total assets in debt securities of corporate or government
issuers and may on occasion, for temporary purposes to preserve capital, hold
part or all of its assets in foreign currency or in non-dollar short-term debt
securities and/or in domestic equity or debt securities. The Fund does not
invest more than 5% of its total assets in debt securities rated lower than the
four highest grades by an NRSRO.

The International Equity Fund may invest in the securities of issuers located in
countries with emerging economies or securities markets. Investment in such
countries involves certain risks that are not present in investments in more
developed countries. See "Foreign Investments and Currency." The International
Equity Fund may make investments or engage in investment practices that involve
special risks. These include: convertible securities, "when-issued" securities,
securities issued on a delayed-delivery basis, options on securities and
securities indices, financial futures contracts and options thereon, restricted
securities, illiquid investments, repurchase agreements, REITs, lending
portfolio securities and borrowing money for investment purposes. These
investment practices and attendant risks are described in "Investment Practices"
in this prospectus or in the SAI.

The International Equity Fund may employ certain currency management techniques
to hedge against currency exchange rate fluctuations and to seek to increase
total return. When used to attempt to increase total return, these management
techniques are speculative. Such currency management techniques involve risks
different from those associated with investing in dollar-denominated securities
of U.S. issuers. These techniques are transactions in currency options, currency
futures contracts, options on currency futures contracts, forward foreign
currency exchange contracts and currency swaps. To the extent that the Fund is
fully invested in foreign securities while also maintaining foreign currency
positions, it may be exposed to greater combined risk. The Fund's net currency
positions may expose it to risks independent of its securities positions. See
"Foreign Investments and Currency."

Real Estate Securities Fund

The Real Estate Securities Fund is intended for investors who can accept the
risks, described below, entailed by indirect investments in real estate.

19
<PAGE>

An issuer is principally "engaged in" or principally "related to" the real
estate industry if at least 50% of its assets (marked-to-market), gross income,
or net profits are attributable to ownership, construction, management or sale
of residential, commercial or industrial real estate, or to products or services
related to the real estate industry. Issuers engaged in the real estate industry
include equity real estate investment trusts (which directly own real estate),
mortgage real estate investment trusts (which make short-term construction or
real estate development loans or invest in long-term mortgages or mortgage
pools), real estate brokers and developers, companies that manage real estate,
and companies that own substantial amounts of real estate. Issuers in businesses
related to the real estate industry include manufacturers and distributors of
building supplies and financial institutions that issue or service mortgages.

The Real Estate Securities Fund generally invests in common stocks but may also,
without limitation, invest in preferred stock, convertible securities, rights
and warrants, and debt securities of the foregoing issuers as well as publicly
traded limited partnerships. In addition to these securities, the Fund may
invest up to 35% of its total assets in equity and debt securities of issuers
outside the real estate industry, including all securities and other investments
that the Total Return Fund may invest in, such as debt securities and
convertible preferred stock and convertible debt securities rated less than BBB
by Standard and Poor's or Baa by Moody's. If held in the Fund in significant
amounts, such lower-rated debt securities would increase financial risk and
income volatility. Lower-rated debt securities and their attendant risks are
described in "Investment Practices" in this prospectus and in the SAI.

The Real Estate Securities Fund may make investments or engage in investment
practices that involve special risks. These include: convertible securities,
"when-issued" securities, securities issued on a delayed-delivery basis, options
on securities and securities indices, financial futures contracts and options
thereon, restricted securities, illiquid investments, repurchase agreements,
structured or indexed securities and lending portfolio securities. These
investment practices and attendant risks are described in "Investment Practices"
in this prospectus or in the SAI.

There are significant risks inherent in the investment objective and policies of
the Real Estate Securities Fund. Because of its objective of investing in, among
other things, the securities of issuers that own, construct, manage, or sell
residential, commercial, or industrial real estate, it is subject to all of the
risks associated with the ownership of real estate. These risks include:
declines in the value of real estate, adverse changes in the climate for real
estate, risks related to general and local economic conditions, over-building
and increased competition, increases in property taxes and operating expenses,
changes in zoning laws, casualty or condemnation losses, limitations on rents,
changes in neighborhood values, the appeal of properties to tenants, leveraging
of interests in real estate, increases in prevailing interest rates and costs
resulting from clean-up of environmental problems or liability to third parties
for damages arising from environmental problems. Likewise, because of its
objective of investing in the securities of issuers whose products and services
are related to the real estate industry, it is subject to the risk that the
value of such securities will be adversely affected by one or more of the
foregoing risks.

Because the Fund may acquire debt securities of issuers primarily engaged in or
related to the real estate industry, it also could conceivably own real estate
directly as a result of a default on such securities. Any rental income or
income from the disposition of such real estate could adversely affect its
ability to retain its tax status as a regulated investment company. See "Taxes."

In addition to the risks discussed above, equity real estate investment trusts
may be affected by any changes in the value of the underlying property owned by
the trusts, while mortgage real estate investment trusts may be affected by the
quality of any credit extended. Further, equity and mortgage real estate
investment trusts are dependent upon management skill, are not diversified, and
are therefore subject to the risk of financing single or a limited number of
projects. Such trusts are also subject to heavy cash flow dependency, defaults
by borrowers, self liquidation, and the possibility of failing to qualify for
special tax treatment under Subchapter M of the Internal Revenue Code and to
maintain an exemption under the 1940 Act. Finally, certain real estate
investment trusts may be self-liquidating in that a specific term of existence
is provided for in the trust document. Such trusts run the risk of liquidating
at an economically inopportune time. See "Investment Practices" in this
prospectus for more information about real estate investment trusts.

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Global Income Fund

The Global Income Fund has the investment objectives of high total return,
emphasizing current income and, to a lesser extent, capital appreciation. The
Fund seeks to achieve these objectives by investing primarily in foreign and
domestic income-bearing debt securities and other foreign and domestic
income-bearing instruments. Such investments may be denominated or quoted in
foreign currencies or U.S. dollars. The Global Income Fund invests in the
foreign securities of issuers located in no fewer than three different countries
as determined using the Country Identification Test.

The Global Income Fund may invest in: (1) U.S. Government securities, (2) debt
securities issued or guaranteed by a domestic or foreign issuer, (3) convertible
bonds and non-convertible preferred stock of domestic or foreign corporate
issuers, (4) certificates of deposit, bankers' acceptances or time deposits of
U.S. or foreign banks (including domestic or foreign branches thereof) having
total assets of more than $1 billion, and (5) general money market instruments.
Debt securities may include floating rate and variable rate instruments, zero
coupon obligations, mortgage-backed and asset-backed securities (including
mortgage dollar rolls), custody receipts, and structured or indexed securities.
See "Investment Practices" in this prospectus and the SAI for more information
about these practices and their risks. The Global Income Fund may invest up to
35% of its total assets in equity securities of the type that the International
Equity Fund may invest in.

The Global Income Fund is intended for investors who can accept the risks
involved in securities of foreign issuers, including securities denominated in
foreign currencies. See "Foreign Investments and Currency."

In selecting investments for the Fund, the Adviser considers such factors as the
instrument's duration, yield, credit quality, the prospects for capital
appreciation, and the fundamental outlooks for currency and interest rate trends
that could affect the instrument. The Fund may use currency transactions both to
enhance overall returns for a given level of risk and to hedge its exposure to
foreign currencies. While the Fund generally has both long and short currency
positions, its net long and short foreign currency exposure generally does not
exceed the value of its total assets. See "Foreign Investments and Currency."

Debt securities held by the Global Income Fund are limited to those rated within
the six highest categories by S&P, Moody's, or another NRSRO. The Fund does not,
however, invest more than 25% of its total assets in securities rated below the
four highest categories or more than 10% of its total assets in securities rated
below the five highest categories. If such lower-rated securities are held in
the Global Income Fund in significant amounts, they increase the financial risk
and income volatility. Lower-rated debt securities and their attendant risks are
described in "Investment Practices" in this prospectus and the SAI.

The Global Income Fund maintains a dollar-weighted average portfolio duration of
not more than seven years. Duration represents the weighted average maturity of
expected cash flows on a debt obligation, discounted to present value. The
longer the duration of a debt obligation, the more sensitive its value is to
changes in interest rates. The Fund may use various techniques to shorten or
lengthen the dollar-weighted average duration of its portfolio, including the
acquisition of debt obligations at a premium or discount, transactions in
structured or indexed securities, options, interest rate futures contracts and
options thereon, and interest rate swaps. The Global Income Fund is not subject
to any limitation with respect to the average maturity of its portfolio.

The Global Income Fund employs certain currency and interest rate management
techniques involving risks different from those associated with investing solely
in dollar-denominated debt securities of U.S. issuers. Such techniques, which
may be used for other purposes as well, include transactions in options on
securities and securities indices, futures contracts on securities and
securities indices, options on such futures contracts, structured or indexed
securities, forward foreign currency exchange contracts, currency options and
futures contracts, options on currency futures contracts and currency and
interest rate swaps. To the extent that the Fund is fully invested in securities
of foreign issuers and non-dollar instruments while also maintaining currency
positions, it may be exposed to greater combined risk. The Fund's net currency
positions also may expose it to risks independent of its securities positions.
See "Investment Practices" in this prospectus and the SAI. The Fund also may
lend securities and invest in repurchase agreements, "when-issued" securities,
securities issued on a delayed-delivery basis, restricted securities and
illiquid investments. See "Investment Practices" in this prospectus and the SAI.

21
<PAGE>

The Global Income Fund is not "diversified" as defined by the 1940 Act.
Therefore, it is more susceptible to adverse developments affecting any single
issuer. Nonetheless, a non-diversified Fund is still subject to the
diversification requirements that arise under federal tax law and the 25% limit
on concentration of investments in a single industry. See "Dividends,
Distributions and Taxes" in this prospectus and "Investment Practices and
Restrictions" in the SAI.

Value Equity Fund

The Value Equity Fund has the investment objective of providing long-term growth
of capital. The Fund seeks to achieve this objective by investing primarily in
common stock and other equity securities of companies that the Adviser believes
are undervalued by the market place at the time of purchase and offer the
potential for above-average growth of capital. Other equity securities include
preferred stock, securities convertible or exchangeable into common stock,
rights and warrants, options on equity securities, and futures contracts on
equity indices (and options thereon). The Fund also may invest in undervalued
convertible preferred stock and debt securities.

The Value Equity Fund may invest in securities of companies in cyclical
industries during periods when such securities appear to the Adviser to have
strong potential for capital appreciation. The Fund also may invest in the
securities of "special situation" companies. A "special situation" company is
one that the Adviser believes has potential for significant future earnings
growth but has not performed well in the recent past. These situations may
include companies with management turnaround, corporate or asset restructuring
or significantly undervalued assets.

The universe from which the Adviser selects securities includes those issued by
companies of varying capitalization. the Adviser identifies potentially
undervalued securities by applying statistical measures designed to reveal value
on an absolute and relative basis. Such statistical measures include key
financial ratios such as stock price-to-earnings, stock price-to-book value and
stock price-to-cash flow. It also evaluates the issuers of such securities on
the basis of management strength, inside ownership, and competitive structure.
The process used by the Adviser to select undervalued securities generally
differs from that used by many other "value" oriented investment advisers in
that the Adviser places a heavy emphasis on normalized earnings, stock
price-to-cash flow ratios, relative value, and whether the security's issuer is
in an industry that is likely to benefit from long-term fundamental improvements
such as restructuring, turnaround trends or consolidation trends. At any point
in time, the Adviser also closely follows approximately 200 companies whose
securities appear to have market appreciation potential based on statistical
analysis. Because first-hand knowledge of management can be an important element
in analyzing and valuing a company, the Adviser interviews key management
personnel of, and also may visit, these select companies to obtain fundamental
research information and verify their value.

The Value Equity Fund may invest up to 35% of its total assets in foreign
securities. The Fund may invest up to 35% of its total assets in debt securities
including those in which the Total Return Fund may invest as well as corporate
bonds, mortgage-backed and asset-backed securities, floating rate and variable
rate instruments and zero coupon obligations. Of these debt securities, the Fund
may invest an amount equal to 15% of its total assets in securities rated below
investment grade. Investment grade debt securities are those rated in the four
highest categories by S&P, Moody's, or another NRSRO. Foreign securities and
debt securities of various types (including lower-rated debt securities) and
their attendant risks are described in "Investment Practices" in this prospectus
and the SAI.

The Value Equity Fund may lend portfolio securities and invest in repurchase
agreements, "when-issued" securities, securities issued on a delayed-delivery
basis, options on securities and currencies, options on securities indices,
financial futures contracts and options thereon, restricted securities and
illiquid investments. See "Investment Practices" in this prospectus and in the
SAI for more information about these practices and their risks.

Income Fund

The Income Fund has the investment objective of providing maximum income
consistent with prudent investment management and preservation of capital. The
Fund seeks to achieve this objective by investing primarily in income-bearing
debt securities and other income-bearing instruments. Capital appreciation with
respect to the Income Fund's portfolio securities may occur but is not an
objective of the Fund.

<PAGE>

In seeking to achieve its investment objective, the Income Fund invests in the
following types of income-bearing debt securities and instruments: U.S.
Government securities; obligations of foreign governments or their agencies or
instrumentalities; bonds, debentures, notes and non-convertible preferred stocks
issued by U.S. and foreign companies; mortgage-backed and asset-backed
securities (including, mortgage dollar rolls, adjustable rate mortgage related
securities, collateralized mortgage obligations, government stripped mortgage
related securities and receivable-backed securities); zero coupon bonds;
floating rate and variable rate instruments; and general money market
instruments. Under normal market conditions, the Fund may invest a substantial
portion of its total assets in general money market instruments. The Income Fund
also may invest in depository receipts and in structured or indexed securities
(the value of which is linked to references such as currencies, interest rates,
commodities, indices or other financial indicators). Mortgage-backed and
asset-backed securities are subject to several risks, including the prepayment
of principal. See "Investment Practices" in this prospectus and in the SAI for
more information about each of the foregoing practices and their risks.

The Income Fund's investments in debt securities are limited to those rated in
the six highest categories by S&P, Moody's or another NRSRO. The Income Fund
does not purchase any security or instrument rated in the fourth highest
category if, as a result of the purchase, more than 25% of the Fund's total
assets would be invested in obligations rated in that category. In addition, the
Income Fund does not purchase any security or instrument if, as a result of that
purchase, more than 10% of the Fund's total assets would be invested in
obligations rated in the fifth and sixth highest categories. Lower-rated debt
securities and their attendant risks are described in "Investment Practices" in
this prospectus and in the SAI.

The Income Fund is subject to no limitation with respect to the maturities of
the instruments in which it may invest; the weighted average maturity of the
Fund's portfolio securities is anticipated to be approximately five to 10 years.

The Income Fund maintains a dollar-weighted average portfolio duration of not
more than 8 years. Duration represents the weighted average maturity of expected
cash flows on a debt obligation, discounted to present value. The longer the
duration of a debt obligation, the more sensitive its value to changes in
interest rates. The Adviser may use various techniques to shorten or lengthen
the dollar-weighted average portfolio duration, including the acquisition of
debt obligations at a premium or discount, transactions in structured or indexed
securities, options, futures contracts, and options on futures contracts.

The Income Fund may invest up to 35% of its total assets in foreign securities.
See "Investment Practices" in this prospectus for more information about the
extent of the Fund's investment in foreign securities. The Income Fund may
utilize the following investment techniques: transactions in options contracts
on securities and securities indices, financial futures contracts, options on
financial futures contracts, options on foreign currencies and forward foreign
currency exchange contracts. The Fund's net currency positions may expose it to
risks independent of its risks of its securities positions. See "Investment
Practices" in this prospectus and the SAI for more information about these
techniques and their risks. The Income Fund also may lend securities and invest
in repurchase agreements, reverse repurchase agreements, "when-issued"
securities, securities issued on a delayed-delivery basis, restricted securities
and illiquid investments. See "Investment Practices" in this prospectus and the
SAI.

U.S. Equity Fund

The U.S. Equity Fund has the investment objective of providing long-term growth
of capital. The Fund seeks to achieve this objective by investing primarily in
equity securities of U.S. companies. Equity securities consist of common stock,
preferred stock, securities convertible or exchangeable into common stock,
including convertible bonds, convertible debentures, convertible notes,
convertible preferred stocks, and warrants or rights. The U.S. Equity Fund
typically invests in equity securities that are issued by U.S. companies and
traded on U.S. securities exchanges, in the U.S. over-the-counter market or in
non-public transactions. The Fund may also invest up to 15% of its total assets
in foreign securities.

<PAGE>

a dividend discount model. The U.S. Equity Fund generally sells these securities
when their prices approach targeted levels. Growth-oriented investing generally
involves buying securities with above average earnings growth rates at
reasonable prices. The U.S. Equity Fund holds these securities until the Adviser
determines that their growth prospects diminish or that they have become
overvalued when compared with alternative investments.

In investing on behalf of the U.S. Equity Fund, the Adviser seeks to construct
an investment portfolio for the U.S. Equity Fund that it believes has similar
characteristics to the S&P 500 Index by blending investments in both
"value-oriented" and "growth-oriented" securities. Because the Fund's strategy
seeks to combine the basic elements of companies comprising the S&P 500 Index,
but is designed to select investments that the Adviser considers the most
attractive within each category, the Adviser believes that the U.S. Equity
Fund's strategy should be capable of outperforming the U.S. equity market as
reflected by the S&P 500 Index on a total return basis.

The Fund may invest up to 35% of its total assets in corporate and government
debt securities when the Adviser determines that such securities are consistent
with the Fund's investment objective. The Adviser believes that it can make such
a determination when, for example, it anticipates that such a security will
increase in value as a result of a development particularly or uniquely
applicable to the issuer such as a liquidation, reorganization, recapitalization
or merger, material litigation, technological breakthrough or new management or
management policies. Under normal market conditions the Fund may maintain a
portion of its total assets in general money market instruments. Of these debt
securities, the Fund may invest an amount equal to 5% of its total assets in
securities rated below the four highest categories by S&P, Moody's or another
NRSRO. Foreign securities and debt securities of various types (including
lower-rated debt securities) and their attendant risks are described in
"Investment Practices" in this prospectus and the SAI.

The U.S. Equity Fund may lend portfolio securities and invest in repurchase
agreements, reverse repurchase agreements, "when-issued" securities, securities
issued on a delayed-delivery basis, restricted securities, illiquid investments,
zero coupon bonds, options on securities and securities indices, financial
futures contracts (and options thereon), options on foreign currencies, and
forward foreign currency exchange contracts. See "Investment Practices" in this
prospectus and the SAI.

Premier Growth Equity Fund

The Premier Growth Equity Fund has the investment objective of providing
long-term growth of capital as well as future (rather than current) income. The
Fund seeks to achieve this objective by investing primarily in growth-oriented
equity securities. Such equity securities include common stock, preferred stock,
securities convertible or exchangeable into common stock, including convertible
bonds, convertible debentures, convertible notes, convertible preferred stocks,
and warrants or rights.

The Premier Growth Equity Fund seeks to acquire principally equity securities of
companies that offer long term potential for capital oppreciation. Such
companies typically possess one or more of a variety of characteristics,
including: (1) high quality products and/or services, (2) strong balance sheets,
(3) sustainable internal growth, (4) superior financial returns over extended
periods of time, (5) competitive position in its industry, and (6) shareholder
oriented management. Although the Fund may invest in securities of issuers of
varying sizes as measured by assets, sales or capitalization, a majority of its
assets are invested, under normal market conditions, in securities of companies
with relatively large capitalizations. In addition, the Fund normally invests in
companies that have above-average growth prospects and which are typically
leaders in their fields. The Fund generally is diversified over a cross-section
of industries.

The Premier Growth Equity Fund may invest up to 25% of its total assets in
foreign securities. See "Investment Practices" in this prospectus for more
information about the extent of the Fund's investment in foreign securities. The
equity securities in which the Fund invests are generally traded on domestic or
foreign securities exchanges or in the domestic or foreign over-the-counter
markets. During periods when the Adviser believes that there will be a market
decline in particular securities, the Premier Growth Equity Fund may, for
temporary defensive purposes, hold or invest in debt and other income-bearing
securities. In addition, under normal market conditions, the Fund may invest up
to 35% of its total assets in the foregoing types of income-bearing securities.
The Fund may invest an amount

<PAGE>

equal to 5% of its total assets in securities rated below the four highest
categories by S&P, Moody's or another NRSRO. Foreign securities and debt
securities of various types (including lower-rated debt securities) and their
attendant risks are described in "Investment Practices" in this prospectus and
the SAI.

The Premier Growth Equity Fund may lend portfolio securities and invest in
repurchase agreements, reverse repurchase agreements, "when-issued" securities,
securities issued on a delayed-delivery basis, restricted securities, illiquid
investments, options on securities and securities indices, financial futures
contracts (and options thereon). See "Investment Practices" in this prospectus
and the SAI.

INVESTMENT PRACTICES

In pursuing their investment objectives, the Funds may engage in the following
investment practices.

Lending Portfolio Securities

Each Fund may from time to time lend securities it holds to brokers, dealers,
and financial institutions, up to a maximum of 20% (30% for the Income Fund,
U.S. Equity Fund and Premier Growth Equity Fund) of the total value of that
Fund's assets. Such loans will be secured by collateral in the form of cash or
other liquid assets, which will be maintained in an amount at least equal to the
current market value of the loaned securities. Each Fund will continue to
receive interest and dividends on the loaned securities during the term of its
loans, and, in addition, will receive either a fee from the borrower or interest
earned from the investment of cash collateral in short-term securities. Each
Fund also will receive any gain or loss in the market value of its loaned
securities and of securities in which cash collateral is invested during the
term of the loan. The primary risk involved in lending securities is that the
borrower will fail financially and not return the loaned securities at a time
when the collateral is insufficient to replace the full amount of the loaned
securities. In order to minimize this risk, the Funds will make loans of
securities only to firms determined by the Adviser (under the supervision of the
board of directors) to be creditworthy.

Money Market Instruments

Each of the Funds, other than the Money Market Fund, may invest in general money
market instruments which are defined as the types of money market securities in
which the Money Market Fund may invest as well as short-term foreign debt
securities denominated in currencies other than U.S. dollar. In contrast with
the money market securities in which the Money Market Fund may invest, general
money market instruments are not limited in their maturity (or remaining
maturity) to a specific number of months nor is there any restriction on the
average weighted maturity of such instruments held by a Fund. General money
market instruments held by a Fund, other than the Money Market Fund, must be
rated in the two highest categories by a NRSRO, or if unrated, are issued by an
issuer having an outstanding unsecured debt issue rated in one of the three
highest rating categories by a NRSRO. Each Fund, other than the Money Market
Fund, does not invest more than 25% of its total assets in bank obligations
(including time deposits).

Pursuant to an exemptive order from the SEC, each of the the Funds, other than
the Money Market Fund also may each invest indirectly in general money market
instruments by investing up to 25% of its total assets in shares of GE
Short-Term Investment Fund (the "Short-Term Fund"). The Short-Term Fund invests
principally in general money market instruments. GEIM and its affiliates created
the Short-Term Fund to serve as an investment vehicle for the collective
investment of cash balances of the Funds (other than the Money Market Fund) and
other mutual funds and accounts managed by GEIM and its affiliates. GEIM manages
the Short-Term Fund but does not charge it a management fee. The Funds invest in
the Short-Term Fund without paying any sales charges or other fees.

When-Issued and Delayed Delivery Securities

When-issued and delayed delivery securities are discussed in "Investment
Practices" in the SAI.

25
<PAGE>

Repurchase Agreements

Each of the Funds may invest in repurchase agreements. A repurchase agreement is
a transaction in which a Fund buys a security at one price and simultaneously
agrees to sell that same security back to the original owner at a higher price.
The Adviser (under the supervision of the board of directors) reviews the
creditworthiness of the other party to the agreement and must find it
satisfactory before engaging in a repurchase agreement. In the event of the
bankruptcy of the other party, the Fund could experience delays in recovering
its money, may realize only a partial recovery or even no recovery, and may also
incur disposition costs. Repurchase agreements are further discussed in
"Investment Practices" in the SAI.

Reverse Repurchase Agreements

The Income Fund, U.S. Equity Fund and Premier Growth Equity Fund may borrow
money by entering into reverse repurchase agreements. A reverse repurchase
agreement involves the sale by a Fund of a security that it holds concurrently
with an agreement by the Fund to repurchase the same security at a specific
price on a specific future date. These Funds use the proceeds from reverse
repurchase agreements to provide liquidity to meet redemption requests and to
make cash payments of dividends and distributions when the Adviser does not
consider it advantageous to sell portfolio securities. A Fund segregates liquid
assets with the Company's custodian equal in value to its obligations with
respect to reverse repurchase agreements.

Foreign Investments and Currency

The S&P 500 Index Fund, Total Return Fund, Value Equity Fund, and Income Fund
may each invest up to 35% of their total assets, taken at market value at the
time of acquisition, in foreign securities. The Premier Growth Equity Fund may
invest up to 25% of its total assets in foreign securities. The Government
Securities Fund, Money Market Fund and Real Estate Securities Fund may invest up
to 20% of its total assets in foreign securities. The U.S. Equity Fund may
invest up to 15% of its total assets in foreign securities. These Funds will not
concentrate their investments in any particular foreign country. The
International Equity Fund and the Global Income Fund may, as described above,
invest all of their assets in the foreign securities. With regard to the
application of the foregoing percentage limitations to the S&P 500 Index Fund,
Government Securities fund, Total Return Fund, Real Estate Securities Fund,
Value Equity Fund, Income Fund, U.S. Equity Fund and Premier Growth Equity Fund,
foreign securities do not include 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.

Foreign Investments Generally. Investments in foreign securities may offer
potential benefits not available from investments solely in securities of
domestic issuers or dollar denominated securities. Such benefits may include the
opportunity to invest in foreign issuers that appear to offer better opportunity
for long-term capital appreciation or current earnings than investments in
domestic issuers, the opportunity to invest in foreign countries with economic
policies or business cycles different from those of the United States and the
opportunity to reduce fluctuations in fund value by taking advantage of foreign
securities markets that do not necessarily move in a manner parallel to U.S.
markets.

Investing in foreign securities (including those dominated in foreign
currencies) involves significant risks that are not typically associated with
investing in U.S. dollar denominated securities or in securities of domestic
issuers. Such investments may be affected by changes in currency rates, changes
in foreign or U.S. laws or restrictions applicable to such investments and in
exchange control regulations. For example, a decline in the currency exchange
rate would reduce the dollar value of certain portfolio investments. In
addition, if the exchange rate for the currency in which a Fund receives
interest payments declines against the U.S. dollar before such interest is paid
as dividends to shareholders, the Fund may have to sell fund securities to
obtain sufficient cash to pay such dividends. As discussed below, some of the
Funds may employ certain investment techniques to hedge their foreign currency
exposure; however, such techniques also entail certain risks. Some foreign stock
markets (and other securities markets) may have substantially less volume than,
for example, the New York Stock Exchange (or other domestic markets) and
securities of some foreign issuers may be less liquid than securities of
comparable domestic issuers. Commissions and dealer mark-ups on transactions in
foreign investments may be higher than for similar transactions in the United
States. In

<PAGE>

addition, clearance and settlement procedures may be different in foreign
countries and, in certain markets, on certain occasions, such procedures have
been unable to keep pace with the volume of securities transactions, thus making
it difficult to conduct such transactions. For example, delays in settlement
could result in temporary periods when a portion of the assets of a Fund are
uninvested and no return is earned thereon. The inability of a Fund to make
intended investments due to settlement problems could cause it to miss
attractive investment opportunities. Inability to dispose of portfolio
securities or other investments due to settlement problems could result either
in losses to a Fund due to subsequent declines in value of the portfolio
investment or, if the Fund has entered into a contract to sell the investment,
could result in possible liability to the purchaser.

Foreign issuers are not generally subject to uniform accounting, auditing and
financial reporting standards comparable to those applicable to domestic
companies. There may be less publicly available information about a foreign
issuer than about a domestic one. In addition, there is generally less
government regulation of stock exchanges, brokers, and listed and unlisted
issuers in foreign countries than in the United States. Furthermore, with
respect to certain foreign countries, there is a possibility of expropriation or
confiscatory taxation, imposition of withholding taxes on dividend or interest
payments, limitations on the removal of funds or other assets of the Fund, or
political or social instability or diplomatic developments which could affect
investments in those countries. Individual foreign economies also may differ
favorably or unfavorably from the United States economy in such respects as
growth of gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position.

Investments in Depository Receipts. Many securities of foreign issuers are
represented by depository receipts such as ADRs, EDRs and GDRs. ADRs are
receipts typically issued by a U.S. bank or trust company which evidence
ownership of underlying securities of foreign corporate issuers. EDRs and GDRs
are receipts issued by non-U.S. financial institutions evidencing arrangements
similar to ADRs. Generally, ADRs are in registered form and are designed for
trading in U.S. markets while EDRs are in bearer form and are designed for
trading in European securities markets. GDRs are issued in either registered or
bearer form and are designed for trading on a global basis.

Each of the Funds, other than the Money Market Fund, may invest in ADRs, EDRs
and GDRs. ADRs represent the right to receive foreign securities deposited in a
domestic bank or a foreign correspondent bank. Prices of ADRs are quoted in U.S.
dollars, and ADRs are traded in the United States on exchanges or
over-the-counter and are sponsored and issued by domestic banks. ADRs do not
eliminate all the risk inherent in investing in foreign securities. To the
extent that a Fund acquires ADRs through banks which do not have a contractual
relationship with the foreign issuer of the security underlying the ADR to issue
and service such ADRs, there may be an increased possibility that the Fund would
not become aware of and be able to respond to corporate actions such as stock
splits or rights offerings involving the foreign issuer in a timely manner. In
addition, the lack of information may result in inefficiencies in the valuation
of such instruments. However, by investing in ADRs rather than directly in the
stock of foreign issuers, a Fund will avoid currency risks during the settlement
period for either purchases or sales. In general, there is a large, liquid
market in the United States for ADRs quoted on a national securities exchange or
the NASD's national market system. The information available for ADRs is subject
to the accounting, auditing and financial reporting standards of the domestic
market or exchange on which they are traded, which standards are more uniform
and more exacting than those to which many foreign issuers may be subject.

EDRs and GDRs are receipts evidencing an arrangement with a non-U.S. bank
similar to that for ADRs and are designed for use in non-U.S. securities
markets. EDRs and GDRs are not necessarily quoted in the same currency as the
underlying security.

Foreign Government Securities. Each of the Funds may invest in debt obligations
of foreign governments or their agencies or instrumentalities, including those
with emerging economies or securities markets. Investing in sovereign debt
obligations involves risks not present in the debt obligations of foreign
corporate issuers. The issuer of the debt or the government authority that
controls the repayment of the debt may be unable or unwilling to repay principal
or interest when due and the Funds may have limited recourse in the event of
such a default. Periods of economic uncertainty may result in the volatility of
market prices of sovereign debt to a greater extent than the volatility inherent
in debt obligations of U.S. issuers. A sovereign debtor's willingness or ability
to repay principal or pay interest in a timely manner may be affected by, among
other factors, its cash flow circumstances, the extent of its foreign currency
reserves, the availability of sufficient foreign exchange on the date a payment
is due, the relative size of the debt

<PAGE>

service burden to the economy as a whole, its policy towards principal
international lenders and the political constraints to which a sovereign debtor
may be subject.

Supranational Agencies. Each of the Funds, except the S&P 500 Index Fund, U.S.
Equity Fund and Premier Growth Equity Fund, may invest in securities issued by
supranational agencies such as the International Bank for Reconstruction and
Development (commonly known as the World Bank), the European Economic Community,
the European Coal and Steel Community and the Asian Development Bank. Securities
of supranational agencies are not U.S. Government securities and are not
supported, directly or indirectly, by the U.S. Government, its agencies or
instrumentalities. The Income Fund may only invest up to 10% of its total assets
in supranational agency securities.

