GE INVESTMENT FUNDS INC, 485BPOS, 1997-10-24

GE INVESTMENT FUNDS INC
485BPOS, 1997-10-24

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As filed with the Securities and Exchange Commission on October 24, 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. 21

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 22

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:

_X_ immediately upon filing pursuant to paragraph (b)

___ on __________________ pursuant to paragraph (b)

___ 60 days after filing pursuant to paragraph (a)

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

___ 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

Item No. of
Form N-1A 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................. Performance Information

23................. Financial Statements
</TABLE>

<PAGE>

GE INVESTMENTS FUNDS, INC.
SUPPLEMENT DATED OCTOBER 24, 1997
TO
PROSPECTUS DATED OCTOBER 24, 1997

The Following Contains Important Information that Qualifies Disclosure in this
Prospectus About the Income Fund, U.S. Equity Fund and Premier Growth Equity
Fund.

This prospectus describes eleven Funds. Three of these Funds, the Income Fund,
U.S. Equity Fund and Premier Growth Equity Fund, are new and have not yet begun
operations. Information about these new Funds is disclosed in a number of places
in the prospectus, particularly pages 2, 20,21 and 22. The following information
qualifies all such disclosure about these Funds.

As of the date of this supplement, these three Funds were not yet available to
investors as investment options under variable annuity contracts issued by The
Life Insurance Company of Virginia, Great Northern Insured Annuity Corporation
or under variable life insurance contracts issued by The Life Insurance Company
of Virginia (together, "variable contracts"). The Company anticipates that these
three Funds will become available to owners of certain contracts towards the end
of November or in early December. These Funds will begin operations at the time
that they first become available to contract owners as investment options under
variable contracts. The Company has no reason to believe that any of the
disclosure about these Funds contained in the prospectus will change or become
untrue or inaccurate before that time.

Current or prospective owners of variable contracts may obtain further
information about the availability of these new Funds by contacting their
variable contract sales representative or calling the telephone number shown on
the cover of the prospectus.

<PAGE>

PART A

PROSPECTUS

<PAGE>
GE Investments Funds, Inc.
- --------------------------------------------------------------------------------

GE
Investments
Funds, Inc.

S&P 500 Index Fund

Government Securities Fund

Money Market Fund

Total Return Fund

International Equity Fund

Real Estate Securities Fund

Global Income Fund

Value Equity Fund

Income Fund

U.S. Equity Fund

Premier Growth Equity Fund

Prospectus
October 24, 1997

This prospectus must be read along with
the current prospectus for the variable annuity contract or
variable life insurance policy being applied for.

Prospectus begins on page 1

<PAGE>

GE INVESTMENTS FUNDS, INC.

3003 Summer Street
Stamford, Connecticut 06905
(800) 493-3042

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 October 24, 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 above.
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.

October 24, 1997

<PAGE>

S&P 500 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 12

S&P 500 Index Fund 12
Government Securities Fund 14
Money Market Fund 14
Total Return Fund 15
International Equity Fund 16
Real Estate Securities Fund 17
Global Income Fund 18
Value Equity Fund 19
Income Fund 20
U.S. Equity Fund 21
Premier Growth Equity Fund 22

Investment Practices 22

Lending of Portfolio Securities 22
Money Market Instruments 23
When Issued and Delayed Delivery Securities 23
Repurchase Agreements 23
Reverse Repurchase Agreements 23
Foreign Investments and Currency 24
Debt Securities 28
Writing Covered Call and Put Options and Purchasing Call and Put Options 30
Financial Futures Contracts and Options on Such Contracts 31
Restricted Securities and Illiquid Investments 32
Borrowing 33
Real Estate Investment Trusts 33
Other Investment Companies 33

Determination of Net Asset Value 33

Purchase and Redemption of Fund Shares 34

Dividends, Distributions and Taxes 34

Dividends and Distributions 34
Taxes 35

Management of the Company 36

Board of Directors 36
Investment Adviser 36
Investment Sub-Advisers 37
Compensation of Adviser and Sub-Advisers 38
Portfolio Managers 38

Additional Information 39

Capital Stock 39
Contract Owner Voting Rights 39
Plan Participant Voting Rights 40
Annual Reports 40
Inquiries 40
Custodian, Transfer and Dividend Paying Agent 40
Legal Matters 40

</TABLE>

3
<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
variable 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 variable 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 and directly 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.

4
<PAGE>

FINANCIAL HIGHLIGHTS

The table below provides selected data for each share of capital stock
outstanding for the periods indicated. The data for the five years ended
December 30, 1996 has been derived from the audited financial statements of the
Company which have been audited by Ernst & Young LLP, independent auditors. The
financial data for the six-month period ended June 30, 1997 and the four-month
period ended August 31, 1997 are derived from unaudited financial statements.

Operating results for the six months ended June 30, 1997 and the four months
ended August 31, 1997 are not necessarily indicative of the results that may be
expected for the entire year ending December 31, 1997. The following data should
be read in conjunction with the unaudited financial statements for the six-month
period ended June 30, 1997 for the S&P 500 Index Fund, Government Securities
Fund, Money Market Fund, Total Return Fund, International Equity Fund, and Real
Estate Securities Fund, and for the four-month period ended August 31, 1997 for
the Global Income Fund and Value Equity Fund and related notes and other
financial information included in the Statement of Additional Information
("SAI"). The Income Fund, U.S. Equity Fund and Premier Growth Equity Fund are
newly added series of the Company and are expected to commence operations
towards the end of November 1997 or early December 1997.

- ------------------------------------------------------------------------------------------------------------------------------------
S&P 500 INDEX FUND
- ------------------------------------------------------------------------------------------------------------------------------------
6/30/97(d 12/30/96(c) 12/31/95(c) 12/31/94 12/31/93(e) 12/31/92(e) 12/31/91(e)
--------- ----------- ----------- -------- ----------- ----------- -----------
(unaudited)

<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $15.14 $20.99 $15.72 $15.99 $17.04 $16.21 $12.75
Income (loss) from investment operations
Net investment income .12 .78 .27 .22 .31 .35 .30
Net realized and unrealized gain
(loss) on investments 2.62 4.36 5.41 (.23) 2.16 1.01 4.08
-------- ------- ------- ------- ------ ------ ------
Total income (loss) from
investment operations 2.74 5.14 5.68 (.01) 2.47 1.36 4.38
-------- ------- ------- ------- ------ ------ ------
Less distributions from:
Net investment income .00 .77 .27 .22 .31 .35 .30
Net realized gain .00 10.22 .14 .04 3.21 .17 .61
Return of capital .00 .00 .00 .00 .00 .01 .01
-------- ------- ------- ------- ------ ------ ------
Total distributions .00 10.99 .41 .26 3.52 .53 .92
-------- ------- ------- ------- ------ ------ ------
Net asset value at end of period $17.88 $15.14 $20.99 $15.72 $15.99 $17.04 $16.21
======== ======= ======= ======= ====== ====== ======

TOTAL RETURN(a) 18.10% 24.51% 36.14% (.06%) 14.52% 8.39% 34.43%

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $106,545 $35,522 $66,017 $23,930 $8,277 $5,178 $4,429
Ratios to average net assets:
Net investment income* 1.83% 1.91% 1.98% 2.22% 2.00% 2.24% 2.28%
Expenses* .51% .48% .66% .75% .87% 1.03% 1.08%

Gross expenses*@ .51% .48% .66% 1.10% 1.39% 1.03% 1.08%

Portfolio turnover 5% 63% 15% 4% 73% 10% 36%
Average brokerage commissions(b) $.036 $.05 N/A N/A N/A N/A N/A

</TABLE>

See notes to financial highlights on page 11.

5
<PAGE>

FINANCIAL HIGHLIGHTS (CONTINUED)

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

12/31/90(e) 12/31/89(e) 12/31/88(e) 12/31/87(e)
----------- ----------- ----------- -----------

<S> <C> <C> <C> <C>
Net asset value at beginning of period $14.67 $12.33 $10.28 $12.66
Income (loss) from investment operations
Net investment income .41 .34 .32 .24
Net realized and unrealized gain (loss)
on investments (1.91) 2.81 2.05 (1.04)
------ ------ ------ ------
Total income (loss) from investment operations (1.50) 3.15 2.37 (.80)
------ ------ ------ ------
Less distributions from:
Net investment income .41 .34 .32 .78
Net realized gain .00 .46 .00 .80
Return of capital .01 .01 .00 .00
------ ------ ------ ------
Total distributions .42 .81 .32 1.58
------ ------ ------ ------
Net asset value at end of period $12.75 $14.67 $12.33 $10.28
====== ====== ====== ======

TOTAL RETURN(a) (10.22%) 25.72% 23.05% (6.32%)

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $3,154 $3,430 $2,127 $1,839
Ratios to average net assets:
Net investment income* 2.99% 2.67% 2.53% 2.03%
Expenses* 1.06% 1.20% 1.35% 1.42%

Gross expenses*@ 1.06% 1.20% 1.35% 1.42%

Portfolio turnover 57% 37% 186% 105%
Average brokerage commissions(b) N/A N/A N/A N/A

</TABLE>

See notes to financial highlights on page 11.

6
<PAGE>

FINANCIAL HIGHLIGHTS (CONTINUED)

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

6/30/97 12/30/96(c) 12/31/95(c) 12/31/94 12/31/93(f) 12/31/92(f)
------- ----------- ----------- -------- ----------- -----------
(unaudited)

<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $9.56 $10.48 $9.51 $10.49 $10.54 $10.54
Income (loss) from investment operations
Net investment income .27 1.01 .49 .42 .45 .69
Net realized and unrealized gain
(loss) on investments (.16) (.87) 1.13 (.98) .50 .06
------- ------- ------- ------- ------ ------
Total income from investment operations .11 .14 1.62 (.56) .95 .75
------- ------- ------- ------- ------ ------
Less distributions from:
Net investment income .00 1.02 .49 .42 .45 .69
Net realized gain .00 .04 .16 .00 .54 .05
Return of capital .00 .00 .00 .00 .01 .01
------- ------- ------- ------- ------ ------
Total distributions .00 1.06 .65 .42 1.00 .75
------- ------- ------- ------- ------ ------
Net asset value at end of period $9.67 $9.56 $10.48 $9.51 $10.49 $10.54
======= ======= ======= ======= ====== ======

TOTAL RETURN(a) 1.15% 1.34% 17.08% (5.34%) 8.96% 7.13%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $13,770 $13,771 $23,708 $12,598 $7,885 $5,053
Ratios to average net assets:
Net investment income* 5.52% 5.64% 5.92% 5.44% 5.41% 6.69%
Expenses* .82% .67% .74% .81% .86% .99%
Gross expenses*@ .82% .67% .74% .81% .86% .99%
Portfolio turnover 68% 322% 131% 566% 113% 14%

</TABLE>

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

12/31/91(f) 12/31/90(f) 12/31/89(f) 12/31/88(f) 12/31/87(f)
----------- ----------- ----------- ----------- -----------

<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $9.60 $9.76 $9.58 $10.09 $11.50
Income (loss) from investment operations
Net investment income .75 .64 .74 .90 .66
Net realized and unrealized gain (loss)
on investments .99 (.15) .31 (.15) (.53)
------ ------ ------ ------ ------
Total income (loss) from investment operations 1.74 .49 1.05 .75 .13
------ ------ ------ ------ ------
Less distributions from:
Net investment income .75 .64 .74 1.26 1.43
Net realized gain .04 .00 .12 .00 .11
Return of capital .01 .01 .01 .00 .00
------ ------ ------ ------ ------
Total distributions .80 .65 .87 1.26 1.54
------ ------ ------ ------ ------
Net asset value at end of period $10.54 $9.60 $9.76 $9.58 $10.09
====== ====== ====== ====== ======

TOTAL RETURN(a) 18.16% 5.05% 10.85% 7.83% 1.13%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $4,445 $3,702 $3,464 $2,934 $3,175
Ratios to average net assets:
Net investment income* 7.73% 7.78% 7.95% 7.67% 7.51%
Expenses* .97% .96% 1.13% 1.07% 1.08%
Gross expenses*@ .97% .96% 1.13% 1.07% 1.08%
Portfolio turnover 23% 57% 80% 178% 11%

</TABLE>

See notes to financial highlights on page 11.

7
<PAGE>

FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>

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

6/30/97 12/30/96(c,g) 12/31/95(c,g) 12/31/94(g) 12/31/93(g) 12/31/92(f,g)
------- ------------- ------------ ----------- ----------- -------------
(unaudited)

<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $1.00 $1.00 $.98 $.97 $.97 $.96
Income (loss) from investment operations
Net investment income .02 .05 .06 .03 .02 .03
Net realized and unrealized gain
(loss) on investments .00 .00 .00 .01 .00 .00
-------- -------- ------- ------- ------ ------
Total income (loss) from investment operations .02 .05 .06 .04 .02 .03
-------- -------- ------- ------- ------ ------
Less distributions from:
Net investment income .02 .05 .04 .03 .02 .02
Net realized gain .00 .00 .00 .00 .00 .00
Return of capital .00 .00 .00 .00 .00 .00
-------- -------- ------- ------- ------ ------
Total distributions .02 .05 .04 .03 .02 .02
-------- -------- ------- ------- ------ ------
Net asset value at end of period $1.00 $1.00 $1.00 $.98 $.97 $.97
======== ======== ======= ======= ====== ======

TOTAL RETURN(a) 2.66% 5.41% 5.90% 3.77% 2.39% 3.10%

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $131,611 $113,263 $63,083 $33,529 $9,904 $5,845
Ratios to average net assets:
Net investment income* 5.21% 5.29% 5.74% 4.04% 2.53% 3.06%
Expenses* .25% .15% .23% .42% .75% .75%

Gross expenses*@ .59% .55% .63% .70% .85% 1.07%

</TABLE>

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

12/31/91(g) 12/31/90(g) 12/31/89(g) 12/31/88(g) 12/31/87(g)
----------- ----------- ----------- ----------- -----------

<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $.96 $.98 $.96 $.98 $1.01
Income (loss) from investment operations
Net investment income .05 .07 .08 .07 .06
Net realized and unrealized gain(loss)
on investments .00 .00 .00 .00 .00
------ ------ ------ ------ ------
Total income (loss) from investment operations .05 .07 .08 .07 .06
------ ------ ------ ------ ------
Less distributions from:
Net investment income .05 .09 .06 .09 .09
Net realized gain .00 .00 .00 .00 .00
Return of capital .00 .00 .00 .00 .00
------ ------ ------ ------ ------
Total distributions .05 .09 .06 .09 .09
------ ------ ------ ------ ------
Net asset value at end of period $.96 $.96 $.98 $.96 $.98
====== ====== ====== ====== ======

TOTAL RETURN(a) 5.32% 7.28% 8.67% 6.76% 5.40%

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $4,093 $3,465 $3,686 $2,376 $4,142
Ratios to average net assets:
Net investment income* 5.43% 7.02% 8.43% 6.68% 5.78%
Expenses* .75% .75% .75% .75% .87%

Gross expenses*@ 1.16% 1.05% 1.39% 1.17% 1.41%

</TABLE>

See notes to financial highlights on page 11.

8
<PAGE>

FINANCIAL HIGHLIGHTS (CONTINUED)

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

6/30/97 12/30/96(c) 12/31/95(c) 12/31/94 12/31/93 12/31/92
------- ----------- ----------- -------- -------- --------
(unaudited)

<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $12.73 $15.93 $13.40 $13.59 $13.00 $12.62
Income (loss) from investment operations
Net investment income .17 1.02 .41 .35 .42 .44
Net realized and unrealized gain
(loss) on investments 1.15 .67 3.34 (.01) 1.35 .51
------- ------- ------- ------- ------- ------
Total income (loss) from investment operations 1.32 1.69 3.75 .34 1.77 .95
------- ------- ------- ------- ------- ------
Less distributions from:
Net investment income .00 1.02 .42 .35 .41 .44
Net realized gain .00 3.87 .80 .18 .76 .12
Return of capital .00 .00 .00 .00 .01 .01
------- ------- ------- ------- ------- ------
Total distributions .00 4.89 1.22 .53 1.18 .57
------- ------- ------- ------- ------- ------
Net asset value at end of period $14.05 $12.73 $15.93 $13.40 $13.59 $13.00
======= ======= ======= ======= ======= ======

TOTAL RETURN(a) 10.37% 10.60% 28.07% 2.54% 13.67% 7.53%

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $43,411 $27,814 $70,507 $34,708 $12,609 $7,248
Ratios to average net assets:
Net investment income* 2.63% 2.73% 3.42% 4.00% 3.80% 4.13%
Expenses* .68% .60% .65% .77% .85% .98%
Gross expenses*@ .68% .60% .65% .77% .85% .98%
Portfolio turnover 87% 144% 106% 67% 48% 12%
Average brokerage commissions(b) $.026 $.06 N/A N/A N/A N/A

</TABLE>

12/31/91 12/31/90 12/31/89 12/31/88 12/31/87
-------- -------- -------- -------- --------

<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $10.59 $11.60 $10.42 $9.29 $11.19
Income (loss) from investment operations
Net investment income .43 .55 .51 .39 .31
Net realized and unrealized gain (loss)
on investments 2.47 (1.00) 1.51 1.28 (.90)
------ ------ ------ ------ ------
Total income (loss) from investment operations 2.90 (.45) 2.02 1.67 (.59)
------ ------ ------ ------ ------
Less distributions from:
Net investment income .43 .56 .51 .39 .94
Net realized gain .43 0.00 .32 .15 .37
Return of capital .01 0.00 .01 0.00 0.00
------ ------ ------ ------ ------
Total distributions .87 .56 .84 .54 1.31
------ ------ ------ ------ ------
Net asset value at end of period $12.62 $10.59 $11.60 $10.42 $9.29
====== ====== ====== ====== ======

TOTAL RETURN(a) 27.45% (3.85%) 19.51% 17.98% (5.27%)

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $4,609 $2,938 $3,065 $2,302 $1,570
Ratios to average net assets:
Net investment income* 4.39% 4.81% 4.54% 3.97% 3.04%
Expenses* 1.11% 1.10% 1.28% 1.35% 1.50%
Gross expenses*@ 1.11% 1.10% 1.28% 1.35% 1.65%
Portfolio turnover 33% 42% 49% 96% 82%
Average brokerage commissions(b) N/A N/A N/A N/A N/A

</TABLE>

See notes to financial highlights on page 11.

9
<PAGE>

FINANCIAL HIGHLIGHTS (CONTINUED)

- ------------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL REAL ESTATE
EQUITY FUND SECURITIES FUND
------------------------------------ ---------------------------------
6/30/97 12/30/96(h) 12/31/95(i) 6/30/97 12/30/96 12/31/95(i)
------- ----------- ----------- ------- -------- -----------
(unaudited) (unaudited)

<S> <C> <C> <C> <C> <C> <C>
Inception date 5/1/95 5/1/95
Net asset value at beginning of period $10.83 $10.47 $10.00 $14.11 $11.05 $10.00
Income (loss) from investment operations
Net investment income .05 .03 .20 .32 .64 .46
Net realized and unrealized
gain on investments 1.85 1.01 .47 .89 3.36 1.23
------- ------- ------- ------- ------- -------
Total income (loss) from investment operations 1.90 1.04 .67 1.21 4.00 1.69
------- ------- ------- ------- ------- -------
Less distributions from:
Net investment income .00 .03 .20 .00 .65 .46
Net realized gain .00 .65 0.00 .00 .29 .18
------- ------- ------- ------- ------- -------
Total distributions .00 .68 .20 .00 .94 .64
------- ------- ------- ------- ------- -------
Net asset value at end of period $12.73 $10.83 $10.47 $15.32 $14.11 $11.05
======= ======= ======= ======= ======= =======

TOTAL RETURN(a) 17.54% 9.91% 6.70%* 8.58% 36.24% 17.00%*

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $25,261 $17,643 $15,347 $39,613 $24,533 $13,428
Ratios to average net assets:
Net investment income* .99% .23% .44% 4.82% 5.90% 6.85%
Expenses* 1.34% 1.50% 1.54% .99% 1.07% 1.31%

Gross expenses*@ 1.56% 1.56% 2.17% .99% 1.07% 1.61%

Portfolio turnover 120% 150% 58% 39% 30% 54%

Average brokerage commission(b) $.017 $.03 N/A $.055 $.06 N/A

</TABLE>

See notes to financial highlights on page 11.