Investments in Emerging Markets. The Total Return Fund, Income Fund,
International Equity Fund and the Global Income Fund may invest substantial
portions of their portfolios in securities of issuers located in countries with
emerging economies and/or securities markets. The S&P 500 Index Fund, Government
Securities Fund, U.S. Equity Fund, Premier Growth Equity Fund and Value Equity
Fund may invest up to 5% of their total assets in such securities. These
countries are located primarily in the Asia-Pacific region, Eastern Europe,
Central and South America and Africa. Political and economic structures in many
of these countries may be undergoing significant evolution and rapid
development, and such countries may lack the social, political and economic
stability characteristic of more developed countries. Certain of these countries
have in the past failed to recognize private property rights and have at times
nationalized or expropriated the assets of private companies. As a result, the
risks of foreign investment generally, including the risks of nationalization or
expropriation of assets, may be heightened. In addition, unanticipated political
or social developments may affect the values of the Funds' investments in those
countries and the availability to a Fund of additional investments in those
countries.

The small size and inexperience of the securities markets in certain of these
countries and the limited volume of trading in securities in those countries may
also make investments in such countries illiquid and more volatile than
investments in Japan or most Western European countries. As a result, these
Funds may be required to establish special custody or other arrangements before
making certain investments in those countries. There may be little financial or
accounting information available with respect to issuers located in certain of
such countries, and it may be difficult as a result to assess the value or
prospects of an investment in such issuers. The laws of some foreign countries
may limit the ability of these Funds to invest in securities of certain issuers
located in those countries.

Foreign Currency Transactions. Because investment in foreign issuers will
usually involve currencies of foreign countries, and because each Fund, other
than the Money Market Fund, may have currency exposure independent of their
securities positions, the value of the assets of these Funds as measured in U.S.
dollars may be affected by changes in foreign currency exchange rates. To the
extent that a Fund's assets consist of investments quoted or denominated in a
particular currency, the Fund's exposure to adverse developments affecting the
value of such currency will increase. The International Equity Fund and the
Global Income Fund often have substantial currency exposure both from
investments quoted or denominated in foreign currencies and from their currency
positions.

Currency exchange rates may fluctuate significantly over short periods of time
causing, along with other factors, a Fund's net asset value to fluctuate. They
generally are determined by the forces of supply and demand in the foreign
exchange markets and the relative merits of investments in different countries,
actual or anticipated changes in interest rates and other complex factors, as
seen from an international perspective. Currency exchange rates also are
affected unpredictably by intervention by U.S. or foreign governments or central
banks, or the failure to intervene, or by currency controls or political
developments in the U.S. or abroad. To the extent that a substantial portion of
a Fund's total assets, adjusted to reflect the Fund's net position after giving
effect to currency transactions, is denominated or quoted in the currencies of
foreign countries, the Fund is more susceptible to the risk of adverse economic
and political developments within those countries.

In addition to investing in securities denominated or quoted in a foreign
currency, each Fund, other than the Money Market Fund, may engage in some or all
of the foreign currency management practices described below. Each also may hold
foreign currency received in connection with investments in foreign securities
when, in the judgment of the Adviser, it would be beneficial to convert such
currency into U.S. dollars at a later date, based on anticipated changes in the
relevant exchange rate. These Funds will incur costs in connection with
conversions between various currencies.

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Forward Foreign Currency Exchange Contracts. The Government Securities Fund,
Income Fund, U.S. Equity Fund, International Equity Fund, Total Return Fund, and
the Global Income Fund may purchase or sell forward foreign currency exchange
contracts for hedging purposes and the Government Securities Fund, International
Equity Fund, Total Return Fund and Global Income Fund may purchase or sell such
contracts to seek to increase total return. When purchased or sold for the
purpose of seeking to increase total return, forward foreign currency exchange
contracts are considered speculative. In addition, each of these Funds may enter
into forward foreign currency exchange contracts in order to protect against
anticipated changes in future foreign currency exchange rates. Each of these
Funds also may engage in cross-hedging by using forward contracts in a currency
different from that in which the hedged security is denominated or quoted if the
Adviser determines that there is a pattern of correlation between the two
currencies.

The Government Securities Fund, Income Fund, U.S. Equity Fund, International
Equity Fund, Total Return Fund, and the Global Income Fund may enter into
contracts to purchase foreign currencies to protect against an anticipated rise
in the U.S. dollar price of securities it intends to purchase. Each may enter
into contracts to sell foreign currencies to protect against the decline in
value of its foreign currency denominated or quoted portfolio securities, or a
decline in the value of anticipated dividends from such securities, due to a
decline in the value of foreign currencies against the U.S. dollar. Contracts to
sell foreign currency could limit any potential gain that might be realized by a
Fund if the value of the hedged currency increases. When the Government
Securities Fund, Income Fund, U.S. Equity Fund, International Equity Fund, Total
Return Fund, or the Global Income Fund enters into a forward foreign currency
exchange contract to sell foreign currency to seek to increase total return or
to buy foreign currency for any reason, it is required to segregate cash or
liquid securities with its custodian in an amount equal to the value of the
Fund's total assets committed to the consummation of the forward contract. If
the value of the segregated securities declines, additional cash or securities
is segregated so that the value of the account will equal the amount of the
Fund's commitment with respect to the contract.

Forward contracts are subject to the risk that the counterparty to such contract
will default on its obligations. Since a forward foreign currency exchange
contract is not guaranteed by an exchange or clearinghouse, a default on the
contract would deprive a Fund of unrealized profits, transaction costs or the
benefits of a currency hedge or force the Fund to cover its purchase or sale
commitments, if any, at the current market price.

Each of the Funds, other than the Money Market Fund, may utilize foreign forward
currency exchange contracts to settle non-dollar securities transactions.

Options on Currencies. The Total Return Fund, Income Fund, U.S. Equity Fund,
International Equity Fund and the Global Income Fund may purchase and sell
(write) put and call options on foreign currencies for the purpose of protecting
against declines in the U.S. dollar value of foreign portfolio securities and
anticipated dividends on such securities and against increases in the U.S.
dollar cost of foreign securities to be acquired. These Funds may use options on
currency to cross-hedge, which involves writing or purchasing options on one
currency to hedge against changes in exchange rates for a different currency, if
there is a pattern of correlation between the two currencies. As with other
kinds of option transactions, however, the writing of an option on foreign
currency will constitute only a partial hedge, up to the amount of the premium
received. These Funds could be required to purchase or sell foreign currencies
at disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on foreign currency may constitute an effective hedge against exchange
rate fluctuations; however, in the event of exchange rate movements adverse to
the Fund's position, the Fund may forfeit the entire amount of the premium plus
related transaction costs. In addition, the Total Return Fund, International
Equity Fund and Global Income Fund may purchase call or put options on currency
to seek to increase total return when the Adviser anticipates that the currency
will appreciate or depreciate in value, but the securities quoted or denominated
in that currency do not present attractive investment opportunities and are not
being held in the Fund. When purchased or sold to increase total return, options
on currencies are considered speculative. Options on foreign currencies written
or purchased by a Fund are traded either on U.S. and foreign exchanges or in the
over-the-counter market. See "Writing Covered Call and Put Options and
Purchasing Call and Put Options" below for a discussion of the liquidity risks
associated with options transactions.

Interest Rate Swaps and Currency Swaps. The Total Return Fund, International
Equity Fund and the Global Income Fund may enter into currency swaps for both
hedging purposes and to seek to increase total return. The Total Return

<PAGE>

Fund, and Global Income Fund may enter into interest rate swaps for these
purposes. These Funds typically use interest rate swaps to shorten the effective
duration of their portfolios. Interest rate swaps involve the exchange by a Fund
with another party of their respective commitments to pay or receive interest,
such as an exchange of fixed rate payments for floating rate payments. Currency
swaps involve the exchange by a Fund with another party of their respective
rights to make or receive payments in specified currencies. Since currency swaps
and interest rate swaps are individually negotiated, a Fund expects to achieve
an acceptable degree of correlation between its fund investments and its swap
positions entered into for hedging purposes.

The Total Return Fund and Global Income Fund only enter into interest rate swaps
on a net basis, which means that the two payment streams are netted out, with
the Fund receiving or paying, as the case may be, only the net amount of the two
payments. Interest rate swaps do not involve the delivery of securities, or
other underlying assets or principal. Accordingly, the risk of loss with respect
to interest rate swaps is limited to the net amount of interest payments that
the Fund is contractually obligated to make. If the other party to an interest
rate swap defaults, the Fund's risk of loss consists of the net amount of
interest payments that the Fund is entitled to receive. In contrast, currency
swaps usually involve the delivery of the entire principal value of one
designated currency in exchange for the other designated currency. Therefore,
the entire principal value of a currency swap is subject to the risk that the
other party to the swap will default on its contractual delivery obligations. A
Fund will segregate with its custodian cash or liquid securities equal to the
net amount, if any, of the excess of a its obligations over its entitlements
with respect to swap transactions. To the extent that the net amount of any swap
obligation is collateralized with liquid assets in this manner, the Company
believes that swaps do not constitute senior securities under the 1940 Act and,
accordingly, will not treat them as being subject to a Fund's borrowing
restriction.

The use of interest rate and currency swaps is a highly specialized activity
which involves investment techniques and risks different from those associated
with ordinary portfolio securities transactions. If the Adviser is incorrect in
its forecasts of market values, interest rates and currency exchange rates, the
investment performance of the Total Return Fund, International Equity Fund or
the Global Income Fund would be less favorable than it would have been if swaps
were not used.

Debt Securities

Debt Securities Generally. The market value of non-convertible debt securities
usually reflects yields generally available on newly issued-securities of
similar quality and type (i.e., prevailing current interest rates). When such
yields decline, the market value of outstanding debt securities generally rises
if such securities are protected against early call. Similarly, when such yields
increase, the market value of outstanding debt securities generally declines.

The Adviser may determine that certain unrated securities are of comparable
quality to those assigned particular ratings by one or more NRSROs. Where an
Adviser makes such a determination, the unrated security is treated as having
the rating of securities with which it is being compared.

U.S. Government Debt Securities. Each of the Funds may invest in U.S. Government
securities. These include: debt obligations of varying maturities issued by the
U.S. Treasury or issued or guaranteed by the Federal Housing Administration,
Farmers Home Administration, Import-Export Bank of the United States, Small
Business Administration, Government National Mortgage Association ("GNMA"),
General Services Administration, Central Bank for Cooperatives, Federal Farm
Credit Banks, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation,
Federal Intermediate Credit Banks, Federal Land Banks, Federal National Mortgage
Association, 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 issue dates. Certain of the foregoing U.S. Government
securities are supported by the full faith and credit of the United States,
whereas others are supported by the right of the agency or instrumentality to
borrow an amount limited to a specific line of credit from the U.S. Treasury or
by the discretionary authority of the U.S. Government or GNMA to purchase
financial obligations of the agency or instrumentality. In contrast, certain of
the foregoing U.S. Government securities are only supported by the credit of the
issuing agency or instrumentality. Because the U.S. Government is not obligated
by

<PAGE>

law to support an agency or instrumentality that it sponsors, a Fund only
invests in U.S. Government securities when the Adviser determines that the
credit risk associated with the obligation is suitable for the Fund.

Custody Receipts. Each of the Funds may also acquire U.S. Government securities
in the form of custody receipts. Such receipts evidence ownership of future
interest payments, principal payments or both on certain U.S. Government
securities. For certain securities law purposes, custody receipts are not
considered U.S. Government securities.

Zero Coupon Bonds. The Government Securities Fund, Total Return Fund, Income
Fund, U.S. Equity Fund, Global Income Fund and Value Equity Fund each may invest
in zero coupon bonds. Zero coupon bonds are debt obligations issued at a
significant discount from face value. The original discount approximates the
total amount of interest the bonds will accrue and compound over the period
until maturity or the first interest accrual date at a rate of interest
reflecting the market rate of the security at the time of issuance. A zero
coupon security pays no interest to its holder during its life and its value
(above its cost to a Fund) consists of the difference between its face value at
maturity and its cost. Zero coupon bonds benefit the issuer by mitigating its
initial need for cash to meet debt service, but some also provide a higher rate
of return to attract investors who are willing to defer receipt of such cash.
Zero coupon bonds experience greater volatility in market value due to changes
in interest rates than debt obligations that provide for regular payments of
interest. A Fund accrues income on zero coupon bonds for tax and accounting
purposes, as required, which is distributable to shareholders and which, because
no cash is received at the time of accrual, may require the liquidation of other
portfolio securities to satisfy the Fund's distribution obligations.

Mortgage-Backed and Asset-Backed Securities. Each of the Funds, other than the
S&P 500 Index Fund, U.S. Equity Fund and Premier Growth Equity Fund, may invest
in mortgage-backed securities, which represent direct or indirect participation
in, or are collateralized by and payable from, mortgage loans secured by real
property or instruments derived from such loans. Mortgage-backed securities
include various types of mortgage related securities such as government stripped
mortgage related securities, adjustable rate mortgage related securities and
collateralized mortgage obligations. These Funds may also invest in asset-backed
securities, which represent participation in, or are secured by and payable
from, assets such as motor vehicle installment sale contracts, installment loan
contracts, leases of various types of real and personal property, receivables
from revolving credit (credit card) agreements and other categories of
receivables. Such securities are generally issued by trusts and special purpose
corporations. Various types of mortgaged-backed and asset-backed securities are
discussed in "Investment Practices" in the SAI.

Mortgage-backed and asset-backed securities are often subject to more rapid
repayment than their stated maturity dates would indicate as a result of the
pass-through of prepayments of principal on the underlying loans. This may
increase the volatility of such instruments relative to other similarly rated
debt securities. During periods of declining interest rates, prepayment of loans
underlying mortgage-backed and asset-backed securities can be expected to
accelerate, and thus impair a Fund's ability to reinvest the returns of
principal at comparable yields. During periods of rising interest rates, reduced
prepayment rates may extend the average life of mortgage-backed and asset-backed
securities and increase the risk of depreciation due to future increases in
market interest rates. Accordingly, the market values of such securities vary
with changes in prevailing market rates of interest generally and in yield
differentials among various kinds of U.S. Government securities and other
mortgage-backed and asset-backed securities. Asset-backed securities present
certain additional risks not presented by mortgage-backed securities because
asset-backed securities generally do not have the benefit of a security interest
in collateral that is comparable to mortgage assets. There is the possibility
that, in some cases, recoveries on repossessed collateral may not be available
to support payments on these securities.

Each of the Funds, other than the S&P 500 Index Fund, U.S. Equity Fund and
Premier Growth Equity Fund, may use up to 25% of its total assets to enter into
mortgage "dollar rolls" in which a Fund sells securities for delivery in the
current month and simultaneously contracts with the same counterparty to
repurchase substantially similar (same type, coupon and maturity) but not
identical securities on a specified future date. A Fund loses the right to
receive principal and interest paid on the securities sold. However, the Fund
may benefit to the extent of any difference between the price received for the
securities sold and the lower forward price for the future purchase or fee
income plus the interest earned on the cash proceeds of the securities sold
until the settlement date for the forward purchase. Unless such benefits exceed
the income, capital appreciation and gain or loss due to mortgage prepayments
that would have been realized on the securities sold as part of the mortgage
dollar roll, the use of this technique dimin-

<PAGE>

ishes the investment performance of the Fund compared with what such performance
would have been without using the technique. Successful use of mortgage dollar
rolls depends upon the Adviser's ability to correctly predict interest rates and
mortgage prepayments. There can be no assurance that the Adviser can
successfully employ mortgage dollar rolls. When a Fund engages in mortgage
dollar rolls, it maintains liquid assets in a segregated account with its
custodian equal to the forward purchase price. For financial reporting and tax
purposes, these Funds treat mortgage dollar rolls as two separate transactions;
one involving the purchase of a security and the other involving the sale of a
different security. These Funds do not currently intend to enter into any
mortgage dollar rolls that are accounted for as a financing.

Structured or Indexed Securities. The Total Return Fund, Real Estate Securities
Fund, Income Fund, and Global Income Fund may invest in structured or indexed
Securities. The value of the principal of and/or interest on such securities is
determined by reference to changes in the value of specific currencies, interest
rates, commodities, indices or other financial indicators (the "Reference") or
the relative change in two or more References. The interest rate or the
principal amount payable upon maturity or redemption may be increased or
decreased depending upon changes in the applicable Reference. The terms of the
structured or indexed securities may provide that in certain circumstances no
principal is due at maturity and, therefore, may result in a loss of the Fund's
investment. Structured or indexed securities may be positively or negatively
indexed, so that appreciation of the Reference may produce an increase or a
decrease in the interest rate or value of the security at maturity. In addition,
changes in interest rates or the value of the security at maturity may be some
multiple of the change in the value of the Reference. Consequently, structured
or indexed securities may entail a greater degree of market risk than other
types of debt securities because a Fund bears the risk of the Reference.
Structured or indexed securities may also be more volatile, less liquid and more
difficult to accurately price than less complex securities.

Lower-Rated Debt Securities. Each Fund, other than the Money Market Fund and the
S&P 500 Index Fund, may invest in debt securities (and/or in convertible debt
securities) with lower ratings which generally carry greater risk of default and
are generally subject to greater market value fluctuations. If held by these
Funds in significant amounts, such securities would increase financial risk and
income fluctuation. Lower-rated debt and convertible securities have speculative
characteristics and changes in economic conditions and other circumstances are
more likely to weaken the capacity of issuers of such securities to make
principal and interest payments than would be the case as to issuers of higher
rated (i.e., investment grade) debt securities. In some cases, lower-rated debt
and convertible securities may be highly speculative, have poor prospects of
reaching investment grade standing or even be in default. See the SAI for a
description of securities ratings and of lower-rated securities, including
further discussion of the risks of investing in such instruments.

Writing Covered Call and Put Options and Purchasing Call and Put Options

Each Fund, other than the Money Market Fund, may write exchange-traded covered
call and put options on or relating to specific securities in order to earn
additional income or, in the case of a call written, to minimize or hedge
against anticipated declines in the value of its portfolio securities. All call
options written by these Funds are covered, which means that the Fund will own
the securities subject to the option as long as the option is outstanding. All
put options written by these Funds are covered, which means that the Fund
segregates with its custodian cash, or liquid securities with a value at least
equal to the exercise price of the option. Call and put options written by a
Fund may also be covered to the extent that the Fund's liabilities under such
options are offset by its rights under call or put options purchased by the Fund
and call options written by a Fund may also be covered by segregating cash or
securities with its custodian in the same manner as written puts are covered.

Through the writing of a covered call option a Fund receives premium income but
obligates itself to sell to the purchaser of such an option the particular
security underlying the option at a specified price at any time prior to the
expiration of the option period, regardless of the market value of the security
during this period. Through the writing of a covered put option, a Fund receives
premium income but obligates itself to purchase a particular security underlying
the option at a specified price at any time prior to the expiration of the
option period, regardless of market value during the option period.

32
<PAGE>

Each Fund, other than the Money Market Fund, may also write exchange-traded
covered call and put options on securities indices that correlate with its
particular portfolio securities. These Funds may write such options for the same
purposes as each may engage in such transactions with respect to individual
portfolio securities, that is, to generate additional income or as a hedging
technique to minimize anticipated declines in the value of the Fund's
securities. In economic effect, a securities index call or put option is similar
to an option on a particular security, except that the value of the option
depends on the weighted value of the group of securities comprising the index,
rather than a particular security, and settlements are made in cash rather than
by delivery of a particular security.

Each Fund, other than the Money Market Fund, may also purchase exchange-traded
call and put options with respect to securities and also with respect to
securities indices that correlate with its particular portfolio securities. A
Fund may purchase put options for defensive purposes in order to protect against
an anticipated decline in the value of their portfolio securities. As the holder
of a put option with respect to individual securities, a Fund has the right to
sell the securities underlying the options and to receive a cash payment at the
exercise price at any time during the option period. As the holder of a put
option on an index, a Fund has the right to receive, upon exercise of the
option, a cash payment equal to a multiple of any excess of the strike price
specified by the option over the value of the index. A Fund may purchase call
options on individual securities or on stock indices in order to take advantage
of anticipated increases in the price of those securities by purchasing the
right to acquire the securities underlying the option (or, with respect to
options on indices, to receive income equal to the value of such index over the
strike price). As the holder of a call option with respect to individual
securities, the Fund obtains the right to purchase the underlying securities at
the exercise price at any time during the option period. As the holder of a call
option on a stock index, a Fund obtains the right to receive, upon exercise of
the option, a cash payment equal to the multiple of any excess of the value of
the index on the exercise date over the strike price specified in the option.

The Income Fund, U.S. Equity Fund and Premier Growth Equity Fund may each use up
to 10% of their net assets to purchase put options on securities and an
additional 10% of their net assets to purchase call options on securities. As to
options purchased by each of these three Funds, the aggregate value of the
securities underlying call options and the obligations underlying put options,
may not exceed 25% of the net assets of each. In addition, premiums paid by each
of these three Funds to purchase options on securities, options on securities
indices, options on currencies and options on futures contracts, may not exceed
20% of the net assets of each.

Each Fund, other than the Money Market Fund, may also write and purchase
unlisted covered call and put options with respect to securities and also with
respect to securities indices. Such options are not traded on an exchange and
may not be as actively traded as listed securities, making the valuation of
these securities more difficult. In addition, an unlisted option entails a risk
not found in connection with listed options -- that the party on the other side
of the option transaction will default. This may make it impossible to close out
an unlisted option position in some cases, and profits may be lost thereby.
Except as described below, such unlisted over-the-counter options are generally
considered illiquid securities. A Fund will engage in such transactions only
with firms of sufficient credit to minimize these risks. Where a Fund enters
into an agreement with a primary dealer with respect to an unlisted option it
has written, and such agreement enables the Fund to have an absolute right to
repurchase at a pre-established formula price, the Fund will treat as illiquid
only the amount equal to the formula price described above less the amount by
which the option is "in-the-money."

Option-related investment practices involve certain risks that are different in
some respects from investment risks associated with similar funds which do not
engage in such activities. These risks include the following: writing covered
call options -- the inability to effect closing transactions at favorable prices
and the inability to participate in the appreciation of the underlying
securities above an amount equal to the exercise price plus the premium; writing
covered put options -- the inability to effect closing transactions at favorable
prices and the obligation to purchase the specified securities or to make a cash
settlement on a stock index at prices that may not reflect current market
values; and purchasing put and call options -- possible loss of the entire
premium paid.

In addition, the effectiveness of hedging through the purchase or sale (writing)
of securities index options by a Fund will depend upon the extent to which price
movements in the Fund's holdings being hedged correlate with price movements in
the selected securities index. Perfect correlation may not be possible because
the securities held or to

<PAGE>

be acquired by a Fund may not exactly match the composition of the securities
index on which options are purchased or written.

As to all options, if the Advisers' forecasts regarding movements in securities
prices or interest rates are incorrect, a Fund's investment results might have
been more favorable without the hedge. Because of these risks, the use of
"options" related investment practices requires special skills in addition to
those needed to select portfolio securities. A more detailed description of
these investment practices and their associated risks is contained in the SAI.

Financial Futures Contracts and Options on Such Contracts

Each Fund, other than the Money Market Fund, may enter into financial futures
contracts (and options thereon) that are traded on a U.S. or foreign exchange or
board of trade or in the over-the-counter market. These Funds enter into
financial futures contracts and options thereon: (1) for the purpose of hedging
against the effects of changes in the value of portfolio securities or other
investments due to anticipated changes in interest rates, stock market
conditions and currency market conditions, (2) to gain stock, bond or currency
market exposure for accumulating and residual cash positions, (3) for duration
management, and (4) when such transactions are an economically appropriate way
to reduce risks inherent in the management of a Fund. When used as hedges, the
Funds will purchase appropriate financial futures contracts only when each
intends to purchase the underlying securities that may be affected by such
increases in equity prices or decreases in interest rates or changes in currency
exchange rates (as the case may be) and will purchase such financial futures
contracts in approximately the amount being hedged. When used as hedges, the
Adviser expects that purchases of the underlying securities will, in fact, be
made a substantial majority of the time. In addition, each Fund, other than the
Money Market Fund, Income Fund, U.S. Equity Fund and Premier Growth Equity Fund
may purchase and sell financial futures contracts for non-hedging purposes such
as seeking additional income or otherwise seeking to increase total return.

Financial futures contracts consist of interest rate futures contracts, stock
index futures contracts, bond index futures contracts, and currency futures
contracts. An interest rate futures contract is a contract to buy or sell
specified debt securities at a future time for a fixed price. A stock index or
bond index futures contract is similar in economic effect, except that rather
than being based on specified debt securities, it is based on a specified index
of stocks or bonds and not the stocks or bonds themselves. A currency futures
contract is a contract to purchase or sell a specific amount of foreign currency
at a future time at a fixed price.

Each Fund, other than the Money Market Fund, may write covered call and put
options and may purchase put and call options on futures contracts of the type
which that Fund is permitted to purchase and sell in accordance with its
investment objective and investment program, and may enter into closing
transactions with respect to such options on futures contracts written or
purchased. An option to acquire a financial futures contract gives the purchaser
thereof the right to assume a position in the underlying futures contract, and,
therefore, can serve the same hedging function as owning the futures contract
directly.

A Fund may seek to close out (at its market price in the secondary market) a put
option it has written before the option has expired. If the secondary market for
that option is not liquid, however, a Fund must continue to be prepared to pay
the strike price while the option remains outstanding, (regardless of price
changes), and must continue to segregate liquid assets to cover this position.

None of the Funds will enter into any financial futures contract or purchase any
option thereon, if, immediately thereafter, the total amount of its assets
required to be on deposit as margin to secure its obligations under open futures
contracts, plus the amount of premiums paid by the Fund for outstanding options
to purchase futures contracts, would exceed 5% of the value of the Fund's total
assets.

The use of futures contracts by these Funds entails certain risks, including but
not limited to the following: no assurance that futures contract transactions
can be offset at favorable prices; possible reduction of a Fund's income due to
the use of hedging; possible reduction in value of both the securities hedged
and the hedging instrument; possible lack of liquidity due to daily limits on
price fluctuations; imperfect correlation between the futures contract and the
securities being hedged; and potential losses in excess of the amount initially
invested in the futures contracts them-

<PAGE>

selves. If expectations regarding movements in securities prices, interest
rates, or currency exchange rates are incorrect, a Fund might have experienced
better investment results without hedging. The use of futures contracts and
options on futures contracts requires special skills in addition to those needed
to select portfolio securities. A further discussion of futures contracts and
their associated risks is contained in the SAI.

Restricted Securities and Illiquid Investments

The Adviser is responsible for determining the value and liquidity of
investments held by each Fund. Investments may be illiquid because of the
absence of a trading market, making it difficult to value them or dispose of
them promptly at an acceptable price. The S&P 500 Index Fund, Government
Securities Fund, Money Market Fund and Total Return Fund will each not purchase
or otherwise acquire any investment, if as a result, more than 10% of its net
assets (taken at current value) would be invested in illiquid investments. The
International Equity Fund, Income Fund, U.S. Equity Fund, Premier Growth Equity
Fund, Real Estate Securities Fund, Value Equity Fund and Global Income Fund will
each not purchase or otherwise acquire any investment, if as a result, more than
15% of its total assets (taken at current value) would be invested in illiquid
investments.

Illiquid investments include most repurchase agreements maturing in more than
seven days, currency swaps, time deposits with a notice or demand period of more
than seven days, certain over-the-counter option contracts (and segregated
assets used to cover such options), participation interests in loans, and
restricted securities. A restricted security is one that has a contractual
restriction on resale or cannot be resold publicly until it is registered under
the Securities Act of 1933 (the "1933 Act").

The International Equity Fund, Income Fund, U.S. Equity Fund, Premier Growth
Equity Fund, Real Estate Securities Fund, Value Equity Fund and Global Income
Fund may invest in restricted securities. Restricted securities are not,
however, considered illiquid if they are eligible for sale to qualified
institutional purchasers in reliance upon Rule 144A under the 1933 Act and that
are determined to be liquid by the Fund's board of directors or by the Adviser
under board-approved procedures. Such guidelines would take into account trading
activity for such securities and the availability of reliable pricing
information, among other factors. To the extent that qualified institutional
buyers become for a time uninterested in purchasing these restricted securities,
a Fund's holdings of those securities may become illiquid. Purchases by these
Funds of securities of foreign issuers offered and sold outside the United
States in reliance upon the exemption from registration provided by Regulation S
under the 1933 Act also may be liquid even though they are restricted.

The Income Fund, U.S. Equity Fund and Premier Growth Equity Fund may each not
invest more than 10% of their total assets in illiquid restricted securities and
more than 15% of their total assets in a combination of illiquid securities and
illiquid restricted securities.

Borrowing

Each of the Funds may borrow the following amounts as a temporary measure to
meet redemption requests or for extraordinary or emergency purposes that might
otherwise require the untimely liquidation of securities: 20% for S&P 500 Index
Fund; 33.33% for Income Fund, U.S. Equity Fund and Premier Growth Equity Fund;
and 10% for all of the other Funds. The amounts are measured as a percent of
total assets measured at market value at the time of the borrowing. The Funds
may only borrow from banks except that the Income Fund, U.S. Equity Fund and
Premier Growth Equity Fund may borrow by entering into reverse repurchase
agreements.

From time to time, the International Equity Fund may increase its ownership of
various investments by borrowing from banks and investing the borrowed funds (on
which the Fund pays interest). The Fund may borrow only up to 10% of the value
of its total assets, subject to the 300% asset coverage requirement under the
1940 Act. Purchasing investments with borrowed funds is a speculative investment
method known as "leverage," that may subject the Fund to relatively greater
risks and costs (which may include commitment fees and/or the cost of
maintaining minimum average balances with the lender) than would otherwise be
the case, including possible reduction of income and increased fluctuation of
net asset value per share. A further discussion of borrowing is contained in the
SAI.

35
<PAGE>

Real Estate Investment Trusts

The S&P 500 Index Fund, Total Return Fund, International Equity Fund, Real
Estate Securities Fund, U.S. Equity Fund, Premier Growth Equity Fund and Value
Equity Fund may invest in shares of REITs. REITs are pooled investment vehicles
that invest primarily in income producing real estate or real estate related
loans or interests therein. REITs are generally classified as equity REITs,
mortgage REITs or a combination of equity and mortgage REITs. Equity REITs
invest the majority of their assets directly in real property and derive income
primarily from the collection of rents. Equity REITs can also realize capital
gains by selling properties that have appreciated in value. Mortgage REITs
invest the majority of their assets in real estate mortgages and derive income
from the collection of interest payments. REITs are not taxed on income
distributed to shareholders provided they comply with several requirements of
the Code.

Other Investment Companies

All of the Funds may invest up to 10% of their total assets in securities of
other investment companies. However, no Fund may invest more than 5% of its
total assets in the securities of any one investment company or in more than 3%
of the voting securities of any other investment company. Investments by the
Funds (other than the Money Market Fund) in the Short-Term Fund is not
considered an investment in another investment fund or investment company for
purposes of this paragraph and the restrictions described above. To the extent a
Fund invests in other investment companies, the Fund incurs certain duplicative
fees and expenses, including investment advisory fees.

DETERMINATION OF NET ASSET VALUE

The net asset value of each Fund is determined as of the time of the close of
trading on the New York Stock Exchange, (currently at 4:00 PM, New York City
time) on each day when the New York Stock Exchange is open. The New York Stock
Exchange is scheduled to be open Monday through Friday throughout the year,
except for certain federal and other holidays. The net asset value of a Fund is
determined by adding the values of all securities, cash and other assets
(including accrued but uncollected interest and dividends) of that Fund and
subtracting all liabilities (including accrued expenses but excluding capital
and surplus). Expenses, including investment advisory fees, are accrued daily.
The net asset value of a share is determined by dividing the net asset value of
a Fund by the number of outstanding shares of that Fund.

The value of each Fund's securities and assets, except those of the Money Market
Fund and certain short-term debt securities held by the other Funds, is
determined on the basis of their market values. All of the securities and assets
of the Money Market Fund and debt securities having a remaining maturity of
sixty days or less held by any of the other Funds are valued by the amortized
cost method, which approximates market value. Investments for which market
quotations are not readily available, are valued at their fair market value as
determined in good faith by, or under the authority delegated by, the Company's
board of directors. See "Determination of Net Asset Value" in the SAI for more
information.