10
<PAGE>

FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------

GLOBAL INCOME VALUE EQUITY
FUND FUND
------------------- -------------------
8/31/97(j) 8/31/97(j)
--------- ---------
(unaudited) (unaudited)

<S> <C> <C>
Inception date 5/1/97 5/1/97

Net asset value, beginning of period $10.00 $10.00
Income (loss) from investment operations:
Net investment income .20 .01
Net realized and unrealized gains (losses) on investments (.07) 2.53
------ ------

Total income (loss) from investment operations .13 2.54
------ ------

Less distributions from:
Net investment income 0.00 0.00
Net realized gains 0.00 0.00
------ ------

Total distributions 0.00 0.00
------ ------

Net asset value, end of period $10.13 $12.54
====== ======

TOTAL RETURN 1.30% 25.40%

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $5,362 $6,867
Ratios to average net assets:
Net investment income* 6.12% .46%
Expenses* .77% .76%
Gross expenses*@ .77% .76%
Portfolio turnover rate 121% 9%
Average brokerage commissions(b) N/A $.053

</TABLE>

Notes to Financial Highlights

(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains. Had the adviser not absorbed a
portion of expenses, total returns would have been lower. Periods less than
one year are not annualized.

(b) For the fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged. Mark-ups, mark-downs and spreads on shares
traded on a principal basis are not included unless they are disclosed on
confirmations prepared in accordance with rule 10b-10 under the Securities
Exchange Act of 1934.

(c) Due to the significant increase in Fund shares in 1995 and the significant
decrease in 1996 related to Aon Savings Plan, the net changes from 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.

(d) As of May 1, 1997, the Fund's name was changed to S&P 500 Index Fund from
Common Stock Index Portfolio.

(e) As of May 1, 1993, the Fund's name was changed to Common Stock Index
Portfolio from Common Stock Portfolio.

(f) As of May 1, 1993, the Fund's name was changed to Government Securities
Fund from Bond Portfolio.

(g) Effective May 5, 1997, the Fund began maintaining a constant net asset
value per share of $1.00. Per share information prior to January 1, 1997
have been restated to reflect the 10.41 to 1 stock split.

(h) Yen-based convertible bonds are excluded from the average commission rate
paid due to the nominal commissions paid which dilutes the results. Had
those securities been included, the average commission rate would have been
$0.00.

(i) Information is for the period May 1, 1995, commencement of investment
operations, through December 31, 1995.

(j) Information is for the period May 1, 1997, commencement of investment
operations, through August 31, 1997.

* Annualized for periods less than one year.

@ Gross expenses represent the ratio of expenses to average net assets absent
any expense reimbursement or waiver of advisory fee by the investment
adviser.

<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 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

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. See "General
Information" in the SAI for details. 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

- ----------

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.

12
<PAGE>

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.

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 choose not to invest in all the securities that
comprise the S&P 500 Index, and its holdings may differ by industry segment from
the S&P 500 Index. The Fund may compensate for the omission from its portfolio
of stocks that are included in the S&P 500 Index, or for purchasing securities
included in the Index in proportions that are different from their weightings in
the Index, by purchasing securities that may or may not be included in the S&P
500 Index but which have characteristics similar to the omitted securities (such
as stocks from the same or similar industry groups having 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 Fund expenses,
in addition to potential tracking error, will tend to cause the S&P 500 Index
Fund's return to be lower than the return of the S&P 500 Index. There can be no
assurance as to how closely the S&P 500 Index Fund's performance will correspond
to the performance of the S&P 500 Index.

The S&P 500 Index Fund will not invest more than 35% of its total assets in
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.

13
<PAGE>

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
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:

<PAGE>

(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).

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 portfolio
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

15
<PAGE>

estate investment trusts ("REITs"). The 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 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

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 foreign securities of issuers located in at least 3
different countries other than the United States. The determination of where an
issuer 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") (collectively "depository receipts"). See "Foreign
Investments and Currency."

16
<PAGE>

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 include 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.

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 REITs (which directly own real estate), mortgage REITs (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 issuers principally engaged in or related
to the real estate industry as well as publicly traded limited partnerships
related to the real estate industry. 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.

17
<PAGE>

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 REITs may be affected by any
changes in the value of the underlying property owned by the trusts, while
mortgage REITs may be affected by the quality of any credit extended. Further,
equity and mortgage REITs are dependent upon management skill and are not
diversified. 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 REITs 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 REITs.

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 including common stock, preferred
stock, convertible debt obligations, convertible preferred stock and warrants or
rights to acquire stock.

18
<PAGE>

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.

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 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

<PAGE>

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. 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.

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

<PAGE>

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 ten
years.

The Income Fund maintains a dollar-weighted average portfolio duration of not
more than eight 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 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.

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 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

<PAGE>

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 issued by U.S.and foreign companies.

The Premier Growth Equity Fund seeks to acquire principally equity securities of
companies that offer long-term potential for growth of capital. 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, (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 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 and 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 contin-

<PAGE>

ue 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. dollars. 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.

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.

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.

23
<PAGE>

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 each invest up to
20% of their 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 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.

24
<PAGE>

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, but are designed for use in non-U.S. securities markets.
Depository receipts are not necessarily quoted in the same currency as the
underlying security. 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. 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.

Depository receipts do not eliminate all the risk inherent in investing in
foreign securities. To the extent that a Fund acquires depository receipts
through banks which do not have a contractual relationship with the foreign
issuer of the security underlying the depository receipts to issue and service
such depository receipts, 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 depository receipts,
rather than directly in the stock of foreign issuers, a Fund will avoid currency
risks during the settlement period for either purchases or sales.

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 when investing 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 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, 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.

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 gen-

<PAGE>

erally, 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.

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.

26
<PAGE>

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 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

<PAGE>

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 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

<PAGE>

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, Money Market Fund, International Equity 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, Money Market Fund,
International Equity 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
diminishes 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

<PAGE>

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 Government Securities
Fund, 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.

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

<PAGE>

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 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)

<PAGE>

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 themselves. 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").

32
<PAGE>

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.

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.

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

<PAGE>

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 October 24, 1997, GE Investment
Services Inc. ("GEIS") acts without remuneration as the Fund's distributor in
the distribution of the shares of each Fund. GEIS is a wholly-owned subsidiary
of GEIM. GEIS is located at 3003 Summer Street, Stamford, CT 06905. GEIS 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 GEIS or both and such plans.

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.

34
<PAGE>

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; and (2) 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.

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.

35
<PAGE>

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 General Electric Company ("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 30 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 June 30,1997,
GEIM and GEIC managed assets in excess of $64 billion, including roughly $12
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 will enter into investment advisory and administration
agreements (also, the "advisory agreements") with GEIM for the Income Fund, U.S.
Equity Fund and Premier Growth Equity Fund that are intended to be effective
November 15, 1997. Under these advisory 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)
superv-

<PAGE>

ises and coordinates the activities of other service providers, including
independent auditors, legal counsel, custodians, accounting service agents, and
transfer agents.

During the Company's fiscal year ended December 30, 1996, the total operating
expenses incurred by the Funds (including the advisory fees), 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, 1.50% of the average net assets of the
International Equity Fund, and 1.07% of the Real Estate Securities Fund. During
the Company's fiscal year ended December 30, 1996, its former investment
adviser, reimbursed expenses in an amount representing 0.06% of the average net
assets of the International Equity Fund.

Investment Sub-Advisers

SSGA is the investment sub-adviser to the S&P 500 Index Fund pursuant to an
investment sub-advisory agreement with GEIM effective July 24, 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 24, 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's predecessor was founded in 1989 and Seneca currently manages
approximately $4.3 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 2049 Century Park East, Los Angeles, CA 90067, is a wholly owned subsidiary
of United Asset Management Corporation, a company whose principal business is
managing investments for institutional clients through 50 operating subsidiaries
and acquiring investment management firms. NWQ is a manager of domestic
investment portfolios for individual, union, corporate, endowment and foundation
clients with 15 years of experience. It manages approximately $8.0 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 $1.12 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, the
sub-advisers follow GEIM's policy of seeking to obtain the most favorable price
and efficient execution available.

<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 Adviser and Sub-Advisers
(as a percentage of average net assets)

<TABLE>
<CAPTION>
Real Premier
S&P 500 Government Money Total International Estate Global Value U.S. Growth
Index Securities Market Return Equity Securities Income Equity Income Equity Equity
Fund Fund Fund** Fund Fund Fund Fund Fund Fund Fund Fund
---- ---- ------ ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum Advisory Fee
Paid to GEIM (net
of any Sub-Advisory
Fee) * .30% .50% .50% .50% 1.00% .425% .55% .1625% .50% .55% .65%

Maximum Sub-
Advisory Fee:*
SSGA .05% -- -- -- -- -- -- -- -- -- --
Seneca -- -- -- -- -- .425% -- -- -- -- --
NWQ -- -- -- -- -- -- -- .4875% -- -- --
GEIUS -- -- -- -- -- -- .05% -- -- -- --

MAXIMUM TOTAL
ADVISORY FEE .35% .50% .50% .50% 1.00% .85% .60% .65% .50% .55% .65%

</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.

** Although the advisory agreement provides for a fee of .50%, 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
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.

38
<PAGE>

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 the 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. 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
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.

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 variable
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

39
<PAGE>

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 the
Funds'custodian and transfer agent 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.

Legal Matters

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

<PAGE>

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

No person has been authorized to give any information or to make any
representations other than those contained in this prospectus or in the
statement of additional information incorporated in this prospectus by
reference in connection with the offering of shares of GE Investments
Funds, Inc., and if given or made, such other information or representations
must not be relied upon as having been authorized by GE Investments Funds, Inc.
This prospectus does not constitute an offer in any state in which, or to any
person to whom, an offer may not lawfully be made.

<PAGE>

PART B

STATEMENT OF ADDITIONAL INFORMATION

<PAGE>
GE INVESTMENTS FUNDS, INC.

STATEMENT OF ADDITIONAL INFORMATION

October 24, 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 800-493-3042.

<PAGE>

TABLE OF CONTENTS

Page
----

<S> <C>

General Information 3

Prior History 3
The Funds 4
Portfolio Turnover Rate Calculation 6
Performance Information 7
Investment Practices and Restrictions 9

Investment Practices 9
Investment Restrictions 23

Management of the Company 25

Directors and Officers 25
AAI 27
AAI Investment Sub-Advisers 28
AAI Reimbursement of Excess Operating Expenses 29
GEIM 29
GEIM Investment Advisory Agreements 30
GEIM Investment Advisory Fees 31
GEIM Investment Sub-Advisers 32
GEIM Investment Sub-Advisory Agreements 32
GEIM Investment Sub-Advisory Fees 33
Securities Activities of the Advisers 33
Portfolio Managers 33

Portfolio Transactions and Brokerage 35

Determination of Net Asset Value 35

Dividends and Distributions 37

Redemption of Fund Shares 37

Additional Information 37

Custodian, Dividend and Transfer Agent 37
Independent Auditors 38
Legal Counsel 38
Capital Stock 38
Voting Rights 38
Other Information 39

Financial Statements F-1

Appendix A A-1

Appendix B B-1

</TABLE>

<PAGE>

GENERAL INFORMATION

GE Investments Funds, Inc. (the "Company") (formerly Life of Virginia Series
Fund, 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 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.)

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 the
prospectus when shares of the Company are offered as a funding vehicle for such
variable 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 the prospectus when shares of the Company are offered as a funding
vehicle for such variable 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 and directly to
qualified pension and retirement plans.

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 Portfolio) and the
Government Securities Fund, (prior to that time, the Bond Portfolio) were
changed. The investment objective of the Common Stock Portfolio was intermediate
and long-term growth of capital, with reasonable income a consideration. The
Common Stock Portfolio 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 Portfolio. On May 1, 1997, it changed its name
(but not its investment objectives) to the S&P 500 Index Fund.

3
<PAGE>

The Funds

The S&P 500 Index Fund(1) 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 30, 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 30, 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%.

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.

- ----------

1 Standard & Poor's(R) and S&P(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 Standard and Poor's ("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.

4
<PAGE>

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 S&P or Moody's
Investors Service, Inc. ("Moody's"). The portfolio turnover rate for the year
ended December 30, 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 30, 1996, the portfolio turnover rate for the International Equity Fund
was 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
30, 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%.

5
<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 anticipated portfolio turnover rate for the Income Fund is approximately
300%.

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 growth of capital. 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, (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 50%.

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

<PAGE>

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.

PERFORMANCE INFORMATION

Yield and total return figures are based on historical earnings and are not
intended to indicate future performances.

Money Market Fund Yield

From time to time the Company may publish the yield and effective yield of
shares of the Money Market Fund in advertisements, sales literature or reports
to shareholders. "Current yield" is based upon the income that a hypothetical
investment in shares of the Money Market Fund would earn over a stated seven-day
period. This amount is then "annualized" by assuming that the amount of income
generated over that week is generated each week over a 52-week period and is
shown as a percentage of the investment. The Money Market Fund's "effective
yield" is calculated similarly, but, when annualized, the income earned by an
investment in the Fund is assumed to be reinvested. For any stated period, the
effective yield is slightly higher than the current yield because of the
compounding effect of this presumed reinvestment.

The yield for the Money Market Fund is computed by (a) determining the net
change in the value of a hypothetical preexisting account in the Fund having a
balance of one share at the beginning of a seven-calendar-day period for which
yield is to be quoted, (b) dividing the net change by the value of the account
at the beginning of the period to obtain the base period return, and (c)
annualizing the results (that is, multiplying the base period return by 365/7).
The net change in the value of the account reflects the value of additional
shares purchased with dividends declared on the original share and any such
additional shares, but does not include realized gains and losses or unrealized
appreciation and depreciation. In addition, the Company may calculate a compound
effective annualized yield by adding one to the base period return (calculated
as described above), raising the sum to a power equal to 365/7 and subtracting
one.

Yield For Other Funds

From time to time the Company may publish the yield for Funds other than the
Money Market Fund in advertisements, sales literature or reports to
shareholders. A Fund's yield is calculated using a standardized formula the
income component of which is computed from the yields to maturity of all debt
obligations in the Fund's portfolio based on the market value of such
obligations (with all purchases and sales of securities during such period
included in the income calculation on a settlement date basis). Yield quotations
are computed based on a 30-day period by dividing (a) the net income based on
the yield to maturity of each security earned during the period by (b) the
average daily number of shares outstanding during the period that were entitled
to receive dividends multiplied by the offering price per share on the last day
of the period.

The 30-day yield figure is calculated for a share of a Fund according to a
formula prescribed by the SEC. The formula can be expressed as follows:

Yield = 2[(a-b + 1)6 - 1]
---
c d

Where:

a = dividends and interest earned during the period.

b = expenses accrued for the period (net of reimbursement).

c = the average daily number of shares outstanding during the period
that were entitled to receive dividends.

7
<PAGE>

d = the maximum offering price per share on the last day of the period.

For the purpose of determining the interest earned (variable "a" in the formula)
on debt obligations that were purchased by a Fund at a discount or premium, the
formula generally calls for amortization of the discount or premium; the
amortization schedule will be adjusted monthly to reflect changes in the market
values of the debt obligations.

Investors should recognize that, in periods of declining interest rates, the
yield will tend to be somewhat higher than prevailing market rates, and in
periods of rising interest rates the yield will tend to be somewhat lower. In
addition, when interest rates are falling, moneys received by a Fund from the
continuous sale of its shares will likely be invested in portfolio instruments
producing lower yields than the balance of the Fund's portfolio, thereby
reducing the current yield of the Fund. In periods of rising interest rates, the
opposite result is likely to occur.

Yield information is useful in reviewing the performance of a Fund, but because
yields fluctuate, this information cannot necessarily be used to compare an
investment in shares of a Fund with bank deposits, savings accounts and similar
investment alternatives that often provide an agreed or guaranteed fixed yield
for a stated period of time. Shareholders of a Fund should remember that yield
is a function of the kind and quality of the instruments in the Fund's
portfolio, portfolio maturity, operating expenses and market conditions.

Average Annual Total Returns

From time to time the Company may publish a Fund's "average annual total return"
in advertisements, sales literature and reports to shareholders. Average annual
total return represents the average annual compounded rates of return over one,
five and ten-year periods, or other periods, or over the life of the Fund. An
average annual total return figure shows an average percentage change in value
of an investment in a Fund from the beginning date of the measuring period to
the ending date of the period, reflects changes in the price of a share and
assumes that any income, dividends and/or capital gains distributions made by
the Fund during the period are reinvested. When considering average annual total
return figures for periods longer than one year, investors should note that a
Fund's annual total return for any one year in the period might have been
greater or less than the average for the entire period.

The "average annual total return" figures for a Fund are computed according to
the following formula prescribed by the SEC:

P(1 + T)n = ERV

Where P = a hypothetical initial payment of $1,000;

T = average annual total return;

n = number of years; and

ERV = Ending Redeemable Value of a hypothetical $1,000 investment
made at the beginning of a 1, 5 or 10-year period at the end
of a 1, 5 or 10-year period (or fractional portion thereof),
assuming reinvestment of all dividends and distributions.

The ERV assumes complete redemption of the hypothetical investment at the end of
the measuring period.

Other Total Returns

The Company also may publish a Fund's "aggregate total return" in
advertisements, sales literature and reports to shareholders. Aggregate total
return represents the cumulative change in value of an investment in a Fund for
a specific period and reflects changes in the Fund's share price and
reinvestment of dividends and distributions. Aggregate total return is shown by
means of schedules, charts or graphs, and may indicate subtotals of the various
components of total return (that is, the change in value of initial investment,
income dividends and capital gains distributions).

<PAGE>

Aggregate total return data reflects compounding over a longer period of time
than does annual total return data, and therefore aggregate total returns are
generally greater.

The "aggregate total return" figures represent the cumulative change in the
value of an investment in a Fund for the specified period are computed by the
following formula:

Aggregate Total Return = ERV - P
-------
P

Where P = a hypothetical initial payment of $1,000; and

ERV = Ending Redeemable Value of a hypothetical $1,000 investment
made at the beginning of a 1, 5 or 10-year period at the end
of the 1, 5 or 10-year period (or fractional portion thereof),
assuming reinvestment of all dividends and distributions.

The Company also may publish the actual annual and annualized total return
performance data for various periods of time, which is shown by means of
schedules, charts or graphs. Actual annual or annualized total return data
generally is lower than average annual total return data, because it does not
reflect compounding of return.

Comparative Performance Information

In addition, the Company may from time to time publish performance of its Funds
relative to certain performance rankings and indices. In particular, the Company
may compare or contrast a Fund's performance with: (1) the performance of other
mutual funds as listed in the rankings prepared by Lipper Analytical Services,
Inc. or similar independent services that monitor the performance of mutual
funds, (2) various unmanaged indices such as the S&P 500 Index and the Dow Jones
Industrial Average, or (3) other appropriate indices of investment securities or
with data developed by GEIM derived by from those indices. The performance
information may also include evaluations of a Fund published by nationally
recognized ranking services and by financial publications that are nationally
recognized, such as Barron's, BusinessWeek, Forbes, Fortune, Institutional
Investor, Kiplinger's Personal Finance, Money Magazine, Morningstar Mutual Fund
Values, The New York Times, The Wall Street Journal and USA Today. These ranking
services or publications may compare or contrast a Fund's performance to, or
rank it within, a universe of mutual funds with investment objectives and
policies similar, but not necessarily identical to, the Funds. Such comparisons
or rankings are made on the basis of several factors, including objectives and
policies, management style and strategy, and portfolio composition, and may
change over time if any of those factors change.

The investment results of the Funds will fluctuate over time and any
presentation of investment results for any prior period should not be considered
a representation of what an investment may earn or what a Fund's performance may
be in any future period. In addition to information provided in shareholder
reports, the Company may, in it's discretion, from time to time make a list of
the Fund's holdings available to investors upon request.

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

<PAGE>

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 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, Income 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.

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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 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

11
<PAGE>

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.

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 addi-

<PAGE>

tion, 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 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

<PAGE>

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 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.

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<PAGE>

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.

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 futures 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.

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

15
<PAGE>

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 purchaser 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.

16
<PAGE>

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 and put options on financial futures contracts of the type
which the particular Fund is authorized to enter into. Covered put and call
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.

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.

17
<PAGE>

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 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;

<PAGE>

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 to 10% 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 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

<PAGE>

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.

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.

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<PAGE>

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 comparable 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.

21
<PAGE>

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 are 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 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 ("CMOs"). 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.

22
<PAGE>

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 guaranteed 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.

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.

23
<PAGE>

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 these purposes, the Income Fund, U.S.
Equity Fund and Premier Growth Equity Fund also may borrow via reverse
repurchase agreements. 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.

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.

24
<PAGE>

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. This restriction does not
apply to the International Equity Fund.

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.

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 (regis-

<PAGE>

tered 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.

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.

26
<PAGE>

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 $6,000 annually, plus $500 per meeting attended in
person and $250 per telephone meeting. 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.

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, 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 Corporation, a wholly owned subsidiary of Aon Corporation, is
located at 123 N. Wacker Drive, Chicago, Illinois 60606. Aon, a publicly owned
Delaware corporation, is an insurance holding company organization principally
engaged through subsidiaries in the insurance and insurance brokerage business.
The duties and responsibilities of AAI were specified in the Investment Advisory
Agreement ("AAI Agreement") between the Company and AAI covering each of the
foregoing Funds and by substantially identical additional agreements ("AAI
Additional Agreements") covering the International Equity Fund and Real Estate
Securities Fund.

AAI furnished an investment program for the Money Market Fund, Government
Securities Fund, S&P 500 Index Fund and Total Return Fund, was responsible for
the actual managing of the investments of such Funds and had

<PAGE>

responsibility for making decisions governing whether to buy, sell or hold any
particular security. 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.

Under the AAI Agreement and AAI Additional Agreements, AAI received investment
advisory fees as compensation for its services. The fees were the same as the
fees under the company's investment advisory agreements with GEIM.

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 30, 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 sub-advisory agreements (the "AAI Sub-Advisory Agreements"), 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.

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 $4.3 billion in equity, fixed-income and real estate
assets.

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.

28
<PAGE>

For the fiscal year ended December 30, 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 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 30, 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 30 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
June 30, 1997, GEIM and GEIC managed assets in excess of $64 billion, including
roughly $12 billion in mutual fund assets.

29
<PAGE>

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.

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 meet-

<PAGE>

ing 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. These three advisory agreements are intended
to be effective as of November 15, 1997, and prior thereto will be approved by
the sole initial shareholder of these Funds. These three advisory agreements
will continue in effect for their respective Fund for an initial term ending two
years after their effective date, 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.

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 and the AAI Additional 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.

31
<PAGE>

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 2049 Century Park East, Los Angeles, CA 90067 and is a wholly
owned subsidiary of United Asset Management Corporation, a company whose
principal business is managing investments for institutional clients through 50
operating subsidiaries and acquiring investment management firms. NWQ is a
manager of domestic investment portfolios for individual, union, corporate,
endowment and foundation clients with 15 years of experience. It manages
approximately $8.0 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 $1.12
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.

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 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 24, 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 24, 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.

32
<PAGE>

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, 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.

33
<PAGE>

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 18 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.

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
Government Securities Fund, 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 and director 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 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 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.

34
<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 entered into 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 30, 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

Custodian, Dividend and Transfer Agent

State Street Bank and Trust Company ("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.

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.

37
<PAGE>

State Street is the Company's transfer and dividend paying agent.

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 LLP, 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
September 30, 1997, Life of Virginia owned 106,084 Class B shares (having a
market value of $1,057,657) representing interests in the Government Securities
Fund, 1,844,214 Class C shares (with a market value of $1,844,214) representing
interests in the Money Market Fund, 1,082,979 Class E shares (with a market
value of $13,927,120) representing interests in the International Equity Fund,
1,129,736 Class F shares (with a market value of $19,160,338) representing
interests in the Real Estate Securities Fund, 300,000 Class G shares (with a
market value of 3,996,000) representing interests in the Value Equity Fund and
500,000 Class H shares (with a market value of 5,160,000) representing interests
in the Global Income Fund.

Life of Virginia and the Accounts currently are the only shareholders of record.
As of September 30, 1997, there were no contract owners who beneficially owned a
5% or greater voting interest in any Fund. As of September 30, 1997, officers
and directors of the Company beneficially owned, as owners of variable annuity
or variable life insurance contracts, less than 1% of each Fund.

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 and GNA (directly or through the Accounts) currently owns all shares

<PAGE>

of the Company. Life of Virginia and GNA 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.

FINANCIAL STATEMENTS

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 are included in the December 31, 1996 Annual
Report incorporated herein by reference. The financial statements have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon appearing in the Annual Report and are included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.

Unaudited Financial Statements. The following pages contain unaudited financial
statements for the six-month period ended June 30, 1997 for the S&P 500 Index
Fund, Government Securities Fund, Money Market Fund, Total Return Fund,
International Equity Fund, and Real Estate Securities Fund; and unaudited
financial statements for the period May 1, 1997 (date of inception) to August
31, 1997 for the Global Income Fund and Value Equity Fund.

No financial statements are included for the Income Fund, U.S. Equity Fund and
Premier Growth Equity Fund because these Funds had not commenced operations as
of the date of this Statement of Additional Information.

39
<PAGE>

S&P 500 Index Fund -- Schedule of Investments June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
S&P 500 INDEX FUND
- --------------------------------------------------------------------------------
Number
of Shares Value
- --------------------------------------------------------------------------------
Common Stock -- 95.4%
- --------------------------------------------------------------------------------
Basic Materials -- 4.8%
Air Products & Chemicals Inc. ...... 1,666 $135,362
Alcan Aluminum Ltd. ................ 3,377 117,140
Allegheny Teldyne Inc. ............. 2,602 70,254
Aluminum Co. of America ............ 2,588 195,070
Armco Inc. ......................... 1,591 6,165 (a)
Asarco Inc. ........................ 638 19,539
Barrick Gold Corp. ................. 5,333 117,326 (f)
Battle Gold Co. .................... 3,353 19,070
Bethleham Steel Corp. .............. 1,666 17,389 (a)
Boise Cascade Corp. ................ 723 25,531
Champion International Corp. ....... 1,425 78,731
Cyprus Amax Minerals Co. ........... 1,391 34,080
Dow Chemical Co. ................... 3,520 306,680
Du Pont de Nemours (E.I.) &
Co ............................... 16,811 1,056,992
Eastman Chemical Co. ............... 1,159 73,597
Echo Bay Mines Ltd. ................ 2,079 11,954
Ecolab Inc. ........................ 963 45,983
Engelhard Corp. .................... 2,146 44,932
FMC Corp. .......................... 553 43,929 (a)
Freeport McMoran Copper &
Gold Inc. (Class A) .............. 2,884 89,764
Georgia Pacific Corp. .............. 1,364 116,451
Goodrich (B.F.) Co. ................ 801 34,693
Grace (WR) & Co. ................... 1,087 59,921
Great Lakes Chemical Corp. ......... 897 46,980
Hercules Inc. ...................... 1,528 73,153
Homestake Mining Co. ............... 2,189 28,594
Inco Ltd. .......................... 2,512 75,517
Inland Steel Industries Inc. ....... 731 19,097
International Paper Co. ............ 4,481 217,609
James River Corp. of Virginia ...... 1,284 47,508
Louisiana Pacific Corp. ............ 1,622 34,265
Mead Corp. ......................... 779 48,493
Monsanto Co. ....................... 8,779 378,046
Morton International Inc. .......... 2,123 64,088
Nalco Chemical Co. ................. 1,005 38,818
Newmont Mining Corp. ............... 2,328 90,792
Nucor Corp. ........................ 1,309 73,959
Phelps Dodge Corp. ................. 967 82,376
Placer Dome Inc. ................... 3,574 58,524
Potlatch Corp. ..................... 430 19,458
PPG Industries Inc. ................ 2,737 159,088
Praxair Inc. ....................... 2,335 130,760
Reynolds Metals Co. ................ 1,085 77,306
Rohm & Haas Co. .................... 954 85,920
Sigma-Aldrich Corp. ................ 1,491 52,278
Union Camp Corp. ................... 1,039 51,950

<PAGE>

- --------------------------------------------------------------------------------
Number
of Shares Value
- --------------------------------------------------------------------------------

Union Carbide Corp. ................ 1,901 $89,466
USX-US Steel Group Inc. ............ 1,265 44,354
Westvaco Corp. ..................... 1,520 47,785
Weyerhaeuser Co. ................... 2,960 153,920
Willamette Industries Inc. ......... 825 57,750
Worthington Industries Inc. ........ 1,441 26,388
5,094,795
Capital Goods -- 9.7%
Aeroquip-Vickers Inc. .............. 417 19,703
AlliedSignal Inc. .................. 4,222 354,648
AMP Inc. ........................... 3,277 136,815
Armstrong World Industries Inc. .... 615 45,126
Avery Dennison Corp. ............... 1,555 62,394
Boeing Co. ......................... 10,699 567,716
Browning-Ferris Industries Inc. .... 3,180 105,735
Case Corp. ......................... 1,095 75,418
Caterpillar Inc. ................... 2,858 306,878
Centex Corp. ....................... 430 17,469
Cincinnati Milacron Inc. ........... 594 15,407
Cooper Industries Inc. ............. 1,771 88,107
Corning Inc. ....................... 3,413 189,848
Crane Co. .......................... 685 28,642
Cummins Engine Co. Inc. ............ 589 41,561
Deere & Co. ........................ 3,820 209,622
Dover Corp. ........................ 1,679 103,258
Eaton Corp. ........................ 1,150 100,409
Emerson Electric Co. ............... 6,674 367,487
Fleetwood Enterprises Inc. ......... 530 15,801
Fluor Corp. ........................ 1,252 69,095
Foster Wheeler Corp. ............... 606 24,543
General Dynamics Corp. ............. 941 70,575
General Electric Co. ............... 49,165 3,214,162
General Signal Corp. ............... 744 32,457
Giddings & Lewis Inc. .............. 494 10,312
Grainger (W.W.) Inc. ............... 791 61,846
Harnischfeger Industries Inc. ...... 733 30,420
Honeywell Inc. ..................... 1,892 143,555
Illinois Tool Works Inc. ........... 3,697 184,619
Ingersoll Rand Co. ................. 1,633 100,838
Johnson Controls Inc. .............. 1,241 50,959
Kaufman & Broad Home Corp. ......... 580 10,186
Laidlaw Inc. ....................... 4,688 64,753
Lockheed Martin Corp. .............. 2,876 297,846
Masco Corp. ........................ 2,395 99,991
McDermott International Inc. ....... 819 23,905
McDonnell Douglas Corp. ............ 3,167 216,939
Millipore Corp. .................... 645 28,380
Minnesota Mining &
Manufacturing Co. ................. 6,240 636,480
Nacco Industries Inc. .............. 122 6,885
National Service Industries Inc. ... 676 32,913
Navistar International Corp. Inc. .. 1,095 18,889 (a)
Northrop Grumman Corp. ............. 861 75,607
Owens Illinois Inc. ................ 776 33,465
PACCAR Inc. ........................ 1,160 53,867
Pall Corp. ......................... 1,878 43,663

- ----------
See Notes to Schedule of Investments and Financial Statements

F-1
<PAGE>

Parker Hannifin Corp. ................ 1,110 $67,363
Pulte Corp. .......................... 311 10,749
Raychem Corp. ........................ 666 49,534
Raytheon Co. ......................... 3,524 179,724
Rockwell International Corp. ......... 3,268 192,812
Sherwin Williams Co. ................. 2,563 79,133
Tenneco Inc. ......................... 2,548 115,138
Textron Inc. ......................... 2,468 163,813
Thermo Electron Corp. ................ 2,228 75,752
Thomas & Betts Corp. ................. 793 41,682
Timken Co. ........................... 931 33,109
Tyco International Ltd. .............. 2,489 173,141
United Technologies Corp. ............ 3,543 294,069
Waste Management Inc. ................ 6,720 215,880
Westinghouse Electric Corp. .......... 9,062 209,559
10,390,652
Consumer - Cyclical -- 8.2%
American Greetings Corp. .............
(Class A) .......................... 1,117 41,469
Automatic Data Processing Inc. ....... 4,359 204,873
Black & Decker Corp. ................. 1,407 52,323
Block H & R Inc. ..................... 1,552 50,052
Briggs & Stratton Corp. .............. 334 16,700
Brunswick Corp. ...................... 1,468 45,875
Chrysler Corp. ....................... 10,490 344,203
Cognizant Corp. ...................... 2,542 102,951
Comcast Corp. (Class A) .............. 4,872 104,139
Cooper Tire & Rubber Co. ............. 1,223 26,906
CUC International Inc. ............... 5,922 152,862 (a)
Dana Corp. ........................... 1,519 57,722
Darden Restaurants Inc. .............. 2,386 21,623
Deluxe Corp. ......................... 1,229 41,940
Disney (Walt) Co. .................... 10,079 808,840
Donnelley (R.R.) & Sons Co. .......... 2,252 82,479
Dow Jones & Co. Inc. ................. 1,442 57,950
Dun & Bradstreet Corp. ............... 2,542 66,727
Eastman Kodak Co. .................... 4,975 381,831
Echlin Inc. .......................... 931 33,516
Ford Motor Co. ....................... 17,700 668,175
Fruit of the Loom Inc. ............... 1,147 35,557 (a)
Gannett Inc. ......................... 2,104 207,770
General Motors Corp. ................. 10,994 612,228
Genuine Parts Co. .................... 2,696 91,327
Goodyear Tire & Rubber Co. ........... 2,319 146,822
Harland (John H.) Co. ................ 460 10,494
Harrahs Entertainment Inc. ........... 1,535 28,014 (a)
Hasbro Inc. .......................... 1,931 54,792
HFS Inc. ............................. 2,315 134,270 (a)
Hilton Hotels Corp. .................. 3,688 97,962
Interpublic Group Cos. Inc. .......... 1,210 74,188
ITT Corp. ............................ 1,736 106,004 (a)
ITT Industries Inc. .................. 1,763 45,397
Jostens Inc. ......................... 576 15,408
King World Productions Inc. .......... 557 19,495

<PAGE>

- --------------------------------------------------------------------------------
Number
of Shares Value
- --------------------------------------------------------------------------------

Knight Ridder Inc. ................... 1,400 $ 68,687
Liz Claiborne Inc. ................... 1,065 49,656
Marriot International Inc. ........... 1,911 117,288
Mattel Inc. .......................... 4,311 146,035
Maytag Corp. ......................... 1,495 39,057
McDonalds Corp. ...................... 10,417 503,271
McGraw Hill Cos. Inc. ................ 1,485 87,337
Meredith Corp. ....................... 798 23,142
New York Times Co. ................... 1,444 71,478
Newell Co. ........................... 2,371 93,951
Nike Inc. ............................ 4,304 251,246
Polaroid Corp. ....................... 678 37,629
Reebok International Ltd. ............ 830 38,803
Rubbermaid Inc. ...................... 2,236 66,521
Russell Corp. ........................ 570 16,886
Safety-Kleen Corp. ................... 868 14,648
Service Corp. International .......... 3,518 115,654
Shared Medical System Corp. .......... 353 19,062
Snap-On Inc. ......................... 909 35,792
Springs Industries Inc. .............. 300 15,825
Stanley Works ........................ 1,326 53,040
Stride Rite Corp. .................... 739 9,515
Tele-Communications Inc.
(Series A) ......................... 9,914 147,471
Time Warner Inc. ..................... 8,488 409,546
Times Mirror Co. ..................... 1,395 77,074
Tribune Co. .......................... 1,838 88,339
TRW Inc. ............................. 1,895 107,660
Tupperware Corp. ..................... 928 33,872
U.S. West Communications
Group .............................. 9,326 188,851 (a)
VF Corp. ............................. 951 80,597
Viacom Inc. (Class B) ................ 5,282 158,460 (a)
Wendy's International Inc. ........... 1,931 50,085
Whirlpool Corp. ...................... 1,109 60,510
Xerox Corp. .......................... 4,845 382,149
8,702,021
Consumer - Stable -- 11.7%
Adolph Coors Co. ..................... 565 15,043
Alberto-Culver Co. ................... 833 23,324
Anheuser Busch Cos. Inc. ............. 7,454 312,602
Archer-Daniels Midland Co. ........... 8,015 188,353
Avon Products Inc. ................... 1,982 139,855
Ball Corp. ........................... 454 13,648
Bemis Inc. ........................... 781 33,778
Brown-Forman Corp. ................... 1,029 50,228
Campbell Soup Co. .................... 6,976 348,800
Clorox Co. ........................... 771 101,772
Coca Cola Co. ........................ 37,151 2,507,693 (f)
Colgate Palmolive Co. ................ 4,386 286,187
Conagra Inc. ......................... 3,584 229,824
CPC International Inc. ............... 2,145 198,010
Crown Cork & Seal Inc. ............... 1,914 102,279
Fleming Cos. Inc. .................... 563 10,134
Fortune Brands Inc. .................. 2,541 94,811
General Mills Inc. ................... 2,411 157,016

- ----------
See Notes to Schedule of Investments and Financial Statements

F-2
<PAGE>

S&P 500 Index Fund -- Schedule of Investments June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
Number
of Shares Value
- --------------------------------------------------------------------------------