PURCHASE AND REDEMPTION OF FUND SHARES

Pursuant to a distribution agreement dated April 2, 1996, Forth Financial
Securities Corporation ("FFSC") acts without remuneration as the Fund's
distributor in the distribution of the shares of each Fund. FFSC is a
wholly-owned subsidiary of Forth Financial Resources, Ltd., which is in turn a
wholly-owned subsidiary of General Electric Company ("GE"). FFSC is located at
6610 West Broad Street, Richmond, Virginia 23230. FFSC has no obligation under
the distribution agreement to sell any stated number of shares.

Shares of the Funds are sold in a continuous offering and are authorized to be
offered to the Accounts to support the variable contracts. Net purchase payments
under the variable contracts are placed in one or more subaccounts of the
Accounts and the assets of each such subaccount are invested in the shares of
the Fund corresponding to that subaccount. The Accounts purchase and redeem
shares of the Funds for their subaccounts at net asset value without sales or
redemption charges. In the future, qualified pension and retirement plans may
purchase and redeem shares of the Funds on a basis to be negotiated between the
Company or FFSC or both and such plans.

<PAGE>

For each day on which a Fund's net asset value is calculated, the Accounts
transmit to the Company any orders to purchase or redeem shares of the Fund(s)
based on the net purchase payments, redemption (surrender) requests, and
transfer requests from variable contract owners, annuitants and beneficiaries
that have been processed on that day. Similarly, qualified pension and
retirement plans may in the future transmit to the Company any orders to
purchase or redeem shares of the Fund(s) based on the instructions of plan
trustees or participants. The Account purchases and redeems shares of each Fund
at the Fund's net asset value per share calculated as of the day the Company
receives the order, although such purchases and redemptions may be executed the
next morning. Money received by the Company from the Accounts for the purchase
of shares of International Equity Fund or Global Income Fund may not be invested
by these Funds until the day following the execution of such purchases. Payment
for shares redeemed will be made within seven days after receipt of a proper
notice of redemption, except that the right of redemption may be suspended or
payments postponed when permitted by applicable laws and regulations.

DIVIDENDS, DISTRIBUTIONS AND TAXES

Dividends and Distributions

It is the Company's intention to distribute, as dividends, substantially all of
the net investment income, if any, from each of the Funds. All dividends of a
Fund are subsequently reinvested in additional shares of that Fund at net asset
value. For dividend purposes, net investment income of a Fund consists of all
payments of dividends or interest received by that Fund less realized investment
losses, if any, and estimated expenses. All net realized investment gains, if
any, of a Fund are expected to be declared and distributed annually. Dividends
attributable to the net investment income of the Funds other than the Money
Market Fund are declared and paid annually. Dividends attributable to the net
investment income of the Money Market Fund are declared daily and paid monthly.

Taxes

The Company believes that each of the Funds will qualify as a regulated
investment company under Subchapter M of Chapter 1 of the Internal Revenue Code
of 1986 (the "Code"). Since each Fund intends to annually distribute
substantially all of its net income and gains to its shareholders, then under
the provisions of Subchapter M, the Funds should have little or no income
taxable to it under the Code. Distributions will be made, however, consistent
with the Code's rules defining a regulated investment company.

Each Fund of the Company must meet several requirements to maintain its status
as a regulated investment company. These requirements include the following: (1)
at least 90% of the Fund's gross income must be derived from dividends,
interest, payments with respect to securities loaned, and gains from the sale or
disposition of securities; (2) the Fund's gains (without reduction for losses)
derived from sales of securities held for less than three months must account
for less than 30% of the Fund's gross income; and (3) at the close of each
quarter of the Fund's taxable year, (a) at least 50% of the value of the Fund's
assets must consist of cash, United States Government securities and other
securities (no more than 5% of the value of the Fund may consist of such other
securities of any one issuer, and the Fund must not hold more than 10% of the
outstanding voting stock of any issuer), and (b) the Fund must not invest more
than 25% of the value of its assets in the securities of any one issuer (other
than United States Government securities).

The Internal Revenue Service (the "Service") has ruled publicly that, for
purposes of various of the requirements described above, an exchange-traded call
option is a security and its issuer is the issuer of the underlying security,
not the writer of the option. Also, the Service has ruled privately (at the
request of a taxpayer other than the Funds) that, for purposes of the various
requirements described above (1) certain instruments on stock indices (including
exchange-traded options on a stock index, stock index futures, and options on
stock index futures) are treated as securities, the issuers of which are the
issuers of the stock underlying each index in proportion to the weighting of the
stocks in the computation of the index, and (2) certain instruments on United
States Government securities (including exchange-traded futures contracts,
options, and options on futures contracts) are treated as securities, the issuer
of which is the United States Government. In addition, with respect to certain
instruments, the Service has ruled privately (at the request of a taxpayer other
than the Funds) that gains includable in income solely by reason of
mark-to-market rules in the Code will be treated as gains derived from
securities held for at least three months for purposes of the 30% test described
above.

<PAGE>

Since taxpayers other than the taxpayer requesting a private ruling from the
Service are not entitled to rely on the ruling, the Company may, in its business
judgment, restrict a Fund's ability to enter into options or futures
transactions or engage in short-term trading and transactions in securities
(including options and futures contracts). For the same reason, the Company may,
in its business judgment, require a Fund to defer the closing out of a contract
beyond the time when it might otherwise be advantageous to do so.

Each of the Funds also intends to comply with section 817(h) of the Code and the
regulations issued thereunder, which impose certain investment diversification
requirements on life insurance companies' separate accounts (such as the
Accounts) that are used to fund benefits under variable life insurance and
variable annuity contracts. These requirements are in addition to the
requirements of subchapter M and of the 1940 Act, and may affect the securities
in which a Fund may invest. In order to comply with the current or future
requirements of section 817(h) (or related provisions of the Code), the Company
may be required, for example, to alter the investment objectives of one or more
of the Funds.

Foreign Investments. Funds investing in foreign securities or currencies may be
required to pay withholding or other taxes to foreign governments. Foreign tax
withholding from dividends and interest, if any, is generally at a rate between
10% and 35%. The investment return of any Fund that invests in foreign
securities or currencies will be reduced by these foreign taxes. Shareholders
will bear the cost of any foreign tax withholding, but may not be able to claim
a foreign tax credit or deduction for these foreign taxes. Funds investing in
securities of passive foreign investment companies may be subject to U.S.
federal income taxes and interest charges, and the investment return of a Fund
making such investments will be reduced by these taxes and interest charges.
Shareholders will bear the cost of these taxes and interest charges, but will
not be able to claim a deduction for these amounts.

Additional Tax Considerations. If a Fund failed to qualify as a regulated
investment company, owners of variable life insurance and annuity contracts
based on the Fund (1) might be taxed currently on the investment earnings under
their contracts and thereby lose the benefit of tax deferral, and (2) the Fund
might incur additional taxes. In addition, if a Fund failed to comply with the
diversification requirements of the regulations under Subchapter L of the Code,
owners of variable life insurance and annuity contracts based on the Fund would
be taxed on the investment earnings under their contracts and thereby lose the
benefit of tax deferral. Accordingly, compliance with the above rules is
carefully monitored by the Advisers and it is intended that each Fund will
comply with these rules as they exist or as they may be modified from time to
time. Compliance with the tax requirements described above may result in a
reduction in the return of a Fund, since, to comply with the above rules, the
investments utilized (and the time at which such investments are entered into
and closed out) may be different from what the Advisers might otherwise believe
to be desirable.

It is not feasible to comment on all of the federal tax consequences
concerning the Funds. Since the shareholders of the Funds are currently limited
to the Accounts, no further discussion of those consequences is included herein.
For information concerning the federal income tax consequences to the owners of
variable life insurance and annuity contracts, see the prospectuses for the
contracts.

MANAGEMENT OF THE COMPANY

Board of Directors

The Company has a board of directors, the members of which are elected by the
shareholders. A majority of the directors are not associated with GEIM, Life of
Virginia or GE or their affiliates. The Directors are responsible for the
overall management of the Company and their duties include reviewing the results
of each Fund, monitoring investment activities and practices, and receiving and
acting upon future plans for the Company.

Investment Adviser

GEIM, a wholly-owned subsidiary of GE, is the investment adviser and
administrator for the Fund. It is registered under the Investment Advisers Act
of 1940 and its principal office is located at 3003 Summer Street, Stamford
Connecticut 06905. GEIM currently provides investment advisory services with
respect to 25 other mutual funds and

<PAGE>

a number of other private institutional accounts. The professionals responsible
for the investment operations of GEIM serve in similar capacities with respect
to General Electric Investment Corporation ("GEIC"), a sister company of GEIM
wholly owned by GE, which provides investment advisory services with respect to
GE's pension and benefit plans and a number of funds offered exclusively to GE
employees, retirees and certain related persons. These funds include the Elfun
family of Funds (the first of which, Elfun Trusts, was established in 1935) and
the funds offered as part of GE's 401(k) program (also known as the GE Savings
and Security Program), which are referred to as the GE S&S Program Mutual Fund
and the GE S&S Long Term Interest Fund. The investment professionals at GEIM and
GEIC and their predecessors have managed GE's pension assets since 1927. As of
December 31, 1996, GEIM and GEIC managed assets in excess of $58 billion,
including roughly $11 billion in mutual fund assets.

GEIM manages the investments of the Government Securities Fund, Money Market
Fund, Total Return Fund, Income Fund, U.S. Equity Fund, Premier Growth Equity
Fund and International Equity Fund determining which securities to buy and sell
for each, selecting the brokers and dealers to effect the transactions,and
negotiating commissions. In placing orders for securities transactions, GEIM's
policy is to attempt to obtain the best overall terms available. Subject to this
policy, GEIM may also allocate brokerage to broker/dealers based upon their sale
of Life of Virginia variable life insurance and variable annuity contracts. GEIM
has engaged investment sub-advisers to provide the day-to-day fund management of
the S&P 500 Index Fund, Real Estate Securities Fund, Value Equity Fund and
Global Income Fund.

The Company has entered into an investment advisory and administration agreement
(together, the "advisory agreements") with GEIM for each Fund, other than the
Income Fund, U.S. Equity Fund, and Premier Growth Equity Fund, effective May 1,
1997. The Company has entered into an investment advisory and administration
agreement (also, the "advisory agreements") with GEIM for the Income Fund, U.S.
Equity Fund and Premier Growth Equity Fund effective August __, 1997. Under
these agreements, GEIM or a sub-adviser provides a continuous investment program
for each Fund's assets, including investment research and management. GEIM or a
sub-adviser determines what investments will be purchased, retained or sold by
the Funds and places purchase and sale orders for the Funds' investments. GEIM
provides the Company 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. GEIM furnishes the Company
and each Fund with office space, facilities, and equipment and pays the
day-to-day expenses related to the operation of such space, facilities and
equipment. GEIM, as administrator, also: (1) maintains the books and records of
each Fund; (2) prepares reports to shareholders of each Fund; (3) prepares and
files tax returns for each Fund; (4) assists with the preparation and filing of
reports and the Company's registration statement with the Securities and
Exchange Commission; (5) provides appropriate officers for the Company; (6)
provides administrative support necessary for the board of directors of the
Company to conduct meetings; and (7) supervises and coordinates the activities
of other service providers, including independent auditors, legal counsel,
custodians, accounting service agents, and transfer agents.

Prior to May 1, 1997, Aon Advisors, Inc. ("AAI") served as investment adviser to
the Company and the Money Market Fund, S&P 500 Index Fund, Government Securities
Fund, Total Return Fund, International Equity Fund and Real Estate Securities
Fund pursuant to a series of investment advisory agreements between the Company
and AAI. AAI, a wholly owned subsidiary of Aon Corporation, is located at 123 N.
Wacker Drive, Chicago, Illinois 60606. The investment advisory fees under the
advisory agreements with GEIM are the same as the fees under the Company's
investment advisory agreements with AAI. The SAI contains a further discussion
of the Company's investment advisory agreements with AAI and information about
AAI.

During the Fund's fiscal year ended December 30, 1996, the total operating
expenses incurred by the Funds (including the advisory fees paid to AAI), before
reimbursement, represented 0.48% of the average net assets of the S&P 500 Index
Fund, 0.67% of the average net assets of the Government Securities Fund, 0.15%
of the average net assets of the Money Market Fund, 0.60% of the average net
assets of the Total Return Fund, 1.56% of the average net assets of the
International Equity Fund, and 1.07% of the Real Estate Securities Fund. During
the Fund's fiscal year ended December 30, 1996, AAI reimbursed the Fund for
expenses in an amount representing 0.06% of the average net assets of the
International Equity Fund.

39
<PAGE>

Investment Sub-Advisers

Prior to May 1, 1997, Perpetual Fund Management, Limited ("Perpetual"), a
wholly-owned subsidiary of Perpetual plc, was the investment sub-adviser for the
International Equity Fund. It is registered under the Investment Advisers Act of
1940 as an investment adviser and has its principal offices at 48 Hart Street,
Henley-on-Thames, Oxfordshire, England RG9 2AZ. In addition to the International
Equity Fund, Perpetual provided investment advice and management to pension
plans, corporations and other institutional and individual clients.

SSGA is the investment sub-adviser to the S&P 500 Index Fund pursuant to an
investment sub-advisory agreement with GEIM effective August __, 1997. SSGA is a
division of State Street Bank and Trust Company ("State Street"). SSGA is
located at Two International Place, Boston, Massachusetts 02110. State Street is
a wholly-owned subsidiary of State Street Corporation, a publicly held bank
holding company. State Street, with over $292 billion under management as of
December 31, 1996, provides complete global investment management services from
offices in the United States, London, Sydney, Hong Kong, Tokyo, Toronto,
Montreal, Luxembourg, Melbourne, Paris, Dubai, Munich and Brussels.

Seneca, a limited liability company, is the investment sub-adviser for the Real
Estate Securities Fund pursuant to an investment sub-advisory agreement
effective July __, 1997. Seneca is located at 909 Montgomery Street, San
Francisco, CA 94133. Seneca is a majority owned subsidiary of Phoenix Duff &
Phelps Corporation ("Phoenix"). 40% of the stock of Phoenix is publicly held and
traded on the New York Stock Exchange while the remaining 60% is owned by a
wholly owned subsidiary of Phoenix Home Life Mutual Insurance Company. Seneca is
an investment adviser that provides investment management services to
foundations, endowments, corporations, mutual funds and private clients. Seneca
currently manages approximately $3.8 billion in equity, fixed-income and real
estate assets.

NWQ is the investment sub-adviser to the Value Equity Fund pursuant to an
investment sub-advisory agreement with GEIM effective May 1, 1997. NWQ, located
at 655 South Hope Street, Los Angeles, CA 90017, is a wholly owned subsidiary of
United Asset Management Corporation, a company whose principal business is
managing investments for institutional clients through 45 operating subsidiaries
and acquiring investment management firms. NWQ is a manager of domestic
investment portfolios for individual, union, corporate, endowment and foundation
clients with 15 years of experience. It manages approximately $6.5 billion in
assets.

GE Investments (US) Limited ("GEIUS") is the investment sub-adviser to the
Global Income Fund pursuant to an investment sub-advisory agreement with GEIM
effective May 1, 1997. Like GEIM, GEIUS is a wholly owned subsidiary of GE and
is considered under common control with GEIM. GEIUS is located at Sweden House,
20 St. James' Street, London, SW1A 1ES, England and is registered as an
investment adviser under the Investment Advisers Act of 1940. Although GEIUS has
no prior experience advising a U.S. mutual fund, it currently manages
approximately $1.1 billion in assets.

Seneca, NWQ, GEIUS and SSGA manage the investments of the Real Estate Securities
Fund, Value Equity Fund. Global Income Fund and S&P 500 Index Fund,
respectively, determining which securities or other investments to buy and sell
for each, selecting the brokers and dealers to effect the transactions, and
negotiating commissions. In placing orders for securities transactions, all
three sub-advisers follow GEIM's policy of seeking to obtain the most favorable
price and efficient execution available.

40
<PAGE>

For their services, GEIM pays (out of the advisory fee that it receives) Seneca,
NWQ, GEIUS, and SSGA monthly compensation in the form of an investment
sub-advisory fee. The fee is paid by GEIM monthly and is based upon the average
daily net assets of the Fund that each sub-adviser manages.

Compensation of Advisers

Maximum annual rate
Adviser or 1996 annual rate (as a % (as a % of average
Fund Sub-Adviser of average daily net assets) daily net assets)*
------------- -------------- ---------------------------- -----------------------

<S> <C> <C> <C>
S&P 500 Index GEIM .35 .35
S&P 500 Index SSGA N/A .05
Government Securities GEIM .50 .50
Money Market GEIM .49 .50**
Total Return GEIM .50 .50
Income GEIM N/A .50
U.S. Equity GEIM N/A .55
Premier Growth Equity GEIM N/A .65
International Equity GEIM 1.00 1.00
Real Estate Securities GEIM .85 .85
Real Estate Securities Seneca .425 .425
Value Equity GEIM N/A .65
Value Equity NWQ N/A .4875
Global Income GEIM N/A .60
Global Income GEIUS N/A .05

</TABLE>
- ----------

* The fees payable to GEIM in connection with the Money Market Fund,
Government Securities Fund, Total Return Fund, International Equity Fund
and Real Estate Securities Fund and the fees payable to SSGA, Seneca and
NWQ in connection with the S&P 500 Index Fund, Real Estate Securities Fund,
and Value Equity Fund are graduated so that increases in the respective
Fund's average annual net assets may result in a lower fee and decreases in
a Fund's average annual net assets may increase the fee. The maximum annual
rate payable to each Adviser is indicated in the right-hand column.

** The Adviser has voluntarily agreed to waive a portion of the fee paid by
the Money Market Fund so that the fee is equal to .25%.

See "Management of the Company" in the SAI for further information.

Portfolio Managers

Eugene K. Bolton leads a team of portfolio managers for the U.S. Equity Fund. He
is an Executive Vice President and Director of GEIM and GEIC (GEIM and GEIC are
referred to hereinafter together as "GE Investments"). Mr. Bolton also is
responsible for the overall management of the domestic equity related process at
GE Investments. He joined GE Investments in 1984, prior to which he served for
twenty years in various financial management positions in GE. Mr. Bolton
received a B.A. in business and management from Mundelein College.

Jon D. Bosse, portfolio manager of the Value Equity Fund, joined NWQ in 1996.
Prior to joining NWQ, he spent ten years with ARCO Investment Management Company
where he was Director of Equity Research and managed a value-oriented fund.
Previous to this, he spent four years in the corporate finance department of
ARCO. Mr. Bosse received his B.A. (summa cum laude) in economics from Washington
University in St. Louis where he received the John M. Olin Award for excellence
in economics and his M.B.A. from Wharton Business School, University of

41
<PAGE>

Pennsylvania. Mr. Bosse is also a Chartered Financial Analyst and a member of
the Association for Investment Management and Research and the Los Angeles
Society of Financial Analysts.

David B. Carlson, portfolio manager of the Premier Growth Equity Fund and the
domestic equity portion of the Total Return Fund, joined GE Investments in 1982.
Since that time, Mr. Carlson has held a variety of positions with GE Investments
and currently is a Senior Vice President of GE Investments. Mr. Carlson received
a B.A. in finance from Indiana University and is a Chartered Financial Analyst.

Ralph R. Layman leads a team of portfolio managers for the International Equity
Fund and is also responsible for international equity portion of the Total
Return Fund. He joined GE Investments in 1991 and is an Executive Vice President
and Director of GE Investments and a trustee of the GE Pension Fund. Prior to
joining GE Investments, he held positions over a twelve-year period with
Northern Capital Management, Templeton Investment Counsel, Wausau Insurance
Company and Rockwell International. Mr. Layman received a B.S. in economics and
an M.S. in finance from the University of Wisconsin. He is a Chartered Financial
Analyst and a founding member of the International Society of Financial
Analysts.

Robert A. MacDougall leads a team of portfolio managers for the Government
Securities Fund, and the Income Fund and is also responsible for the debt
portion of the Total Return Fund. He joined GE Investments in 1986 and has
served in various financial management capacities with GE since 1973. Mr.
MacDougall is an Executive Vice President and a Director of GE Investments. Mr.
MacDougall received a B.B.A. and an M.B.A. from the University of Massachusetts.

David A. Shapiro, portfolio manager of the Real Estate Securities Fund, joined
Seneca as a portfolio manager in 1995. In 1992, Mr. Shapiro became a principal
of Asset Holdings Group (he has remained a principal of Asset Holdings Group).
From 1982 to 1992, he was a Managing Director of The Adco Group, a real estate
development and finance company. Mr. Shapiro received a B.A. from Columbia
University and a J.D. from the University of Arizona.

William R. Wright, portfolio manager of the Global Income Fund, joined GE
Investments in 1993, and assumed responsibility for GEIUS at its inception in
1995. He is also a Vice President of GE Investments. Prior to joining GE
Investments, Mr. Wright worked for Continental Asset Management Corp. where he
was a portfolio manager of its U.K. subsidiary. After serving as a language
specialist in the U.S. Army Security Agency, he began his career in 1979 with
Coopers & Lybrand, and joined Bankers Trust Company in 1980. Mr. Wright received
his B.A. in political science/Asian studies from Wittenberg University and an
MBA in finance from New York University. He is a member of the Association for
Investment Management and Research and the New York Society of Security
Analysts.

James B. May leads a team of portfolio managers for the S&P 500 Index Fund. Mr.
May has been an investment officer and portfolio manager in the U.S. Structured
Products Group of State Street since 1994. From 1991 to 1993, Mr. May served as
an Investment Support Analyst in the U.S. Passive Services Group of State
Street. Mr. May holds a B.S. in finance from Bentley College and an M.B.A. from
Boston College.

ADDITIONAL INFORMATION

Capital Stock

The Company is currently issuing eleven classes of capital stock with each
representing interests in a different Fund. All shares of capital stock
(including fractional shares) have equal rights with regard to voting,
redemptions, dividends, distributions, and liquidations with respect to the Fund
in which they represent an interest. When issued, shares are fully paid and
nonassessable and do not have preemptive or conversion rights or cumulative
voting rights.

Contract Owner Voting Rights

With regard to matters for which the 1940 Act requires a shareholder vote, Life
of Virginia and GNA votes Fund shares held in an Account in accordance with
instructions received from owners of variable life insurance and vari-

<PAGE>

able annuity contracts (or annuitants or beneficiaries thereunder) having a
voting interest in that Account. Each share has one vote and votes are counted
on an aggregate basis except as to matters where the interests of Funds differ
(such as approval of an investment advisory agreement or a change in the
fundamental investment policies). In such a case, the voting is on a
Fund-by-Fund basis. Fractional shares are counted. Shares held by the Accounts
for which no instructions are received are voted by Life of Virginia and GNA for
or against any proposition, or in abstention, in the same proportion as the
shares for which instructions have been received.

Plan Participant Voting Rights

With regard to matters for which the 1940 Act requires a shareholder vote,
trustees of qualified pension and retirement plans are expected to vote Fund
shares held by their plans either in their own discretion or in accordance with
instructions received from participants in such plans if such participants have
a voting interest in such plans.

Annual Reports

The Fund's annual report to shareholders contains additional performance
information that will be made available upon request and without charge.

Inquiries

Contract owner and plan participant inquiries should be sent to GE Investments
Funds, Inc., 3003 Summer Street, Stamford, Connecticut 06905.

Custodian, Transfer and Dividend Paying Agent

Pursuant to a custody agreement with the Company, State Street serves as
custodian of the Fund's assets and also performs certain accounting services for
the Company. These services include maintaining certain of the Company's books,
accounts, journals and other records of original entry and performing certain
daily functions related thereto, including calculating each Fund's daily net
asset value. The principal office of State Street is 225 Franklin Street,
Boston, MA 02110. The Life Insurance Company of Virginia is the Company's
transfer and dividend paying agent. It is located at 6610 West Broad Street,
Richmond, VA 23230.

Legal Matters

Sutherland, Asbill & Brennan, L.L.P., of Washington, D.C. is Counsel for the
Company. There are no material legal proceedings in which the Company is a
party.

<PAGE>

PART B

STATEMENT OF ADDITIONAL INFORMATION

<PAGE>

GE INVESTMENTS FUNDS, INC.

STATEMENT OF ADDITIONAL INFORMATION

September ___, 1997

This Statement of Additional Information is not a prospectus. Much of the
information contained in this Statement expands upon matters discussed in the
prospectus and should, therefore, be read in conjunction with the prospectus. To
obtain a copy of a prospectus with the same date as this Statement of Additional
Information, send a written request to GE Investments Funds, Inc., 3003 Summer
Street, Stamford, Connecticut 06905, or call (203) 326-4040.

<PAGE>

TABLE OF CONTENTS

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Page
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<S> <C>
General Information 3

Prior History 3
The Funds 3

Portfolio Turnover Rate Calculation 6

Investment Practices and Restrictions 6

Investment Practices 6
Investment Restrictions 19

Management of the Company 22

Directors and Officers 22
AAI 24
AAI Investment Advisory Agreement 24
AAI Investment Advisory Fee 25
AAI Investment Sub-Advisers 26

AAI Investment Sub-Advisory Agreements 27

AAI Investment Sub-Advisory Fees 27
AAI Reimbursement of Excess Operating Expenses 27
GEIM 28
GEIM Investment Advisory Agreements 28

GEIM Investment Advisory Fees 30

GEIM Investment Sub-Advisers 30

GEIM Investment Sub-Advisory Agreements 31

GEIM Investment Sub-Advisory Fees 31
Securities Activities of the Advisers 31

Portfolio Managers 32

Portfolio Transactions and Brokerage 34

Determination of Net Asset Value 34

Dividends and Distributions 36

Redemption of Fund Shares 36

Additional Information 36

Life of Virginia 36

Custodian, Dividend and Transfer Agent 36

Independent Auditors 37
Legal Counsel 37
Capital Stock 37
Voting Rights 38
Other Information 38

Audited Financial Statements 39

Appendix A A-1

Appendix B B-1

</TABLE>

<PAGE>

GENERAL INFORMATION

GE Investments Funds, Inc. (the "Company") is an open-end management investment
company incorporated under the laws of the Commonwealth of Virginia on May 14,
1984. The Company consists of eleven separate investment portfolios (the "Funds"
or a "Fund"), each of which is, in effect, a separate mutual fund. The Company
issues a separate class of capital stock for each Fund representing fractional
undivided interests in that Fund. An investor, by investing in a Fund, becomes
entitled to a pro-rata share of all dividends and distributions arising from the
net income and capital gains on the investments of that Fund. Likewise, an
investor shares pro-rata in any losses of that Fund.

Pursuant to investment advisory agreements and subject to the authority of the
Company's board of directors, GE Investment Management Incorporated ("GEIM")
serves as the Company's investment adviser and administrator and conducts the
business and affairs of the Company. GEIM has engaged State Street Global
Advisors ("SSGA") as the investment sub-adviser to provide day-to-day portfolio
management to the S&P 500 Index Fund; has engaged Seneca Capital Management,
L.L.C. ("Seneca") as the investment sub-adviser to provide day-to-day portfolio
management to the Real Estate Securities Fund; has engaged NWQ Investment
Management Company ("NWQ") as the investment sub-adviser to provide day-to-day
portfolio management to the Value Equity Fund; and has engaged GE Investments
(US) Limited ("GEIUS") to provide day-to-day portfolio management to the Global
Income Fund. (As used herein, "Adviser" shall refer to GEIM and, where
applicable, either SSGA, Seneca, NWQ or GEIUS in their respective roles.)

Prior History

On May 1, 1993, pursuant to shareholder approval obtained on April 20, 1993, the
names and the investment objectives, policies and fundamental restrictions of
the S&P 500 Index Fund (prior to that time, the Common Stock Fund) and the
Government Securities Fund, (prior to that time, the Bond Fund) were changed.
The investment objective of the Common Stock Fund was intermediate and long-term
growth of capital, with reasonable income a consideration. The Common Stock Fund
sought to achieve this objective by investing principally in common stocks and
securities convertible into or with rights to purchase common stocks. The
investment objective of the Bond Fund was providing as high a level of income as
is consistent with the preservation of capital. It sought to achieve this
objective by investing primarily in corporate bonds and government obligations.
From May 1, 1993 until April 30, 1997, the S&P 500 Index Fund was called the
Common Stock Index Fund. On May 1, 1997, it changed its name (but not its
investment objectives) to the S&P 500 Index Fund

The Funds

The S&P 500 Index Fund has the investment objective of providing capital
appreciation and accumulation of income that corresponds to the investment
return of the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500
Index"), through investment in common stocks comprising that index. The S&P 500
Index Fund attempts to achieve its objective by replicating the total return of
the S&P 500 Index. To the extent that it can do so consistent with the pursuit
of its investment objective, it will attempt to keep transaction costs low and
minimize portfolio turnover. Like the S&P 500 Index, the S&P 500 Index Fund will
hold both dividend paying and non-dividend paying common stocks comprising the
S&P 500 Index. From time to time, adjustments will be made in the S&P 500 Index
Fund's holdings due to changes in the composition or weightings of issues
comprising the S&P 500 Index. For the year ended December 31, 1996, the
portfolio turnover rate for the S&P 500 Fund was 63.06%. For the year ended
December 31, 1995, the portfolio turnover rate for the S&P 500 Index Fund was
14.58%.

The Government Securities Fund has the investment objective of seeking high
current income and protection of capital through investment in intermediate and
long-term debt instruments issued or guaranteed by the U.S. Government, its
agencies or instrumentalities. The Government Securities Fund may also invest in
U.S. Government debt instruments having maturities of less than one year and in
other general money market instruments (as defined in the prospectus). The
Government Securities Fund invests at least 80% of its total assets, valued at
the time of purchase, in U.S. Government securities of various maturities. For
the year ended December 31, 1996, the portfolio turnover rate for the Government
Securities Fund was 322%. For the year ended December 31, 1995, the portfolio
turnover rate for the Government Securities Fund was 130.64%.

3
<PAGE>

The Money Market Fund has the investment objective of providing the highest
level of current income as is consistent with high liquidity and safety of
principal by investing in good quality money market securities. Such securities
include: (1) debt obligations issued by or guaranteed as to interest and
principal by the government of the United States or any agency or
instrumentality thereof ("U.S. Government Securities") and related custody
receipts, (2) debt obligations of U.S. and foreign banks, (3) repurchase
agreements with banks and government securities dealers, (4) commercial paper
and notes, (5) other short-term debt obligations issued or guaranteed by U.S. or
foreign corporations, state and municipal governments or other issuers, and (6)
dollar-denominated debt obligations issued or guaranteed by foreign governments
or supranational entities.

The Total Return Fund has the investment objective of providing the highest
total return, composed of current income and capital appreciation, as is
consistent with prudent investment risk. It attempts to achieve this objective
by investing in common stocks, bonds and money market instruments, the
proportion of each being continuously determined by the Adviser. This Fund
invests in common stocks and other equity securities including preferred stock,
securities convertible or exchangeable into common stock, rights and warrants,
foreign equity securities and securities of real estate investment trusts
("REITs"). This Fund also invests in general money market instruments, U.S.
Government securities, marketable domestic and foreign corporate debt
obligations, debt obligations of foreign governments and their agencies and
instrumentalities, floating rate and variable rate instruments, zero coupon
bonds, custody receipts, mortgage-backed and asset-backed securities (including
mortgage dollar rolls), options on securities and securities indicies, financial
futures contracts (and options thereon), municipal obligations, forward foreign
currency exchange contracts, currency and interest rate swaps, and structured or
indexed securities.