Gillette Co. ..................... 8,283 $784,814
Heinz (H.J.) Co. ................. 5,497 253,549
Hershey Foods Corp. .............. 2,292 126,776
International Flavours ........... 1,647 83,174
Kellogg Co. ...................... 3,145 269,291
Kimberly Clark Corp. ............. 8,436 419,691
Pepsico Inc. ..................... 23,010 864,313
Philip Morris Cos. Inc. .......... 36,479 1,618,756
Pioneer Hi-Bred International Inc. 1,229 98,320
Procter & Gamble Co. ............. 10,144 1,432,840
Quaker Oats Co. .................. 2,028 91,007
Ralston Purina Co. ............... 1,586 130,349
Sara Lee Corp. ................... 7,181 298,909
Seagram Ltd. ..................... 5,535 222,784
Stone Container Corp. ............ 1,479 21,168
Supervalu Inc. ................... 998 34,431
Sysco Corp. ...................... 2,636 96,214
Temple Inland Inc. ............... 826 44,604
Unilever N.V ..................... 2,389 520,802
UST Inc. ......................... 2,779 77,117
Whitman Corp. .................... 1,549 39,209
Wrigley (W.M.) Junior Co. ........ 1,734 116,178
12,457,653
Energy -- 8.4%
Amerada Hess Corp. ............... 1,390 77,232
Amoco Corp. ...................... 7,423 645,337 (f)
Ashland Oil Inc. ................. 1,107 51,337
Atlantic Richfield Co. ........... 4,809 339,034
Baker Hughes Inc. ................ 2,171 83,991
Burlington Resources Inc. ........ 1,865 82,293
Chevron Corp. .................... 9,741 720,225
Dresser Industries Inc. .......... 2,624 97,744
Exxon Corp. ...................... 37,089 2,280,973
Halliburton Co. .................. 1,868 148,039
Helmerich & Payne Inc. ........... 371 21,379
Kerr-McGee Corp. ................. 723 45,820
Louisiana Land & Exploration Co. . 509 29,077
Mobil Corp. ...................... 11,762 821,870
Occidental Petroleum Corp. ....... 4,910 123,057
Oryx Energy Co. .................. 1,564 33,040 (a)
Pennzoil Co. ..................... 694 53,265
Phillips Petroleum Co. ........... 3,929 171,894
Rowan Cos. Inc. .................. 1,277 35,995 (a)
Royal Dutch Petroleum Co. ADR .... 32,016 1,740,870
Santa Fe Energy Resources Inc. ... 1,366 20,063 (a)
Schlumberger Ltd. ................ 3,677 459,625
Sun Co. Inc. ..................... 1,088 33,728
Texaco Inc. ...................... 3,948 429,345
Union Pacific Resources Group Inc. 3,729 92,759
Unocal Corp. ..................... 3,738 145,081
USX Marathon Group ............... 4,292 123,931
Western Atlas Inc. ............... 800 58,600 (a)
8,965,604

<PAGE>

- --------------------------------------------------------------------------------
Number
of Shares Value
- --------------------------------------------------------------------------------

Financial -- 11.2%
Ahmanson (H.F.) & Co. .......... 1,574 $ 67,682
American Express Co. ........... 7,074 527,013 (f)
American General Corp. ......... 3,604 172,084
Banc One Corp. ................. 6,381 309,080 (f)
Bank of New York Inc. .......... 5,855 254,692 (f)
BankAmerica Corp. .............. 10,714 691,723
BankBoston Corp. ............... 2,283 164,519
Bankers Trust New York Corp. ... 1,219 106,053
Barnett Banks Inc. ............. 3,115 163,538
Beneficial Corp. ............... 806 57,276
Charles Schwab Corp. ........... 2,189 89,065
Chase Manhattan Corp. .......... 6,477 628,674
Citicorp ....................... 6,916 833,810
Comerica Inc. .................. 1,604 109,072
Corestates Financial Corp. ..... 3,140 168,775
Countrywide Credit Industries .. 1,400 43,663
Federal Home Loan Mortgage Corp. 10,465 359,734
Federal National Mortgage Assoc 15,976 696,953
Fifth Third Bancorp ............ 1,581 129,741
First Bank Systems Inc. ........ 2,008 171,433
First Chicago Corp. ............ 4,760 287,980
First Union Corp. .............. 4,235 391,737
Fleet Financial Group Inc. ..... 3,916 247,687
Golden West Financial Corp. .... 855 59,850
Great Western Financial Corp. .. 2,055 110,456
Green Tree Financial Corp. ..... 2,051 73,067
Household International Inc. ... 1,447 169,932
KeyCorp ........................ 3,364 187,963
MBIA Inc. ...................... 645 72,764
MBNA Corp. ..................... 4,989 182,722
Mellon Bank Corp. .............. 3,864 174,363
Merrill Lynch & Co. Inc. ....... 4,917 293,176
MGIC Investment Corp. .......... 1,759 84,322
Morgan (J.P.) & Co. Inc. ....... 2,764 288,492
Morgan Stanley, Dean Witter,
Discover & Co. ................. 8,498 365,945 (a)
National City Corp. ............ 3,332 174,930
Nationsbank Corp. .............. 10,905 703,372
Norwest Corp. .................. 5,529 311,006
PNC Bank Corp. ................. 5,008 208,458
Providian Financial Corp. ...... 1,398 44,911 (a)
Republic of New York Corp. ..... 823 88,473
Salomon Inc. ................... 1,627 90,502
Suntrust Banks Inc. ............ 3,329 183,303
Transamerica Corp. ............. 988 92,440
Travelers Group Inc. ........... 9,540 601,616
US Bancorp ..................... 2,254 144,538
Wachovia Corp. ................. 2,466 143,799
Wells Fargo & Co. ............. 1,346 362,747
11,885,131
Healthcare -- 10.9%
Abbott Laboratories ............ 11,598 774,166 (f)
Allergan Inc. .................. 976 31,049
Alza Corp. ..................... 1,261 36,569 (a)

- ----------
See Notes to Schedule of Investments and Financial Statements

F-3
<PAGE>
S&P 500 Index Fund -- Schedule of Investments June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
Number
of Shares Value
- --------------------------------------------------------------------------------

American Home Products Corp. ........ 9,627 $736,465 (f)
Amgen Inc. .......................... 3,948 229,478 (f)
Bard (C.R.) Inc. .................... 851 30,902
Bausch & Lomb Inc. .................. 828 39,020
Baxter International Inc. ........... 4,074 212,867
Becton, Dickinson & Co. ............. 1,835 92,897
Beverly Enterprises ................. 1,482 24,083 (a)
Biomet Inc. ......................... 1,707 31,793
Boston Scientific Corp. ............. 2,894 177,800 (a)
Bristol-Myers Squibb Co. ............ 14,954 1,211,274 (f)
Cardinal Health Inc. ................ 1,649 94,405
Columbia/HCA Healthcare Corp. ....... 10,023 394,029
Eli Lilly & Co. ..................... 8,308 908,168
Guidant Corp. ....................... 1,106 94,010
Healthsouth Corp. ................... 5,136 128,079 (a)
Humana Inc. ......................... 2,427 56,124 (a)
Johnson & Johnson ................... 19,883 1,279,968
Mallinckrodt Inc. ................... 1,104 41,952
Manor Care Inc. ..................... 937 30,570
Medtronic Inc. ...................... 3,583 290,223
Merck & Co. Inc. .................... 18,075 1,870,762
Pfizer Inc. ......................... 9,624 1,150,068
Pharmacia & Upjohn Inc. ............. 7,585 263,579
Schering Plough Corp. ............... 11,029 528,013 (f)
St. Jude Medical Inc. ............... 1,223 47,697 (a)
Tenet Healthcare Corp. .............. 4,497 132,943 (a)
United Healthcare Corp. ............. 2,747 142,844
United States Surgical Corp ......... 1,045 38,926
Warner-Lambert Co. .................. 4,049 503,088
11,623,811
Insurance -- 3.5%
Aegon ............................... 552 38,654
Aetna Inc. .......................... 2,252 230,548
Allstate Corp. ...................... 6,638 484,574 (f)
American International Group Inc. ... 7,010 1,047,119 (f)
Aon Corp. ........................... 2,424 125,442
Chubb Corp. ......................... 2,597 173,674
CIGNA Corp. ......................... 1,121 198,977
Conseco Inc. ........................ 2,847 105,339
General Reinsurance Corp. ........... 1,228 223,496
Hartford Financial Services Group ... 1,752 144,978
Jefferson-Pilot Corp. ............... 1,055 73,718
Lincoln National Corp. .............. 1,556 100,168
Loews Corp. ......................... 1,716 171,815
Marsh & McLennan Cos. Inc. .......... 2,436 173,869
Safeco Corp. ........................ 1,881 87,819
St. Paul Cos. Inc. .................. 1,238 94,398
Torchmark Corp. ..................... 1,050 74,813
UNUM Corp. .......................... 2,182 91,644
USF & G Corp. ....................... 1,568 37,632
3,678,677

<PAGE>

- --------------------------------------------------------------------------------
Number
of Shares Value
- --------------------------------------------------------------------------------

Miscellaneous -- 0.2%
SPDR Trust .......................... 3,000 $264,938

Retail Trade-- 4.4%
Albertsons Inc. ..................... 3,747 136,766
American Stores Co. ................. 2,176 107,440
Autozone Inc. ....................... 2,244 52,874 (a)
Charming Shoppes Inc. ............... 1,573 8,209 (a)
Circuit City Stores Inc. ............ 1,463 52,028
Costco Cos. Inc. .................... 3,133 102,997 (a)
CVS Corp. ........................... 2,149 110,136
Dayton Hudson Corp. ................. 3,238 172,221
Dillards Inc. ....................... 1,695 58,689
Federated Department Stores Inc. .... 3,104 107,864 (a)
Gap Inc. ............................ 4,169 162,070
Giant Foods Inc. .................... 892 29,102
Great Atlantic & Pacific Tea Co. Inc. 570 15,497
Harcourt General Inc. ............... 1,061 50,530
Home Depot Inc. ..................... 7,171 494,351
K Mart Corp. ........................ 7,231 88,580 (a)
Kroger Co. .......................... 3,765 109,185 (a)
Limited Inc. ........................ 4,047 81,952
Longs Drug Stores Corp. ............. 582 15,241
Lowes Cos. Inc. ..................... 2,582 95,857
May Department Stores Co. ........... 3,656 172,746
Mercantile Stores Inc. .............. 549 34,553
Nordstrom Inc. ...................... 1,196 58,679
Penney J.C. Inc. .................... 3,687 192,415
Pep Boys Manny Moe & Jack ........... 903 30,758
Rite Aid Corp. ...................... 1,829 91,221
Sears Roebuck & Co. ................. 5,845 314,169
Tandy Corp. ......................... 864 48,384
TJX Cos. Inc. ....................... 2,320 61,190
Toys 'R Us Inc. ..................... 4,335 151,725 (a)
Wal Mart Stores Inc. ................ 34,012 1,150,031
Walgreen Co. ........................ 3,675 197,072
Winn Dixie Stores Inc. .............. 2,240 83,440
Woolworth Corp. ..................... 2,000 48,000 (a)
4,685,972
Software & Services -- 3.5%
Adobe Systems Inc. .................. 1,098 38,499
Autodesk Inc. ....................... 712 27,278
Computer Associates International
Inc. ................................ 5,421 301,882
Computer Sciences Corp. ............. 1,141 82,295 (a)
Equifax Inc. ........................ 979 36,407
First Data Corp. .................... 6,681 293,546
Microsoft Corp. ..................... 17,964 2,270,200 (a)
Novell Inc. ......................... 5,166 35,839 (a)
Oracle Systems Corp. ................ 9,848 496,093 (a)
Parametric Technology Corp. ......... 1,903 80,996 (a)
Unisys Corp. ........................ 2,609 19,894 (a)
3,682,929

- ----------
See Notes to Schedule of Investments and Financial Statements

F-4
<PAGE>
S&P 500 Index Fund -- Schedule of Investments June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
Number
of Shares Value
- --------------------------------------------------------------------------------

Technology -- 8.9%
3Com Corp. .......................... 4,954 $222,930 (a)
Advanced Micro Devices Inc. ......... 2,037 73,332 (a)
Amdahl Corp. ........................ 1,811 15,846 (a)
Andrew Corp. ........................ 1,356 38,138 (a)
Apple Computer ...................... 1,860 26,505
Applied Materials Inc. .............. 2,700 191,194 (a)
Bay Networks Inc. ................... 2,945 78,227 (a)
Cabletron Systems Inc. .............. 2,326 65,855 (a)
Cisco Systems Inc. .................. 9,923 666,081 (a)
Compaq Computer Corp. ............... 4,042 401,168 (a)
Data General Corp. .................. 595 15,470 (a)
Dell Computer Corp. ................. 2,528 296,882 (a)
Digital Equipment Corp. ............. 2,347 83,172 (a)
DSC Communications Corp. ............ 1,750 38,937 (a)
EG & G Inc. ......................... 705 15,863
EMC Corp. of Massachusetts .......... 3,668 143,052 (a)
General Instrument Corp. ............ 2,043 51,075 (a)
Harris Corp. ........................ 581 48,804
Hewlett Packard Co. ................. 15,141 847,896
Ikon Office Solutions Inc. .......... 2,010 50,124
Intel Corp. ......................... 12,251 1,737,345
Intergraph Corp. .................... 710 6,035 (a)
International Business Machines ..... 14,865 1,340,637
LSI Logic Corp. ..................... 2,096 67,072 (a)
Lucent Technologies Inc. ............ 9,527 686,539
Micron Technology Inc. .............. 3,127 124,885
Moore Corp. Ltd. .................... 1,474 29,019
Motorola Inc. ....................... 8,851 672,676
National Semiconductor Corp. ........ 2,083 63,792 (a)
Northern Telecom Ltd. ............... 3,857 350,987
Perkin Elmer Corp. .................. 650 51,716
Pitney Bowes Inc. ................... 2,216 154,012
Scientific-Atlanta Inc. ............. 1,153 25,222
Seagate Technology .................. 3,690 129,842 (a)
Silicon Graphics Inc. ............... 2,633 39,495 (a)
Sun Microsystems Inc. ............... 5,495 204,517 (a)
Tandem Computers Inc. ............... 1,773 35,903 (a)
Tektronix Inc. ...................... 492 29,520
Tellabs Inc. ........................ 2,676 149,521
Texas Instruments Inc. .............. 2,842 238,906
9,508,192
Transportation -- 1.2%
AMR Corp. ........................... 1,357 125,522 (a)
Burlington Northern Santa Fe ........ 2,283 205,185
Caliber Systems Inc. ................ 584 21,754
CSX Corp. ........................... 3,238 179,709
Delta Air Lines Inc. ................ 1,091 89,462
Federal Express Corp. ............... 1,703 98,348 (a)
Norfolk Southern Corp. .............. 1,867 188,100
Ryder System Inc. ................... 1,131 37,323
Southwest Airlines Co. .............. 2,164 55,994
U.S. Airways Group Inc. ............. 1,207 42,245 (a)
Union Pacific Corp. N.V ............. 3,654 257,607
1,301,249
<PAGE>

- --------------------------------------------------------------------------------
Number
of Shares Value
- --------------------------------------------------------------------------------
Utilities -- 8.8%
Airtouch Communications Inc. ...... 7,486 $ 204,929 (a,f)
Alltel Corp. ...................... 2,794 93,424 (f)
American Electric Power Inc. ...... 2,797 117,474
American Telephone &
Telegraph Corp. ................... 24,192 848,232 (f)
Ameritech Corp. ................... 8,202 557,223 (f)
Baltimore Gas & Electric Co. ...... 2,203 58,792
Bell Atlantic Corp. ............... 6,536 495,919 (f)
Bellsouth Corp. ................... 14,799 686,304 (f)
Carolina Power & Light Co. ........ 2,260 81,077
Central & South West Corp. ........ 3,148 66,895
CINergy Corp. ..................... 2,353 81,914
Coastal Corp. ..................... 1,571 83,557
Columbia Gas Systems Inc. ......... 823 53,701
Consolidated Edison Co.
of New York Inc. ................ 3,507 103,237
Consolidated Natural Gas Co. ...... 1,415 76,145
Dominion Resources Inc. ........... 2,689 98,485
DTE Energy Co. .................... 2,166 59,836
Duke Power Co. .................... 5,167 247,697
Eastern Enterprises ............... 302 10,476
Edison International .............. 6,142 152,782
Enron Corp. ....................... 3,798 155,006
Enserch Corp. ..................... 1,039 23,118
Entergy Corp. ..................... 3,447 94,362
FPL Group Inc. .................... 2,731 125,797
Frontier Corp. .................... 2,443 48,707
GPU Inc. .......................... 1,800 64,575
GTE Corp. ......................... 14,361 630,089
Houston Industries Inc. ........... 3,500 75,031
MCI Communications Corp. .......... 10,225 391,426
Niagara Mohawk Power Corp. ........ 2,154 18,444
Nicor Inc. ........................ 743 26,655
Noram Energy Corp. ................ 2,049 31,247
Northern States Power Co.
of Minnesota ..................... 1,030 53,302
NYNEX Corp. ....................... 6,569 378,539
Ohio Edison Co. ................... 2,277 49,667
Oneok Inc. ........................ 407 13,100
Pacific Enterprises ............... 1,269 42,670
Pacificorp ........................ 4,399 96,778
Peco Energy Co. ................... 3,322 69,762
Peoples Energy Corp. .............. 521 19,505
PG&E Corp. ........................ 6,154 149,234
PP&L Resources Inc. ............... 2,422 48,289
Public Service Enterprise
Group ............................ 3,559 88,975
SBC Communications Inc. ........... 13,690 847,069
Sonat Inc. ........................ 1,287 65,959
Southern Co. ...................... 10,058 220,019
Sprint Corp. ...................... 6,426 338,168
Texas Utilities Co. ............... 3,353 115,469
U.S. West Inc. .................... 7,156 269,692

- ----------
See Notes to Schedule of Investments and Financial Statements

F-5
<PAGE>

Unicom Corp. ...................... 3,219 $ 71,623
Union Electric Co. ................ 1,524 57,436
Williams Cos. Inc. ................ 2,343 102,506
WorldCom Inc. ..................... 13,298 425,536 (a)
9,385,854
Total Common Stock
(Cost $81,600,191) ............... 101,627,478

- --------------------------------------------------------------------------------
Preferred Stock -- 0.0%
- --------------------------------------------------------------------------------

Ceridian Corp. ....................
(Cost $49,149) .................. 1,204 50,869 (a)

Total Investments in Securities
(Cost $81,649,340) .............. 101,678,347

- --------------------------------------------------------------------------------
Short Term Investments -- 4.3%
- --------------------------------------------------------------------------------

GEI Short Term Investment Fund
(Cost $4,575,083) ............... 4,575,083 $ 4,575,083

Other Assets and Liabilities,
net 0.3% ........................ 291,990
------------

NET ASSETS -- 100%................. $106,545,420
============

Other Information
- --------------------------------------------------------------------------------

The S&P 500 Index Fund had the following long Futures contracts open at June 30,
1997:

Number
Expiration of Underlying Unrealized
Description Date Contracts Face Value (Loss)
- ----------- ---- --------- ---------- ------
S&P 500 September 1997 10 $4,451,250 ($50,500)

- ----------
See Notes to Schedule of Investments and Financial Statements

F-6
<PAGE>

Government Securities Fund -- Schedule of Investments June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------

GOVERNMENT SECURITIES FUND

- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------

Bonds and Notes -- 95.3%
- --------------------------------------------------------------------------------
U.S. Governments -- 95.3%

Federal Farm Credit Bank
6.80% 04/04/02 $1,500,000 $ 1,514,535
Federal Home Loan Mortgage Corp.
6.33% 09/21/05 1,500,000 1,456,410
Federal National Mortgage Assoc.
6.43% 04/11/99 1,000,000 1,003,590
Private Export Funding Corp.
7.01% 04/30/04 1,000,000 1,020,930
Student Loan Marketing Assoc.
5.20% 02/26/99 1,000,000 986,410
Tennessee Valley Authority
6.00% 11/01/00 1,000,000 986,410

U.S. Treasury Notes
5.25% 01/31/01 271,000 261,981
5.75% 09/30/97 44,000 44,034
5.875% 11/30/01 1,000,000 980,780
6.25% 08/31/00 - 02/15/03 2,681,000 2,678,141
6.50% 08/31/01 1,357,000 1,363,568
6.875% 03/31/00 814,000 827,227
6,155,731
Total Investments in Securities
(Cost $13,061,247) 13,124,016

Number of
Shares
- --------------------------------------------------------------------------------
Short Term Investments -- 2.7%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund
(Cost $372,300) 372,300 372,300

Other Assets and Liabilities,
net 2.0% 274,090
-----------
NET ASSETS -- 100% $13,770,406
===========

- ----------
See Notes to Schedule of Investments and Financial Statements

F-7
<PAGE>

Money Market Fund -- Schedule of Investments June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
MONEY MARKET FUND
- --------------------------------------------------------------------------------
Principal Amortized
Amount Cost
- --------------------------------------------------------------------------------

Short Term Investments -- 96.1%
- --------------------------------------------------------------------------------
U.S. Governments(d) -- 26.1%

Federal Home Loan Mortgage Corp.
5.53% 07/08/97 - 07/10/97 $7,000,000 $ 6,991,402
5.58% 07/02/97 5,530,000 5,529,155
5.73% 08/08/97 5,080,000 5,050,347
17,570,904
Federal National Mortgage Assoc.
5.51% 09/12/97 3,760,000 3,718,523
5.60% 07/01/97 1,000,000 1,000,000
5.64% 07/18/97 - 09/15/97 8,100,000 8,043,414
5.88% 11/06/97 4,100,000 4,018,583
16,780,520
Total U.S. Governments
(Cost $34,351,424) 34,351,424

Commercial Paper(d) -- 39.8%

Abbey National PLC
5.64% 09/25/97 4,800,000 4,736,303
Ameritech Corp.
5.63% 07/03/97 5,000,000 4,998,458
Halifax Building Society
5.56% 08/18/97 4,800,000 4,764,736
International Lease Finance Corp.
5.68% 07/17/97 4,465,000 4,453,887
Koch Industries
5.54% 07/03/97 4,800,000 4,798,525
Merrill Lynch & Co. Inc.
5.64% 09/02/97 1,170,000 1,158,595
5.69% 08/27/97 2,870,000 2,844,507
Nalco Chemical Co.
5.71% 07/14/97 5,000,000 4,989,835
Norwest Corp.
5.61% 09/24/97 4,870,000 4,806,413
Prudential Funding Corp.
5.44% 07/03/97 915,000 915,000
Schering Plough Corp.
5.64% 07/01/97 5,000,000 5,000,000
Toronto Dominion Bank
5.65% 08/22/97 5,250,000 5,207,761
UBS Finance Delaware Inc.
5.13% 07/01/97 3,700,000 3,700,000
Total Commercial Paper
(Cost $52,374,020) 52,374,020

<PAGE>
- --------------------------------------------------------------------------------
Principal Amortized
Amount Cost
- --------------------------------------------------------------------------------

Certificates of Deposit -- 30.2%

Algemene Yankee
5.59% 07/30/97 $5,100,000 $ 5,100,000
Bank of Montreal
5.59% 07/31/97 5,250,000 5,250,000
Bank of Nova Scotia
5.72% 08/07/97 5,000,000 5,000,000
Bayerische Hypotheken Bank
5.65% 09/09/97 5,100,000 5,100,000
Bayerische Vereinsbank AG
5.61% 07/16/97 5,000,000 5,000,000
Credit Suisse
5.63% 08/27/97 4,000,000 4,000,063 (d)
Societe Generale
5.59% 08/18/97 4,800,000 4,800,000
Swiss Bank Corp.
5.63% 07/03/97 5,500,000 5,500,000

Total Certificates of Deposit
(Cost $39,750,063) 39,750,063

Total Short Term Investments
(Cost $126,475,507) 126,475,507

Other Assets and Liabilities,
net 3.9% 5,135,300
------------
NET ASSETS -- 100% $131,610,807
============

- ----------
See Notes to Schedule of Investments and Financial Statements

F-8
<PAGE>

Total Return Fund -- Schedule of Investments June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
TOTAL RETURN FUND
- --------------------------------------------------------------------------------
Number
of Shares Value
- --------------------------------------------------------------------------------
Common Stock -- 60.8%
- --------------------------------------------------------------------------------
Basic Materials -- 1.6%
Air Products & Chemicals Inc. ........ 1,200 $97,500
Airgas Inc. .......................... 5,900 116,894 (a)
Banpu PLC ............................ 900 13,132
BASF AG .............................. 1,329 49,111
Holderbank Financiere Glarus AG ...... 30 28,335
Morton International Inc. ............ 6,000 181,125
SGL Carbon AG ........................ 841 115,149
South African Iron & Steel ........... 83,110 54,955
Tokyo Steel Manufacturing ............ 2,200 24,568
Usinor Sacilor ....................... 1,974 35,606
716,375
Capital Goods -- 6.9%
ABB AG ............................... 104 157,425
AlliedSignal Inc. .................... 5,600 470,400
AMP Inc. ............................. 3,400 141,950
Bombardier Inc. (Class B) ............ 2,844 64,564
Dover Corp. .......................... 8,600 528,900
Emerson Electric Co. ................. 2,100 115,631
Grupo Carso S.A. de C.V. ADR ......... 3,394 47,007
Hubbell Inc. (Class B) ............... 6,000 268,875
Lyonnaise Des Eaux S.A ............... 542 54,599
Mannesmann AG ........................ 264 117,612
Metra AB ............................. 154 4,641
Molex Inc. (Class A) ................. 4,800 167,400
NEC Corp. ............................ 6,000 83,755
PT Mulia Industrindo ................. 30,500 15,990
Schneider S.A ........................ 228 12,136
Siam Cement PLC ...................... 200 3,459
Siebe PLC ............................ 8,068 136,775
Siemens AG ........................... 1,697 100,754
Tyco International Ltd. .............. 1,400 97,387
VA Technologie AG .................... 740 135,422
Valeo S.A ............................ 1,440 89,438
Valmet Corp. ......................... 1,869 32,321
Waste Management Inc. ................ 4,200 134,925
2,981,366
Consumer - Cyclical-- 7.8%
Airtours PLC ......................... 7,574 146,563
Autoliv Inc. ......................... 1,400 54,775
Autoliv Inc. SDR ..................... 100 3,846 (a)
Automatic Data Processing Inc. ....... 5,800 272,600
Canon Inc. ........................... 6,000 163,322
Carnival Corp. (Class A) ............. 3,300 136,125
Catalina Marketing Corp. ............. 2,800 134,750 (a)

<PAGE>

- --------------------------------------------------------------------------------
Number
of Shares Value
- --------------------------------------------------------------------------------

Circus Circus Enterprises Inc. .......... 3,600 $ 88,650 (a)
Comcast Corp. (Class A) ................. 6,600 141,075
Comcast UK Cable Partners Ltd. ..........
(Class A) ............................. 7,700 92,400 (a)
CUC International Inc. .................. 5,000 129,062 (a)
Disney (Walt) Co. ....................... 3,000 240,750
Electrolux AB (Series B) ................ 864 62,325
Gannett Inc. ............................ 2,000 197,500
Granada Group PLC ....................... 7,089 93,262
Gucci Group N.V. ADR .................... 145 9,334
Harman International Industries
Inc. .................................. 2,700 113,738
Honda Motor Co. ......................... 3,000 90,298
Industrie Natuzzi Spa ADR ............... 432 11,070
Interpublic Group Cos. Inc. ............. 3,100 190,069
Johnson Electric Holdings ............... 7,000 20,872
Kinnevik (Series B) ..................... 1,080 30,087
Lucas Varity PLC ........................ 12,511 43,336
McDonalds Corp. ......................... 2,300 111,119
Michelin CGDE (Regd.) ................... 768 46,119
Polygram N.V ............................ 1,664 87,316
Reed International PLC .................. 10,482 101,243
Saatchi & Saatchi ....................... 26,293 54,732
Sony Corp. .............................. 1,400 122,021
Suzuki Motor Corp. ...................... 5,000 63,252
Tele-Communications Inc. (Class A) ...... 7,600 113,050
Tele-Communications Inc. ................
Liberty Media Group (Series A) .......... 4,600 109,250 (a)
Television Broadcasts Ltd. ADR .......... 9,000 40,427
Time Warner Inc. ........................ 1,900 91,675
3,406,013
Consumer - Stable -- 4.7%
Anheuser Busch Cos. Inc. ................ 2,000 83,875
Avon Products Inc. ...................... 2,800 197,575
Coca Cola Amatil Ltd. ................... 4,121 53,568
Coca Cola Co. ........................... 1,400 94,500
Colgate Palmolive Co. ................... 1,600 104,400
Gehe AG ................................. 1,241 84,674
Gillette Co. ............................ 1,200 113,700
Gruma S.A. de C.V ....................... 1,818 8,371
Kimberly Clark Corp. .................... 7,100 353,225
Nestle S.A. (Regd.) ..................... 66 87,066
Panamerican Beverages Inc.
(Class A) ............................. 1,670 54,901
Pepsico Inc. ............................ 8,500 319,281
Philip Morris Cos. Inc. ................. 7,800 346,125
Procter & Gamble Co. .................... 700 98,875
San Miguel Corp. ........................ 16,930 44,610
2,044,746
Energy -- 5.8%
Amoco Corp. ............................. 1,500 130,406
Anadarko Petroleum Corp. ................ 2,200 132,000
Atlantic Richfield Co. .................. 2,600 183,300
Baker Hughes Inc. ....................... 2,500 96,719

- ----------
See Notes to Schedule of Investments and Financial Statements

F-9
<PAGE>
Total Return Fund -- Schedule of Investments June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
Number
of Shares Value
- --------------------------------------------------------------------------------

Coflexip S.A. ADR ...................... 1,622 $48,863
ENI Spa (Regd.) ........................ 4,461 25,263
Exxon Corp. ............................ 3,100 190,650
OMV AG ................................. 296 37,916
Repsol S.A ............................. 2,161 91,368
Royal Dutch Petroleum Co. ADR .......... 6,800 369,750
Saga Petroleum ......................... 785 14,888
Schlumberger Ltd. ...................... 3,900 487,500
Texaco Inc. ............................ 1,200 130,500
Total S.A. (Class B) ................... 1,923 194,371
Union Pacific Resources Group Inc. ..... 3,200 79,600
Unocal Corp. ........................... 6,000 232,875
Veba AG ................................ 951 53,436
2,499,405
Financial -- 7.2%
Alpha Credit Bank (Regd.) .............. 365 24,837
American Express Co. ................... 2,100 156,450
AMMB Holdings .......................... 1,200 7,464
Banco Comercial Portugues ADR .......... 4,715 88,689
Banco Santander ........................ 1,419 43,721
Cheung Kong (Holdings) Ltd. ............ 7,000 69,121
China Resources Development Inc. ....... 6,000 29,430
Citicorp ............................... 2,600 313,463
Countrywide Credit Industries Inc. ..... 3,900 121,631
DBS Land ............................... 6,000 18,969
Den Danske Bank ........................ 1,075 104,587
Dresdner Bank AG ....................... 749 25,896
Federal National Mortgage Assoc ........ 11,000 479,875
First Industrial Realty Trust Inc. ..... 428 10,700 (a)
HSBC Holdings PLC ...................... 4,800 144,360
ING Groep N.V .......................... 2,489 114,756
Investor AB ............................ 178 9,377
Lai Sun Development Co. Ltd. ........... 17,000 19,091
Merita Ltd. ............................ 3,751 12,497
Metro Bank & Trust Co. ................. 1,800 38,217
Morgan (J.P.) & Co. Inc. ............... 1,200 125,250
New World Development Co. Ltd. ......... 4,000 23,853
Promise Co. ............................ 500 28,616
State Street Corp. ..................... 5,100 235,875
Sumitomo Realty & Development .......... 2,000 17,623
Thai Farmers Bank PLC .................. 1,400 5,945
Travelers Group Inc. ................... 9,400 592,787
Wells Fargo & Co. ..................... 1,000 269,500
3,132,580
Healthcare -- 9.3%
Abbott Laboratories .................... 6,300 420,525
American Home Products Corp. ........... 3,700 283,050
Bristol-Myers Squibb Co. ............... 4,000 324,000
Cardinal Health Inc. ................... 3,500 200,375
Dentsply International Inc. ............ 1,800 88,200
Eli Lilly & Co. ........................ 1,600 174,900
FH Faulding & Co. Ltd. ................. 2,970 17,059

<PAGE>

- --------------------------------------------------------------------------------
Number
of Shares Value
- --------------------------------------------------------------------------------

Fresenius Medical Care .................. 853 $ 66,995
Johnson & Johnson ....................... 7,500 482,812
Lincare Holdings Inc. ................... 2,800 120,400 (a)
Medeva PLC .............................. 27,055 115,791
Merck & Co. Inc. ........................ 3,100 320,850
Novartis AG (Regd.) ..................... 142 227,005
Pfizer Inc. ............................. 3,500 418,250
Astra AB (Series B) ..................... 536 9,458
Astra International (Series B) .......... 26,000 106,908
Roche Holdings AG ....................... 9 81,401
Scherer (R.P.) Corp. Delaware ........... 1,900 98,088 (a)
Smithkline Beecham PLC ADR .............. 2,400 219,900
Sun Healthcare Group Inc. ............... 2,000 41,625 (a)
Tenet Healthcare Corp. .................. 3,000 88,688 (a)
Watson Pharmaceuticals Inc. ............. 2,900 122,525 (a)
4,028,805
Insurance -- 3.1%
American International Group Inc. ....... 1,800 268,875
AXA-UAP ................................. 776 48,263
Chubb Corp. ............................. 2,100 140,438
General Reinsurance Corp. ............... 1,000 182,000
Loews Corp. ............................. 3,200 320,400
Marsh & McLennan Cos. Inc. .............. 2,800 199,850
Pohjola Insurance Group ................. 527 15,629
Sampo Insurance Co. Ltd. ................ 93 9,044
Schw Ruckversicher (Regd.) .............. 37 52,332
TIG Holdings Inc. ....................... 2,000 62,500
Zurich Versicherungsgesellschaft
(Regd.) ............................... 89 35,417
1,334,748
Miscellaneous -- 0.6%
SPDR Trust .............................. 3,000 264,938

Retail Trade -- 2.0%
Arbor Drugs Inc. ........................ 9,500 191,187
Carrefour S.A ........................... 202 146,704
Credit Saison Co. Ltd. .................. 5,200 127,028
Giordano International Ltd. ............. 52,000 35,574
Home Depot Inc. ......................... 2,500 172,344
Thorn PLC ............................... 4,758 13,470
Toys 'R Us Inc. ......................... 5,500 192,500 (a)
878,807
Software & Services-- 4.3%
Cap Gemini S.A .......................... 310 16,353
Dimension Data Holdings Ltd. ............ 7,981 31,664
Equifax Inc. ............................ 12,700 472,281
First Data Corp. ........................ 16,700 733,756
Microsoft Corp. ......................... 1,400 176,925 (a)
NTT Data Corp. .......................... 2 77,299
Reuters Holdings PLC ADR (Class B) ...... 5,700 359,100
1,867,378

- ----------
See Notes to Schedule of Investments and Financial Statements

F-10
<PAGE>
Total Return Fund -- Schedule of Investments June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
Number
of Shares Value
- --------------------------------------------------------------------------------

Technology -- 2.5%
Applied Materials Inc. .............. 1,600 $113,300 (a)
Brambles Industries Ltd. ............ 4,820 95,406
Cisco Systems Inc. .................. 2,000 134,250 (a)
ECI Telecommunications Ltd. ......... 3,605 107,249
Hewlett Packard Co. ................. 1,700 95,200
Intel Corp. ......................... 2,600 368,712
Murata Manufacturing Co. Ltd. ....... 1,000 39,784
Rohm Co. ............................ 1,000 102,949
Wolters Kluwer N.V .................. 209 25,448
1,082,298
Transportation -- 1.2%
Burns, Philp & Co. Ltd. ............. 51,603 95,937
IHC Caland N.V ...................... 1,666 91,070
Pittston Brinks Group ............... 2,700 81,000
Railtrack Group PLC ................. 10,217 106,000
Union Pacific Corp. N.V ............. 2,200 155,100
529,107
Utilities -- 3.8%
Airtouch Communications Inc. ........ 17,100 468,112 (a)
DDI Corp. ........................... 15 110,714
Edison Spa .......................... 8,042 40,007
Electricidade De Portugal ........... 440 8,075 (a)
GTE Corp. ........................... 2,000 87,750
Korea Electric Power ................ 3,877 72,451
NetCom Systems AB (Series B) ........ 949 13,495 (a)
NTL Inc. ............................ 10,700 266,162 (a)
NYNEX Corp. ......................... 1,700 97,963
Panamsat Corp. (new) ................ 4,235 122,819 (a)
Tele Danmark AS (Series B) .......... 109 5,663
Telecom Italia Mobilire ............. 40,266 130,305
Telecomunicacoes Brasileiras ........ 708 107,439
Telefonaktiebolaget LM Ericson
(Series B) ........................ 661 26,020
Telefonica del Peru S.A. ADR
(Class B) ......................... 3,108 81,391
Telekom Malaysia Berhad ............. 3,500 16,363
1,654,729
Total Common Stock
(Cost $22,684,466) ................. 26,421,295

- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------

Bonds and Notes -- 30.9%
- --------------------------------------------------------------------------------

Federal Agencies -- 0.7%

Federal Home Loan Mortgage Corp.
6.32% 12/04/97 $ 210,000 210,590

<PAGE>
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------

Federal National Mortgage Assoc.
7.05% 12/10/98 $ 105,000 $ 106,362
Total Federal Agencies
(Cost $315,033)
316,952
U.S. Treasuries -- 13.9%
U.S. Treasury Bonds
6.50% 11/15/26 1,649,000 1,581,490 (f)
U.S. Treasury Notes
6.00% 05/31/98 1,357,000 1,359,538
6.25% 06/30/02 65,000 64,614
6.50% 08/31/01 - 05/31/02 1,901,000 1,909,711
7.125% 09/30/99 339,000 345,939
7.75% 01/31/00 742,000 769,016
4,448,818
Total U.S. Treasuries
(Cost $5,956,429) 6,030,308

Asset Backed -- 0.2%
First USA Credit Card Master Trust
5.7975% 02/17/05 42,000 41,980
IMC Home Equity Loan Trust
7.23% 05/20/27 28,000 28,158
Total Asset Backed
(Cost $70,311) 70,138

Corporate Notes -- 7.1%
Airtouch Communications Inc.
7.00% 10/01/03 212,000 211,828
Bangko Sentral Ng Philipinas
8.60% 06/15/27 15,000 14,850
Brunswick Corp.
6.75% 12/15/06 200,000 194,076
Chrysler Financial Corp.
6.95% 03/25/02 500,000 502,565
Cobb Theatres
10.625% 03/01/03 212,000 234,260
Commercial Credit Group Inc.
6.00% 06/15/00 64,000 62,906
Merrill Lynch & Co. Inc.
7.00% 01/15/07 500,000 496,680
Nationsbank Corp.
7.50% 09/15/06 424,000 435,350
Norfolk Southern Corp.
7.90% 05/15/97 55,000 56,798
Oracle Corp.
6.72% 02/15/04 250,000 246,682
Southdown Inc.
10.00% 03/01/06 212,000 230,550

- ----------
See Notes to Schedule of Investments and Financial Statements

F-11
<PAGE>
Total Return Fund -- Schedule of Investments June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------

Tribune Co. (new)
6.875% 11/01/06 $ 200,000 $ 197,256
US West Capital Funding Inc.
6.85% 01/15/02 200,000 199,786
Washington Mutual Capital
8.375% 06/01/27 22,000 22,354
Total Corporate Notes
(Cost $3,054,709) 3,105,941