There are no percentage limitations on the types of securities in which the
Total Return Fund may invest, so from time to time it may invest entirely in
stocks, entirely in bonds, entirely in money market instruments, or in any
combination of these types of securities in accordance with the sole discretion
of the Adviser and the board of directors of the Company. At least 60% of the
value of any bonds held by this Fund will be rated within the four highest
grades by a nationally recognized rating service such as Standard and Poor's
Corporation ("S&P") or Moody's Investors Service, Inc. ("Moody's"). The
portfolio turnover rate for the year ended December 31, 1996, was 144.02%.
Stocks in the Fund had a turnover ratio of 81.02%. Bonds in the portfolio had a
turnover ratio of 385.43%. The portfolio turnover rate for the year ended
December 31, 1995, was 105.56%. Stocks in the Fund had a turnover ratio of
154.74%. Bonds in the portfolio had a turnover ratio of 51.62%.

The International Equity Fund has the investment objective of providing
long-term growth of capital. The Fund seeks to achieve its objective by
investing primarily in foreign equity and equity-related securities which the
Adviser believes have long-term potential for capital growth. For the year ended
December 31, 1996, the portfolio turnover rate for the International Equity Fund
149.72%. For the fiscal period ended December 31, 1995, the portfolio turnover
rate for the International Equity Fund was 58.11% on an annualized basis.

The Real Estate Securities Fund has the investment objective of providing
maximum total return through current income and capital appreciation. The Fund
seeks to achieve this objective by investing primarily in equity and debt
securities of U.S. issuers that are principally engaged in or related to the
real estate industry, including those that own significant real estate assets.
The Fund does not invest directly in real estate. For the year ended December
31, 1996, the portfolio turnover rate for the Real Estate Securities Fund was
30.36%. For the fiscal period ended December 31, 1995, the portfolio turnover
rate for the Real Estate Securities Fund was 54.43% on an annualized basis.

The Global Income Fund has the investment objective of high total return,
emphasizing current income and, to a lesser extent, capital appreciation. The
Fund seeks to achieve these objectives by investing primarily in foreign and
domestic income-bearing debt securities and other foreign and domestic
income-bearing instruments. Such investments may be denominated or quoted in
foreign currencies or U.S. dollars. The anticipated portfolio turnover rate for
the Global Income Fund is approximately 250%.

<PAGE>

common stock, rights and warrants, options on equity securities, and futures
contracts on equity indices (and options thereon). The Fund also may invest in
undervalued convertible preferred stock and debt securities. The anticipated
portfolio turnover rate for the Value Equity Fund is approximately 100%.

In seeking to achieve its investment objective, the Income Fund invests in the
following types of income-bearing debt securities and instruments: U.S.
Government securities; obligations of foreign governments or their agencies or
instrumentalities; bonds, debentures, notes and non-convertible preferred stocks
issued by U.S. and foreign companies; mortgage-backed and asset-backed
securities (including, mortgage dollar rolls, adjustable rate mortgage related
securities, collateralized mortgage obligations, government stripped mortgage
related securities and receivable-backed securities); zero coupon bonds;
floating rate and variable rate instruments; and general money market
instruments. Under normal market conditions, the Fund may invest a substantial
portion of its total assets in general money market instruments. The Income Fund
also may invest in depository receipts and in structured or indexed securities.
The anticipated portfolio turnover rate for the Income Fund is approximately
100%.

In managing the assets of the U.S. Equity Fund, the Adviser uses a combination
of "value-oriented" and "growth-oriented" investing. Value-oriented investing
involves seeking securities that have low price-to-earnings ratios, or high
yields, or that sell for less than the issuer's intrinsic value as determined by
the Adviser, or that appear attractive on a dividend discount model. The U.S.
Equity Fund generally sells these securities when their prices approach targeted
levels. Growth-oriented investing generally involves buying securities with
above average earnings growth rates at reasonable prices. The U.S. Equity Fund
holds these securities until the Adviser determines that their growth prospects
diminish or that they have become overvalued when compared with other
investments. The anticipated portfolio turnover rate for the U.S. Equity Fund is
approximately 100%.

The Premier Growth Equity Fund has the investment objective of providing
long-term growth of capital as well as future (rather than current) income. The
Fund seeks to achieve this objective by investing primarily in "growth-oriented"
equity securities. Such equity securities include common stock, preferred stock,
securities convertible or exchangeable into common stock, including convertible
bonds, convertible debentures, convertible notes, convertible preferred stocks,
and warrants or rights.

The Premier Growth Equity Fund seeks to acquire principally equity securities of
companies that offer long-term potential for capital appreciation. Such
companies typically possess one or more of a variety of characteristics,
including: (1) high quality products and/or services, (2) strong balance sheets,
(3) sustainable internal growth, (4) superior financial returns over extended
periods of time, (5) competitive position in its industry, and (6) shareholder
oriented management. Although the Fund may invest in securities of issuers of
varying sizes, as measured by assets, sales or capitalization, a majority of its
assets are invested, under normal market conditions, in securities of companies
with relatively large capitalizations. In addition, the Fund normally invests in
companies that have above-average growth prospects and which are typically
leaders in their fields. The Fund generally is diversified over a cross-section
of industries. The anticipated portfolio turnover rate for the Premier Growth
Equity Fund is approximately 100%.

<PAGE>

Portfolio Turnover Rate Calculation

The turnover rate for each Fund is calculated by dividing the lesser of
purchases or sales of portfolio securities during the fiscal year by the monthly
average of the value of the Fund's securities (excluding from the computation
all securities, including options, with maturities at the time of acquisition of
one year or less). For example, a portfolio turnover rate of 100% would mean
that all of a Fund's securities (except those excluded from the calculation)
were replaced once in a period of one year. A high rate of portfolio turnover
generally involves correspondingly greater brokerage commission expenses.
Turnover rates may vary greatly from year to year as well as within a particular
year and may also be affected by cash requirements for redemptions of a Fund's
shares and by requirements, the satisfaction of which enable the Company to
receive certain favorable tax treatment. Because the rate of portfolio turnover
is not a limiting factor, however, particular holdings may be sold at any time,
if investment judgment or Fund operations make a sale advisable. As a result,
the annual portfolio turnover rates in future years may exceed the percentages
shown above. Since short term instruments are excluded from the calculation of a
portfolio turnover rate, no meaningful portfolio turnover rate can be estimated
or calculated for the Money Market Fund.

INVESTMENT PRACTICES AND RESTRICTIONS

Investment Practices

The policies by which the Funds will pursue their objectives are generally set
forth in the prospectus. This section is intended to augment the explanation
found in the prospectus.

When-Issued and Delayed Delivery Securities. From time to time, in the ordinary
course of business, each Fund may purchase securities on a when-issued basis or
delayed-delivery basis (i.e., delivery and payment can take place a month or
more after the date of the transaction). The securities so purchased are subject
to market fluctuation, and no interest accrues to the purchaser during this
period. At the time a Fund makes the commitment to purchase securities on a
when-issued or delayed-delivery basis, the Company will record the transaction
and thereafter reflect the value, each day, of such security in determining the
net asset value of that Fund. At the time of delivery of the securities, the
value may be more or less than the purchase price. Each Fund will also establish
a segregated account with the Company's custodian bank in which it will maintain
cash or liquid assets equal in value, marked to market on a daily basis, to
commitments for such when-issued or delayed-delivery securities.

Lending of Portfolio Securities. The Funds may from time to time lend securities
each Fund holds to brokers, dealers and financial institutions, up to a maximum
of 20% (30% for the Income Fund, U.S. Equity Fund and Premier Growth Equity
Fund) of the total value of each Fund's assets. Such loans are secured by
collateral in the form of cash or other liquid assets, which at all times while
the loan is outstanding, is maintained in an amount at least equal to the
current market value of the loaned securities. The Funds continue to receive
interest and dividends on the loaned securities during the term of the loans,
and, in addition, receive a fee from the borrower or interest earned from the
investment of cash collateral in short-term securities. The Funds also receive
any gain or loss in the market value of loaned securities and of securities in
which cash collateral is invested during the term of the loan.

The right to terminate a loan of securities, subject to appropriate notice, is
given to either party. When a loan is terminated, the borrower returns the
loaned securities to the Company. The Company does not have the right to vote
securities on loan, but may terminate the loan and regain the right to vote if
that were important with respect to the investment.

For tax purposes, the dividends, interest and other distributions which the
Company receives on loaned securities may be treated as other than qualified
income for the 90% test discussed under "Taxes" in the prospectus. The Company
intends to lend portfolio securities only to the extent that this activity does
not jeopardize a Fund's status as a regulated investment company under the
Internal Revenue Code of 1986 (the "Code").

The primary risk involved in lending securities is that the borrower will fail
financially and not return the loaned securities at a time when the collateral
is insufficient to replace the full amount of the loaned securities. The
borrower would be liable for the shortage, but a Fund would be an unsecured
creditor with respect to such shortage and might

<PAGE>

not be able to recover all or any of it. In order to minimize this risk, a Fund
makes loans of securities only to firms the Adviser (under the supervision of
the board of directors) deems creditworthy.

Convertible Securities. Each Fund, other than the Money Market Fund and S&P 500
Index Fund, may each invest in one or more types of convertible securities.
Convertible securities may include corporate notes or preferred stock but are
ordinarily a long-term debt obligation of the issuer convertible at a stated
exchange rate into common stock of the issuer. As with all debt securities, the
market value of convertible securities tends to decline as interest rates
increase and, conversely, to increase as interest rates decline. Convertible
securities generally offer lower interest or dividend yields than
non-convertible securities of similar quality. However, when the market price of
the common stock underlying a convertible security exceeds the conversion price,
the price of the convertible security tends to reflect the value of the
underlying common stock. As the market price of the underlying common stock
declines, the convertible security tends to trade increasingly on a yield basis,
and thus may not depreciate to the same extent as the underlying common stock.
Convertible securities generally rank senior to common stocks in an issuer's
capital structure and are consequently of higher quality and entail less risk of
declines in market value than the issuer's common stock. However, the extent to
which such risk is reduced depends in large measure upon the degree to which the
convertible security sells above its value as a debt security. In evaluating a
convertible security, an Adviser usually gives primary emphasis to the
attractiveness of the underlying common stock. The convertible debt securities
in which these Funds may invest are subject to the same rating criteria as each
portfolio's investment in non-convertible debt securities.

Warrants. The U.S. Equity Fund, Premier Growth Equity Fund, International Equity
Fund, Total Return Fund, Real Estate Securities Fund, Value Equity Fund and
Global Income Fund may each invest up to 5% of its total assets, calculated at
the time of purchase, in warrants or rights (other than those acquired in units
or attached to other securities) which entitle the holder to buy equity
securities at a specific price for a specific period of time. Warrants and
rights have no voting rights, receive no dividends and have no rights with
respect to the assets of the issuer.

Risks of Foreign Investments. Investing in foreign securities (including
securities denominated or quoted in foreign currency) involves certain special
considerations, including those set forth below, which are not typically
associated with investing in securities of domestic issuers or U.S. dollar
denominated securities.

Since investments in foreign securities may involve currencies of foreign
countries and since a Fund may temporarily hold funds in bank deposits in
foreign currencies during completion of investment programs and since a Fund may
be subject to currency exposure independent of its securities positions, the
Fund may be affected favorably or unfavorably by changes in currency rates and
in exchange control regulations and may incur costs in connection with
conversions between various currencies.

Since foreign issuers are not subject to uniform accounting, auditing and
financial reporting standards, practices and requirements comparable to those
applicable to U.S. issuers, there may be less publicly available information
about a foreign issuer than about a domestic issuer. Volume and liquidity in
most foreign securities markets are less than in the United States and
securities of many foreign issuers are less liquid and more volatile than
securities of comparable domestic issuers. Fixed commissions on foreign
securities exchanges are generally higher than negotiated commissions on U.S.
exchanges, although a Fund may endeavor to achieve the most favorable net
results on its portfolio transactions. There is generally less government
supervision and regulation of securities exchanges, brokers, dealers and listed
and unlisted issuers than in the United States. Mail service between the United
States and foreign countries may be slower or less reliable than within the
United States, thus increasing the risk of delayed settlements of portfolio
transactions or loss of certificates for portfolio securities.

Foreign investment markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of transactions, making it difficult to
conduct such transactions. Such delays in settlement could result in temporary
periods when a portion of the assets of a Fund are uninvested and no return is
earned on such assets. The inability of a Fund to make intended security
purchases due to settlement problems could cause the Fund to miss attractive
investment opportunities. Inability to dispose of portfolio investments due to
settlement problems could result either in losses to a Fund due to subsequent
declines in value of the portfolio securities or, if the Fund has entered into a
contract to sell the securities, could result

<PAGE>

in possible liability to the purchaser. In addition, with respect to certain
foreign countries, there is the possibility of expropriation or confiscatory
taxation, political or social instability, or diplomatic developments which
could affect a Fund's investments in those countries. Moreover, individual
foreign economies may differ favorably or unfavorably from the U.S. economy in
such respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position.

Forward Foreign Currency Exchange Contracts. Each Fund may enter into forward
foreign currency exchange contracts. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days from the date of the contract
agreed upon by the parties, at a price set at the time of the contract. These
contracts are traded in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are generally charged
at any stage for trades. At the maturity of a forward contract, a Fund may
either accept or make delivery of the currency specified in the contract or, at
or prior to maturity, enter into a closing purchase transaction involving the
purchase or sale of an offsetting contract. Closing purchase transactions with
respect to forward contracts are usually effected with the currency trader who
is a party to the original forward contract.

The Government Securities Fund, Income Fund, U.S. Equity Fund, International
Equity Fund, Total Return Fund, and Global Income Fund may enter into forward
foreign currency exchange contracts in several circumstances. First, when they
enter into a contract for the purchase or sale of a security denominated or
quoted in a foreign currency, or when they anticipate the receipt in a foreign
currency of dividend or interest payments on such a security which either holds,
the Funds may desire to "lock in" the U.S. dollar price of the security or the
U.S. dollar equivalent of such dividend or interest payment, as the case may be.
By entering into a forward contract for the purchase or sale, for a fixed amount
of dollars, of the amount of foreign currency involved in the underlying
transactions, the Funds will attempt to protect themselves against an adverse
change in the relationship between the U.S. dollar and the subject foreign
currency during the period between the date on which the security is purchased
or sold, or on which the dividend or interest payment is declared, and the date
on which such payments are made or received.

Additionally, when an Adviser believes that the currency of a particular foreign
country may suffer a substantial decline against the U.S. dollar, it may enter
into a forward contract to sell, for a fixed amount of dollars, the amount of
foreign currency approximating the value of some or all of a Fund's portfolio
securities denominated in such foreign currency. The precise matching of the
forward contract amounts and the value of the securities involved will not
generally be possible because the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date on which the contract is entered into and the
date it matures. Using forward contracts to protect the value of these Funds'
portfolio securities against a decline in the value of a currency does not
eliminate fluctuations in the underlying prices of the securities. It simply
establishes a rate of exchange which the Fund can achieve at some future point
in time. The precise projection of short-term currency market movements is not
possible, and short-term hedging provides a means of fixing the dollar value of
only a portion of a Fund's foreign assets.

The Government Securities Fund, Income Fund, U.S. Equity Fund, International
Equity Fund, Total Return Fund, and Global Income Fund may engage in
cross-hedging by using forward contracts in one currency to hedge against
fluctuations in the value of securities quoted or denominated in a different
currency if the Adviser determines that there is a pattern of correlation
between the two currencies. The Government Securities Fund, International Equity
Fund, Total Return Fund and Global Income Fund also may purchase and sell
forward contracts to seek to increase total return when the Adviser anticipates
that the foreign currency will appreciate or depreciate in value, but securities
denominated or quoted in that currency do not present attractive investment
opportunities and are not held by the Funds.

Each of the Funds may utilize foreign forward currency exchange contracts to
settle non-dollar securities transactions.

8
<PAGE>

The Company's custodian will segregate cash or other liquid assets in an amount
equal to the value of a Fund's total assets committed to the consummation of
forward foreign currency exchange contracts requiring the Fund to purchase
foreign currencies or forward contracts entered into to seek to increase total
return. If the value of the securities so segregated declines, additional cash
or liquid assets are segregated on a daily basis so that the value of the
account equals the amount of the Fund's commitments with respect to such
contracts. These segregated securities are marked-to-market on a daily basis.
Although the contracts are not presently regulated by the CFTC, the CFTC may in
the future assert authority to regulate these contracts. In such event, a Fund's
ability to utilize forward foreign currency exchange contracts may be
restricted.

While the Government Securities Fund, Income Fund, U.S. Equity Fund,
International Equity Fund, Total Return Fund, and Global Income Fund will enter
into forward contracts to reduce currency exchange rate risks, transactions in
such contracts involve certain other risks. Therefore, while these Funds may
benefit from such transactions, unanticipated changes in currency prices may
result in a poorer overall performance for the Funds than if they had not
engaged in any such transactions. Moreover, there may be imperfect correlation
between a Fund's portfolio holdings of securities quoted or denominated in a
particular currency and forward contracts entered into by the Fund. Such
imperfect correlation may cause the Fund to sustain losses which will prevent
the Fund from achieving a complete hedge or expose the Fund to risk of foreign
exchange loss. Likewise, to the extent that the Government Securities Fund,
International Equity Fund, Total Return Fund and Global Income Fund enter into
forward foreign currency exchange contracts to seek to increase total return,
the risk of losses on such contracts due to unanticipated changes in currency
prices is greater than it is when such contracts are used to reduce currency
exchange rate risk.

Writing and Purchasing Currency Call and Put Options. The Total Return Fund,
Income Fund, U.S. Equity Fund, International Equity Fund and Global Income Fund
may write covered put and call options and purchase put and call options on
foreign currencies for the purpose of protecting against declines in the U.S.
dollar value of portfolio securities and against increases in the dollar cost of
securities to be acquired. These Funds also may use options on currency to
cross-hedge, which involves writing or purchasing options on one currency to
hedge against changes in exchange rates for a different currency if a pattern of
correlation exists between the values of the currencies. In addition, these five
Funds may purchase call options on currency when the Adviser anticipates that
the foreign currency will appreciate in value, but securities denominated or
quoted in that currency do not present attractive investment opportunities and
are not held by the Fund. A call option written by a Fund obligates the Fund to
sell specified currency to the holder of the option at a specified price at any
time before the expiration date. A put option written by a Fund would obligate
the Fund to purchase specified currency from the option holder at a specified
price at any time before the expiration date. The writing of currency options
involves a risk that the Fund will, upon exercise of the option, be required to
sell currency subject to a call at a price that is less than the currency's
market value or be required to purchase currency subject to a put at a price
that exceeds the currency's market value.

A Fund may terminate its obligations under a call or put option by purchasing an
option identical to the one it has written. Such purchases are referred to as
"closing purchase transactions." These Funds also are able to enter into closing
sale transactions in order to realize gains or minimize losses on options that
either purchases.

A Fund normally purchases call options in anticipation of an increase in the
U.S. dollar value of currency in which securities to be acquired by either are
quoted or denominated. The purchase of a call option would entitle a Fund, in
return for the premium paid, to purchase specified currency at a specified price
during the option period. The Fund ordinarily realizes a gain if, during the
option period, the value of such currency exceeded the sum of the exercise
price, the premium paid and transaction costs; otherwise the Fund realizes
either no gain or a loss on the purchase of the call option.

A Fund normally purchases put options in anticipation of a decline in the dollar
value of currency in which securities in its portfolio are quoted or denominated
("protective puts"). The purchase of a put option would entitle a Fund, in
exchange for the premium paid, to sell specified currency at a specified price
during the option period. The purchase of protective puts is designed merely to
offset or hedge against a decline in the dollar value of a Fund's portfolio
securities due to currency exchange rate fluctuations. A Fund would ordinarily
realize a gain if, during the option period, the value of the underlying
currency decreased below the exercise price sufficiently to more than cover the
premium and transaction costs; otherwise the Fund would realize either no gain
or a loss on the purchase of the

<PAGE>

put option. Gains and losses on the purchase of protective put options would
tend to be offset by countervailing changes in the value of underlying currency.

In addition to using options for the hedging purposes described above, the Total
Return Fund, International Equity Fund and Global Income Fund may use options on
currency to seek to increase total return. It may write (sell) covered put and
call options on any currency in order to realize greater income than would be
realized on portfolio securities transactions alone. However, in writing covered
call options for additional income, the Funds may forgo the opportunity to
profit from an increase in the market value of the underlying currency. Also,
when writing put options, the Funds accept, in return for the option premium,
the risk that it may be required to purchase the underlying currency at a price
in excess of the currency's market value at the time of purchase.

The Total Return Fund, International Equity Fund and Global Income Fund normally
purchase call options to seek to increase total return in anticipation of an
increase in the market value of a currency. They ordinarily realize a gain if,
during the option period, the value of such currency exceeded the sum of the
exercise price, the premium paid and transaction costs. Otherwise the Funds
realize either no gain or a loss on the purchase of the call option. Put options
may be purchased by a Fund for the purpose of benefiting from a decline in the
value of currencies which it does not own. It would ordinarily realize a gain
if, during the option period, the value of the underlying currency decreased
below the exercise price sufficiently to more than cover the premium and
transaction costs. Otherwise it would realize either no gain or a loss on the
purchase of the put option.

Special Risks Associated With Options on Currency. An exchange-traded option
position may be closed out only on an options exchange which provides a
secondary market for an option of the same series. Although a Fund generally
purchases or writes only those options for which there appears to be an active
secondary market, there is no assurance that a liquid secondary market on an
exchange will exist for any particular option, or at any particular time. For
some options no secondary market on an exchange may exist. In such event, it is
not possible to effect closing transactions in particular options, with the
result that a Fund would have to exercise its options in order to realize any
profit and would incur transaction costs upon the sale of underlying securities
pursuant to the exercise of put options. If a Fund as a covered call option
writer is unable to effect a closing purchase transaction in a secondary market,
it is not able to sell the underlying currency (or security quoted or
denominated in that currency) until the option expires or it delivers the
underlying currency upon exercise.

There is no assurance that higher than anticipated trading activity or other
unforeseen events might not, at times, render certain of the facilities of the
Options Clearing Corporation inadequate, and thereby result in the institution
by an exchange of special procedures which may interfere with the timely
execution of customers' orders.

The Total Return Fund, Income Fund, U.S. Equity Fund, International Equity Fund
and Global Income Fund may purchase and write over-the-counter options to the
extent consistent with their limitations on investments in illiquid investments.
See "Investment Restrictions." Trading in over-the-counter options is subject to
the risk that the other party will be unable or unwilling to close-out options
purchased or written by the Funds. See "Investment Practices" in the Prospectus.

Interest Rate and Currency Swaps. The Total Return Fund, International Equity
Fund and Global Income Fund may enter into currency swaps for hedging purposes
and to increase total return. The Total Return Fund, and Global Income Fund may
enter into interest rate swaps for these purposes. Inasmuch as swaps are entered
into for good faith hedging purposes (or are offset by a segregated account as
described below), the Company and the Adviser believe that swaps do not
constitute senior securities as defined in the Investment Company Act of 1940
(the "1940 Act") and, accordingly, will not treat them as being subject to a
Fund's borrowing restrictions. The net amount of the excess, if any, of a Fund's
obligations over its entitlement with respect to each currency swap will be
accrued on a daily basis and an amount of cash or other liquid assets having an
aggregate net asset value at least equal to such accrued excess will be
maintained in a segregated account by the Company's custodian. An amount of cash
or liquid assets having an aggregate net asset value at least equal to the
entire amount of payment stream payable by the Total Return Fund, and Global
Income Fund pursuant to an interest rate swap will be segregated with the
Company's custodian. These Funds do not enter into any interest rate or currency
swap unless the credit quality of the unsecured senior debt or the claims-paying
ability of the other party thereto is considered to be investment grade by the
Adviser. If there is a default by the other party to such a transaction, the
Company will have contractual remedies pursuant to

<PAGE>

the agreement, related to the transaction. The swap market has grown
substantially in recent years with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid in
comparison with the markets for other similar instruments which are traded in
the interbank market. Nevertheless, the SEC staff takes the position that
currency swaps are illiquid investments subject to a Fund's limitation on such
investments. See "Investment Practices" in the prospectus.

Options on Securities and Securities Indices. Each Fund, other than the Money
Market Fund, may write exchange-traded covered call and put options on or
relating to specific securities in order to earn additional income or, in the
case of a call written, to minimize or hedge against anticipated declines in the
value of its portfolio securities. All call options written by these Funds are
covered, which means that the Fund will own the securities subject to the option
as long as the option is outstanding. All put options written by these Funds are
covered, which means that the Fund has deposited with its custodian cash, or
other liquid assets with a value at least equal to the exercise price of the
option. Call and put options written by a Fund may also be covered to the extent
that the Fund's liabilities under such options are offset by its rights under
call or put options purchased by the Fund and call options written by a Fund may
also be covered by depositing cash or liquid assets with the Company's custodian
in the same manner as written puts are covered.

If a Fund writes an option which expires unexercised or is closed out by the
Fund at a profit, it will retain the premium received for the option, which will
represent a capital gain to the Fund. If the price of the underlying security
moves adversely to the Fund's position, the option may be exercised and the
Fund, as the writer of the option, will be required to sell or purchase the
underlying security at a disadvantageous price, which may only be partially
offset by the amount of premium received.

When a Fund writes an option on an index, and the underlying index moves
adversely to its position, the option may be exercised. Upon such exercise, the
Fund, as the writer of the option, will be required to pay in cash an amount
equal to the difference between the exercise settlement value of the underlying
index and the exercise price of the option, multiplied by a specified index
"multiplier."

Call or put options on a securities index may be written at an exercise or
"strike" price which is either below or above the current value of the index. If
the exercise price at the time of writing the option is below the current value
of the index for a call option or above the current value of the index for a put
option, the option is considered to be "in the money." In such a case, the Fund
will cover such options written by segregating with its custodian or pledging to
its futuers commissions merchant ("FCM") as collateral, cash or other liquid
assets equal in value to the amount by which the option written is in the money,
times the multiplier, times the number of contracts.

Securities indices for which options are currently traded include the S&P 500
Index, Value Line Index, National OTC Index, Major Market Index, and NYSE Beta
Index. The Funds may also use options on such other indices as may now or in the
future be available.

11
<PAGE>

Each Fund, other than the Money Market Fund, may purchase call and put options
on securities in which it may invest for the purposes described in the
Prospectus.

These Funds may also purchase put or call options on securities indices in order
to (i) hedge against anticipated changes in stock prices that may adversely
affect the prices of securities that they intend to purchase at a later date,
(ii) hedge their investments against an anticipated decline in value, or (iii)
attempt to reduce the risk of missing a general market advance. In the event
that the anticipated changes in stock prices occur, these Funds may be able to
offset the resulting adverse effect, in whole or in part, through the options
purchased.

The premium paid for a put or call option plus any transaction costs will reduce
the benefit, if any, realized by a Fund upon exercise or liquidation of the
option, and, unless the price of the underlying securities index changes
sufficiently, the option may expire without value to the Fund. To close option
positions purchased by it, a Fund may sell put or call options identical to
options previously purchased, which could result in a net gain or loss depending
on whether the amount received on the sale is more or less than the premium and
other transaction costs paid on the put or call option purchased.

Each Fund, other than the Money Market Fund, may use options traded on a
national securities exchange. Each also may use over-the-counter (i.e.,
unlisted) options. Options traded in the over-the-counter market may not be as
actively traded as those on an exchange. Accordingly, it may be more difficult
to value such options. In addition, it may be more difficult to enter into
closing transactions with respect to options traded over-the-counter. In this
regard, these Funds may enter into contracts with the dealers with whom they
write over-the-counter options. The contracts will provide that the Funds have
the absolute right to repurchase an option it writes at any time at a repurchase
price which represents the fair market value of such option, as determined in
good faith through negotiations between the parties, but which in no event will
exceed a price determined pursuant to a formula contained in the contract.
Although the specific details of the formula may vary between contracts with
different dealers, the formula will generally be based on a multiple of the
premium received by a Fund plus the amount, if any, of the option's intrinsic
value (i.e., the amount the option is "in-the-money"). The formula will also
include a factor to account for the difference between the price of the security
and the strike price of the option if the option is written "out-of-the-money."
The Company's board of directors has established standards of creditworthiness
for these dealers.

Financial Futures Contracts. Each Fund, other than the Money Market Fund, in
accordance with its investment objective, investment program, policies, and
restrictions may purchase and sell financial futures contracts as a hedge to
protect against anticipated changes in prevailing interest rates, currency
exchange rates, overall prices of securities in which it may invest, or to
efficiently and in a less costly manner implement either increases or decreases
in exposure to the equity, bond or foreign currency markets. Each Fund, other
than the Money Market Fund, Income Fund, U.S. Equity Fund and Premier Growth
Equity Fund, also may purchase and sell financial futures contracts to earn
additional income or otherwise seek to increase total return.

Financial futures contracts consist of interest rate futures contracts, bond
index futures contracts, stock index futures contracts and currency futures
contracts. An interest rate futures contract is a contract to buy or sell
specified debt securities at a future time for a fixed price. A stock index
futures contract or a bond index futures contract is similar in economic effect,
except that rather than being based on specific securities, it is based on a
specified index of stocks or bonds and not the stocks or bonds themselves. A
currency futures contract is a contract to purchase or sell a specific amount of
foreign currency at a future time for a fixed price.

An interest rate futures contract binds the seller to deliver to the purchaser
on a specified future date a specified quantity of one of several listed
financial instruments, against payment of a settlement price specified in the
contract. A public market currently exists for futures contracts on Government
National Mortgage Association ("GNMA") Certificates, long-term U.S. Treasury
Bonds, three-month U.S. Treasury Bills, short-term U.S. Treasury Notes, and bank
certificates of deposit.

Stock index or bond index futures contracts bind purchaser and seller to
deliver, at a future date specified in the contract, a cash amount equal to a
multiple of the difference between the value of a specified stock or bond index
on that date and the settlement price specified by the contract. That is, the
seller of the futures contract must pay and the pur-

<PAGE>

chaser would receive a multiple of any excess of the value of the index over the
settlement price, and conversely, the purchaser must pay and the seller would
receive a multiple of any excess of the settlement price over the value of the
index. A public market currently exists for stock index futures contracts based
on the S&P 500 Index, the New York Stock Exchange Composite Index, the Value
Line Stock Index, and the Major Market Index. It is expected that financial
instruments related to broad-based indices, in addition to those for which
futures contracts are currently traded, will in the future be the subject of
publicly-traded futures contracts. Each Fund may use those indices which are
appropriate to its hedging strategies.

A financial futures contract is an agreement to buy or sell a security or
currency (or deliver a final cash settlement price, in the case of a contract
relating to an index or otherwise not calling for physical delivery of a
specified security) for a set price in the future. Exchange-traded futures
contracts are designated by boards of trade which have been designated
"contracts markets" by the CFTC. Futures contracts traded over-the-counter are
not designated or regulated by the CFTC.

Positions taken in the futures markets are not normally held until delivery or
cash settlement is required, but instead are liquidated through offsetting
transactions which may result in a gain or a loss. While futures positions taken
by a Fund are usually liquidated in this manner, a Fund may instead make or take
delivery of underlying securities whenever it appears economically advantageous
to do so. A clearing organization associated with the relevant exchange assumes
responsibility for closing out transactions on the exchange and guarantees that,
as between the clearing members of the exchange, the sale and purchase
obligations will be performed with regard to all positions that remain open at
the termination of the contract. No clearing organization exists in connection
with futures contracts traded in the over-the-counter market. Consequently,
there is an increased risk that counterparties may fail to perform their
obligations to a Fund under a futures contract and that the Fund may not be able
to close out the position related to the contract.

When financial futures contracts are entered into by a Fund, either as the
purchaser or the seller of such contracts, the Fund is required to deposit with
its custodian in a segregated account in the name of the FCM an initial margin
of cash or U.S. Treasury bills equalling as much as 5% to 10% or more of the
contract settlement price. The nature of initial margin requirements in futures
transactions differs from traditional margin payments made in securities
transactions in that initial margins for financial futures contracts do not
involve the borrowing of funds by the customer to finance the transaction.
Instead, a customer's initial margin on a financial futures contract represents
a good faith deposit securing the customer's contractual obligations under the
financial futures contract. The initial margin deposit is returned, assuming
these obligations have been met, when the financial futures contract is
terminated. In addition, subsequent payments to and from the FCM, called
"variation margin," are made on a daily basis as the price of the underlying
security or stock index fluctuates reflecting the change in value in the long
(purchase) or short (sale) positions in the financial futures contract, a
process known as "marking to market."