Mortgage-Backed -- 9.0%
Federal Home Loan Mortgage Corp.
7.50% TBA 1,250,000 1,255,469 (c)
9.00% 04/01/25 - 12/01/25 290,719 307,676
1,563,145
Federal National Mortgage Assoc.
5.45% 10/10/03 40,000 37,675
8.00% TBA 2,000,000 2,044,375 (c)
2,082,050
Government National Mortgage Assoc.
7.00% 08/20/26 173,633 177,485 (e)
7.50% 12/15/23 23,139 23,312
200,797
Mid State Trust
7.54% 07/01/35 20,000 20,122

Collateralized Mortgage Obligation
Morgan Stanley Capital Inc.
6.86% 07/15/29 52,000 52,000

Total Mortgage-Backed
(Cost $3,885,249) 3,918,114

Total Bonds and Notes
(Cost $13,281,731) 13,441,453

- --------------------------------------------------------------------------------
Number
of Shares Value
- --------------------------------------------------------------------------------

Preferred Stock -- 0.1%
- --------------------------------------------------------------------------------
Beacon Properties Corp.
(Cost $29,625) 1,185 29,847
Total Investments in Securities
(Cost $35,995,822) 39,892,595

<PAGE>
- --------------------------------------------------------------------------------
Number
of Shares Value
- --------------------------------------------------------------------------------
Short Term Investments -- 15.8%
GEI Short Term Investment Fund
(Cost $6,861,631) 6,861,631 $ 6,861,631

Other Assets and Liabilities,
net (7.6%) (3,312,829)
------------
NET ASSETS -- 100% $ 43,441,397
============
- ----------
See Notes to Schedule of Investments and Financial Statements

F-12
<PAGE>

International Equity Fund -- Schedule of Investments June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------

INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
Number
of Shares Value
- --------------------------------------------------------------------------------
Common Stock -- 97.7%
- --------------------------------------------------------------------------------
Australia -- 3.7%
Brambles Industries Ltd. ................... 20,381 $403,418
Burns, Philp & Co. Ltd. .................... 155,044 288,249
Coca Cola Amatil Ltd. ...................... 13,945 181,270
Colonial Ltd. .............................. 8,714 22,259 (a)
F.H. Faulding & Co. Ltd. ................... 8,363 48,035
943,231
Austria -- 2.3%
OMV AG ..................................... 1,002 128,352
VA Technologie AG .......................... 2,503 458,055
586,407
Brazil -- 1.3%
Telecomunicacoes Brasileiras
S.A. ADR ................................... 2,217 336,430

Canada -- 0.9%
Bombardier Inc. (Class B) .................. 10,278 233,329

Denmark -- 1.5%
Den Danske Bank ............................ 3,639 354,040
Tele Danmark AS (Series B) ................. 274 14,237
368,277
Finland -- 1.3%
Merita Ltd. ................................ 26,185 87,237
Metra AB ................................... 521 15,702
Pohjola Insurance Group .................... 1,584 46,976
Sampo Insurance Co., Ltd. .................. 631 61,365
Valmet Corp. ............................... 6,325 109,381
320,661
France -- 11.0%
Alcatel Alsthom ............................ 2,197 275,153
AXA-UAP .................................... 2,632 163,697
Cap Gemini S.A ............................. 1,058 55,810
Carrefour S.A .............................. 683 496,034
Cie General des Eaux (Wts.) ................ 1,460 875
Coflexip S.A. ADR .......................... 5,488 165,326
Lyonnaise Des Eaux S.A ..................... 2,335 235,220
Michelin CGDE (Regd.) ...................... 2,905 174,447
Schneider S.A .............................. 2,266 120,613
Total S.A. (Class B) ....................... 6,326 639,414
Usinor Sacilor ............................. 6,688 120,634
Valeo S.A .................................. 5,141 319,306
2,766,529

<PAGE>

- --------------------------------------------------------------------------------
Number
of Shares Value
- --------------------------------------------------------------------------------
Germany -- 8.4%
BASF AG ................................ 5,568 $ 205,755
Dresdner Bank AG ....................... 2,536 87,679
Fresenius Medical Care ................. 1,181 104,279
Fresenius Medical Care
(Pfd. stock) ......................... 1,704 122,321
Gehe AG ................................ 4,200 286,566
Mannesmann AG .......................... 894 398,279
SGL Carbon AG .......................... 2,659 364,067
Siemens AG ............................. 5,742 340,912
Veba AG ................................ 3,604 202,507
2,112,365
Greece -- 0.4%
Alpha Credit Bank (Regd.) .............. 1,528 103,973

Hong Kong -- 4.8%
Cheung Kong (Holdings) Ltd. ............ 22,000 217,237
China Resources Development ............ 20,000 98,099
Giordano International Ltd. ............ 154,000 105,353
GZI Transport Ltd. (Wts.) .............. 24,000 2,478 (a)
HSBC Holdings PLC ...................... 16,265 489,170
Johnson Electric Holdings .............. 22,000 65,597
Lai Sun Development Co. Ltd. ........... 67,000 75,239
Lai Sun Hotels International Ltd. ...... 4,014 352 (a)
New World Development Corp. ............ 12,904 76,951
Television Broadcasts Ltd. ............. 20,000 89,838
1,220,314
India -- 0.4%
BSES Ltd. GDR .......................... 2,098 55,597
Tata Engineering &
Locomotive Co. Ltd. GDR .............. 3,180 47,223
Tata Engineering &
Locomotive Co. Ltd. GDR .............. 367 5,809 (b)
108,629
Indonesia -- 1.9%
Astra International Inc. ............... 88,000 361,842
Bank Dagang Nasional ................... 25,000 17,732 (a)
Bank Dagang Nasional (Wts.) ............ 17,500 5,577
Mulia Industrindo ...................... 118,500 62,125
Tambang Timah GDR ...................... 2,266 33,423 (b)
480,699

- ----------
See Notes to Schedule of Investments and Financial Statements

F-13
<PAGE>
International Equity Fund -- Schedule of Investments June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------

Israel -- 1.5%
ECI Telecommunications Ltd. ... 12,718 $378,360

Italy -- 2.8%
Edison Spa .................... 21,652 107,714
ENI Spa (Regd.) ............... 15,097 85,497
Gucci Group N.V. ADR .......... 490 31,544
Industrie Natuzzi Spa ADR ..... 1,462 37,464
Telecom Italia Mobiliare ...... 136,269 440,982
703,201
Japan -- 15.1%
Canon Inc. .................... 21,000 571,628
Credit Saison Co. Ltd. ........ 17,600 429,942
DDI Corp. ..................... 50 369,046
Honda Motor Co. ............... 11,000 331,094
Murata Manufacturing Co. Ltd. . 4,000 159,135
NEC Corp. ..................... 21,000 293,143
NTT Data Corp. ................ 9 347,845
Promise Co. ................... 1,600 91,572
Rohm Co. ...................... 4,000 411,795
Sony Corp. .................... 5,500 479,367
Sumitomo Realty &
Development ................... 11,000 96,929
Suzuki Motor Corp. ............ 16,000 202,408
Tokyo Steel Manufacturing ..... 3,300 36,852
3,820,756
Malaysia -- 0.3%
ACP Industries (Rts.) ......... 10,000 6,735 (a)
AMMB Holdings ................. 3,000 18,661
Telekom Malaysia .............. 10,000 46,751
72,147
Mexico -- 1.1%
Desc S.A. de C.V. ADR (Class C) 1 23
Gruma S.A. de C.V ............. 15,937 73,394
Grupo Carso S.A. de C.V. ADR .. 11,487 159,095
Grupo Financiero Bancomer S.A .
ADR (Series C) ................ 5,744 55,286 (a,b)
287,798
Netherlands -- 4.3%
IHC Caland N.V ................ 5,638 308,196
ING Groep N.V ................. 8,550 394,200
PolyGram N.V .................. 5,633 295,582
Wolters Kluwer N.V ............ 788 95,946
1,093,924

<PAGE>

- --------------------------------------------------------------------------------
Number
of Shares Value
- --------------------------------------------------------------------------------

Norway -- 0.1%
Saga Petroleum ASA ............ 1,888 $35,806

Panama -- 0.7%
Panamerican Beverages Inc.
(Class A) ................... 5,571 183,147

Peru -- 1.1%
Telefonica del Peru S.A. ADR
(Class B) ................... 10,926 286,125

Philippines -- 1.1%
Metro Bank & Trust Co. ........ 6,000 127,389
San Miguel Corp. .............. 53,500 140,971
268,360
Portugal -- 1.3%
Banco Comercial Portugues ..... 10,757 203,149
Banco Comercial Portugues
ADR ......................... 4,096 76,288
Banco Commercial Portugues
International Ltd. (Series A) . 390 26,715
Electricidade de Portugal S.A . 1,555 28,536
334,688
Singapore -- 0.3%
Acma Ltd. (Wts.) .............. 4,500 2,266
DBS Land Ltd. ................. 19,000 60,069
Jardine Strategic Holdings Ltd.
(Wts.) ...................... 600 6
United Overseas Land &
Investment (Wts.) ........... 1,600 867 (a)
63,208
South Africa -- 1.2%
Dimension Data Holdings Ltd. .. 31,693 125,738
South African Iron & Steel .... 266,162 175,994
301,732
South Korea -- 1.0%
CITC Seoul Excel IDR .......... 2 14,500 (a)
Kookmin Bank GDR .............. 430 9,138 (b)
Korea Electric Power Corp. ....
ADR ........................... 11,648 217,672
241,310
Spain -- 2.0%
Banco Santander ............... 6,105 188,101
Repsol S.A .................... 7,312 309,154
497,255

- ----------
See Notes to Schedule of Investments and Financial Statements

F-14

<PAGE>
International Equity Fund -- Schedule of Investments June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------

Sweden -- 3.6%
Astra AB (Series B) ............ 614 $ 10,834
Autoliv Inc. ................... 8,043 314,682
Autoliv Inc. SDR ............... 2,186 84,071 (a)
Electrolux AB (Series B) ....... 2,925 210,995
Granges AB ..................... 1 7 (a)
Investor AB .................... 929 48,939
Kinnevik (Series B) ............ 2,696 75,107
NetCom Systems AB (Series B) ... 5,271 74,954 (a)
Telefonaktiebolaget LM Ericson
(Series B) ................... 1,958 77,075
896,664
Switzerland -- 9.6%
ABB AG ......................... 353 534,336
Holderbank Financiere Glarus AG 124 117,121
Nestle S.A. (Regd.) ............ 222 292,857
Novartis AG (Regd.) ............ 482 770,540
Roche Holdings AG .............. 31 280,380
Schw Ruckversicher (Regd.) ..... 134 189,527
Zurich Versicherungsgesellschaft
(Regd.) ...................... 602 239,563
2,424,324
Taiwan -- 0.9%
Formosa Growth Fund Inc. ....... 5,000 117,600
Taipei Fund .................... 1,000 117,300
234,900
Thailand -- 0.3%
Banpu PLC ...................... 3,400 49,612
Siam Cement PLC ................ 500 8,647
Thai Farmers Bank PLC .......... 4,400 18,684
76,943
United Kingdom -- 11.5%
Airtours PLC ................... 25,631 495,980
Cordiant PLC ................... 88,981 185,225
Granada Group PLC .............. 26,094 343,289
Indian Opportunities Fund Ltd. . 6,000 59,220 (a)
Lucas Varity PLC ............... 56,616 196,108
Medeva PLC ..................... 88,548 378,970
Railtrack Group PLC ............ 34,578 358,741
Reed International PLC ......... 35,472 342,615
Siebe PLC ...................... 28,857 489,206
Thorn PLC ...................... 19,690 55,743
United Assurance Group PLC ..... 53,700 3,577 (a)
2,908,674
Total Investments in Securities
(Cost $22,130,159) ........... 24,690,166

<PAGE>

- --------------------------------------------------------------------------------
Number
of Shares Value
- --------------------------------------------------------------------------------
Short Term Investments -- 4.6%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund
(Cost $1,148,992) 1,148,992 $ 1,148,992

Other Assets and Liabilities,
net (2.3%) (577,982)
-----------
NET ASSETS - 100% $25,261,176
===========

FORWARD FOREIGN CURRENCY CONTRACTS
- --------------------------------------------------------------------------------

At June 30, 1997, the outstanding forward foreign currency contracts, which
contractually obligate the International Equity Fund to deliver currencies at a
specified date, were as follows:

U.S. $ Cost U.S. $ Unrealized
Foreign Currency Foreign on Origination Current Appreciation
Purchase Contracts Currency Date Value (Depreciation)
- --------------------------------------------------------------------------------
CHF, expiring 07/15/97 1,164,240 $799,396 $800,100 $ 704

Foreign Currency Sale Contracts
- -------------------------------
CHF, expiring 07/15/97 1,164,240 $800,000 $800,100 $(100)
-----
$ 604
=====

- ----------
See Notes to Schedule of Investments and Financial Statements

F-15

<PAGE>

Real Estate Securities Fund -- Schedule of Investments June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
REAL ESTATE SECURITIES FUND
- --------------------------------------------------------------------------------
Number
of Shares Value
- --------------------------------------------------------------------------------
Common Stock -- 92.0%

Financial -- 6.4%
Green Tree Financial Corp. ....... 29,000 $1,033,125
Redwood Trust Inc. ............... 31,900 1,491,325
2,524,450
Hotels / Restaurants -- 3.7%
Circus Circus Enterprises Inc. ... 33,000 812,625 (a)
Host Marriott Corp. .............. 36,000 641,250
1,453,875
Real Estate -- 73.3%
Ambassador Apartments Inc. ....... 32,900 818,387
Apartment Investment &
Management Co. (Class A) ......... 50,100 1,415,325
Avalon Properties Inc. ........... 22,800 652,650
Boston Properties Inc. ........... 34,300 943,250 (a)
Burnham Pacific Properties Inc. .. 18,000 247,500
Cali Realty Corp. ................ 23,600 802,400
CarrAmerica Realty Corp. ......... 15,000 431,250
Catellus Development Corp. ....... 55,600 1,007,750 (a)
Centerpoint Properties Corp. ..... 25,000 793,750
Developers Diversified Realty
Corp. .......................... 20,000 800,000
Equity Residential Properties
Trust .......................... 38,900 1,847,750
Evans Withycombe Residential
Inc. ........................... 27,000 560,250
First Industrial Realty Trust Inc. 50,100 1,465,425
General Growth Properties ........ 700 23,450
Glenborough Realty Trust Inc. .... 12,200 308,050
Irvine Apartment Communities Inc. 27,900 823,050
Liberty Property ................. 47,000 1,169,125
Macerich Co. ..................... 8,000 222,000
Manufactured Home Communities
Inc. ........................... 51,500 1,187,719
Merry Land & Investment Co. Inc. . 31,000 672,313
Oakwood Homes Corp. .............. 14,000 336,000
Pacific Gulf Properties Inc. ..... 33,700 741,400
Patriot American Hospitality Inc. 78,020 1,989,510
Prentiss Properties Trust ........ 51,000 1,306,875
Security Capital Atlantic Inc. ... 44,000 1,053,250
Security Capital Pacific Trust ... 46,100 1,054,537
Shurgard Storage Centers Inc. ....
(Class A) ...................... 12,600 352,800
Simon DeBartolo Group Inc. ....... 39,300 1,257,600
Spieker Properties Inc. .......... 32,000 1,126,000
Sun Communities Inc. ............. 23,000 771,938

- --------------------------------------------------------------------------------
Number
of Shares Value
- --------------------------------------------------------------------------------

Thornburg Mortgage Asset
Corp ............................. 44,500 $ 956,750
TriNet Corporation Realty Trust
Inc............................... 26,000 859,625
Urban Shopping Centers Inc. ........ 33,100 1,055,062
29,052,741
Real Estate Investment Trust -- 8.6%
American General Hospitality
Corp. ............................ 39,500 977,625
Bedford Property Investments
Inc. ............................. 45,000 905,625
FelCor Suite Hotels Inc. ........... 18,200 677,950
Sunstone Hotel Investors Inc. ...... 57,700 836,650
3,397,850
Total Investments in Securities
(Cost $30,875,887) ................. 36,428,916

- --------------------------------------------------------------------------------
Short Term Investments -- 7.6%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund
(Cost $3,027,234) ................ 3,027,234 3,027,234

Other Assets and Liabilities,
net 0.4% ......................... 156,560
-----------
NET ASSETS -- 100% ................ $39,612,710
===========

- ----------
See Notes to Schedule of Investments and Financial Statements

F-16

<PAGE>

Notes to Schedules of Investments
- --------------------------------------------------------------------------------

(a) Non-income producing security.

(b) Pursuant to Rule 144A of Securities Act of 1933, these securities may be
only resold in transactions exempt from registration, normally to
qualified institutional buyers. At June 30, 1997, these securities
amounted to $103,656 or 0.4% of net assets for the International Equity
Fund.

(d) Coupon amount represents effective yield.

(e) Adjustable rate mortgage coupon. The stated rate represents the rate at
June 30, 1997.

(f) At June 30, 1997, all or a portion of this security was pledged to cover
collateral requirements for futures and TBA's.

Abbreviations:

ADR -- American Depositary Receipt
GDR -- Global Depositary Receipt
IDR -- International Depositary Receipt
SDR -- Special Drawing Rights
Rts. -- Rights
Wts. -- Warrants
Regd. -- Registered
Pfd. -- Preferred

Currency Terms:

CAD -- Canadian Dollar
CHF -- Swiss Franc
DEM -- Deutsche Mark
ESP -- Spanish Peseta
FIM -- Finnish Markka
FRF -- French Franc
GBP -- Pound Sterling
HKD -- Hong Kong Dollar
IDR -- Indonesian Rupiah
MYR -- Malaysian Ringgit
PHP -- Philippine Peso
SEK -- Swedish Krona
ZAR -- South African Rand

F-17
<PAGE>

Statements Of Assets
And Liabilities June 30, 1997 (unaudited)

<TABLE>
<CAPTION>
REAL
S&P 500 GOVERNMENT MONEY TOTAL INTERNATIONAL ESTATE
INDEX SECURITIES MARKET RETURN EQUITY SECURITIES
FUND FUND FUND FUND FUND FUND
---- ---- ---- ---- ---- ----

<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in securities,
at market (cost $81,649,340,
$13,061,247, $0, $35,995,822,
$22,130,159, and $30,875,887,
respectively) $101,678,347 $13,124,016 $ 0 $39,892,595 $24,690,166 $36,428,916

Short term investments
(at amortized cost) 4,575,083 372,300 126,475,507 6,861,631 1,148,992 3,027,234
Cash 4,399 4 14,287 13 160,001 979
Foreign currency (cost $0, $0,
$0, $17,581, $502,877,
and $0, respectively) 0 0 0 17,461 502,892 0
Receivable for investments sold 1,264,044 0 0 1,292,204 279,287 0
Income receivables 151,692 248,212 273,486 225,750 139,461 242,092
Receivable for fund shares sold 263,204 43,147 5,022,880 31,317 31,380 67,001
Receivable on forward foreign
currency contracts 0 0 0 0 604 0
------------ ----------- ------------ ----------- ----------- -----------
Total assets 107,936,769 13,787,679 131,786,160 48,320,971 26,952,783 39,766,222
------------ ----------- ------------ ----------- ----------- -----------

LIABILITIES
Distributions payable to
shareholders 0 0 91,588 0 0 0
Payable for investments purchased 1,285,713 0 0 4,834,944 1,557,219 95,434
Payable to GEIM 75,565 17,273 83,765 44,630 134,388 58,078
Variation margin payable 30,071 0 0 0 0 0
Payable on forward foreign
currency contracts 0 0 0 0 0 0
------------ ----------- ------------ ----------- ----------- -----------
Total liabilities 1,391,349 17,273 175,353 4,879,574 1,691,607 153,512
------------ ----------- ------------ ----------- ----------- -----------
NET ASSETS $106,545,420 $13,770,406 $131,610,807 $43,441,397 $25,261,176 $39,612,710
------------ ----------- ------------ ----------- ----------- -----------

NET ASSETS CONSIST OF:
Capital paid in $ 84,195,860 $14,259,957 $131,611,746 $34,641,859 $20,709,239 $30,725,515
Undistributed (overdistributed)
net investment income 809,152 382,900 0 532,393 103,698 823,094
Accumulated net realized
gain (loss) 1,561,901 (935,220) (939) 4,370,506 1,887,631 2,511,072
Net unrealized appreciation /
(depreciation) on:
Investments 20,029,007 62,769 0 3,896,773 2,560,007 5,553,029
Futures (50,500) 0 0 0 0 0
Foreign currency transactions 0 0 0 (134) 601 0
NET ASSETS $106,545,420 $13,770,406 $131,610,807 $43,441,397 $25,261,176 $39,612,710

Shares outstanding
($.001 par value) 5,959,209 1,423,407 131,610,743 3,092,527 1,984,970 2,586,366

Net asset value, offering and
redemption price per share $17.88 $9.67 $1.00 $14.05 $12.73 $15.32

</TABLE>

* For the period May 1, 1997 (inception) through June 30, 1997.

- ----------

See Notes to Financial Statements

F-18
<PAGE>

Statements Of Operations
For the six months ended June 30, 1997 (unaudited)

REAL
S&P 500 GOVERNMENT MONEY TOTAL INTERNATIONAL ESTATE
INDEX SECURITIES MARKET RETURN EQUITY SECURITIES
FUND FUND FUND FUND FUND FUND
---- ---- ---- ---- ---- ----

<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Income:
Dividends $ 673,523 $ 0 $ 0 $ 233,237 $ 274,309 $ 906,163
Interest 312,912 439,534 3,279,262 442,267 3,946 85,340
Less: Foreign taxes withheld (4,721) 0 0 (5,184) (32,557) 0
----------- -------- ---------- ---------- --------- ---------
Total income 981,714 439,534 3,279,262 670,320 245,698 991,503
----------- -------- ---------- ---------- --------- ---------
Expenses:
Advisory and administration fees 140,933 34,967 290,927 101,009 101,684 140,027
Trustees' fees 5,230 3,333 6,580 4,028 1,377 3,680
Custody and accounting expenses 47,892 8,389 24,214 18,659 53,302 12,248
Professional fees 16,397 8,250 21,647 11,721 6,412 10,367
Other expenses 2,746 2,043 3,346 2,211 1,077 2,057
----------- -------- ---------- ---------- --------- ---------
Total expenses before waiver 213,198 56,982 346,714 137,628 163,852 168,379
Less: Expenses waived or borne by
the adviser 0 0 (199,285) 0 (22,680)
----------- -------- ---------- ---------- --------- ---------
Net expenses 213,198 56,982 147,429 137,628 141,172 168,379
----------- -------- ---------- ---------- --------- ---------
Net investment income 768,516 382,552 3,131,833 532,692 104,526 823,124
=========== ======== ========== ========== ========== ==========

NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) on:
Investments 1,424,471 (92,085) (193) 4,303,444 2,150,731 2,510,944
Futures 137,430 0 0 0 0 0
Foreign currency transactions 0 0 0 4,799 123,058 0
Increase (decrease) in unrealized
appreciation/depreciation on:
Investments 11,919,192 (149,223) 0 (777,808) 1,045,350 (639,366)
Futures (50,500) 0 0 0 0 0
Foreign currency transactions 0 0 0 (134) 7,770 0
----------- -------- ---------- ---------- --------- ---------
Net realized and unrealized gain
(loss) on investments 13,430,593 (241,308) (193) 3,530,301 3,326,909 1,871,578
----------- -------- ---------- ---------- --------- ---------
Net increase in net assets
resulting from operations $14,199,109 $141,244 $3,131,640 $4,062,993 $3,431,435 $2,694,702
=========== ======== ========== ========== ========== ==========

</TABLE>

* For the period May 1, 1997 (inception) thru June 30, 1997.

- ----------
See Notes to Financial Statements

F-19
<PAGE>

Statements Of Changes
In Net Assets

S&P 500 GOVERNMENT MONEY
INDEX SECURITIES MARKET
FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended Six Months Ended Year Ended
June 30, 1997 December 30, June 30, 1997 December 30, June 30, 1997 December 30,
(unaudited) 1996 (unaudited) 1996 (unaudited) 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income $ 768,516 $ 1,833,619 $ 382,552 $ 1,456,380 $ 3,131,833 $ 5,899,989
Net realized gain (loss)
on investments,
futures, and
foreign currency
transactions 1,561,901 23,983,222 (92,085) 62,255 (193) (745)
Net increase (decrease)
in unrealized
appreciation/
depreciation 11,868,692 (3,717,302) (149,223) (1,084,049) 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
from operations 14,199,109 22,099,539 141,244 434,586 3,131,640 5,899,244
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to
shareholders from:
Net investment income 0 (1,807,487) 0 (1,463,959) (3,139,763) (5,892,059)
Net realized gains 0 (23,983,222) 0 (62,255) 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions 0 (25,790,709) 0 (1,526,214) (3,139,763) (5,892,059)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in
net assets from
operations and
distributions 14,199,109 (3,691,170) 141,244 (1,091,628) (8,123) 7,185
- ------------------------------------------------------------------------------------------------------------------------------------
Share transactions:
Proceeds from sale
of shares 32,604,729 46,416,381 1,697,920 9,778,053 108,394,356 190,250,466
Value of distributions
reinvested 25,790,709 0 1,526,214 0 8,940,234 0
Cost of shares
redeemed (1,571,279) (73,219,899) (3,366,422) (18,623,156) (98,978,429) (140,078,242)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
from share
transactions 56,824,159 (26,803,518) (142,288) (8,845,103) 18,356,161 50,172,224
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase
(decrease) in
net assets 71,023,268 (30,494,688) (1,044) (9,936,731) 18,348,038 50,179,409

NET ASSETS
Beginning of year 35,522,152 66,016,840 13,771,450 23,708,181 113,262,769 63,083,360
- -----------------------------------------------------------------------------------------------------------------------------------
End of period $106,545,420 $35,522,152 $13,770,406 $13,771,450 $131,610,807 $113,262,769
====================================================================================================================================
Undistributed
(overdistributed)
net investment
income, end of period $ 809,152 $ 40,636 $ 382,900 $ 348 $ 0 $ 7,930
- ------------------------------------------------------------------------------------------------------------------------------------

CHANGES IN PORTFOLIO
SHARES:
Shares sold by
subscription 2,006,773 2,040,664 177,480 946,788 35,553,560 17,868,330
Issued for
distributions
reinvested 1,704,607 0 159,646 0 118,602,790 0
Shares redeemed (97,835) (2,839,987) (353,544) (1,768,841) (33,456,828) (13,044,358)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) in
portfolio shares 3,613,545 (799,323) (16,418) (882,053) 120,699,522 4,823,972
====================================================================================================================================
</TABLE>

* For the period May 1, 1997 (inception) thru June 30, 1997.

- ----------
See Notes to Financial Statements

<PAGE>

Statements Of Changes
In Net Assets

<TABLE>
<CAPTION>
REAL
TOTAL INTERNATIONAL ESTATE
RETURN EQUITY SECURITIES
FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended Six Months Ended Year Ended
June 30, 1997 December 30, June 30, 1997 December 30, June 30, 1997 December 30,
(unaudited) 1996 (unaudited) 1996 (unaudited) 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income $ 532,692 $ 2,215,251 $ 104,526 $ 55,092 $ 823,124 $ 1,124,059
Net realized gain (loss)
on investments,
futures, and
foreign currency
transactions 4,308,243 8,450,564 2,273,789 1,034,935 2,510,944 509,943
Net increase (decrease)
in unrealized
appreciation/
depreciation (777,942) (3,141,042) 1,053,120 571,033 (639,366) 5,092,453
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
from operations 4,062,993 7,524,773 3,431,435 1,661,060 2,694,702 6,726,455
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to
shareholders from:
Net investment income 0 (2,230,657) 0 (69,707) 0 (1,133,355)
Net realized gains 0 (8,448,019) 0 (1,034,935) 0 (509,943)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions 0 (10,678,676) 0 (1,104,642) 0 (1,643,298)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in
net assets from
operations and
distributions 4,062,993 (3,153,903) 3,431,435 556,418 2,694,702 5,083,157
- ------------------------------------------------------------------------------------------------------------------------------------
Share transactions:
Proceeds from sale
of shares 4,155,992 21,203,447 8,520,879 26,614,888 13,761,217 11,868,291
Value of distributions
reinvested 10,678,676 0 1,104,642 0 1,643,298 0
Cost of shares
redeemed (3,270,292) (60,742,609) (5,439,625) (24,875,243) (3,019,755) (5,847,077)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
from share
transactions 11,564,376 (39,539,162) 4,185,896 1,739,645 12,384,760 6,021,214
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase
(decrease) in
net assets 15,627,369 (42,693,065) 7,617,331 2,296,063 15,079,462 11,104,371

NET ASSETS
Beginning of year 27,814,028 70,507,093 17,643,845 15,347,782 24,533,248 13,428,877
- ------------------------------------------------------------------------------------------------------------------------------------
End of period $43,441,397 $27,814,028 $25,261,176 $17,643,845 $39,612,710 $24,533,248
====================================================================================================================================
Undistributed
(overdistributed)
net investment
income, end of period $ 532,393 $ 0 $ 103,698 $ 0 $ 823,094 $ 0
- ------------------------------------------------------------------------------------------------------------------------------------

CHANGES IN PORTFOLIO
SHARES:
Shares sold by
subscription 314,163 1,306,831 724,674 2,420,951 937,725 962,667
Issued for
distributions
reinvested 838,859 0 101,998 0 116,463 0
Shares redeemed (245,167) (3,548,503) (470,967) (2,258,249) (206,762) (438,509)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) in
portfolio shares 907,855 (2,241,672) 355,705 162,702 847,426 524,158
====================================================================================================================================

</TABLE>

* For the period May 1, 1997 (inception) thru June 30, 1997.

- ----------
See Notes to Financial Statements

F-20

<PAGE>

Notes To Financial Statements June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------

1. Organization of the Funds

GE Investments Funds, Inc. (the "Company") (formerly, Life of Virginia Series
Funds, Inc.) was incorporated under the laws of the Commonwealth of Virginia on
May 14, 1984 and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company. The Company is comprised
of eight investment funds (the "Funds"), which are currently being offered
through the separate accounts of The Life Insurance Company of Virginia ("Life
of Virginia") and other life insurance companies. The separate accounts fund
certain benefits for flexible and single premium variable life insurance and
annuity policies issued by Life of Virginia. Life of Virginia is an indirect
wholly-owned subsidiary of General Electric Capital Corporation. As of June 30,
1997, Life of Virginia controlled the Funds by ownership, through separate
accounts, of virtually all of the Funds' shares of beneficial interest.

Effective April 30, 1997, the Common Stock Index Portfolio changed its name to
S&P 500 Index Fund. On May 5, 1997, the Money Market Fund's investment objective
was amended to comply with Rule 2a-7 of the Investment Company Act of 1940, as
amended, governing money market funds. To effect this change the Money Market
Fund declared a stock dividend in the ratio of 10.41 to 1. As a result of the
stock dividend, the Money Market Fund's net asset value per share reverted to
$1.00. The financial highlights of the Money Market Fund have been restated to
reflect this stock dividend. The Global Income Fund and Value Equity Fund
commenced operations on May 1, 1997.

2. Summary of Significant Accounting Policies

The following summarizes the significant accounting policies of the Company:

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results may differ from those
estimates.

Security Valuation and Transactions

Securities for which exchange quotations are readily available are valued at the
last sale price, or if no sales occurred on that day, at the last quoted bid
price. Certain fixed income securities are valued by a dealer or by a pricing
service based upon a computerized matrix system, which considers market
transactions and dealer supplied valuations. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on which
they are principally traded. Options are valued at the last sale price, or if no
sales occurred on that day, at the last quoted bid price. Forward foreign
currency contracts are valued at the mean between the bid and the offered
forward rates as last quoted by a recognized dealer. Short term investments
maturing within 60 days are valued at amortized cost. Fund positions which
cannot be valued as set forth above are valued at fair value determined under
procedures approved by the Board of Directors of the Funds.

The Money Market Fund values its securities using the amortized cost method,
which values securities initially at cost and thereafter assumes a constant
amortization to maturity of any discount or premium. Amortized cost approximates
fair value.

Transactions are accounted for as of the trade date. Cost is determined and
gains and losses are based upon the specific identification method for both
financial statement and federal tax purposes.

Foreign Currency

Accounting records of the Funds are maintained in U.S. dollars. Investment
securities and other assets and liabilities and purchases and sales of
investment securities denominated in a foreign currency are translated to U.S.
dollars at the prevailing exchange rate on the respective dates of such
transactions.

F-21
<PAGE>
Notes To Financial Statements June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------

The Funds do not isolate the portion of the results of operations resulting from
changes in foreign exchange rates on investments from the fluctuations arising
from changes in their market prices. Such fluctuations are included in net
realized and unrealized gain or loss from investments. Reported net realized
exchange gains or losses from foreign currency transactions represent sale of
foreign currencies, currency gains or losses between the trade date and the
settlement date on securities transactions, realized gains and losses on forward
foreign currency contracts, and the difference between the amounts of dividends,
interest, and foreign withholding taxes recorded on the Funds' books, and the
U.S. dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of assets and
liabilities, other than investments in securities at fiscal year end, as a
result of changes in exchange rates.

Income Taxes

It is each Fund's policy to comply with all sections of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income and gains to its shareholders and, therefore, no provision for
federal income tax has been made. Each Fund is treated as a separate taxpayer
for federal income tax purposes. Capital loss carryovers are available to offset
future realized capital gains. To the extent that these carryover losses are
used to offset future capital gains, it is probable that the gains so offset
will not be distributed to shareholders because they would be taxable as
ordinary income. Any net capital and currency losses incurred after October 31,
within each Fund's tax year, are deemed to arise on the first day of the Fund's
next tax year if the Fund so elects to defer such losses.

Investment Income

Corporate actions (including cash dividends) are recorded net of nonreclaimable
tax withholdings on the ex-dividend date, except for certain foreign securities
for which corporate actions are recorded as soon after ex-dividend date as such
information is available. Interest income is recorded on the accrual basis. All
discounts and premiums on taxable bonds are amortized to call or maturity date,
whichever is shorter using the effective yield method.

Expenses

Expenses of the Company which are directly identifiable to a specific Fund are
allocated to that Fund. Expenses which are not readily identifiable to a
specific Fund are allocated in such a manner as deemed equitable, taking into
consideration the nature and type of expense and the relative sizes of the
Funds. All expenses of the Funds are paid by GEIM, Investment Adviser to the
Funds, and reimbursed by the Funds.

Distributions to Shareholders

The Money Market Fund declares investment income dividends daily and pays
monthly. All other Funds declare and pay dividends of net investment income
annually. All Funds declare and pay net realized capital gain distributions
annually. The character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences include treatment of realized and
unrealized gains and losses on forward foreign currency contracts, paydown gains
and losses on mortgage-backed securities, losses on wash sale transactions, and
deferred organization expenses. Reclassifications are made to the Funds' capital
accounts to reflect income and gains available for distribution (or available
capital loss carryovers) under income tax regulations. The calculation of net
investment income per share in the Financial Highlights table excludes these
adjustments.

When-Issued Securities

The Funds may purchase or sell securities on a when-issued or forward commitment
basis. Payment and delivery may take place a month or more after the date of the
transaction. The price of the underlying securities and the date when the
securities will be delivered and paid for are fixed at the time the transaction
is negotiated. This may increase the risk if the other party involved in the
transaction fails to deliver and causes the Fund to subsequently invest at less
advantageous yields. In connection with such purchases, the Fund is required to
hold liquid assets as collateral with the Funds' custodian sufficient to cover
the purchase price, unless they enter into an offsetting contract for the sale
of equal securities and value.

F-22
<PAGE>
Notes To Financial Statements June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------

Forward Foreign Currency Contracts

A forward foreign currency contract ("Forward") is an agreement between two
parties to buy and sell a currency at a set price on a future date. The market
value of the Forward fluctuates with changes in currency exchange rates. The
Forward is marked-to-market daily and the change in the market value is recorded
by the Fund as an unrealized gain or loss. When the Forward is closed, the Fund
records a realized gain or loss equal to the difference between the value at the
time it was opened and the value at the time it was closed. The Fund could be
exposed to risk if a counterparty is unable to meet the terms of the contract or
if the value of the currency changes unfavorably. The Fund may enter into
Forwards in connection with planned purchases and sales of securities, to hedge
specific receivables or payables against changes in future exchange rates or to
hedge the U.S. dollar value of portfolio securities denominated in a foreign
currency.

Futures and Options

The Funds, other than the Money Market Fund, may invest in futures contracts and
purchase and write options. These investments involve, to varying degrees,
elements of market risk and risks in excess of the amount recognized in the
Statements of Assets and Liabilities. The face or contract amounts reflect the
extent of the involvement the Funds have in the particular classes of these
instruments. Risks may be caused by an imperfect correlation between movements
in the price of the instruments and the price of the underlying securities and
interest rates. Risks also may arise if there is an illiquid secondary market
for the instruments, or an inability of counterparties to perform. The Funds may
invest in futures contracts for the following reasons: (1) for the purpose of
hedging against the effects of changes in the value of portfolio securities or
other investments due to anticipated changes in interest rates, stock market
conditions and currency market conditions, (2) to gain stock, bond, or currency
market exposure for accumulating and residual cash positions, (3) for duration
management, (4) when such transactions are an economically appropriate way to
reduce risks inherent in the management of a Fund, and (5) for non-hedging
purposes such as seeking additional income or otherwise seeking to increase
total return.

Upon entering into a futures contract, the Fund is required to deposit either
cash or securities in an amount (initial margin) equal to a certain percentage
of the contract value. Subsequent payments (variation margin) are made or
received by the Fund each day. The variation margin payments are equal to the
daily change in the contract value and are recorded as unrealized gains and
losses. The Fund recognizes a realized gain or loss when the futures contract is
closed. The Fund will realize a gain or loss upon the expiration or closing of
an option transaction. When an option is exercised, the proceeds on sales for a
written call option, the purchase cost for a written put option, or the proceeds
on the sale of the security for a purchased put or cost of the security for a
call option is adjusted by the amount of premium received or paid.

Other

There are certain additional risks involved when investing in foreign securities
that are not inherent in domestic securities. These risks may involve foreign
currency exchange rate fluctuations, adverse political and economic developments
and the imposition of unfavorable foreign governmental laws and restrictions.

3. Fees and Compensation Paid to Affiliates Advisory and Administration Fees

Compensation of GEIM, the Funds' Investment Adviser and Administrator, a
wholly-owned subsidiary of General Electric Company, for investment advisory and
administrative services is paid monthly based on the average daily net assets of
each Fund. The administrative and advisory fees payable to GEIM for each Fund
are at the following annual rates, based on average daily net assets:

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*

F-23
<PAGE>

Notes To Financial Statements June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------

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

S&P 500 Index Fund: .35%

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

** Prior to May 1, 1997, the Adviser agreed to reimburse for any amount by
which the total operating expenses of the International Equity Fund
exceeded 1.75% of the first $30 million of the aggregate average daily
net assets of the Fund and 1% of the aggregate average daily net assets
in excess of $30 million.