Financial future contracts generally are not entered into to acquire the
underlying asset and generally are not held to term. Prior to the contract
settlement date, a Fund will normally close all futures positions by entering
into an off-setting transaction which operates to cancel the position held, and
which usually results in a profit or loss.

Options on Financial Futures Contracts. Each Fund, other than the Money Market
Fund, may also purchase call and put options on financial futures contracts and
write covered call options on financial futures contracts of the type which the
particular Fund is authorized to enter into. Covered put and call and put
options on futures contracts will be covered in the same manner as covered
options on securities and securities indices. The Funds may invest in such
options for the same purposes as they may each purchase or sell financial
futures contracts.

Options on financial futures contracts are traded on exchanges that are licensed
and regulated by the CFTC. A call option on a financial futures contract gives
the purchaser the right in return for the premium paid, to purchase a financial
futures contract (assume a "long" position) at a specified exercise price at any
time before the option expires. A put option gives the purchaser the right, in
return for the premium paid, to sell a financial futures contract (assume a
"short" position), for a specified exercise price, at any time before the option
expires.

13
<PAGE>

Unlike entering into a financial futures contract itself, purchasing options on
financial futures contracts allows a buyer to decline to exercise the option,
thereby avoiding any loss beyond forgoing the purchase price (or "premium") paid
for the options. Therefore, the purchase of options on financial futures
contracts may be a preferable hedging strategy when a Fund desires maximum
flexibility. Whether, in order to achieve a particular objective, a Fund enters
into a financial futures contract, on the one hand, or an option contract on a
financial futures contract, on the other, will depend on all the circumstances,
including the relative costs, liquidity, availability and capital requirements
of such financial futures and options contracts. Each Fund will consider the
relative risks involved, which may be quite different. These factors, among
others, will be considered in light of market conditions and the particular
objective to be achieved.

Certain Additional Risks of Options and Financial Futures Contracts. In addition
to the risks described in the Prospectus, the use of options and financial
futures contracts may entail the following risks. First, although such
instruments when used by a Fund are intended to correlate with the Fund's
portfolio securities, in many cases, the options or financial futures contracts
used may be based on securities or currencies which, or stock or bond indices
the components of which, are not identical to the portfolio securities owned or
intended to be acquired by the Fund. Second, due to supply and demand imbalances
and other market factors, the price movements of financial futures contracts and
options thereon, and stock or bond index options may not necessarily correspond
exactly to the price movements of the securities, currencies or stock or bond
indices on which such instruments are based. Accordingly, there is a risk that a
Fund's transactions in those instruments will not in fact offset the impact on
the Fund of adverse market developments in the manner or to the extent
contemplated or that such transactions will result in losses to the Fund which
are not offset by gains with respect to corresponding portfolio securities owned
or to be purchased by that Fund.

To some extent, these risks can be minimized by careful management of hedging
activities. For example, where price movements in a financial futures or option
contract are expected to be less volatile than price movements in the related
portfolio securities owned or intended to be acquired by a Fund, it may, in
order to compensate for this difference, use an amount of financial futures or
option contracts which is greater than the amount of such portfolio securities.
Similarly, where the price movement of a financial futures or option contract is
anticipated to be more volatile, a Fund may use an amount of such contract which
is smaller than the amount of portfolio securities to which such contracts
relate.

The risk that the hedging technique used will not actually or entirely offset an
adverse change in the value of a Fund's securities is particularly relevant to
financial futures contracts and options written on stock or bond indices. A Fund
in entering into a futures purchase contract, potentially could lose any or all
of the contract's settlement price. In entering into a futures sale contract, a
Fund could potentially lose a sum equal to the excess of the contract's value
(marked to market daily) over the contract's settlement price. In writing
options on securities indices, a Fund could potentially lose a sum equal to the
excess of the value of the index (marked to market daily) over the exercise
price. In addition, because financial futures contracts require delivery at a
future date of either a specified security or an amount of cash equal to a
multiple of the difference between the value of a specified stock or bond index
on that date and the settlement price, an algebraic relationship exists between
any price movement in the underlying security or index and the potential cost of
settlement to a Fund. A small increase or decrease in the value of the
underlying security or stock or bond index can, therefore, result in a much
greater increase or decrease in the cost to the Fund.

Stock or bond index call options written also pose another risk as hedging
tools. Because exercises of securities index options are settled in cash, there
is an inherent timing risk that the value of a Fund's securities "covering" a
securities index call option written by it may decline during the time between
exercise of the option by the option holder and notice to the Fund of such
exercise (usually one day or more) thereby requiring the Fund to use additional
assets to settle the transaction. This risk is not present in the case of
covered call options on individual securities, which are settled by delivery of
the actual securities.

Although the Funds intend to establish positions in these instruments only when
there appears to be an active market, there is no assurance that a liquid market
for such instruments will exist when they seek to "close out" (i.e. terminate) a
particular financial futures contract or option position. This is particularly
relevant for over-the-counter futures and options contracts. Trading in such
instruments could be interrupted, for example, because of a lack of either
buyers or sellers. In addition, the futures and options exchanges may suspend
trading after the price of such

<PAGE>

instruments has risen or fallen more than the maximum amount specified by the
exchange. Exercise of options could also be restricted or delayed because of
regulatory restrictions or other factors. A Fund may be able, by adjusting
investment strategy in the cash or other contract markets, to offset to some
extent any adverse effects of being unable to liquidate a hedge position.
Nevertheless, in some cases, a Fund may experience losses as a result of such
inability. Therefore, it may have to liquidate other more advantageous
investments to meet its cash needs.

In addition, FCMs or brokers in many circumstances will have access to the
Funds' assets posted as margin in connection with these transactions as
permitted under the 1940 Act. See "Custodian, Dividend and Transfer Agent," in
this Statement of Additional Information. The Funds will use only FCMs or
brokers in whose reliability and financial soundness they have full confidence
and have adopted certain other procedures and limitations to reduce the risk of
loss with respect to any assets which brokers hold or to which they may have
access. Nevertheless, in the event of an FCM's or broker's insolvency or
bankruptcy, it is possible that a Fund could experience a delay or incur costs
in recovering such assets or might recover less than the full amount due. Also
the value of such assets could decline by the time the Fund could effect such
recovery.

The success of any Fund in using hedging techniques depends, among other things,
on the Adviser's ability to predict the direction and volatility of price
movements in both the futures and options markets as well as the securities
markets and on its ability to select the proper type, time, and duration of
hedges. There can be no assurance that these techniques will produce their
intended results. In any event, the Adviser will use financial futures
contracts, options thereon, and stock index options only when it believes the
overall effect is to reduce, rather than increase, the risks to which the Fund
is exposed. Hedging transactions also, of course, may be more, rather than less,
favorable to a Fund than originally anticipated.

Borrowing. Each of the Funds may borrow the following amounts as a temporary
measure to meet redemption requests or for extraordinary or emergency purposes
that might otherwise require the untimely liquidation of securities: 20% for S&P
500 Index Fund; 33.33% for Income Fund, U.S. Equity Fund and Premier Growth
Equity Fund; and 10% for all of the other Funds. The amounts are measured as a
percent of total assets measured at market value at the time of the borrowing.
The Funds may only borrow from banks except that the Income Fund, U.S. Equity
Fund and Premier Growth Equity Fund may borrow by entering into reverse
repurchase agreements.

From time to time the International Equity Fund may increase its ownership of
investments by borrowing from banks on an unsecured basis and investing the
borrowed funds, subject to the restrictions stated in the prospectus. The Fund
may not borrow more than 10% of the value of its assets for this purpose and may
not borrow unless the value of its assets, less its liabilities other than
borrowing, is equal to at least 300% of all borrowings, including any additional
proposed borrowings. If the value of the Fund's assets so computed should fail
to meet the 300% asset coverage requirement, the Fund must, within three days,
reduce its borrowing to the extent necessary to meet the coverage requirement
and may have to sell a portion of its investments at an inopportune time.
Borrowing for investment increases both investment opportunity and risk.
Interest on borrowed money is an expense that the Fund would not otherwise
incur, so that it may have little or no net investment income during periods of
borrowing. Since substantially all of the Fund's assets fluctuate in value
whereas borrowing obligations are fixed, when the Fund has outstanding
borrowings, its net asset value tends to increase and decrease more when
portfolio investments increase and decrease than would otherwise be the case.

Lower-Rated, Lower Quality Debt Instruments. Up to 30% of the total assets of
the Total Return Fund; 35% of the total assets of the Real Estate Securities
Fund; 15% of the total assets of the Value Equity Fund. 25% of the total assets
of the Global Income Fund; and 5% of the International Equity Fund, U.S. Equity
Fund and Premier Growth Equity Fund, may be invested in debt instruments that
are unrated or are rated lower than the four highest rating categories assigned
by Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation
("Standard & Poor's"). Up to10% of the total assets of the Income Fund may be
invested in debt instruments that are rated in the fifth or sixth highest rating
categories. Up to 10% of the total assets of the Global Income Fund may be
invested in debt instruments that are rated lower than the five highest rating
categories. Furthermore, debt instruments that are rated in the four highest
categories assigned by Moody's or Standard & Poor's (i.e. investment grade debt
instruments), and especially those which are unrated or are rated lower than the
four highest categories by such rating organizations may, after purchase by a
Fund, have their ratings lowered due to the deterioration of the issuer's
financial

<PAGE>

position. The Adviser may determine that an unrated security is of comparable
quality to securities with a particular rating. Such unrated securities are
treated as if they carried the rating of securities with which the Adviser
compares them.

Risks of Lower-Rated, Lower Quality Debt Instruments. Lower-rated debt
securities (i.e. those rated Ba or lower by Moody's or BB or lower by Standard &
Poor's) are considered, on balance, as predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with the terms of the
obligation and will generally involve more credit risk than securities in the
higher rated categories. Reliance on credit ratings entails greater risks with
regard to lower-rated securities than it does with regard to higher-rated
securities and the Adviser's success is more dependent upon its own credit
analysis with regard to lower-rated securities than is the case with regard to
higher-rated securities. The market values of such securities tend to reflect
individual corporate developments to a greater extent than do higher-rated
securities, which react primarily to fluctuations in the general level of
interest rates. Such lower-rated securities also tend to be more sensitive to
economic conditions than are higher-rated securities. Adverse publicity and
investor perceptions, whether or not based on fundamental analysis, regarding
lower-rated bonds may depress prices and liquidity for such securities. To the
extent a Fund invests in these securities, factors adversely affecting the
market value of lower-rated securities will adversely affect the Funds' net
asset value. In addition, a Fund may incur additional expenses to the extent it
is required to seek recovery upon a default in the payment of principal or
interest on its portfolio holdings. Although some risk is inherent in all
securities ownership, holders of debt securities have a claim on the assets of
the issuer prior to the holders of common stock. Therefore, an investment in
debt securities generally entails less risk than an investment in common stock
of the same issuer.

Lower-rated securities may be issued by corporations in the growth stage of
their development. They may also be issued in connection with a corporate
reorganization or as a part of a corporate takeover. Companies that issue such
lower-rated securities are often highly leveraged and may not have available to
them more traditional methods of financing. Therefore, the risk associated with
acquiring the securities of such issuers generally is greater than is the case
with higher rated securities. For example, during an economic downturn or a
sustained period of rising interest rates, highly leveraged issuers of
lower-rated securities may experience financial stress. During such periods,
such issuers may not have sufficient revenues to meet their interest payment
obligations. The issuer's ability to service its debt obligations may also be
adversely affected by specific corporate developments or the issuer's inability
to meet specific projected business forecasts, or the unavailability of
additional financing. The risk of loss due to default by the issuer is
significantly greater for the holders of lower-rated securities because such
securities are generally unsecured and are often subordinated to other creditors
of the issuer.

Lower-rated securities frequently have call or buy-back features that would
permit an issuer to call or repurchase the security from a Fund. If a call were
exercised by the issuer during a period of declining interest rates, the Fund
would likely have to replace such called security with a lower yielding
security, thus decreasing the net investment income to the Fund.

A Fund may have difficulty disposing of certain lower-rated securities for which
there is a thin trading market. Because not all dealers maintain markets in all
lower-rated securities, there is no established retail secondary market for many
of these securities, and the Company anticipates that they could be sold only to
a limited number of dealers or institutional investors. To the extent there is a
secondary trading market for lower-rated securities, it is generally not as
liquid as that for higher-rated securities. The lack of a liquid secondary
market for certain securities may make it more difficult for the Company to
obtain accurate market quotations for purposes of valuing a Fund's assets.
Market quotations are generally available on many lower-rated issues only from a
limited number of dealers and may not necessarily represent firm bids of such
dealers or prices for actual sales. When market quotations are not readily
available, lower-rated securities must be valued by (or under the direction of)
the Company's board of directors. This valuation is more difficult and judgement
plays a greater role in such valuation when there is less reliable objective
data available.

The market for lower-rated securities has not weathered a major economic
recession, and it is not known how one might affect that market. It is likely,
however, that any such recession could severely affect the market for and the
values of such securities, as well as the ability of the issuers of such
securities to repay principal and pay interest thereon.

16
<PAGE>

The Real Estate Securities Fund, Value Equity Fund, Global Income Fund, Income
Fund, U.S. Equity Fund and Premier Growth Equity Fund may acquire lower-rated
securities that are sold without registration under the federal securities laws
and therefore carry restrictions on resale. These Funds may incur special costs
in disposing of such securities, but will generally incur no costs when the
issuer is responsible for registering the securities. The Funds also may acquire
lower-rated securities during an initial underwriting. Such securities involve
special risks because they are new issues. The Company has no arrangement with
any person concerning the acquisition of such securities, and the Adviser will
carefully review the credit and other characteristics pertinent to such new
issues.

Zero Coupon Bonds. The Government Securities Fund, Total Return Fund, Income
Fund, U.S. Equity Fund, Global Income Fund and Value Equity Fund may invest in
zero coupon bonds which are debt obligations that do not entitle the holder to
any periodic payments of interest prior to maturity or provide for a specified
cash payment date when the bonds begin paying interest. As a result, zero coupon
bonds are generally traded at a significant discount from their face value. The
discount approximates the present value of interest that the bonds would have
accrued and compounded over the period until maturity.

Zero coupon bonds benefit the issuer by mitigating its initial need for cash to
meet debt service, but generally provide a higher rate of return to compensate
investors for the deferral of interest (and sometimes principal) payments.
Companies that issue zero coupon bonds often do not have the capacity to pay
current interest and so are likely to be poorer credit risks than other issuers.
In addition, the market prices of zero coupon bonds are likely to be more
volatile and to fluctuate to a greater degree in response to interest rates than
the market prices of interest-bearing bonds having similar maturities and credit
quality. Zero coupon bonds entail the disadvantage that cash cannot be generated
from them prior to the maturity or payment date except by liquidating them at a
discount. Similarly, if the issuer of a zero coupon bond defaults, the Fund may
obtain no return on its investment.

Mortgage-Backed and Asset-Backed Securities. The Government Securities Fund,
Total Return Fund, Real Estate Securities Fund, Global Income Fund, Value Equity
Fund and Income Fund may invest in mortgage-backed and asset-backed securities,
which represent direct or indirect participation in, or are collateralized by
and payable from, mortgage loans secured by real property or instruments derived
from such loans. Mortgage-backed securities include various types of mortgage
related securities such as government stripped mortgage related securities,
adjustable rate mortgage related securities and collateralized mortgage
obligations. These are described below. These Funds may also invest in
asset-backed securities, which represent participation in, or are secured by and
payable from, assets such as motor vehicle installment sales contracts,
installment loan contracts, leases of various types of real and personal
property, receivables from revolving credit (i.e., credit card) agreements and
other categories of receivables. Such assets are securitized through the use of
trusts and special purpose corporations. Payments or distributions of principal
and interest may be guaranteed up to certain amounts and for certain time
periods by letters of credit or pool insurance policies issued by a financial
institution unaffiliated with the trust or corporation. Other credit
enhancements also may exist.

Mortgage-backed and asset-backed securities are often subject to more rapid
repayment than their stated maturity date would indicate as a result of the
pass-through of prepayments of principal on the underlying loans. Prepayments of
principal by mortgagors or mortgage foreclosures shorten the term of the
mortgage pool underlying the mortgage security. The occurance of mortgage
prepayments is a function of several factors including the level of interest
rates, general economic conditions, the location and age of the mortgage and
other social and demographic conditions. A Fund's ability to maintain positions
in such securities is affected by the reductions in the principal amount of such
securities resulting from prepayments, and its ability to reinvest prepayments
of principal at comparable yield is subject to generally prevailing interest
rates at that time. The values of mortgage-backed or asset-backed securities
varies with changes in market interest rates generally and the differentials in
yields among various kinds of U.S. Government securities and other
mortgage-backed and asset-backed securities. In periods of rising interest
rates, the rate of prepayment tends to decrease, thereby lengthening the average
life of a pool of mortgages supporting a mortgage-backed security. Conversely,
in periods of falling interest rates, the rate of prepayment tends to increase
thereby shortening the average life of such a pool. Because prepayments of
principal generally occur when interest rates are declining, an investor, such
as a Fund, generally has to reinvest the proceeds of such prepayments at lower
interest rates than those at which its assets were previously invested.
Therefore, mortgage-backed securities have less potential for capital
appreciation in periods of falling interest rates than other income-bearing
securities of compara-

<PAGE>

ble maturity, although such other income-bearing securities may have a
comparable risk of capital depreciation during periods of rising interest rates.

Because asset-backed securities generally do not have the benefit of a security
interest in collateral that is comparable to mortgage assets, asset-backed
securities present certain additional risks that are not present with
mortgage-backed securities. Revolving credit receivables are generally unsecured
and the debtors on such receivables are entitled to the protection of a number
of state and federal consumer credit laws, many of which give debtors the right
to set-off certain amounts owed, thereby reducing the balance due. Automobile
receivables generally are secured, but by automobiles rather than by real
property. Most issuers of automobile receivables permit the loan servicers to
retain possession of the underlying obligations. If the servicer sells these
obligations to another party, there is the risk that the purchaser could acquire
an interest superior to that of holders of the asset-backed securities. In
addition, because of the large number of vehicles involved in a typical issue of
asset-backed securities and technical requirements under state law, the trustee
for the holders of the automobile receivables may not have a proper security
interest in the automobiles. Therefore, there is the possibility that recoveries
on repossessed collateral may not be available to support payments on these
securities.

Government Stripped Mortgage Related Securities. The Government Securities Fund,
Total Return Fund, Real Estate Securities Fund, Global Income Fund, Value Equity
Fund and Income Fund may invest in government stripped mortgage related
securities. These securities represent beneficial ownership interests in either
periodic principal distributions ("principal-only") or interest distributions
("interest-only") on mortgage-backed certificates issued by the Government
National Mortgage Association ("GNMA"), the Federal Home Loan Mortgage
Corporation ("FHLMC"), or the Federal National Mortgage Association ("FNMA").
The certificates underlying the government stripped mortgage related securities
represent all or part of the beneficial interest in pools of mortgage loans.

Investing in government stripped mortgage related securities involves all of the
risks of investing in mortgage-backed securities and U.S. Government securities
generally. In addition, the yields on these instruments is extremely sensitive
to the prepayment experience of the mortgage loans making up the pool underlying
the certificates. If a decline in the level of prevailing current interest rates
results in a rate of principal prepayments that is higher than anticipated when
the certificate was created, then distributions of principal will accelerate
thereby reducing the yield to maturity of interest-only securities from that
certificate and increasing the yield to maturity of principal-only securities
from that certificate. Sufficiently high prepayment rates could result in a Fund
not recovering its investment in interest-only securities. Where a certificate
represents only a part of the beneficial interest in a pool, the sensitivity of
an interest-only security of that certificate to interest rate fluctuations, may
be greater than that of other interest-only securities derived from other
certificates supported by the same underlying pool because of the particular
character of the principal portion of the pool that the certificate represents.

Government stripped mortgage related securities are currently traded over the
counter in a market maintained by several investment banking firms. No one can
be certain that a Fund will be able to purchase or sell a government stripped
mortgage related security at any time in the future. The Funds only purchase
such securities if a secondary market exists for the securities at the time of
purchase. Except for certain government stripped mortgage related securities
derived from fixed rate FHLMC and FNMA certificates meeting certain liquidity
requirements established by the Company's Board of Directors, the Funds treat
government stripped mortgage related securities as illiquid investments.

Adjustable Rate Mortgage Related Securities. The Government Securities Fund,
Total Return Fund, Real Estate Securities Fund, Global Income Fund, Value Equity
Fund and Income Fund may invest in adjustable rate mortgage related securities.
Adjustable Rate Mortgage Related Securities ("ARMs") have interest rates that
reset at periodic intervals. Acquiring ARMs permits a Fund to participate in
increases in prevailing current interest rates through periodic adjustments in
the coupons of mortgages underlying the pool on which certificates are based.
Such certificates generally have higher current yield and lower price
fluctuation than is the case with more traditional fixed-income debt securities
of comparable rating and maturity. In addition, when prepayments of principal
are made on the underlying mortgages during periods of rising interest rates, a
Fund can reinvest the proceeds of such prepayments at rates higher than that at
which they were previously invested. Mortgages underlying most ARMs, however,
have limits on the allowable annual or lifetime increases that can be made in
the interest rate that the mortgagor pays. Therefore, if

<PAGE>

current interest rates rise above such limits over the period of the limitation,
a Fund holding an ARM does not benefit from further increases in interest rates.
Moreover, when interest rates are in excess of coupon rates (i.e., the rates
being paid by mortgagors) of the mortgages, ARMs behave more like fixed-income
securities and less like adjustable rate securities. In addition, during periods
of rising interest rates, increases in the coupon rate of adjustable rate
mortgages generally lags current market interest rates slightly, thereby
creating the potential for capital depreciation on such securities.

Collateralized Mortgage Obligations. The Government Securities Fund, Total
Return Fund, Real Estate Securities Fund, Global Income Fund, Value Equity Fund
and Income Fund may invest in collateralized mortgage obligations.
Collateralized Mortgage Obligations ("CMOs") are obligations fully
collateralized by a portfolio of mortgages or mortgage-backed 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 other classes with respect to the receipt of
prepayments on the mortgages. Therefore, depending upon the type of CMO in which
a Fund invests, the investment is subject to a greater or lesser risk of
prepayment than other types of mortgage-backed securities.

GNMA Certificates. GNMA Certificates are securities representing part ownership
of a pool of mortgage loans. These loans, issued by lenders such as mortgage
bankers, commercial banks and savings and loan associations, are insured either
by the Federal Housing Administration or by the Veterans Administration. Each
pool of mortgage loans is assembled and, after being approved by GNMA, is sold
to investors through broker-dealers in the form of certificates representing
participations in the pool. GNMA guarantees the timely payment of principal and
interest of each mortgage in the pool and its guarantee is backed by the full
faith and credit of the U.S. Government. GNMA Certificates differ from bonds in
that a borrower pays the principal over the term of the loan rather than in a
lump sum at maturity. GNMA Certificates are called "pass-through" certificates
because both principal and interest payments on the mortgages (including
prepayments) are passed through to the holder of the certificate.

The average life of GNMA Certificates varies with the maturities of the
underlying mortgages. The Government Securities Fund may use principal payments
it receives to purchase additional GNMA Certificates or other investments.
Prepayments of any mortgages in the pool will usually result in the return of
the greatest part of principal invested well before the maturity of the
mortgages in the pool. The volume of such prepayments of principal in a given
pool of mortgages will influence the actual yield of the GNMA Certificate. Also,
the Government Securities Fund may reinvest principal repaid to it in
instruments whose yield may be higher or lower than that of the GNMA Certificate
had such prepayments not been made.

Investment Restrictions

Fundamental Restrictions. Each class of capital stock of the Company represents
interests in a separate Fund of the Company. The Funds are subject to certain
fundamental restrictions on their investments. These restrictions may not be
changed without the approval of the holders of a majority of the outstanding
voting shares of the Funds affected by the change. Except where otherwise noted,
each Fund may not:

1. Issue senior securities except: (a) to the extent that borrowings
under paragraph (10) below exceeding 5% may be deemed to be senior
securities under the 1940 Act, or (b) in connection with investments
of certain Funds in options and futures contracts.

2. As to 75% of its total assets, invest more than 5% of its total assets
taken at market value at the time of each investment in the securities
(other than United States government or government agency securities)
of any one issuer (including repurchase agreements with any one bank).
For purposes of this restriction, an issuer includes the government
(including agencies and instrumentalities thereof) of any country
other than the United States. This restriction does not apply to the
Global Income Fund.

3(a). For Funds other than Income Fund, U.S. Equity Fund and Premier Growth
Equity Fund, purchase more than either: (i) 10% in principal amount of
the outstanding debt securities of an issuer; or (ii) 10% of the
outstanding voting securities of an issuer, except that such
restriction shall not apply to securities issued or guar-

<PAGE>

anteed by the United States Government or its agencies, bank money
market instruments or bank repurchase agreements.

3(b). The Income Fund, U.S. Equity Fund and Premier Growth Equity Fund may
not purchase more than 10% of the voting securities of any single
issuer or more than 10% of the outstanding securities of any class of
any single issuer, except that this restrictions does not apply to:
(I) U.S. Government securities, or (ii) up to 25% of the total assets
of these three Funds. For the purposes of this restriction, a foreign
government and its agencies and instrumentalities are treated as a
single issuer.

4. Invest more than 25% of its total assets (taken at market value at the
time of each investment) in the securities of issuers primarily
engaged in the same industry; utilities will be divided according to
their services; for example, gas, gas transmission, electric and
telephone each will be considered a separate industry for purposes of
this restriction. For purposes of this restriction, the term industry
includes (a) the government (including agencies and instrumentalities
thereof) of any country other than the United States, and (b) any
supranational entity (including agencies and instrumentalities
thereof). This restriction does not apply to the Real Estate
Securities Fund. For the Global Income Fund, the term industry does
not include the government of any country other than the U.S.

5. Purchase real estate or any interest therein, except through the
purchase of corporate or certain government securities including
securities secured by a mortgage or a leasehold interest or other
interest in real estate. A security issued by a real estate or
mortgage investment trust is not treated as an interest in real
estate.

6. Purchase securities which are subject to legal or contractual delays
in or restrictions on resale. This restriction does not apply to the
International Equity Fund, the Real Estate Securities Fund, Value
Equity Fund Income Fund, U.S. Equity Fund, Premier Growth Equity Fund
or Global Income Fund.

7. Purchase any securities on margin except: (a) that a Fund may obtain
such short-term credit as may be necessary for the clearance of
purchases and sales of portfolio securities, or (b) in connection with
investments of Funds in options and futures contracts.

8. Make loans, except as provided in (9) below and except through the
purchase of obligations in private placements (the purchase of
publicly traded obligations not being considered the making of a
loan).

9. Lend its portfolio securities in excess of 20% of its total assets
(30% of total assets for the Income Fund, U.S. Equity Fund and Premier
Growth Equity Fund), taken at market value at the time of the loan,
and provided that such loan shall be made in accordance with the
Fund's guidelines.

10. Borrow amounts in excess of 10% (20% in the case of the S&P 500 Index
Fund; 33.33% in the case of Income Fund, U.S. Equity Fund, Premier
Growth Equity Fund) of its total assets, taken at market value at the
time of the borrowing, and then only from banks as a temporary measure
for extraordinary or emergency purposes or to meet redemption requests
that might otherwise require the untimely disposition of securities,
and not for investment or leveraging. For this purpose the Income
Fund, U.S. Equity Fund and Premier Growth Equity Fund may borrow from
banks and via reverse repurchase agreements; the other Funds may only
borrow from banks. The International Equity Fund, however, may borrow
amounts up to an additional 10% of its net asset value from banks to
increase its holdings of portfolio investments.

11. Mortgage, pledge, hypothecate or in any manner transfer, as security
for indebtedness, any securities owned or held by such Fund except:
(a) as may be necessary in connection with borrowings mentioned in
(10) above, and then such mortgaging, pledging or hypothecating may
not exceed 10% of the Fund's total assets, taken at market value at
the time thereof, or (b) in connection with investments of certain
Funds in options and futures contracts.

12. Underwrite securities of other issuers except insofar as the Company
may be deemed an underwriter under the Securities Act of 1933 in
selling portfolio securities.

20
<PAGE>

13. Invest more than 10% of its net assets (15% of total assets for the
International Equity Fund, Real Estate Securities Fund, Value Equity
Fund, Income Fund, U.S. Equity Fund, Premier Growth Equity Fund and
Global Income Fund) in repurchase agreements maturing in more than
seven days and other illiquid investments.

Nonfundamental Restrictions. The Company has also adopted the following
additional investment restrictions applicable (except as noted) to all Funds.
These are not fundamental and may be changed by the board of directors without
shareholder approval. Under these restrictions, each Fund may not:

1. Invest in securities of foreign issuers if at the time of acquisition
more than 20% of its total assets, taken at market value,would be
invested in such securities. This restriction is not applicable to the
Total Return Fund, S&P 500 Index Fund, International Equity Fund,
Value Equity Fund, Income Fund, Premier Growth Equity Fund and Global
Income Fund.

2. Purchase securities of other investment companies if, as a result
thereof, the Fund would own more than 3% of the total outstanding
voting stock of any one investment company, or more than 5% of the
Fund's assets would be invested in any one investment company, or more
than a total of 10% of the Fund's assets would be invested in
investment company securities. These limitations do not apply to
securities acquired in connection with a merger, consolidation,
acquisition or reorganization, or by purchase in the open market of
securities of closed-end investment companies where no underwriter or
dealer's commission or profit, other than customary broker's
commission, is involved, and so long as immediately thereafter not
more than 10% of such Fund's total assets, taken at market value,
would be invested in such securities. These limitations also do not
apply to investment by the Funds in shares of GEI Short-Term
Investment Fund as permitted by an exemptive order issued by the SEC.

3. Purchase or sell interests in commodities, or commodity contracts,
except that certain Funds may invest in currency and financial
instruments and contracts that are commodities or commodity contracts.

4. Invest more than 30% (35% for the Real Estate Securities Fund) of its
assets, measured at time of purchase, in debt securities (other than
U.S. Government securities) that are rated lower than the four highest
rating categories assigned by Moody's or Standard & Poor's.

5. The Money Market Fund may not invest more than 5% of its total assets
taken at market value at the time of each investment in the securities
(other than United States government or government agency securities)
of any one issuer (including repurchase agreements with any one bank).

6. The S&P 500 Index Fund, Total Return Fund, Government Securities Fund,
International Equity Fund, Real Estate Securities Fund, Value Equity
Fund, Income Fund, U.S. Equity Fund, Premier Growth Equity Fund and
Global Income Fund may not enter into a financial futures contract (by
exercise of any option or otherwise) or acquire any options thereon,
if, immediately thereafter, the total of the initial margin deposits
required with respect to all open futures positions, at the time such
positions were established, plus the sum of the premiums paid for all
unexpired options on futures contracts would exceed 5% of the value of
its total assets.

7. Make additional investments when borrowings (including reverse
repurchase agreements) exceed 5% of its total assets.

8. The Income Fund, U.S. Equity Fund and Premier Growth Equity Fund may
not make short sales of securities or maintain a short position,
unless at all times when a short position is open, the Fund holds the
securities sold short or may obtain such securities (in an amount
equal to the short position) without payment of any consideration.

21
<PAGE>

9. The Income Fund, U.S. Equity Fund and Premier Growth Equity Fund may
each not invest more than 10% of their total assets in illiquid
restricted securities and more than 15% of their total assets in a
combination of illiquid securities and illiquid restricted securities.

MANAGEMENT OF THE COMPANY

Directors and Officers

The directors and officers of the Company and their principal occupations for
the last five years are set forth below. Unless otherwise noted, the address of
each director and officer is 3003 Summer Street, Stamford, CT 06905.

Names, Positions, and Addresses of Directors and Officers of the Company
Occupation During the Past 5 Years

Michael J. Cosgrove*, Director

President, GE Mutuals since 1997. Executive Vice President, Mutual Funds,
GEIM and GEIC, since 1993. Executive Vice President and Director of GEIM
and Director of GEIC, since 1988. Executive Vice President, Finance and
Administration, GEIM and GEIC, 1988-1993. Trustee, GEFunds (registered
investment company), since 1992. Trustee, Variable Investment Trust
(registered investment company), since 1994. Trustee, GE LifeStyle Funds
(registered investment company), since 1996.

John R. Costantino, Director
150 East 58th Street
New York, NY 10055

Managing Director, Walden Partners, Ltd., since 1992. President, CMG
Acquisition Corp., Inc., since 1988. Vice Chairman, Acoustiguide Holdings,
Inc., since 1989. President CMG/IKH, Inc., since 1991. Director since 1991:
Crossland Federal Savings Bank; Brooklyn Bancorp, Inc. 1991 - 1996; IK
Holdings, Inc.; I. Kleinfeld & Son, Inc.; and High Performance Appliances,
Inc. ("HPA"), Ltd. Director, Lancit Media Productions, Ltd., since 1995.
Partner, Costantino Melamede-Greenberg Investment Partners, 1987-1992.
Trustee, GE Funds (registered investment company), since 1992. Trustee,
Variable Investment Trust (registered investment company), since 1994.
Trustee, GE LifeStyle Funds (registered investment company), since 1996,
Clayton Group, Inc., since 1996.

William J. Lucas, Director
Fairfield University
North Benson Road
Fairfield, CT 06480

Vice President and Treasurer, Fairfield University, since 1983. Trustee, GE
Funds (registered investment company), since 1992. Trustee, Variable
Investment Trust (registered investment company), since 1994. Trustee, GE
LifeStyle Funds (registered investment company), since 1996.

Robert P. Martin, Jr., Director
115 Granite Avenue
Richmond, VA 23226

Self-employed investment consultant, since 1985.

J. Clifford Miller, III, Director
372 Lexington Road
Richmond, VA 23226

Vice President - Investments, Davenport & Co. LLC., since 1992; Self
Employed Consultant from 1988 to 1992; Director, Miller Manufacturing Co.,
Inc., from 1977 to 1990; General Partner, Miller Land Company, 1987 - 1996;
Manager, Miller Properties, L.L.C., since, 1996.

22
<PAGE>

Lee A. Putney, Director
4208 Sulgrave Road
Richmond, VA

Director, Regency Financial Shares, Inc., since 1989 Chairman from 1989 -
1992; Chairman of Board of Directors, Regency Bank, since 1987, Chairman
from 1987 -1992.

J. Garnett Nelson*, Director
Route 1, Box 195
Montpelier, VA 23192

President, Mid-Atlantic Holdings, L.L.C. since 1995; Senior Vice President
1988-1995 and Director 1989-1995, The Life Insurance Company of Virginia;
Director RAC Income Fund, Inc. since 1991; Director, Lawyers Title
Corporation, 1991-1996.

Robert P. Quinn, Director
45 Shinnecock Road
Quogue, NY 11959

Retired, Saloman Brothers, Inc., since 1983. Director, GP Financial Corp.,
since 1994. Director, The Greenpoint Savings Bank, since 1987. Trustee, GE
Funds (registered investment company), since 1992. Trustee, Variable
Investment Trust (registered investment company), since 1994. Trustee, GE
LifeStyle Funds (registered investment company), since 1996.

Paul E. Rutledge*, President and Director
6610 W. Broad Street
Richmond, VA 23230

President and Chief Operating Officer of The Life Insurance Company of
Virginia since 1992.

Jeffrey A. Groh*, Treasurer

Vice President, Operations of GEIM and GEIC since January 1997, and
Treasurer and Controller of GEIM and GEIC since August 1994; prior to
August 1994, was a Senior Manager in Investment Company Services Group and
certified public account with Price Waterhouse LLP.

Matthew J. Simpson*, Secretary

Vice President, Associate General Counsel and Assistant Secretary of GEIM
and GEIC since October 1992; attorney with the law firm of Baker &McKenzie,
April 1991 to October 1992; prior to April 1991 was an attorney with the
law firm of Spengler Carlson Gubar Brodsky & Frischling.

- ----------

* Directors and officers identified with an asterisk are considered
"interested persons" of the Company as that term is defined in the 1940 Act
because of their employment or other affiliation with Life of Virginia
and/or GEIM.

Directors or officers who are interested persons of the Company do not
receive any compensation from the Company for their services to the
Company. The directors who are not interested persons of the Company
receive compensation from the Company at a rate of $2,000 annually, plus
$250 per meeting attended. In addition, directors who are not interested
persons of the Company are reimbursed for any out-of-pocket expenses
incurred in connection with affairs of the Company. During 1996 the Company
paid directors' fees of $16,868 to the directors who were not interested
persons of the Company.

23
<PAGE>

Table Of Directors Compensation

Aggregate Compensation
Name of Director From the Company
- ---------------- ----------------

Mr. W. Chandler $3,250

Mr. J. Leard $3,500

Mr. R. Martin $3,500

Mr. C. Miller $3,500

Mr. G. Nelson 0

Mr. J. Palmer 0

Mr. L. Putney $3,500

Directors and officers of the Company do not receive any benefits from the
Company upon retirement nor does the Company accrue any expenses for pension or
retirement benefits. Mr. Chandler, Mr. Leard and Mr. Palmer are no longer
directors of the Company. Mr. Cosgrove, Mr. Costantino, Mr. Lucas and Mr.
Rutledge became directors in 1997 and therefore received no compensation from
the Company in 1996.

AAI

Prior to May 1, 1997 the investment adviser for the Company and the Money Market
Fund, Government Securities Fund, S&P 500 Index Fund, Total Return Fund,
International Equity Fund and Real Estate Securities Fund was Aon Advisors, Inc.
("AAI"), a wholly-owned subsidiary of Aon Corporation ("Aon"). In addition to
the Company, AAI provided investment advice and management to pension plans,
corporations, and other organizations. Aon, a publicly owned Delaware
corporation, is an insurance holding company organization principally engaged
through subsidiaries in the insurance and insurance brokerage business.

AAI Investment Advisory Agreement

The duties and responsibilities of AAI are specified in the Investment Advisory
Agreement ("AAI Agreement") between the Company and AAI. The Agreement was first
approved for each of the above Funds, other than the International Equity Fund
and Real Estate Securities Fund, by the board of directors of the Company
(including a majority of directors who are not parties to the Agreement or
interested persons, as defined by the 1940 Act, of any such party --
hereinafter, "independent directors") at a meeting held for that purpose on
January 27, 1993. It was also approved by the shareholders of these Funds at a
meeting held on April 20, 1993. Likewise, the board of directors approved
substantially identical additional agreements ("AAI Additional Agreements")
covering the International Equity Fund and the Real Estate Securities Fund at a
meeting held for that purpose on January 25, 1995. The AAI Additional Agreements
were approved by the shareholders of these Funds on May 24, 1995. The AAI
Agreement and the AAI Additional Agreements were not assignable and could be
terminated without penalty upon 60 days written notice at the option of either
the Company or AAI or by a vote of shareholders. The AAI Agreement provided that
it could be continued for each Fund from year to year so long as such
continuance was specifically approved annually (a) by the board of directors of
the Company or by a majority of the outstanding shares of the Fund and (b) by a
majority vote of the independent directors cast in person at a meeting held for
that purpose. Each AAI Additional Agreement provided that it could be continued
from year to year so long as such continuance was specifically approved annually
(a) by the board of directors of the Company or by a majority of the outstanding
shares of the Fund and (b) by a majority vote of the independent directors cast
in person at a meeting held for that purpose.

24
<PAGE>

AAI (under the supervision of the board of directors) continuously furnished an
investment program for the Money Market Fund, Government Securities Fund, S&P
500 Index Fund, Total Return Fund, International Equity Fund and Real Estate
Securities Fund other than the International Equity Fund and the Real Estate
Securities Fund, was responsible for the actual managing of the investments of
such Funds and had responsibility for making decisions governing whether to buy,
sell or hold any particular security. In carrying out its obligations to manage
the investment and reinvestment of the assets of these Funds, AAI performed
research and obtained and evaluated pertinent economic, statistical and
financial data relevant to the investment policies of these Funds.

As described below, AAI had engaged Perpetual as the investment sub-adviser to
provide day-to-day portfolio management for the International Equity Fund and
had engaged Seneca, as the investment sub-adviser to provide day-to-day
portfolio management for the Real Estate Securities Fund.

In addition to performing management duties and providing the investment advice
described above, AAI was responsible for the administrative services in
connection with the management of the Company and the Funds, including financial
reporting.

AAI was responsible for payment of all expenses it incurred in performing the
services described. These expenses included costs incurred in providing
investment advisory services, compensating and furnishing office space for
officers and employees of AAI connected with investment and economic research,
trading and investment management of the Company and the payment of any fees to
interested directors of the Company. AAI provided all executive, administrative,
clerical and other personnel necessary to operate the Company and paid the
salaries and other employment related costs of employing those persons. AAI
furnished the Company with office space, facilities and equipment and paid the
day-to-day expenses related to the operation and maintenance of such office
space facilities and equipment. Legal, accounting and all other expenses
incurred in the organization of the Company or of new Funds of the Company,
including costs of registering under federal and state securities laws, were
also paid by AAI. AAI entered into an indemnity agreement with Life of Virginia,
whereby Life of Virginia agreed to reimburse it if certain expenses borne by it
during any month exceeded the investment advisory fee paid by the Company during
that period.

The Company was responsible for payment of all expenses it incurred in its
operation and all of its general administrative expenses except those expressly
assumed by AAI as described in the preceding paragraph. These included (by way
of description and not of limitation), any share redemption expenses, expenses
of portfolio transactions, shareholder servicing costs, pricing costs (including
the daily calculation of net asset value), interest on borrowings by the
Company, charges of the custodian and transfer agent, if any, cost of auditing
services, non-interested directors' fees, legal expenses, state franchise taxes,
certain other taxes, investment advisory fees, certain insurance premiums, cost
of maintenance of corporate existence, investor services (including allocable
personnel and telephone expenses), costs of printing and mailing updated Fund
prospectuses to shareholders, proxy statements and shareholder reports, the cost
of paying dividends and capital gains distributions, capital stock certificates,
costs of directors and shareholder meetings, and any extraordinary expenses,
including litigation costs in legal actions involving the Company, or costs
related to indemnification of directors, officers and employees of the Company.
The board of directors of the Company determined the manner in which expenses
were allocated among the Funds of the Company.

The AAI Agreement and the AAI Additional Agreements also provided that AAI would
not be liable to the Company or to any shareholder or policyowner for any error
of judgment or mistake of law or for any loss suffered by the Company or by any
shareholder in connection with matters to which the such Agreements or
Additional Agreements related, except for a breach of fiduciary duty or a loss
resulting from willful misfeasance, bad faith, gross negligence, or reckless
disregard on the part of AAI in the performance of its duties thereunder.

AAI Investment Advisory Fee

AAI received investment advisory fees as compensation for its services. The fees
were accrued by each Fund of the Company daily but paid to AAI monthly. The
investment advisory fee for each Fund was based upon the average daily net
assets of the Fund (as computed in accordance with the description in the
Company prospectus) at the following annual rates:

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S&P 500 Index Fund: .35%

Government Securities Fund: .50% of the first $100,000,000; .45% of the
next $100,000,000; .40% of the next $100,000,000; .35% of the next
$100,000,000; and .30% of amounts in excess of $400,000,000.

Money Market Fund: .50% of the first $100,000,000; .45% of the next
$100,000,000; .40% of the next $100,000,000; .35% of the next $100,000,000;
and .30% of amounts in excess of $400,000,000.

Total Return Fund: .50% of the first $100,000,000; .45% of the next
$100,000,000; .40% of the next $100,000,000; .35% of the next $100,000,000;
and .30% of amounts in excess of $400,000,000.

International Equity Fund: 1.00% of the first $100,000,000; .95% of the
next $100,000,000; and .90% of amounts in excess of $200,000,000.

Real Estate Securities Fund: .85% of the first $100,000,000; .80% of the
next $100,000,000; and .75% of amounts in excess of $200,000,000.

For the fiscal year ended December 31, 1994, the total advisory fee paid was
$326,133 of which $51,712 was paid by the S&P 500 Index Fund, $49,571 was paid
by the Government Securities Fund, $114,126 was paid by the Money Market Fund,
and $110,724 was paid by the Total Return Fund. For the fiscal year ended
December 31, 1995, the total advisory fee paid was $834,124 of which $148,409
was paid by the S&P 500 Index Fund, $88,566 was paid by the Government
Securities Fund, $201,711 was paid by the Money Market Fund, $250,070 was paid
by the Total Return Fund, $79,321 was paid by the International Equity Fund, and
$66,047 was paid by the Real Estate Securities Fund.

For the fiscal year ended December 31, 1996, the total advisory fee paid was
$1,822,519 of which $336,589 was paid by the S&P 500 Index Fund, $129,056 was
paid by the Government Securities Fund, $552,126 was paid by the Money Market
Fund, $405,779 was paid by the Total Return Fund, $237,088 was paid by the
International Equity Fund, and $161,881 was paid by the Real Estate Securities
Fund.

AAI Investment Sub-Advisers

Pursuant to separate sub-advisory agreements described below, AAI had engaged
Perpetual as the investment sub-adviser to provide day-to-day portfolio
management for the International Equity Fund and had engaged Seneca as the
investment sub-adviser to provide day-to-day portfolio management for the Real
Estate Securities Fund.

Perpetual, a wholly-owned subsidiary of Perpetual plc, was the investment
sub-adviser for the International Equity Fund. It is registered under the
Investment Advisers Act of 1940 as an investment adviser and has its principal
offices at 48 Hart Street, Henley-on-Thames, Oxfordshire, England RG9 2AZ. In
addition to the International Equity Fund, Perpetual provides investment advice
and management to pension plans, corporations and other institutional and
individual clients. Although Perpetual had no prior experience advising a U.S.
mutual fund, it and its affiliates managed over 29 unit trusts (the British term
for mutual funds) in the United Kingdom and overseas.

Seneca was (and still is) the investment sub-adviser for the Real Estate
Securities Fund. Seneca is at 909 Montgomery Street, San Francisco, CA 94133.
Seneca is a majority owned subsidiary of Phoenix Duff & Phelps Corporation
("Phoenix"). 40% of the stock of Phoenix is publicly held and traded on the New
York Stock Exchange while the remaining 60% is owned by a wholly owned
subsidiary of Phoenix Home Life Mutual Insurance Company. Seneca is an
investment adviser that provides investment management services to foundations,
endowments, corporations, mutual funds and private clients. Seneca currently
manages approximately $3.8 billion in equity, fixed-income and real estate
assets.

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AAI Investment Sub-Advisory Agreements

AAI entered into a separate sub-advisory agreement (the "AAI Sub-Advisory
Agreements") with Perpetual and with Seneca for the day-to-day portfolio
management of the International Equity Fund and the Real Estate Securities Fund.
The AAI Sub-Advisory Agreement for the International Equity Fund was approved by
the board of directors of the Company (including a majority of the independent
directors) at a meeting held for that purpose on January 25, 1995. The AAI
Sub-Advisory Agreement for the Real Estate Securities Fund was approved by the
board of directors of the Company (including a majority of the independent
directors) at a meeting held for that purpose on April 24, 1996. The
International Equity Fund AAI Sub-Advisory Agreement was also approved by the
initial shareholder of that Fund on May 24, 1995. The Real Estate Securities
Fund AAI Sub-Advisory Agreement was approved by the shareholders of that Fund on
August 20, 1996. The AAISub-Advisory Agreements were not assignable and could
each be terminated without penalty upon 60 days written notice at the option of
AAI or either Perpetual or Seneca, as the case may be, or by the board of
directors of the Company or by a vote of a majority of the outstanding shares of
the class of stock representing an interest in the appropriate Fund. Each AAI
Sub-Advisory Agreement provided that it would continue in effect for two years
and could thereafter be continued for its Fund from year to year so long as such
continuance was specifically approved annually (a) by the board of directors of
the Company or by a majority of the outstanding shares of the Fund and (b) by a
majority vote of the the independent directors cast in person at a meeting held
for that purpose.

AAI Investment Sub-Advisory Fees

For their services, AAI paid Perpetual and Seneca monthly compensation in the
form of an investment sub-advisory fee. The fee was paid by AAI monthly and was
based upon the average daily net assets (see "Purchase and Redemption of Fund
Shares") of the Fund that each sub-adviser managed, at the following annual
rates:

International Equity Fund: .50% of the first $100,000,000; .475% of the
next $100,000,000; and .45% of amounts in excess of $200,000,000.

Real Estate Securities Fund: .425% of the first $100,000,000; .40% of the
next $100,000,000; and .375% of amounts in excess of $200,000,000.

For the fiscal year ended December 31, 1996, AAI paid Perpetual $118,544 and
Seneca $80,941 in sub-advisory fees. For the fiscal period ended December 31,
1995, AAI paid Perpetual $39,660 and Seneca $33,023 in sub-advisory fees.

AAI Reimbursement of Excess Operating Expenses

Under the AAI Agreement and the AAI Additional Agreements, any operating
expenses allocable to the following Funds of the Company for the 1994, 1995 and
1996 fiscal years that exceeded the amounts indicated below, AAI reimbursed the
Company for the excess:

(1) With respect to the Government Securities Fund, the Total Return Fund
and the Real Estate Securities Fund, 1.5% of the first $30,000,000 of
the average daily net assets of each of those portfolios and 1% of the
amount by which the average daily net assets of each of those Funds
exceed $30,000,000.

(2) With respect to the Money Market Fund and the S&P 500 Index Fund,
0.75% of the average daily net assets of each of those Funds.

(3) With respect to the International Equity Fund, 1.75% of the first
$30,000,000 of the average daily net assets of the portfolio and 1% of
the amount by which the average daily net assets of the Fund exceeds
$30,000,000.

Effective July 1, 1995, on a voluntary basis, AAI also agreed to reimburse the
International Equity and Real Estate Securities Funds annually for expenses in
excess of the following amounts: International Equity Fund, 1.50% of the

<PAGE>

first $30 million of average daily net assets; Real Estate Securities Fund,
1.25% of the first $30 million of average daily net assets. For purposes of this
reimbursement formula, "operating expenses" did not include attorneys' fees,
court judgements, decrees or awards, or any other litigation costs in legal
actions involving the Company, or costs related to indemnification of directors,
officers or employees of the Company where such costs were not covered by
director and officer liability insurance.

Expenses that were reimbursable as described above, if any, were calculated
daily and credited to the Company on a monthly basis.

For the fiscal year ended December 31, 1994, total reimbursements paid to the
Company by AAI amounted to $53,529, all of which pertained to the S&P 500 Index
Fund. For the fiscal year ended December 31, 1995, total reimbursements paid to
the Company amounted to $72,688. Of this amount, $49,516 pertained to the
International Equity Fund and $23,172 pertained to the Real Estate Securities
Fund. For the fiscal year ended December 31, 1996, total reimbursements paid to
the Company by AAI amounted to $14,412 all of which pertained to the
International Equity Fund.

GEIM

GEIM serves as the Company's investment adviser and administrator. GEIM is
registered as an investment adviser under the Investment Advisers Act of 1940
and is located at 3003 Summer Street, Stamford, Connecticut 06905. GEIM, which
was formed under the laws of Delaware in 1988, is a wholly owned subsidiary of
General Electric Company ("GE"). GEIM currently provides investment advisory
services with respect to 25 other mutual funds and a number of other private
institutional accounts. The professionals responsible for the investment
operations of GEIM serve in similar capacities with respect to General Electric
Investment Corporation ("GEIC"), a sister company of GEIM wholly owned by GE,
which provides investment advisory services with respect to GE's pension and
benefit plans and a number of funds offered exclusively to GE employees,
retirees and certain related persons. These funds include the Elfun family of
Funds (the first of which, Elfun Trusts, was established in 1935) and the funds
offered as part of GE's 401(k) program (also known as the GE Savings and
Security Program), which are referred to as the GE S&S Program Mutual Fund and
the GE S&S Long Term Interest Fund. The investment professionals at GEIM and
GEIC and their predecessors have managed GE's pension assets since 1927. As of
December 31, 1996, GEIM and GEIC managed assets in excess of $58 billion,
including roughly $11 billion in mutual fund assets.

GEIM Investment Advisory Agreements

The duties and responsibilities of GEIM are specified in investment advisory and
administration agreements (the "advisory agreements") between GEIM and the
Company on behalf of each Fund. Under the advisory agreements, GEIM provides a
continuous investment program for each Fund's assets, including investment
research and management. GEIM determines what investments are purchased,
retained or sold by the Funds and places purchase and sale orders for the Funds
investments. GEIM provides the Company 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. GEIM furnishes
the Company and each Fund with office space, facilities, and equipment and pays
the day-to-day expenses related to the operation of such space, facilities and
equipment. GEIM, as administrator, also: (1) maintains the books and records of
each Fund; (2) prepares reports to shareholders of each Fund; (3) prepares and
files tax returns for each Fund; (4) assists with the preparation and filing of
reports and the Company's registration statement with the Securities and
Exchange Commission; (5) provides appropriate officers for the Company; (6)
provides administrative support necessary for the board of directors of the
Company to conduct meetings; and (7) supervises and coordinates the activities
of other service providers, including independent auditors, legal counsel,
custodians, accounting service agents, and transfer agents.

GEIM is generally responsible for employing sufficient staff and consulting with
other persons that it determines to be necessary or useful in the performance of
its obligations under the advisory agreements. The advisory agreements obligate
GEIM to provide services in accordance with each Fund's investment objectives,
policies and restrictions as stated in the Company's current registration
statement, as amended from time to time, and to keep the Company informed of
developments materially affecting each Fund, including furnishing the Company
with whatever information and reports that the board of directors reasonably
request.

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Other than those expenses expressly assumed by GEIM, as described above, each
Fund is responsible under the advisory agreement relating to it for paying all
expenses incurred in its operations and all of the Company's general
administrative expenses allocated to it. These include, but are not limited to:
(1) share redemption expenses, (2) shareholder servicing costs, (3) expenses of
any shareholder servicing plans or distribution plans adopted by the board of
directors, (4) custody expenses, (5) transfer agency and recordkeeping expenses,
(6) brokerage fees and commissions, (7) taxes, (8) federal and state
registration fees, (9) expenses of preparing, printing and distributing
prospectuses to regulators and existing shareholders, (10) expenses of
shareholder and board of directors meetings, (11) fees of disinterested
directors, (12) expenses of preparing and distributing proxy materials, (13)
fees of parties unaffiliated with GEIM for valuing portfolio securities and
computing net asset values for Funds, (14) legal fees, (15) auditors fees, (16)
insurance premiums, and (17) membership dues in industry associations.

The advisory agreements permit GEIM, subject to the approval of the board of
directors and other applicable legal requirements, to enter into any advisory or
sub-advisory agreement with affiliated or unaffiliated entities whereby such
entity would perform some or all of GEIM's responsibilities under one or more of
the advisory agreements. In this event, GEIM remains responsible for ensuring
that these entities perform the services that each undertakes pursuant to a
sub-advisory agreement.

The advisory agreements provide that GEIM may render similar advisory and
administrative services to other clients so long as the services that it
provides under the agreements are not impaired thereby. The advisory agreements
also provide that GEIM shall not be liable for any error of judgment or mistake
of law or for any loss incurred by a Fund in connection with GEIM's services
pursuant to the agreements, except for (1) willful misfeasance, bad faith or
gross negligence in the performance of its duties or by reason of reckless
disregard of its duties or obligations under the agreements, and (2) to the
extent specified in Section 36(b) of the Act concerning loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation.

The advisory agreements, for the S&P 500 Index Fund, Government Securities Fund,
Money Market Fund, Total Return Fund, International Equity Fund and Real Estate
Securities Fund were each approved by the board of directors (including a
majority of independent directors) at a meeting held for that purpose on January
29, 1997 and by the shareholders at meetings held on April 16, 1997. The
advisory agreements for the Value Equity Fund and Global Income Fund were
approved by the board of directors (including a majority of the independent
directors) at a meeting held for that purpose on April 23, 1997 and by the sole
initial shareholder of these Funds on April 29, 1997. Each of the foregoing
advisory agreements are effective as of May 1, 1997 and continue in effect for
their respective Fund for an initial term ending April 30, 1999, and will
continue from year to year thereafter, subject to approval annually by (a) the
board of directors or a vote of a majority of the outstanding shares of the
class of stock representing an interest in the applicable Fund, and (b) the vote
of a majority of the independent directors, cast in person at a meeting called
for the purpose of voting on such approval. The advisory agreements for the
Income Fund, U.S. Equity Fund and Premier Growth Equity Fund were approved by
the board of directors (including a majority of the independent directors) at a
meeting held for that purpose on June 4, 1997 and by the sole initial
shareholder of these Funds on August __, 1997. These three advisory agreements
are effective as of August __, 1997 and continue in effect for their respective
Fund for an initial term ending [July ,] 1999, and continue from year to year
thereafter, subject to annual approval by (a) the board of directors or a vote
of a majority of the outstanding shares of the class of stock representing an
interest in the applicable Fund, and (b) a vote of a majority of the independent
directors, cast in person at a meeting called for the purpose of voting on such
approval.

The advisory agreements are not assignable and each may be terminated without
penalty by either the Company or GEIM upon no more than sixty days nor less than
thirty days written notice to the other or by the board of directors of the
Company or by the vote of a majority of the outstanding shares of the class of
stock representing an interest in the applicable Fund.

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<PAGE>

GEIM Investment Advisory Fees

For its services to each Fund of the Company, GEIM receives a monthly advisory
and administrative fee. The fee is deducted daily from the assets of each of the
Funds and paid to GEIM monthly. The fees payable to GEIM (which are identical to
the fees under the AAI Agreements) are based on the average daily net assets of
each Fund at the following annual rates:

Government Securities Fund, Money Market Fund and Total Return Fund: .50%
of the first $100,000,000; .45% of the next $100,000,000; .40% of the next
$100,000,000; .35% of the next $100,000,000; and .30% of the amounts in
excess of $400,000,000;

International Equity Fund: 1.00% of the first $100,000,000; .95% of the
next $100,000,000; and .90% of the amounts in excess of $200,000,000;

Real Estate Securities Fund: .85% of the first $100,000,000; .80% of the
next $100,000,000; and .75% of the amounts in excess of $200,000,000; and

S&P 500 Index Fund: .35%.

Value Equity Fund: .65%

Income Fund .50%

U.S. Equity Fund .55%

Premier Growth Equity Fund .65%

Global Income Fund: .60%

The advisory agreements do not contain any provisions prescribing limits on the
operating expenses of the Company or of any Fund.

GEIM Investment Sub-Advisers

As was the case with AAI, GEIM has retained Seneca as sub-adviser for the Real
Estate Securities Fund. GEIM also has engaged NWQ as the investment sub-adviser
to provide day-to-day portfolio management to the Value Equity Fund; engaged
GEIUS to provide day-to-day portfolio management to the Global Income Fund and;
SSGA to provide day-to-day portfolio management to the S&P 500 Index Fund.

NWQ is located at 655 South Hope Street, Los Angeles, CA 90017 and is a wholly
owned subsidiary of United Asset Management Corporation, a company whose
principal business is managing investments for institutional clients through 45
operating subsidiaries and acquiring investment management firms. NWQ is a
manager of domestic investment portfolios for individual, union, corporate,
endowment and foundation clients with 15 years of experience. It manages
approximately $6.5 billion in assets.

Like GEIM, GEIUS is a wholly owned subsidiary of GE and is considered under
common control with GEIM. GEIUS is located at Sweden House, 20 Saint James'
Street, London, SW1A 1ES, England and is registered as an investment adviser
under the Investment Advisers Act of 1940. Although GEIUS has no prior
experience advising a U.S. mutual fund, it currently manages approximately $1.1
billion in assets.

SSGA is a division of State Street Bank and Trust Company ("State Street"). SSGA
is located at Two International Place, Boston, Massachusetts 02110. State Street
is a wholly-owned subsidiary of State Street Corporation, a publicly held bank
holding company. State Street, with over $292 billion under management as of
December 31, 1996, provides complete global investment management services from
offices in the United States, London, Sydney, Hong Kong, Tokyo, Toronto,
Montreal, Luxembourg, Melbourne, Paris, Dubai, Munich and Brussels.

30
<PAGE>

GEIM Investment Sub-Advisory Agreements

NWQ is the investment sub-adviser to the Value Equity Fund and GEIUS is the
investment sub-adviser to the Global Income Fund pursuant to an investment
sub-advisory agreements with GEIM effective May 1, 1997. Both investment
sub-advisory agreements were approved by the board of directors, including a
majority of the independent directors at a meeting held for that purpose on
April 23, 1997 and by the respective Funds' sole initial shareholder on April
29, 1997.

Seneca is the investment sub-adviser to the Real Estate Securities Fund pursuant
to an investment sub-advisory agreement with GEIM effective July __, 1997. This
investment sub-advisory agreement was approved by the board of directors
(including a majority of the independent directors) at a meeting held for that
purpose on June 4, 1997 and by the Fund's shareholders on July 23, 1997.

SSGA is the investment sub-adviser to the S&P 500 Index Fund pursuant to an
investment sub-advisory agreement with GEIM effective July __, 1997. This
investment sub-advisory agreement was approved by the board of directors,
including a majority of independent directors, at a meeting held for that
purpose on June 4, 1997 and by the Fund's shareholders on July 23, 1997.

The investment sub-advisory agreements are not assignable and each may be
terminated without penalty by either the sub-adviser or GEIM upon sixty days
written notice to the other or by the board of directors of the Company or by
the vote of a majority of the outstanding shares of the class of stock
representing an interest in the applicable Fund.

The investment sub-advisory agreements each provide that the subadviser may
render similar advisory and administrative services to other clients so long as
the services that it provides under the agreements are not impaired thereby. The
investment 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 suffered
by the applicable Fund or its shareholders or by GEIM in connection with its
services pursuant to the agreements, except for a loss resulting from willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of reckless disregard of its duties or obligations under the
agreements.

GEIM Investment Sub-Advisory Fees

For their services, GEIM pays SSGA, NWQ, Seneca and GEIUS monthly compensation
in the form of an investment sub-advisory fee. The fee is paid by GEIM monthly
and is a percentage of the average daily net assets of the Fund that each
sub-adviser manages, at the following annual rates:

S&P 500 Index Fund: .05% of the first $100,000,000; .04% of the next
$200,000,000; and .03% of amounts in excess of $300,000,000.

Real Estate Securities Fund: .425% of the first $100,000,000; .400% of the
next $100,000,000; and .375% of amounts in excess of $200,000,000.

Value Equity Fund: .4875% of the first $50,000,000; and .325% of amounts in
excess of $50,000,000.

Global Income Fund: .05%.

Securities Activities of the Advisers

Securities held by the Company may also be held by Life of Virginia or GNA, or
by separate accounts, mutual funds or pension funds for which GEIM or its
affiliate, GEIC, acts as an adviser. Because of different investment objectives
or other factors, a particular security may be bought by Life of Virginia or GNA
or by GEIM or GEIC or for one or more of their clients, when one or more other
clients are selling the same security. If purchases or sales of securities for a
Fund or other client of GEIM or GEIC or Life of Virginia or GNA arise for
consideration at or about the same time, transactions in such securities will be
made, insofar as feasible, for the Fund, Life of Virginia or GNA,

<PAGE>

and other clients in a manner deemed equitable to all. To the extent that
transactions on behalf of more than one client of GEIM or GEIC during the same
period may increase the demand for securities being purchased or the supply of
securities being sold, there may be an adverse effect on price.

On occasions when GEIM (under the supervision of the board of directors) deems
the purchase or sale of a security to be in the best interests of the Company as
well as other accounts, mutual funds, pension funds or companies, 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 Company with those
to be sold or purchased for other accounts or companies in order to obtain
favorable execution and low brokerage commissions. In that event, allocation of
the securities purchased or sold, as well as the expenses incurred in the
transaction, will be made by GEIM in the manner it considers to be most
equitable and consistent with its fiduciary obligations to the Company and to
such other accounts or companies. In some cases this procedure may adversely
affect the size of the position obtainable for a Fund. Likewise, SSGA Seneca,
NWQ or GEIUS 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 Company with those to be sold or purchased for other accounts or
companies in order to obtain favorable execution and low brokerage commissions.
Like GEIM, SSGA Seneca, NWQ and GEIUS allocates the securities purchased or
sold, as well as the expenses incurred in the transaction, in the manner that
each considers to be most equitable and consistent with its fiduciary
obligations to the Company and to such other accounts or companies.

Portfolio Managers

Eugene K. Bolton leads a team of portfolio managers for the U.S. Equity Fund and
is also responsible for the overall management of the domestic equity investment
process at GEIM and GEIC (GEIM, GEIC and their predecessors are collectively
referred to as "GE Investments"). He is also responsible for overseeing the
management of the GE U.S. Equity Fund, the GE S&S Program Mutual Fund, the GE
U.S. Equity Portfolio of the Variable Investment Trust and the U.S. Equity
Portfolio of the WRL Series Fund, Inc. Mr. Bolton has more than 12 years of
experience and has held positions with GE Investments since 1984. He is
currently an Executive Vice President and director of GE Investments.

Jon D. Bosse, portfolio manager of the Value Equity Fund, joined NWQ in 1996.
Prior to joining NWQ, he spent ten years with ARCO Investment Management Company
where he was Director of Equity Research and managed a value-oriented Fund.
Previous to this, he spent four years in the corporate finance department of
ARCO. Mr. Bosse received his B.A. (summa cum laude) in economics from Washington
University in St. Louis where he received the John M. Olin Award for excellence
in economics and his M.B.A. from Wharton Business School, University of
Pennsylvania. Mr. Bosse is also a Chartered Financial Analyst and a member of
the Association for Investment Management and Research and the Los Angeles
Society of Financial Analysts.

David B. Carlson is the portfolio manager of the Premier Growth Equity Fund and
is also responsible for the domestic equity portion of the Total Return Fund.
Mr. Carlson is also responsible for the management of the GE Premier Growth
Equity Fund, the equity related investments of the Elfun Diversified Fund and
the GE Strategic Investment Fund, and is one of four portfolio managers selected
by Mr. Bolton to serve the GE U.S. Equity Fund, the GE U.S. Equity Portfolio of
the Variable Investment Trust and the U.S. Equity Portfolio of the WRL Series
Fund, Inc. Mr. Carlson has more than 14 years of investment experience and has
held positions with GE Investments since 1982. He is currently a Senior Vice
President.

Ralph R. Layman leads a team of portfolio managers for the International Equity
Fund and is responsible for the international equity related investments of the
Total Return Fund. He is also responsible for overseeing the management of the
GE Global Equity Fund, the GE International Equity Fund, the Elfun Global Fund,
the GE International Equity Portfolio of the Variable Investment Trust, the
Global Small Cap Fund Inc., the PaineWebber Global Equity Fund of the
PaineWebber Investment Trust, the Global Growth Portfolio of PaineWebber Series
Trust, the IDEX International Equity Portfolio and a portion of the
International Equity Portfolio of the WRL Series Fund, Inc. Mr. Layman has more
than 17 years of investment experience and has held positions with GE
Investments since 1991. From 1989 to 1991, he served as an Executive Vice
President, Partner and Portfolio Manager of Northern Capital Management, and
prior thereto, served as Vice President and Portfolio Manager of Templeton
Investment Counsel. Mr. Layman is currently an Executive Vice President and
director of GE Investments.

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Robert A. MacDougall leads a team of portfolio managers for the Income Fund and
Government Securities Fund and is responsible for the debt portion of the Total
Return Fund. He is also responsible for overseeing the management of the GE
Fixed Income Fund, the GE Short-Term Government Fund, the Elfun Income Fund, the
GE Fixed Income Portfolio of the Variable Investment Trust, the GE S&S Long Term
Interest Fund, and the fixed income related investments of GE Strategic
Investment Fund and the Elfun Diversified Fund. Mr. MacDougall has more than 13
years of investment experience and has held positions with GE Investments since
1986. He is currently an Executive Vice President of GE Investments.

William R. Wright, portfolio manager of the Global Income Fund, joined GE
Investments in 1993, and assumed responsibility for GEIUS at its inception in
1995. He is also a Vice President of GE Investments. Prior to joining GE
Investments, Mr. Wright worked fro Continental Asset Management Corp. where he
was a portfolio manager of its U.K. subsidiary. After serving as a language
specialist in the U.S. Army Security Agency, he began his career in 1979 with
Coopers & Lybrand, and joined Bankers Trust Company in 1980. Mr. Wright received
his B.A. in political science/Asian studies from Wittenberg and an M.B.A. in
finance from New York University. He is a member of the Association for
Investment Management and Research and the New York Society of Security
Analysts.

<PAGE>

PORTFOLIO TRANSACTIONS AND BROKERAGE

As described above, GEIM, SSGA, Seneca, NWQ or GEIUS determines which securities
to buy and sell for the Funds, selects brokers and dealers to effect the
transactions, and negotiates commissions. Transactions on domestic stock
exchanges and some foreign stock exchanges involve the payment of negotiated
brokerage commissions. On exchanges on which commissions are negotiated, the
cost of transactions may vary among different brokers. On most foreign
exchanges, commissions are fixed. No stated commission is generally applicable
to securities traded in the U.S. over-the-counter markets, but the prices of
those securities include undisclosed mark-ups or commissions. The cost of
securities purchased from underwriters include an underwriting commission or
concession, and the prices at which securities are purchased from and sold to
dealers include a dealer's mark-up or mark-down. U.S. Government securities are
generally purchased from underwriters or dealers, although certain newly issued
U.S. Government securities are purchased directly from the U.S.
Treasury or from the issuing agency or instrumentality.

In selecting brokers or dealers to effect transactions on behalf of a Fund, GEIM
(followed by NWQ, Seneca, SSGA and GEIUS) selects the best overall terms
available. In assessing the best overall terms available for any transaction,
each 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. In addition, the investment advisory
agreement between the Company and the Adviser relating to each Fund authorizes
the Adviser, on behalf of each Fund, in selecting brokers or dealers to execute
a particular transaction, and in evaluating the best overall terms available to
consider brokerage and research services provided to the Fund and/or other
accounts over which the Adviser or its affiliates exercise investment
discretion. The fees paid by a Fund under an investment advisory and
administration agreement or an investment sub-advisory agreement, are not
reduced by reason of an Adviser receiving brokerage or research services. In
some cases, the Adviser may use such information to advise other investment
accounts that it advises. Brokers or dealers which supply research may be
selected for execution of transactions for such other accounts, while the data
may be used by the Adviser in providing investment advisory services to the
Company. In addition, the Adviser may select broker-dealers to execute portfolio
transactions based upon sales by that broker-dealer of Life of Virginia variable
life insurance or annuity contracts and may select broker-dealers who are
affiliated with the Company or GEIM. However, all directed brokerage will be
subject to GEIM's policy to attempt to obtain the best overall terms available.

The Company's board of directors periodically reviews the commissions paid by
each Fund to determine whether or not such commissions, over representative
periods of time, are reasonable in relation to the benefits inuring to the Fund.
Over-the-counter transactions on behalf of the Funds are carried out directly
with the principal market makers except in cases where better prices or
execution is obtained elsewhere. The Funds do not purchase securities, including
U.S. Government securities, during any underwriting where an affiliate of the
Company or GEIM (or a sub-adviser) is a member of the selling group, except as
permitted under applicable SEC rules or regulations (or SEC staff
interpretations thereof).

During the year ended December 31, 1996, the Company paid brokerage commissions
of $407,581 based on $324,352,452 of transactions. During the year ended
December 31, 1995, the Company paid brokerage commissions of $315,311, based on
$175,411,650 of transactions. During the year ended December 31, 1994, the
Company paid brokerage commissions of $48,969, based on $34,724,499 of
transactions.

DETERMINATION OF NET ASSET VALUE

The net asset value of each Fund is determined as of the time of the close of
trading on the New York Stock Exchange, (currently at 4:00 PM, New York City
time) on each day when the New York Stock Exchange is open. The New York Stock
Exchange is scheduled to be open Monday through Friday throughout the year,
except for certain federal and other holidays. The net asset value of each Fund
will not be calculated on the Friday following Thanksgiving or on December 31
when December 31 falls on a weekday. The net asset value of a share is
determined by dividing the net asset value of a Fund by the number of
outstanding shares of that Fund.

<PAGE>

Equity securities (including common stocks, preferred stocks, convertible
securities and warrants) and call options written on all portfolio securities,
listed or traded on a national exchange are valued at their last sale price on
that exchange prior to the time when assets are valued. In the absence of any
exchange sales on that day and for unlisted equity securities, such securities
are valued at the last sale price on the NASDAQ (National Association of
Securities Dealers Automated Quotations) National Market System. In the absence
of any National Market System sales on that day, equity securities are valued at
the last reported bid price.

Debt securities traded on a national exchange are valued at their last sale
price on that exchange prior to the time when assets are valued, or, lacking any
sales, at the last reported bid price. Debt securities other than money market
instruments traded in the over-the-counter market are valued at the last
reported bid price or at yield equivalent as obtained from one or more dealers
that make markets in the securities. Debt securities traded in both the
over-the-counter market and on a national exchange are valued according to the
broadest and most representative market, and it is expected that this ordinarily
will be the over-the-counter market.

Securities that are primarily traded on foreign securities exchanges are
generally valued at the last sale price on the exchange where they are primarily
traded. All foreign securities traded on the over-the-counter market are valued
at the last sale quote, if market quotes are available, or the last reported bid
price if there is no active trading in a particular security on a given day.
Quotations of foreign securities in foreign currencies are converted, at current
exchange rates, to their U. S. dollar equivalents in order to determine their
current value. In addition, because of the need to value foreign securities
(other than ADRs) as of the close of trading on various exchanges and
over-the-counter markets throughout the world, the calculation of the net asset
value of Funds investing in foreign securities may not take place
contemporaneously with the valuation of such foreign securities in such Funds.

Securities for which market quotations are not readily available are valued at
fair value as determined in good faith by or under the direction of the board of
directors of the Company, including valuations provided by a pricing service
retained for this purpose.

For Funds other than the Money Market Fund, debt instruments held with a
remaining maturity of 60 days or less are generally valued on an amortized cost
basis. Under the amortized cost basis method of valuation, the security is
initially valued at its purchase price (or in the case of securities purchased
with more than 60 days remaining to maturity, the market value on the 61st day
prior to maturity), and thereafter by amortizing any premium or discount
uniformly to maturity. If for any reason the Company's directors believe the
amortized cost method of valuation does not fairly reflect the fair value of any
security, fair value will be determined in good faith by or under the direction
of the board of directors of the Company as in the case of securities having a
maturity of more than 60 days.

Exchange listed put options written and options purchased are valued on the
primary exchange on which they are traded. Over-the-counter options written or
purchased by a Fund are valued based upon prices provided by market-makers in
such securities. Exchange-traded financial futures contracts are valued at their
settlement price established each day by the board of trade or exchange on which
they are traded.

All of the assets of the Money Market Fund are valued on the basis of amortized
cost in an effort to maintain a constant net asset value per share of $1.00. The
Company's board of directors has determined such a valuation to be in the best
interests of the Money Market Fund and its shareholders. Under the amortized
cost method of valuation, securities are valued at cost on the date of their
acquisition, and thereafter a constant accretion of any discount or amortization
of any premium to maturity is assumed, regardless of the impact of fluctuating
interest rates on the market value of the security. While this method provides
certainty in valuation, it may result in periods in which value as determined by
amortized cost is higher or lower than the price the Fund would receive if it
sold the security. During such periods, the quoted yield to investors may differ
somewhat from that obtained by a similar fund or portfolio which uses available
market quotations to value all of its portfolio securities.

The Company's board of directors has established procedures reasonably designed,
taking into account current market conditions and the Money Market Fund's
investment objective, to stabilize the net asset value per share for purposes of
sales and redemptions at $1.00. These procedures include review by the board, at
such intervals as it deems appropriate, to determine the extent, if any, to
which the net asset value per share calculated by using available market
quota-

<PAGE>

tions deviates from $1.00 per share. In the event that such deviation should
exceed one half of one percent, the board of directors will promptly consider
initiating corrective action. If the board believes that the extent of any
deviation from a $1.00 amortized cost price per share may result in material
dilution or other unfair results to new or existing shareholders, it will take
such steps as it considers appropriate to eliminate or reduce these consequences
to the extent reasonably practicable. Such steps may include: selling portfolio
securities prior to maturity, shortening the average maturity of the portfolio;
withholding or reducing dividends; or utilizing a net asset value per share
determined from available market quotations. Even if these steps were taken, the
Money Market Fund's net asset value might still decline.

DIVIDENDS AND DISTRIBUTIONS

It is the Company's intention to distribute substantially all the net investment
income, if any, of a Fund. For dividend purposes, net investment income of a
Fund will consist of all payments of dividends or interest received by that Fund
less realized investment losses, if any, and the estimated expenses of that Fund
(including fees payable to GEIM). Dividends from net investment income of a
Fund, other than the Money Market Fund, will be paid at least annually and are
expected to be reinvested in additional full and fractional shares of that Fund.
Dividends attributable to the net investment income of the Money Market Fund are
declared daily and paid monthly. Shares will begin accruing dividends on the day
following the date on which the shares are issued, the date of issuance
customarily being the "settlement" date. All net realized investment gains of
the Company, if any, are declared and distributed annually after the close of
the Company's fiscal year to the shareholders of the Company and are expected to
be reinvested in additional full and fractional shares of the Company.

REDEMPTION OF FUND SHARES

The Company is required to redeem all full and fractional shares of the Funds
for cash. The redemption price is the net asset value per share next determined
after the receipt of proper notice of redemption. Payment for redeemed shares
will generally occur within seven days of receipt of a proper notice of
redemption.

The right to redeem shares or to receive payment with respect to any redemption
may be suspended for any period during which trading on the New York Stock
Exchange is restricted as determined by the Securities and Exchange Commission
or when such Exchange is closed (other than customary weekend and holiday
closings) for any period during which an emergency exists, as defined by the
Securities and Exchange Commission, which makes disposal of a Fund's securities
or determination of the net asset value of a Fund not reasonably practicable,
and for any other periods as the Securities and Exchange Commission may by order
permit for the protection of shareholders of the Fund.

ADDITIONAL INFORMATION

Life of Virginia

Life of Virginia contributed the initial capital necessary for the Company to
commence operations. Life of Virginia is a stock life insurance company
operating under a charter granted by the Commonwealth of Virginia on March 21,
1871. Life of Virginia is an indirect, wholly-owned subsidiary of General
Electric Capital Corporation. General Electric Capital Corporation is a wholly
owned subsidiary of GEC and is a diversified financial services company. Life of
Virginia ranks among the 25 largest stock life insurance companies in the United
States in terms of assets and business in force. The principal offices of Life
of Virginia are at 6610 W. Broad Street, Richmond, Virginia 23230.

Custodian, Dividend and Transfer Agent

State Street is the Company's custodian. State Street's principal office is
located at 225 Franklin Street, MA 02110. Under a custody agreement with the
Company, State Street maintains the portfolio securities acquired by the
Company, administers the purchases and sales of portfolio securities, collects
interest and dividends and other distributions made on the securities held in
the Funds of the Company.

36
<PAGE>

State Street may segregate securities of the Funds on which call options are
written and cash or liquid assets in amounts sufficient to cover put options
written on securities by "tagging" such securities or assets and not permitting
them to be sold. Likewise, such segregation may be used in connection with the
covering of put and call options written on futures contracts. State Street also
will segregate assets of certain of the Funds constituting margin deposits with
respect to financial futures contracts at the disposal of FCMs through which
such transactions are effected. These Funds may also be required to post margin
deposits with respect to covered call and put options written on stock indices
and for this purpose certain assets of the Fund may be segregated pursuant to
similar arrangements with the brokers involved.

The Life Insurance Company of Virginia is the Company's transfer and dividend
paying agent. It is located at 6610 west Broad street, Richmond. VA 23230.

Independent Auditors

KPMG Peat Marwick LLP have been appointed as independent auditors for the
Company for the year ending December 31, 1997. Its offices are at 345 Park
Avenue, New York, NY 10154. KPMG Peat Marwick LLP will perform an audit of the
financial statements of the Company annually.

Legal Counsel

Sutherland, Asbill & Brennan, L.L.P., 1275 Pennsylvania Avenue, NW, Washington,
DC 20004-2404, is counsel for the Company.

Capital Stock

The Company was incorporated in the Commonwealth of Virginia on May 14, 1984.
The authorized capital stock of the Company consists of 3.75 billion shares of
capital stock, par value one cent ($0.01) per share. All of the shares of the
authorized capital stock have been divided into and may be issued in a
designated class as follows: 250 million shares have been designated as Class A
shares, representing interests in the S&P 500 Index Fund; 250 million shares
have been designated as Class B shares, representing interests in the Government
Securities Fund; 250 million shares have been designated as Class C shares
representing interests in the Money Market Fund; 250 million shares have been
designated as Class D shares, representing interests in the Total Return Fund;
250 million shares have been designated as Class E shares, representing
interests in the International Equity Fund; 250 million shares have been
designated as Class F shares, representing interests in the Real Estate
Securities Fund; 250 million shares have been designated as Class G shares,
representing interests in the Value Equity Fund; 250 million shares have been
designated Class H shares, representing interests in the Global Income Fund; 250
million shares have been designated Class I shares, representing interests in
the Income Fund; 250 million shares have been designated Class J shares,
representing interests in the U.S. Equity Fund; and 250 million shares have been
designated Class K shares, representing interests in the Premier Growth Equity
Fund. Classes L through O have also been designated with 250 million shares
each. These shares, however, do not yet represent interests in any Fund.

Each issued and outstanding share of a class is entitled to participate equally
in dividends and distributions declared by the respective class and, upon
liquidation or dissolution, in net assets allocated to such class remaining
after satisfaction of outstanding liabilities. The shares of each class are
fully paid and non-assessable and have no preemptive or conversion rights. As of
February 28, 1997, Life of Virginia owned 106,084 Class B shares (having a
market value of $1,014,163) representing interests in the Government Securities
Fund, 169,837 Class C shares (with a market value of $1,762,912) representing
interests in the Money Market Fund, 1,079,404 Class E shares (with a market
value of $11,121,858) representing interests in the International Equity Fund
and 1,121,858 Class F shares (with a market value of $15,829,412) representing
interests in the Real Estate Securities Fund.

Life of Virginia and the Accounts currently are the only shareholders of record.
As of February 28, 1997, there were no contract owners who beneficially owned a
5% or greater voting interest in any Fund. As of February 28, 1997, officers and
directors of the Company beneficially owned, as owners of variable annuity or
variable life insurance contracts, less than 1% of the S&P 500 Index Fund and
less than 1% of the Total Return Fund.

37
<PAGE>

Voting Rights

All shares of capital stock have equal voting rights, except that only shares
representing interests in a particular Fund will be entitled to vote on matters
affecting only that Fund. The shares do not have cumulative voting rights.
Accordingly, owners of variable annuity or variable life insurance contracts
having voting interests in more than 50% of the shares of the Company voting for
the election of directors could elect all of the directors of the Company if
they choose to do so, and in such event, contract owners having voting interests
in the remaining shares would not be able to elect any directors. Life of
Virginia (directly or through the Accounts) currently owns all shares of the
Company. Life of Virginia will vote all shares of the Company (or a Fund) as
described in the prospectus.

Other Information

This Statement of Additional Information and the prospectus for the Company do
not contain all the information set forth in the registration statement and
exhibits relating thereto, which the Company has filed with the Securities and
Exchange Commission, Washington, D.C. under the Securities Act of 1933 and the
Investment Company Act of 1940, to which reference is hereby made.

<PAGE>

AUDITED FINANCIAL STATEMENTS

The financial statements of the Company at December 30, 1996 and December 31,
1995 and for each of the two years in the period ended December 30, 1996,
appearing in this Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.

[to be filed by amendment]

<PAGE>

APPENDIX A

Description of Money Market Securities

The following information includes a description of certain money market
instruments in which a Fund may invest to the extent consistent with its
investment objective.

Bank Money Instruments. These include instruments, such as certificates of
deposit and bankers' acceptances. Certificates of deposit are generally
short-term, interest-bearing negotiable certificates issued by commercial banks
or savings and loan associations against funds deposited in the issuing
institution. A bankers' acceptance is a time draft drawn on a commercial bank by
a borrower usually in connection with an international commercial transaction
(to finance the import, export, transfer or storage of goods). The borrower is
liable for payment as well as the bank, which unconditionally guarantees to pay
the draft at its face amount on the maturity date. Most acceptances have
maturities of six months or less and are traded in secondary markets prior to
maturity.

A Fund may not invest in any security issued by a commercial bank or a savings
and loan association unless the bank or association is organized and operating
in the United States, has total assets of at least one billion dollars and is a
member of the Federal Deposit Insurance Corporation, in the case of banks, or
the Federal Savings and Loan Insurance Corporation, in the case of savings and
loan associations, provided that this limitation shall not prohibit investments
in foreign branches of banks which meet the foregoing requirements.

Government Agency Securities. These include debt securities issued by
government-sponsored enterprises, federal agencies or instrumentalities and
international institutions. Such securities are not direct obligations of the
U.S. Treasury but involve government sponsorship or guarantees. Thus the Company
may not be able to assert a claim against the United States itself in the event
the agency or instrumentality does not meet its commitment.

United States Government Securities. These include marketable securities issued
by the United States Treasury, which consist of bills, notes and bonds. Such
securities are direct obligations of the United States government and differ
mainly in the length of their maturity. Treasury bills, the most frequently
issued marketable government security, have a maturity of up to one year and are
issued on a discount basis.

Short-Term Corporate Debt Instruments. These include commercial paper (including
variable amount master demand notes), which refers to short-term unsecured
promissory notes issued by corporations to finance short-term credit needs.
Commercial paper is usually sold on a discount basis and has a maturity at the
time of issuance not exceeding nine months. Variable amount master demand notes
are demand obligations that permit the investment of fluctuating amounts at
varying market rates of interest pursuant to arrangements between the issuer and
a commercial bank acting as agent for the payees of such notes, whereby both
parties have the right to vary the amount of the outstanding indebtedness on the
notes.

Because variable amount master notes are direct lending arrangements between the
lender and borrower, it is not generally contemplated that such instruments will
be traded and there is no secondary market for the notes. Typically, agreements
relating to such notes provide that the lender may not sell or otherwise
transfer the note without the borrower's consent. Such notes provide that the
interest rate on the amount outstanding is adjusted periodically, typically on a
daily basis in accordance with a stated short-term interest rate benchmark.
Since the interest rate of a variable amount master note is adjusted no less
often than every 60 days and since repayment of the note may be demanded at any
time, the Company values such a note in accordance with the amortized cost basis
at the outstanding principal amount of the note.
(See Determination of Net Asset Value, on page 29.)

Also included are nonconvertible corporate debt securities (e.g., bonds and
debentures) with no more than one year remaining to maturity at the date of
settlement. Corporate debt securities with a remaining maturity of less than one
year tend to become extremely liquid and are traded as money market securities.
Such issues with less than one year remaining to maturity tend to have greater
liquidity and considerably less market value fluctuations than longer term
issues. Commercial paper investments at the time of purchase will be rated at
least "A" by Standard and Poor's or "Prime" by Moody's or, if not rated, issued
by companies having an outstanding debt issue rated at least "A" by Standard and
Poor's or by Moody's. (See Corporate Bond Ratings, Appendix B.)

A-1
<PAGE>

Repurchase Agreements. A repurchase agreement is an instrument under which the
purchaser (i.e., a Fund) acquires ownership of the obligation (debt security)
and the seller agrees, at the time of the sale, to repurchase the obligation at
a mutually agreed upon time and price, thereby determining the yield during the
purchaser's holding period. This results in a fixed rate of return insulated
from market fluctuations during such period. The underlying securities will
consist only of U.S. government or government agency securities, certificates of
deposit, commercial paper or bankers' acceptances. Repurchase agreements usually
are for short periods, such as under one week. Repurchase agreements are
considered to be loans under the 1940 Act, with the security subject to
repurchase, in effect, serving as "collateral" for the loan. The Company will
require the seller to provide additional collateral if the market value of the
securities falls below the repurchase price at any time during the term of the
repurchase agreement. In the event of a default by the seller because of
bankruptcy or otherwise, the Company may suffer time delays and incur costs or
losses in connection with the disposition of the collateral. Repurchase
agreements will be entered into with primary dealers for periods not to exceed
30 days and only with respect to underlying money market securities in which the
Fund may otherwise invest. A repurchase agreement maturing in more than seven
days is deemed an illiquid investment.

A-2

<PAGE>

APPENDIX B

Description of Corporate Bond Ratings

Moody's Investors Services, Inc.

Aaa - Bonds which 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 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 which 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 which make
the long-term risks appear somewhat larger than in Aaa securities.

A - Bonds which 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 which
suggest a susceptibility to impairment sometime in the future.

Baa - Bonds which are rated Baa are considered as medium grade obligations i.e.,
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 which 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 which 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 which 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 which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C - Bonds which 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.

Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a midrange ranking; and the modifier 3
indicates that the issue ranks in the lower end of its generic rating category.

Standard & Poor's Corporation

AAA - This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.

B-1
<PAGE>

AA - Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.

A - Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.

BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the A category.

BB-B-CCC-CC - Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation and CC 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.

C - The rating C is reserved for income bonds on which no interest is being
paid.

D - Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.

The ratings from "AA" to "B" may be modified by the addition of a plus or
minus sign to relative standing within the major rating categories.

Description of Commercial Paper Ratings

Commercial paper rated A-1 by Standard & Poor's has the following
characteristics: Liquidity ratios are adequate to meet cash requirements.
Long-term senior debt is rated "A" or better, although in some cases "BBB"
credits may be allowed. 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. The
reliability and quality of management are unquestioned. Relative strength or
weakness of the above factors determine whether the issuer's commercial paper is
rated A-1, A-2 or A-3.

The rating Prime-1 is the highest commercial paper rating assigned by
Moody's Investor's Service, Inc. Among the factors considered by Moody's in
assigning ratings are the following: (1) evaluation of the management of the
issuer; (2) economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trends
of earnings over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer, and (8) recognition
by the management of obligations which may be present or may arise as a result
of public interest questions and preparations to meet such obligations.

B-2
<PAGE>

GE INVESTMENTS FUNDS, INC.

PART C - OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Financial Statements

The financial statements of GE Investments Funds, Inc. are included in Part
B to this Registration Statement.

(b) Exhibits

1 Amended and restated Articles of Incorporation of GE Investments
Funds, Inc.

2 Amended and restated By-laws of Life of Virginia Series Fund, Inc.
dated January 25, 1995 incorporated herein by reference to
post-effective amendment #15 to this Form N-1A registration statement
(File No. 2-91369), filed with the Securities and Exchange Commission
on May 1, 1995.

3 Not Applicable

4 Not Applicable

5(a) Investment Advisory Agreement between Life of Virginia Series Fund,
Inc. and Aon Advisors, Inc., dated May 1, 1993 incorporated herein by
reference to post-effective amendment #13 to this Form N-1A
registration statement (File No. 2-91369), filed with the Securities
and Exchange Commission on April 29, 1994.

5(b) New Investment Advisory Agreement between Life of Virginia Series
Fund, Inc. and Aon Advisors, Inc. dated April 27, 1995, covering the
International Equity Portfolio incorporated herein by reference to
post-effective amendment #15 to this Form N-1A registration statement
(File No. 2-91369), filed with the Securities and Exchange Commission
on May 1, 1995.

5(c) New Investment Advisory Agreement between Life of Virginia Series
Fund, Inc. and Aon Advisors, Inc. dated April 27, 1995, covering the
Real Estate Securities Portfolio incorporated herein by reference to
post-effective amendment #15 to this Form N-1A registration statement
(File No. 2-91369), filed with the Securities and Exchange Commission
on May 1, 1995.

5(d) Form of Investment Sub-Advisory Agreement between Aon Advisors, Inc.
and Perpetual Portfolio Management, Limited incorporated herein by
reference to post-effective amendment #15 to this Form N-1A
registration statement (File No. 2-91369), filed with the Securities
and Exchange Commission on May 1, 1995.

5(e) Form of Investment Sub-Advisory Agreement between Aon Advisors, Inc.
and Genesis Realty Capital Management, L.P. incorporated herein by
reference to post-effective amendment #15 to this Form N-1A
registration statement (File No. 2-91369), filed with the Securities
and Exchange Commission on May 1, 1995.

5(f) Form of Investment Sub-Advisory Agreement between Aon Advisors, Inc.
and GMG/Seneca Capital Management, LLC incorporated herein by
reference to exhibit 17 to post-effective amendment # 16 to this Form
N-1A registration statement (File No. 2-91369), filed with the
Securities and Exchange Commission on May 1, 1996.

<PAGE>

5(g) Investment Advisory and Administration Agreement dated May 1, 1997,
between GE Investments Funds, Inc. and GE Investment Management
Incorporated incorporated herein by reference to post-effective
amendment #18 to this registration statement (File No. 2-91369), filed
on April 30, 1997.

5(h) Sub-Advisory Agreement dated May 1, 1997, between GE Investment
Management Incorporated and GMG/Seneca Capital Management, LLC
incorporated herein by reference to post-effective amendment #18 to
this registration statement (File No. 2-91369), filed on April 30,
1997.

6 Underwriting Agreement between Life of Virginia Series Fund, Inc. and
Forth Financial Securities Corporation, dated April 2, 1996
incorporated herein by reference to post-effective amendment #16 to
this Form N-1A registration statement (File No. 2-91369), filed with
the Securities and Exchange Commission on May 1, 1996.

7 Not Applicable

8(a) Custody Agreement between Life of Virginia Series Fund, Inc. and
Crestar incorporated herein by reference to post-effective amendment
#4 to this Form N-1A registration statement (File No. 2-91369), filed
with the Securities and Exchange Commission on 4/10/87.

8(b) Form of Custody Agreement between Life of Virginia Series Fund, Inc.
and Firstar Trust Company incorporated herein by reference to
post-effective amendment #15 to this Form N-1A registration statement
(File No. 2-91369), filed with the Securities and Exchange Commission
on May 1, 1995.

8(c) Form of Sub-Custody Agreement between Firstar Trust Company and Chase
Manhattan Bank, N.A. incorporated herein by reference to
post-effective amendment #15 to this Form N-1A registration statement
(File No. 2-91369), filed with the Securities and Exchange Commission
on May 1, 1995.

8(d) Custody Agreement dated May 1, 1997, between GE Investments Funds,
Inc. and State Street Bank and Trust Company (to be filed by
amendment).

9 Not Applicable.

10 Opinion and consent of William E. Daner, Jr., Esq. incorporated herein
by reference to pre-effective amendment #1 to this Forn N-1A
registration statement (File No. 2-91369), filed with the Securities
and Exchange Commission on 12/21/84.

11(a) Consent of Sutherland, Asbill & Brennan, LLP (to be filed by
amendment).

11(b) Consent of Ernst & Young, LLP (to be filed by amendment).

12 Not Applicable.

13(a) Letter regarding initial capital incorporated herein by reference to
post-effective amendment #1 to this Form N-1A registration statement
(File No. 2-91369), filed with the Securities and Exchange Commission
on 6/28/85.

13(b) Stock Sale Agreement incorporated herein by reference to pre-effective
amendment #1 to this Form N-1A registration statement (File No.
2-91369), filed with the Securities and Exchange Commission on
12/21/84.

13(c) Stock Sale Agreements for Separate Accounts III and 4; Amendments to
Stock Sale Agreements for Separate Accounts I and II incorporated
herein by reference to post-effective amendment #7 to this Form N-1A
registration statement (File No. 2-91369), filed with the Securities
and Exchange Commission on 4/19/89.
<PAGE>

14 Not Applicable.

15 Not Applicable.

16 Not Applicable.

17. Financial Data Schedules incorporated herein by reference to
post-effective amendment #18 to this registration statement (File No.
2-91369), filed on April 30, 1997.

18. Not applicable.

19 Not Applicable

Item 25. Persons Controlled by or Under Common Control with Registrant.

GE Investments Funds, Inc. ("Fund") is a Virginia corporation organized on May
14, 1984. The Life Insurance Company of Virginia, a corporation chartered under
the Laws of the Commonwealth of Virginia, has provided the initial investment in
the Fund. The Life Insurance Company of Virginia and Great Northern Insured
Annuity Corporation each own a significant amount of the shares of one or more
classes of the Fund's stock through the Separate Accounts to support the
variable life insurance and/or variable annuity contracts which they offer.

The Life Insurance Company of Virginia and Great Northern Insured Annuity
Corporation each are an indirect, wholly-owned subsidiaries of General Electric
Capital Corporation ("GE Capital"). GE Capital, a diversified financial services
company, is a wholly-owned subsidiary of General Electric Company. The chart
that follows this page illustrates the structure of GE Capital and its
subsidiaries.

- ---------------------------------------------------------------------------------------------------------------------------
| |
| |
|
Various General Electric
Subsidiaries Capital Services, Inc.
(06-1109503) DE
|
|
- ---------------------------------------------------------------------------------------------------------------------------
| |
| |
General Electric Various
Capital Corporation Subsidiaries
(13-1500700) NY
|
|
GNA Corporation
(91-1277112) NA
|
|
|
- ---------------------------------------------------------------------------------------------------------------------------
| | | | | | |
GNA Mortgage | GNA Distributors, Inc. | GNA Securities, Inc. | GNA Insurance
Funding Corporation | (91-1601607) WA | (91-1143830) WA | Services, Inc.
(91-1635446) OH | | (51-0348373) DE | |
| | | | |
| | | | |
| GNA Capital General Electric Various Various State
| Management, Inc. Capital Assurance Subsidiaries Specific
| (91-1356174) WA Company Subsidiaries
| NAIC #70025 |
| (91-6027719) DE |
| |
| |
| |
- ---------------------------------------------------------------------------------------------------------------------------
| | | | | |
| Great Northern American First Federal Home Life AMEX Life LOV
| Insured Annuity Security Life Insurance Assurance
| Corporation Insurance Company Company
| NAIC #94366 Company NAIC #67695 NAIC #67952
| (91-1127115) WA NAIC #73091 (35-0576390) IN (95-20099931) CA
| (05-0399955) RI
| | |
52% | | 40% |
| | |
| | |
| | |
- ---------------------------------------------------------------------------------------------------------------------------
GR Capital Life Assurance | |
Company of New York PHP Life The Harvest Life
(fka First GNA Life Insurance Insurance Insurance
Company of New York) Company Company
NAIC #72990 NAIC #84808 NAIC #79421
(22-2882416) NY (38-2055892) FL (94-1099737) OH

</TABLE>

<PAGE>

Item 26. Number of Holders of Securities

Number of Record Holders
Title of Class as of May 1, 1997
- ----------- ----------------------

Capital Stock, Class A 6

Capital Stock, Class B 6

Capital Stock, Class C 6

Capital Stock, Class D 6

Capital Stock, Class E 6

Capital Stock, Class F 6

Capital Stock, Class G 1

Capital Stock, Class H 1

Item 27. Indemnification

Under Section 13.1-697.A of the Virginia Stock Corporation Act, with
respect to any threatened, pending or completed proceeding against a present or
former director, officer, employee or agent ("corporate representative") of the
registrant, except a proceeding brought by or on the behalf of the registrant,
the registrant may indemnify the corporate representative against expenses,
including attorneys' fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such proceedings, if:
(i) he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interest of the registrant; and (ii) with respect to any
criminal action or proceeding, he had no reasonable cause to believe his conduct
was unlawful. The registrant is also authorized under Section 13.1-3.1(b) of the
Virginia Stock Corporation Act to indemnify a corporate representative under
certain circumstances against expenses incurred in connection with any
threatened, pending, or completed proceeding brought by or in the right of the
registrant.

The Articles of Incorporation of the Fund (Exhibit 1.(c) to this
Registration Statement) provide that the Fund may indemnify it corporate
representatives, in a manner that is consistent with the laws of the
Commonwealth of Virginia. The Articles preclude indemnification for "disabling
conduct" (willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of office) and sets forth
reasonable and fair means for determining whether indemnification shall be made.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the Fund has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of such action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the 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.

<PAGE>

Item 28. Business and Other Connections of Investment Adviser.

Directors and executive officers of GEIM are listed below.

Name Principal Occupation
---- --------------------
<S> <C>
John H. Myers - Chairman of the Board of Directors, CEO Chairman and President, GEIM
Eugene K. Bolton - Director Executive Vice President, GEIM
Michael J. Cosgrove - Director Executive Vice President, GEIM
Ralph R. Layman - Director Executive Vice President, GEIM
Alan M. Lewis - Director Executive Vice President, General
Counsel and Secretary, GEIM
Robert A. MacDougall - Director Executive Vice President, GEIM
Geoffrey R. Norman - Director Executive Vice President, GEIM

Thomas Szkutak - Director Executive Vice President and
Chief Financial Officer, GEIM

Donald W. Torey - Director Executive Vice President, GEIM

</TABLE>

The address for each person listed above is 3003 Summer St., Stamford, CT 06905.

Item 29. Principal Underwriters

(a) Forth Financial Securities, Inc. ("FFSC") serves as principal underwriter
for the registrant and also acts as principal underwriter for the variable
life insurance contracts and variable annuity contracts issued by The Life
Insurance Company of Virginia through various separate accounts that are
registered as unit investment trusts. The principal business address of
FFSC is 6610 West Broad Street, Richmond, Virginia 23230.

(b) The principal business address of directors and officers of FFSC is the
same as that of FFSC. Set forth below is a list of each director and
officer of FFSC.

Name and Position With FFSC Position With Registrant
- --------------------------- ------------------------

Scott R. Reeks, President None
Treasurer, and Compliance
Officer

Jerry G. Overman, Assistant None
Treasurer

William E. Daner, None
General Counsel

Linda L. Lanam None
Secretary

Item 30. Location of Accounts and Records

All accounts, books and other documents required to be maintained by Section
31(a) of the 1940 Act and the Rules thereunder will be maintained at the offices
of the Fund (3003 Summer Street, Stamford, CT 06905) or at State Street Bank and
Trust Company, 225 Franklin Street, Boston, Massachusetts, 02101.

<PAGE>

Item 31. Management Services

None.

Item 32. Undertakings

(a) Not applicable.

(b) The Registrant undertakes to file a post-effective amendment, containing
reasonably current financial statements for the Global Income Fund and the
Value Equity Fund (that need not be certified) within four to six months
from the effective date of post-effective amendment number 18. The
Registrant undertakes to file a post-effective amendment, containing
reasonably current financial statements for Income Fund, U.S. Equity Fund
and Premier Growth Equity Fund (that need not be certified) within four to
six months from the effective date of this post-effective amendment number
19.

(c) The Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.

(d) The Registrant hereby undertakes, if requested to do so by the holders of
at least 10% of the Registrant's outstanding shares, to call a meeting of
shareholders for the purpose of voting upon any question of removal of a
director or directors, and to assist in communications with other
shareholders as required by Section 16(c) of the Investment Company Act of
1940, as amended.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, GE Investments Funds, Inc. has duly caused this
Post-Effective Amendment No. 19 to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Stanford, State of Connecticut, on the
25th day of June, 1997.

GE Investments Funds, Inc.

By: /s/____________________________________
Paul E. Rutledge, President

<PAGE>

Pursuant to the requirements of the Securities Act of 1933, this
post-effective amendment to the registration statement has been signed below by
the following persons in the capacities and on the dates indicated.

Signature Title Date
- --------- ----- ----

/s/
__________________________________ President (Principal Executive Officer) 6/25/97
Paul E. Rutledge and Director

/s/
__________________________________ Treasurer (Principal Financial 6/24/97
Jeffrey A. Groh and Accounting Officer)

/s/
__________________________________ Director 6/24/97
Michael J. Cosgrove

/s/
__________________________________ Director 6/26/97
John R. Costantino

/s/
__________________________________ Director 6/26/97
William J. Lucas

/s/
__________________________________ Director 6/26/97
Robert P. Martin, Jr.

/s/
__________________________________ Director 6/26/97
J. Clifford Miller, III

/s/
__________________________________ Director 6/26/97
J. Garnett Nelson

/s/
__________________________________ Director 6/26/97
Lee A. Putney

/s/
__________________________________ Director 6/26/97
Robert P. Quinn

</TABLE>

Exhibit 1

ARTICLES OF INCORPORATION
OF
GE INVESTMENTS FUNDS, INC.

(AMENDED AND RESTATED)
April 17- 1997

The Undersigned person, pursuant to Chapter 9, Title 13.1, Section 13.1-711
of the Code of Virginia, hereby executes the following amended and restated
Articles of Incorporation and sets forth the following:

FIRST: The name of the corporation is GE Investments Funds, Inc.
(hereinafter the "Corporation").

SECOND: The purposes for which the Corporation is formed are:

(1) to conduct, operate and carry on the business of an open-end
management investment company described in and regulated by the Investment
Company Act of 1940 (hereinafter the "1940 Act");

(2) to subscribe for, invest in, reinvest in, purchase or otherwise
acquire, hold, pledge, sell, assign, transfer, exchange, distribute or
otherwise dispose of notes, bills, bonds, debentures and other negotiable
or non-negotiable instruments, obligations and evidences of indebtedness
issued or guaranteed as to principal or interest by the United States
Government, or any agency or instrumentality thereof, any State, local or
foreign government, or any agency or instrumentality thereof, or any other
securities or other investments of any kind issued by any corporation or
other issuer whether organized under the laws of the United States or any
State, territory or possession thereof or the laws of any foreign country
or any political subdivision, territory or possession thereof, to pay for
the same in cash or by the issue of stock, including treasury stock, bonds
or notes of the Corporation or otherwise;

(3) to exercise any and all rights, powers and privileges of ownership
or interest in respect of any and all such investments of every kind and
description, including and without limitation, the right to consent and
otherwise act with respect thereto, with power to designate one or more
persons, firms, associations or corporations to exercise any of said
rights, powers and privileges in respect of any said investments;PRIVATE #

(4) to conduct research and investigations in respect of securities or
other investments, organizations and general business and financial
conditions in the United States of America and elsewhere for the purpose of
obtaining information pertinent to the investment and employment of the
assets of the Corporation and to procure any or all of the foregoing to be
done by others as independent contractors and to pay compensation therefor;

(5) to borrow money or otherwise obtain credit and, if required, to
secure the same by mortgaging, pledging or otherwise subjecting as security
the assets of the Corporation, and to endorse, guarantee or undertake the
performance of any obligation, contract or engagement of any other persons,
firm, association or corporation, each subject to the 1940 Act;

(6) to issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, transfer, and otherwise deal in, redeemable
shares of Common Stock of the Corporation, including shares of Common Stock
of the Corporation in fractional denominations, and to apply to any such
repurchase, redemption, retirement, cancellation or acquisition of shares
of Common Stock of the Corporation, any funds or property of the
Corporation, whether capital or surplus or otherwise, to the full extent
now or hereafter permitted by the 1940 Act, the laws of the Commonwealth of
Virginia and by these Articles of Incorporation;

(7) to enter into investment advisory, distribution, administration,
custodian contracts, and such other contracts as may be appropriate;

(8) to have and exercise all of the powers and privileges conferred by
the laws of the Commonwealth of Virginia upon corporations formed under the
laws of such Commonwealth; and

1
<PAGE>

(9) to do any and all such further acts and to exercise any and all
such further powers and privileges as may be necessary, incidental,
relative, conducive, appropriate or desirable for the foregoing purposes.

The enumeration herein of the objects and purposes of the Corporation shall
be construed as powers as well as objects and purposes and shall not be deemed
to exclude by inference any powers, objects or purposes which the Corporation is
empowered to exercise, whether expressly by force of the laws of the
Commonwealth of Virginia now or hereafter in effect, or impliedly by the
reasonable construction of the said laws.

THIRD: The total number of shares of Capital Stock which the Corporation
shall have authority to issue is three billion seven hundred fifty million
(3,750,000,000) having each a par value of one cent.PRIVATE #

(1) The shares of such Capital Stock are hereby divided into and will
be issued in the following classes, such classes comprising the number of
shares and having the designations indicated:

CLASSES OF CAPITAL STOCK NUMBER OF SHARES
------------------------ ----------------

Capital Stock, Class A
S&P 500 Index Fund 250,000,000

Capital Stock, Class B
Government Securities Fund 250,000,000

Capital Stock, Class C
Money Market Fund 250,000,000

Capital Stock, Class D
Total Return Fund 250,000,000

Capital Stock, Class E
International Equity Fund 250,000,000

Capital Stock, Class F
Real Estate Securities Fund 250,000,000

Capital Stock, Class G 250,000,000

Capital Stock, Class H 250,000,000

Capital Stock, Class I 250,000,000

Capital Stock, Class J 250,000,000

Capital Stock, Class K 250,000,000

Capital Stock, Class L 250,000,000

Capital Stock, Class M 250,000,000

Capital Stock, Class N 250,000,000

Capital Stock, Class O 250,000,000

(2) The Board of Directors may, without shareholder action, amend these
Articles of Incorporation to designate investment portfolios for Class G, H, I,
J, K, L, M, N and O PRIVATE #Capital Stock. The Board of Directors may
redesignate any shares of ay series theretofore established that have not been
issued, or that have been issued and

<PAGE>

reacquired, as shares of some other series, and may delete from the Articles of
Incorporation any provisions originally adopted by the Board of Directors
without shareholder action fixing the preferences, limitations and relative
rights of any class of shares or series within a class, provided there are no
shares of such class or series then outstanding.

(3) The Corporation may issue fractions of shares of each class of the
Capital Stock of the Corporation (calculated three places beyond the decimal)
having pro rata all the rights of full shares, including, without limitation,
the right to vote and to receive dividends and distributions, as and when
declared by the Board of Directors, and the right to participate upon
liquidation of the Corporation. Where the words "share" or "shares" are used in
these Articles of Incorporation or in the By-Laws, they shall be deemed to
include fractions of shares where the context does not clearly indicate that
only full shares are intended.

(4) With the approval of a majority of the shareholders of each affected
class of Capital Stock, the Board of Directors may transfer the assets allocated
to any particular class to any other class. Upon such a transfer, the
Corporation shall issue shares of Capital Stock representing interests in the
class to which the assets were transferred, in exchange for all shares of the
Capital Stock representing interest in the class from which the assets were
transferred. Such shares shall be exchanged at their respective net asset
values.

(5) Each share of a class shall have the same rights and privileges with
respect to the assets allocated to such class and shall be entitled to
participate equally in any dividends or distributions that may be declared as
any other share of that class. Each fractional share of a class of Capital Stock
shall have proportionately the same rights and privileges with respect to the
assets allocated to such class as a whole share and shall participate
proportionately in dividends or distributions declared.

(6) Each shareholder of the Capital Stock of the Corporation shall be
entitled to one vote for each full share, and a fractional vote for each
fractional share, of Capital Stock, irrespective of the class, then standing in
his name on the books of the Corporation. On any matter submitted to a vote of
shareholders, all shares of the Capital Stock of the Corporation then issued and
outstanding and entitled to vote shall be voted in the aggregate and not by
class except:

(i) when otherwise expressly required by law, shares of the Capital
Stock shall be voted by individual class; or

(ii) if the Board of Directors, in its sole discretion, determines
that any matter concerns only one or more particular class or classes, it
may direct that only holders of that class or those classes may vote on the
matter.PRIVATE #

(7) Each shareholder of any class of the Capital Stock of the Corporation
may require the Corporation to redeem all or any part of the shares of any class
of the Capital Stock of the Corporation standing in the name of such holder on
the books of the Corporation. The Corporation shall redeem all shares of such
Capital Stock tendered to it for redemption at the redemption price of such
shares in effect as determined by the Board of Directors of the Corporation.
This right of redemption is subject to the right of the Board of Directors of
the Corporation to suspend the right of redemption of any class of shares of the
Capital Stock of the Corporation or postpone the date of payment of such
redemption price in accordance with provisions of applicable law. Redemptions
shall be conditioned upon the Corporation's having funds legally available
therefor. The redemption price of shares of any class of the Capital Stock of
the Corporation shall be the net asset value thereof as determined by the Board
of Directors of the Corporation in accordance with the provisions of applicable
law or these Articles, less such redemption fee or other charge, if any, as may
be fixed by resolution of the Board of Directors of the Corporation. Payment of
the redemption price shall be made in cash by the Corporation at such time and
in such manner as may be determined by the Board of Directors of the
Corporation, except that the shares of any class of the Capital Stock may be
redeemed in kind with the assets allocated to that class if the Board of
Directors deems such action desirable.

(8) Each class of the Capital Stock of the Corporation shall have the
following additional rights, qualifications, restrictions and/or limitations:

(i) The shares of each class of the Capital Stock, when issued, will
be fully paid and non-assessable, have no preemptive, conversion, exchange,
or similar rights, except as set forth in (ii) below.

3
<PAGE>

(ii) All consideration received by the Corporation for the issue or
sale of the Capital Stock of each class, together with all assets in which
such consideration is invested or reinvested, all income, earnings, profits
and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or payments derived
from any reinvestment of such proceeds in whatever form, shall for all
purposes be allocated to the assets of that class, subject only to the
liabilities of that class. Each share of such class of the Capital Stock
shall have a pro rata interest in the assets allocated to that class but
shall not have any interest in the assets allocated to any other class. Any
assets, income, earnings, profits, and proceeds thereof, and funds or
payments which are not readily identifiable as allocable to any particular
class, shall be allocated by or under the general supervision of the Board
of Directors to and among one or more of the classes established and
designated in such a manner and on such basis as the Board of Directors, in
its sole discretion, deems fair and equitable.PRIVATE #

(iii) The Board of Directors may declare and pay dividends or
distributions, in stock or in cash, upon the shares of any or all classes
of the Capital Stock, the declaration and the amounts of such dividends and
distributions being wholly in the discretion of the Board of Directors
subject to the following conditions:

(a) Dividends or distributions upon shares of any class of the
Capital Stock, when declared by the Board of Directors, shall be paid
only out of earned surplus or other lawfully available assets
allocated to such class.

(b) Insomuch as one goal of the Corporation is to qualify as a
"regulated investment company" under the Internal Revenue Code of
1986, as amended, or any successor or comparable statute, and inasmuch
as the computation of net income and gains for Federal income tax
purposes may vary from the computation thereof on the books of the
Corporation, the Board of Directors shall have the power in its
discretion to distribute in any fiscal year as dividends, including
dividends designated in whole or in part as capital gains
distributions, amounts sufficient in the opinion of the Board of
Directors, to enable the Corporation to qualify as a regulated
investment company and to avoid liability of the Corporation for
Federal income tax in respect of that year. In furtherance, and not in
limitation of the foregoing, in the event that a class of shares of
the Capital Stock has a net capital loss for a fiscal year, and to the
extent that a net capital loss for a fiscal year offsets net capital
gains from one or more of the other classes, the amount to be deemed
available for distribution to the class or classes with the net
capital gains may be reduced by the amount of the offset.

(iv) The assets allocated to any class of the Capital Stock shall be
charged with the liabilities in respect to such class, and shall also be
charged with their share of the general liabilities of the Corporation in
proportion to the net asset values of the assets allocated to the
respective classes before allocation of general liabilities. The
determination of the Board of Directors shall be conclusive as to the
amount of liabilities or the amount of any general assets of the
Corporation, as to whether such liabilities or assets are allocable to one
or more classes, and as to the allocation of such liabilities or assets to
a given class or among several classes.

(v) In the event of a liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the assets allocated to any
class of the Capital Stock of the Corporation shall be charged with the
liabilities in respect to such class and shall also be charged with their
share of the general liabilities of the Corporation in proportion to the
net asset values of the assets allocated to the respective classes. The
determination of the Board of Directors shall be conclusive as to the
amount of liabilities or the amount of any general assets of the
Corporation and as to whether such liabilities or assets are allocable to
one or more classes.PRIVATE #

FOURTH: The address of the Corporation's registered office is 6610 West
Broad Street Road, Richmond, Virginia 23230, which is located in the County of
Henrico.

FIFTH: The name of the registered agent is William E. Daner, Jr., who is a
Virginia resident and a member of the Virginia State Bar, whose business address
is identical with the Corporation's registered office.

SIXTH: (1) The number of Directors constituting the Board of Directors
shall be fixed by the By-Laws, or in the absence of a by-law fixing the number,
the number shall be seven. At the annual meeting of shareholders, the
shareholders shall elect said number of directors.

4
<PAGE>

(2) The following Directors shall serve until the next annual meeting of
shareholders or until their successors are duly elected and qualified:

Michael J. Cosgrove
3003 Summer Street
Stamford, CT 06905

John R. Costantino
150 East 58th Street
New York, NY 10055

William J. Lucas
Fairfield University
North Benson Road
Fairfield, CT 06480

Robert E. Martin
115 Granite Avenue
Richmond, VA 23226

J. Clifford Miller, III
7103 Glen Parkway
Richmond, VA 23229

J. Garnett Nelson
Route 1, Box 195
Montpelier, VA 23192

Lee A. Putney
4208 Sulgrave Road
Richmond, VA 23221

Robert P. Quinn
45 Shinnecock Road
Quogue, NY 11959

Paul E. Rutledge III
6610 West Broad Street
Richmond, VA 23230

(3) A Director may be removed with or without cause, but only by action of
the shareholders at a meeting called for such purposes by the holders of ten
percent (10%) of the Capital Stock of the Corporation at the time issued and
outstanding and entitled to vote in any election of Directors.

5
<PAGE>

(4) The Board of Directors of the Corporation is hereby empowered to
authorize the issuance from time to time of shares of the Capital Stock of any
class, whether now or hereafter authorized, subject to such limitations as may
be set forth in these Articles of Incorporation or in the By-Laws of the
Corporation or in the Virginia Stock Corporation Actor in the 1940 Act.

SEVENTH: Unless the Board of Directors conditions its submission of a
proposed extraordinary corporate event on a receipt of a greater vote, any
extraordinary corporate event that requires shareholder approval under the
Virginia Stock Corporation Act, shall be approved by the holders of not less
than two-thirds of the Capital Stock of the Corporation at the time outstanding
and entitled to vote at a meeting at which a quorum is present in person or by
proxy.

The provisions of this Article shall not be deemed to affect any
shareholder vote required by the Virginia Stock Corporation Act.

EIGHTH: Any Article of these Articles of Incorporation may be amended,
altered or repealed, upon the vote of a majority of the holders of the Capital
Stock of the Corporation who are present in person or by proxy at a meeting at
which a quorum is present. Provisions which might, under the laws of the
Commonwealth of Virginia at the time in force, be lawfully contained in these
Articles of Incorporation, may be added or inserted upon a vote of holders of
the Capital Stock of the Corporation who are present at a meeting in person or
by proxy at a meeting at which a quorum is present. All rights at any time
conferred upon the shareholders of the Corporation by these Articles of
Incorporation are granted subject to the provisions of this Article.

Notwithstanding any other Article of these Articles of Incorporation or the
By-Laws of the Corporation, the amendment or repeal of the Seventh Article of
these Articles of Incorporation requires the affirmative vote of holders of at
least two-thirds of the Capital Stock of the Corporation at the time outstanding
and entitled to vote.

NINTH: As indicated in this Article, the Corporation shall indemnify its
currently acting, former or future directors and officers against liability
incurred in any proceeding. As used in this Article, "liability" means the
obligation to pay a judgement, settlement, penalty, fine and all reasonable
expenses incurred with respect to a proceeding, including attorney's fees, and
"proceeding" means any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, arbitrative or
investigative, and whether formal or informal.PRIVATE #

(1) The Corporation shall indemnify a director or officer made a party
to a proceeding because he/she is or was a director or officer of the
Corporation against liability incurred in the proceeding if:

(i) he/she conducted himself/herself in good faith, and

(ii) he/she reasonably believed that his/her conduct was in, or
not opposed to, the Corporation's best interest, and

(iii) he/she was not guilty of willful misconduct, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his/her office, and

(iv) in the case of any criminal proceeding, he/she had no
reasonable cause to believe his/her conduct was unlawful.

The termination of a proceeding by an adverse judgement or order, by
settlement or by conviction will not, of itself, be determinative that the
officer or director did not meet the standard of conduct described in this
section.

(2) Indemnification provided pursuant to Section (1) shall be limited
to reasonable expenses incurred in connection with the proceeding.

(3) The Corporation shall indemnify a director or officer who entirely
prevails in the defense of any proceeding to which he/she was a party
because he/she is or was a director or officer of the Corporation against
reasonable expenses incurred by him/her in connection with the proceeding.

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(4) The Corporation may pay for or reimburse the reasonable expenses
incurred by a director or officer who is a party to a proceeding in advance
of final disposition of the proceeding if:

(i) the director or officer furnishes the Corporation a written
statement of his/her good faith belief that he/she has met the
standard of conduct described in Section (1) of this Ninth Article,
andPRIVATE #

(ii) the director or officer furnishes the Corporation a written
undertaking (which shall be an unlimited general obligation of the
director or officer but need not be secured and may be accepted
without reference to financial ability to make repayment), executed
personally or on his/her behalf to repay the advance if it is
ultimately determined that he/she did not meet the standard of conduct
specified in Section (1), and

(iii) a determination is made that the facts then known to the
persons making the determination would not preclude indemnification
under this Ninth Article.

(5) The Corporation shall not indemnify a director or officer under
Section (1) of this Ninth Article unless authorized in the specific case
after a determination has been made that indemnification is permissible in
the circumstances because the director or officer has met the standard of
conduct set forth in Section (1). The determination shall be made:

(i) By a majority of a quorum of directors who are neither
interested persons nor parties to the proceeding or a proceeding on
the same or similar grounds; or

(ii) If a quorum cannot be obtained under Subsection (5) (i), by
a written opinion of special legal counsel (a) selected by the Board
of Directors in the manner prescribed in Subsection (5) (i), or (b) if
a quorum cannot be obtained under Subsection (5) (i) selected by a
majority vote of the full Board of Directors, in which selection
directors who are parties may participate; or

(iii) By the shareholders, but shares owned by or voted under the
control of directors or officers who are at the time parties to the
proceeding may not be voted on the determination.

(6) Authorizations of indemnification and evaluations as to the
reasonableness of expenses shall be made in the same manner as the
determination that indemnification is permissible, except that if the
determination is made by special legal counsel, authorization of
indemnification and determination of reasonableness of expenses shall be
made by those entitled under Subsection (5) (ii) to select special legal
counsel.

(7) Every reference herein to director or officer shall include every
director or officer or former director or officer of the Corporation and
shall enure to the benefit of the heirs, executors and administrators of
such person.

(8) The foregoing rights of indemnification shall not be exclusive of
any other rights and indemnifications to which the directors and officers
of the Corporation may be entitled according to law.PRIVATE #

(9) The Corporation shall have the power to make any other or further
indemnity to its directors and officers except an indemnity against willful
misconduct, willful misfeasance, bad faith, gross negligence, reckless
disregard of the duties involved in the conduct of his/her office, or a
knowing violation of criminal law.

TENTH: Any determination made in good faith, so far as accounting matters
are involved, and in accordance with generally accepted accounting principles,
by or pursuant to the direction of the Board of Directors is considered final
and conclusive. This includes determinations as to:

(1) the amount of assets, obligations or liabilities of the
Corporation, the amount of net income of the Corporation from dividends and
interest for any period and amounts at any time legally available for the
payment of dividends,

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(2) the amount of any reserves or charges set up and the propriety
thereof, the time of or purpose for creating reserves and the use,
alteration or cancellation of any reserves or charges (whether or not any
obligation or liability for which such reserves or charges have been
created shall have been paid or discharged or shall be then or thereafter
required to be paid or discharged),

(3) the value of any investment owned by the Corporation, the net
asset value per share of the outstanding Capital Stock of the Corporation
and the establishment or designation or methods to be employed for valuing
any asset of the Corporation or for determining the net asset value per
share of Capital Stock of the Corporation, and

(4) any other matters relating to the issuance, sale, redemption or
other acquisition or disposition of investments or shares of the Capital
Stock of the Corporation.

Any reasonable determination made in good faith by or at the direction of
the Board of Directors shall be final and conclusive, and shall be binding upon
the Corporation and all holders of its Capital Stock, past, present and future.
Shares of the Capital Stock of the Corporation are issued and sold on the
condition and understanding, evidenced by the purchase of shares of Capital
Stock, that any and all such determinations shall be binding.

ELEVENTH: The holders of not less than one-third of the shares of the
Corporation's Capital Stock issued and outstanding and entitled to vote,
represented in person or by proxy, shall constitute a quorum for the transaction
of business at any meeting of the Corporation's shareholders. The vote of a
majority of the shares cast on any matter at a meeting of shareholders at which
a quorum is present shall be the act of the shareholders on that matter, unless
the vote of a greater number of shares is required by law, including the 1940
Act, or by these Articles of Incorporation or the By-Laws of the
Corporation.PRIVATE #

TWELFTH: The By-Laws of the Corporation shall be adopted by the directors
of the Corporation. Thereafter the Board of Directors shall have the power to
make, alter or repeal the By-Laws except any by-law in effect which may require
shareholder action for adoption, alteration or repeal.

THIRTEENTH: The net asset value per share of each share of the Capital
Stock of the Corporation shall be determined by or pursuant to the discretion of
the Board of Directors and shall be final and conclusive. Such values shall be
determined in the manner and subject to such applicable requirements as may be
set forth in the By-Laws of the Corporation and any applicable law.

FOURTEENTH: No provision of these Articles of Incorporation shall be
effective to require a waiver of compliance with any provision of the Securities
Act of 1933, as amended, or the 1940 Act, or of any valid rule, regulation or
order of the Securities and Exchange Commission thereunder.

April 17, 1997

--------------------------
Paul E. Rutledge III
President

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CERTIFICATE

I, Linda L. Lanam, Secretary of Life of Virginia Series Fund, Inc., a
Virginia corporation, in order to satisfy the requirements of Section 13.1-711
of the Virginia Stock Corporation Act relating to the filing of Amended and
Restated Articles of Incorporation with the Virginia State Corporation
Commission, do hereby certify that at a meeting of the Board of Directors held
January 29, 1997 the

Board of Directors unanimously approved, and referred to the shareholders
for their vote thereon, and thereafter at their meeting held April 16, 1997, by
a more than two-thirds favorable vote of all classes of Capital Stock
outstanding and entitled to vote, the shareholders approved, the following
amendments to the Articles of Incorporation, the text of which appears in the
Amended and Restated Articles of Incorporation being filed herewith:

1. An amendment to the FIRST Article to change the name of the
corporation to GE Investments Funds, Inc.;

2. Amendments to the THIRD Article to authorize the corporation to
issue an additional 1,000,000,000 shares of its Capital Stock (par value
$0.01 per share) for a total of 3,750,000,000 shares of authorized Capital
Stock, and to create four new classes of Capital Stock designated,
respectively, as Class L, Class M, Class N and Class O, with each of the
four new classes having 250,000,000 shares of Capital Stock allocated to
it.

I further certify that at their meeting of April 16, 1997 the shareholders
of each of the following classes of Capital Stock entitled to vote, voting
together, cast votes approving the above amendments to the Articles
Incorporation as follows:

Capital Stock, Class A
S&P 500 Index Fund
Capital Stock, Class B
Government Securities Fund
Capital Stock, Class C
Money Market Fund

Capital Stock, Class D
Total Return Fund
Capital Stock, Class E
International Equity Fund
Capital Stock, Class F
Real Estate Securities Fund

Total Votes in Favor: 21,597,647.706
Approval Percentage: 92.725%
Dated: April 17, 1997

- ------------------------
Linda L. Lanam
Secretary