Directors' Fees

The Funds pay no compensation to their Directors who are employees of Life of
Virginia or GEIM. Directors who are not employees of Life of Virginia or GEIM
receive an annual fee of $6,000 plus $500 per Directors' board meeting attended
in person and an additional fee of $250 for each Directors' conference call
meeting attended.

4. Sub-advisory Fees

Effective May, 1, 1997, GMG/Seneca Management, LLC ("Seneca") is the investment
sub-adviser to the Real Estate Securities Fund pursuant to investment
sub-advisory agreements with GEIM.

For their services GEIM pays Seneca, 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:

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

5. Aggregate Unrealized Appreciation and Depreciation

Aggregate gross unrealized appreciation/(depreciation) of investments for each
Fund at June 30, 1997, were as follows:

Net
Gross Gross Unrealized
Unrealized Unrealized Appreciation
Appreciation Depreciation (Depreciation)
- --------------------------------------------------------------------------------
S&P 500 Index
Fund $20,641,235 $612,228 $20,029,007
Government
Securities Fund 95,280 32,511 62,769
Total Return
Fund 4,054,906 158,133 3,896,773
International
Equity Fund 2,794,463 234,456 2,560,007
Real Estate
Securities Fund 5,941,824 388,795 5,553,029

The aggregate cost of each Fund's investments was substantially the same for
book and federal income tax purposes at June 30, 1997.

F-24
<PAGE>
Notes To Financial Statements June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------

6. Investment Transactions

The cost of purchases and the proceeds from sales of investments, other than
U.S. Government securities, short term securities and options, for the period
ended June 30, 1997, were as follows:

Purchases Sales
--------- -----
S&P 500 Index Fund $36,253,118 $ 3,842,571
Total Return Fund 28,440,949 29,144,194
International Equity Fund 27,665,157 24,532,963
Real Estate Securities Fund 21,074,969 11,772,562

The cost of purchases and the proceeds from sales of long term U.S. Government
securities for the period ended June 30, 1997, were as follows:

Purchases Sales
--------- -----
Government Securities Fund $ 8,864,972 $ 9,146,159
Total Return Fund 5,207,882 1,607,974

F-25
<PAGE>

Schedule of Investments August 31, 1997 (unaudited)
- --------------------------------------------------------------------------------
GLOBAL INCOME FUND
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
Bonds and Notes -- 83.3%
- --------------------------------------------------------------------------------
Austria -- 1.9%
Republic of Austria
6.25% 10/16/03 JPY 10,000,000 104,463

Canada -- 17.9%
Government of Canada
7.50% 03/01/01 CAD 150,000 115,881
7.00% 12/01/06 CAD 170,000 131,251
Province of New Brunswick
11.25% 12/13/00 CAD 270,000 229,566
Thomson Corp.
7.15% 10/23/06 CAD 320,000 243,292
Toyota Credit Canada Inc.
7.375% 12/31/01 CAD 310,000 238,376
958,366
Denmark -- 2.0%
Kingdom of Denmark
6.00% 12/10/99 DKK 310,000 46,414
6.00% 11/15/02 DKK 130,000 19,527
7.00% 12/15/04 DKK 140,000 21,737
7.00% 11/15/07 DKK 130,000 19,916
107,594
Germany -- 17.4%
Bayerische Vereinsbank AG
4.50% 06/24/02 DEM 410,000 223,752
Dresdner Finance
5.50% 04/30/04 DEM 420,000 233,980
Federal Republic of Germany
6.00% 01/04/07 DEM 420,000 238,261
Merrill Lynch & Co. Inc.
4.54% 05/18/00 DEM 480,000 235,359 (b)
931,352
Japan -- 3.0%
International Bank for
Reconstruction & Development
4.50% 03/20/03 JPY 1,690,000 161,696

Italy -- 2.4%
Republic of Italy
3.75% 06/08/05 JPY 14,000,000 126,951

Netherlands -- 2.9%
Dutch Government
7.50% 06/15/99 NLG 70,000 36,431
5.75% 09/15/02 NLG 95,000 48,330
5.75% 02/15/07 NLG 145,000 71,804
156,565

<PAGE>

- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------

Spain -- 18.5%
Government of Spain
10.10% 02/28/01 ESP 100,000,000 752,519
8.80% 04/30/06 ESP 20,000,000 153,201
Kingdom of Spain
3.10% 09/20/06 JPY 10,000,000 88,566
994,286
Sweden -- 2.1%
Kingdom of Sweden
10.25% 05/05/00 SEK 500,000 71,017
8.00% 08/15/07 SEK 300,000 41,923
112,940
United Kingdom -- 15.2%
Commonwealth Bank of Australia
8.125% 12/07/06 GBP 99,000 165,805
Halifax Building Society
8.75% 07/10/06 GBP 100,000 171,735
SmithKline Beecham PLC
8.375% 12/29/00 GBP 140,000 232,202
Treasury
8.00% 09/25/09 GBP 140,000 243,267
813,009
Total Investments in Securities
(Cost $4,568,673) 4,467,222

- --------------------------------------------------------------------------------
Number
of Shares Value
- --------------------------------------------------------------------------------

Short Term Investments -- 11.5%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund
(Cost $615,179) 615,179 615,179

Other Assets and Liabilities,
net 5.2% 279,971
------------
NET ASSETS -- 100% $ 5,362,372
============

FORWARD FOREIGN CURRENCY CONTRACTS

At August 31, 1997, the outstanding forward foreign currency contracts, which
contractually obligate the Global Income Fund to deliver currencies at a
specified date, were as follows:

U.S. $ Cost U.S. $ Unrealized
Foreign Currency Foreign on Origination Current Appreciation/
Purchase Contracts Currency Date Value (Depreciation)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SEK, expiring 09/04/97 2,270,347 $ 290,571 $ 289,242 $ (1,329)
----------- ----------- -------------

Foreign Currency
Sale Contracts

DEM, expiring 09/04/97 1,096,830 $ 592,905 $ 609,535 $ (16,630)
DKK, expiring 10/06/97 777,520 113,564 113,677 (113)
GBP, expiring 09/04/97 255,100 407,395 413,622 (6,227)
JPY, expiring 10/06/97 59,680,000 498,402 496,754 1,648
NLG, expiring 10/06/97 330,590 163,658 163,523 135
SEK, expiring 09/02/97 5,381,239 688,667 685,521 3,146
SEK, expiring 09/04/97 3,177,347 393,723 404,793 (11,070)
------------ ------------ ------------
$2,858,314 $2,887,425 $ (29,111)
============ ============ ============
$ (30,440)
============
</TABLE>

F-26
<PAGE>

Schedule of Investments August 31, 1997 (unaudited)
- --------------------------------------------------------------------------------

VALUE EQUITY FUND
- --------------------------------------------------------------------------------
Number
of Shares Value
- --------------------------------------------------------------------------------
Common Stock -- 93.4%
- --------------------------------------------------------------------------------
Capital Goods -- 7.1%
Atchison Casting Corp. ......... 8,000 154,500 (a)
Case Corp. ..................... 2,500 167,656 (a)
Century Aluminum Co. ........... 3,000 49,500
Chicago Bridge & Iron .......... 5,600 118,300 (a)
489,956
Consumer - Cyclical -- 13.6%
Cox Communications Inc. ........ 4,800 129,900 (a)
Darden Restaurants Inc. ........ 9,000 90,563 (a)
Ford Motor Co. ................. 2,800 120,400 (a)
Tele-Communications Inc. Liberty
Media Group (SeriesA) ....... 6,000 158,250 (a)
Tele-Communications
International Inc. (Series A) 7,000 112,437 (a)
Time Warner Inc. ............... 3,000 154,500 (a)
U.S. West Communications
Group Inc. .................. 8,500 170,000 (a)
936,050
Energy -- 25.4%
BJ Services Co. ................ 2,200 158,950 (a)
Cairn Energy USA Inc. .......... 13,000 148,688 (a)
Diamond Offshore
Drilling Inc. ............... 3,700 202,112 (a)
Forcenergy Inc. ................ 3,200 116,000
Meridian Resource Corp. ........ 10,000 109,375
Noble Affiliates Inc. .......... 3,500 162,312 (a)
Ocean Energy Inc. .............. 3,500 225,094 (a)
Santa Fe International Corp. ... 2,800 125,300 (a)
Tosco Corp. .................... 3,300 109,106 (a)
Transocean Offshore Inc. ....... 1,600 152,100 (a)
United Meridian Corp. .......... 4,200 164,587 (a)
Valero Energy Corp. ............ 2,200 73,288
1,746,912
Financial -- 11.4%
BankAmerica Corp. .............. 3,300 217,181
Bear Stearns Cos. Inc. ......... 3,000 118,688
Chase Manhattan Corp. .......... 1,600 177,900
CWM Mortgage Holdings Inc. ..... 5,500 131,656 (a)
First Union Corp. .............. 2,800 134,575 (a)
780,000

- --------------------------------------------------------------------------------
Number
of Shares Value
- --------------------------------------------------------------------------------
Healthcare -- 4.4%
Aetna Inc. ......................... 1,800 171,788
Integrated Health Services Inc. .... 4,000 132,000
303,788
Insurance -- 10.2%
Hartford Financial Services Group .. 2,000 159,500
Loews Corp. ........................ 2,700 275,231 (a)
Provident Cos. Inc. ................ 2,500 162,813
USF&G Corp. ........................ 4,700 103,106
700,650
Retail Trade -- 1.1%
Mercantile Stores Inc. ............. 1,200 74,925 (a)

Technology -- 9.8%
Allen Telecom Inc. ................. 3,600 85,950 (a)
Avnet Inc. ......................... 2,100 145,294
Berg Electronics Corp. ............. 2,700 110,869
Ceridian Corp. ..................... 2,200 76,037 (a)
Intel Corp. ........................ 1,200 110,550 (a)
Storage Technology Corp. ........... 2,800 142,625 (a)
671,325
Utilities -- 10.4%
360 Communications Co. ............. 8,500 156,187 (a)
Cellular Communications
International ................... 7,500 270,000 (a)
NTL Inc. ........................... 6,000 132,750 (a)
PG&E Corp. ......................... 1 19
Telephone & Data Systems Inc. ...... 3,900 154,050
713,006
Total Investments in Securities
(Cost $5,548,820) ................ 6,416,612

- --------------------------------------------------------------------------------
Number
of Shares Value
- --------------------------------------------------------------------------------
Short-Term Investments -- 5.7%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund
(Cost $390,704) .................. 390,704 390,704

- --------------------------------------------------------------------------------
Expiration Date/ Number of
Strike Price contracts Value
- --------------------------------------------------------------------------------
Call Options Written -- 0.0%
- --------------------------------------------------------------------------------
Mercantile Stores I ................ Sep. 97/65.0 1,200 (2,400)

Other Assets and Liabilities,
net 0.9% ......................... 62,378
----------
NET ASSETS -- 100% $6,867,294
==========

- ----------

See Notes to Schedule of Investments and Financial Statements

F-27
<PAGE>

Notes to Schedules of Investments
- --------------------------------------------------------------------------------

(a) Non-income producing security.

(b) Coupon amount represents effective yield.

Currency Terms:

CAD -- Canadian Dollar

DEM -- Deutsche Mark

DKK -- Danish Krone

ESP -- Spanish Peseta

GBP -- Pound Sterling

JPY -- Japanese Yen

NLG -- Netherlands Guilder

SEK -- Swedish Krona

<PAGE>

STATEMENTS OF ASSETS AND LIABILITIES
August 31, 1997 (unaudited)

GLOBAL VALUE
INCOME EQUITY
FUND FUND
---- ----
<S> <C> <C>
ASSETS
Investments in securities, at market (cost
$4,568,673, and $5,548,820, respectively) .......... $4,467,222 $6,416,612
Short term investments (at amortized cost) ............ 615,179 390,704
Cash .................................................. 1 934
Foreign currency ($19,664, and $0 respectively) ....... 19,577 0
Receivable for investments sold ....................... 1,041,128 97,907
Income receivables .................................... 140,917 9,708
Receivable for fund shares sold ....................... 0 63,512
Receivable on forward foreign currency contracts ...... 0 0
Variation margin receivable ........................... 0 0
---------- ----------
Total assets ................................. 6,284,024 6,979,377
---------- ----------

LIABILITIES
Options written, at market
(Premium received $0, and $5,364, respectively)...... 0 2,400
Distributions payable to shareholders ................. 0 0
Payable for investments purchased ..................... 884,311 102,050
Payable for fund shares repurchased ................... 0 0
Payable to GEIM ....................................... 6,901 7,633
Variation margin payable .............................. 0 0
Payable to custodian .................................. 0 0
Payable on forward foreign currency contracts ......... 30,440 0
---------- ----------
Total liabilities ............................ 921,652 112,083
---------- ----------
NET ASSETS ..................................................... $5,362,372 $6,867,294
========== ==========

NET ASSETS CONSIST OF:
Capital paid in ....................................... $5,297,848 $5,922,435
Undistributed net investment income ................... 107,216 7,991
Accumulated net realized gain ......................... 90,429 66,111
Net unrealized appreciation / (depreciation) on:
Investments .................................. (101,451) 867,792
Written options .............................. 0 2,965
Foreign currency transactions ................ (31,670) 0
---------- ----------
NET ASSETS ..................................................... $5,362,372 $6,867,294
========== ==========

Shares outstanding ($.001 par value) ........................... 529,477 547,771
Net asset value, offering and redemption price per share ....... $10.13 $12.54

</TABLE>

- ----------

See Notes to Financial Statements

F-29

<PAGE>

STATEMENTS OF OPERATIONS
For the period ended August 31, 1997 (unaudited)

<TABLE>
<CAPTION>
GLOBAL VALUE
INCOME EQUITY
FUND * FUND *
------ ------
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends ................................................. $ 0 $ 12,604
Interest .................................................. 120,782 8,544
-------- ---------
Total income ....................................................... 120,782 21,148
-------- ---------

Expenses:
Advisory and administration fees .......................... 10,411 10,002
Trustees' fees ............................................ 386 386
Custody and accounting expenses ........................... 1,095 1,095
Professional fees ......................................... 1,502 1,502
Other expenses ............................................ 172 172
-------- ---------
Total expenses ..................................................... 13,566 13,157
-------- ---------
Net investment income .............................................. 107,216 7,991
-------- ---------

NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Realized gain on:
Investments ...................................... 26,252 66,111
Foreign currency transactions .................... 64,177 0
Increase (decrease) in unrealized appreciation/depreciation
on:
Investments ...................................... (101,451) 867,792
Written options .................................. 0 2,965
Foreign currency transactions .................... (31,670) 0
-------- ---------
Net realized and unrealized gain
(loss) on investments ............................ (42,692) 936,868
-------- ---------
Net increase in net assets
resulting from operations ................................. $ 64,524 $ 944,859
======== =========

</TABLE>

*For the period May 1, 1997 (inception) through August 31, 1997.

- ----------
See Notes to Financial Statements

F-30

<PAGE>

STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
GLOBAL VALUE
INCOME EQUITY
FUND FUND
(unaudited)* (unaudited)*
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income ................ $ 107,216 $ 7,991
Net realized gain on investments,
futures, and foreign currency
transactions ................ 90,429 66,111
Net increase (decrease) in unrealized
appreciation/depreciation ... (133,121) 870,757
----------- -----------
Net increase from operations ......... 64,524 944,859

Distributions to shareholders from:
Net investment income ................ 0 0
Net realized gains ................... 0 0
----------- -----------
Total distributions ........................... 0 0
----------- -----------
Increase in net assets from
operations and distributions ......... 64,524 944,859
----------- -----------
Share transactions:
Proceeds from sale of shares ......... 5,300,310 6,077,720
Value of distributions reinvested .... 0 0
Cost of shares redeemed .............. (2,462) (155,285)
----------- -----------
Net increase from
share transactions .......... 5,297,848 5,922,435
----------- -----------
Total increase in net assets .................. 5,362,372 6,867,294

NET ASSETS
Beginning of period ........................... 0 0
----------- -----------
End of period ................................. $ 5,362,372 $ 6,867,294
=========== ===========

Undistributed net investment
income, end of period ................ $ 107,216 $ 7,991
----------- -----------

CHANGES IN PORTFOLIO SHARES:
Shares sold by subscription ............................ 529,723 560,977
Issued for distributions reinvested .................... 0 0
Shares redeemed ........................................ (246) (13,206)
----------- -----------
Net increase in portfolio shares ....................... 529,477 547,771
=========== ===========

</TABLE>

* For the period May 1, 1997 (inception) through August 31, 1997

- ----------
See Notes to Schedule of Investments and Financial Statements

F-31
<PAGE>

Notes To Financial Statements August 31, 1997 (unaudited)
- --------------------------------------------------------------------------------

1. Organization of the Funds

GE Investments Funds, Inc. (the "Company") (formerly, Life of Virginia Series
Funds, Inc.) was incorporated under the laws of the Commonwealth of Virginia on
May 14, 1984 and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company. The Company is comprised
of eight investment funds (the "Funds"), which are currently being offered
through the separate accounts of The Life Insurance Company of Virginia ("Life
of Virginia") and other life insurance companies. The separate accounts fund
certain benefits for flexible and single premium variable life insurance and
annuity policies issued by Life of Virginia. Life of Virginia is an indirect
wholly-owned subsidiary of General Electric Capital Corporation. As of August
31, 1997, Life of Virginia controlled the Funds by ownership, through separate
accounts, of virtually all of the Funds' shares of beneficial interest.

The Global Income Fund and Value Equity Fund commenced operations on May 1,
1997.

2. Summary of Significant Accounting Policies

The following summarizes the significant accounting policies of the Company:

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results may differ from those estimates.

Security Valuation and Transactions

Transactions are accounted for as of the trade date. Cost is determined and
gains and losses are based upon the specific identification method for both
financial statement and federal tax purposes.

Foreign Currency

Income Taxes

F-32

<PAGE>

in the Fund's tax year, are deemed to arise on the first day of the Fund's next
tax year if the Fund so elects to defer such losses.

Investment Income

Expenses

Distributions to Shareholders

The Funds declare and pay dividends of net investment income annually. The Funds
declare and pay net realized capital gain distributions annually. The character
of income and gains to be distributed are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences include treatment of realized and unrealized gains and losses
on forward foreign currency contracts, paydown gains and losses on
mortgage-backed securities, losses on wash sale transactions, and deferred
organization expenses. Reclassifications are made to the Funds' capital accounts
to reflect income and gains available for distribution (or available capital
loss carryovers) under income tax regulations. The calculation of net investment
income per share in the Financial Highlights table excludes these adjustments.

When-Issued Securities

Forward Foreign Currency Contracts

Futures and Options

The Funds may invest in futures contracts and purchase and write options. These
investments involve, to varying degrees, elements of market risk and risks in
excess of the amount recognized in the Statements of Assets and Liabilities. The
face or contract amounts reflect the extent of the involvement the Funds have in
the particular classes of these instruments. Risks may be caused by an imperfect
correlation between movements in the price of the instruments and the price of
the underlying securities and interest rates. Risks also may arise if there is
an illiquid secondary market for the instruments, or an inability of
counterparties to perform. The Funds may invest in futures contracts for the
following reasons: (1) for the purpose of hedging against the effects of changes
in the value of portfolio securities or other investments due to anticipated
changes in interest rates, stock market conditions and currency market
conditions, (2) to gain stock, bond, or currency market exposure for
accumulating and residual cash positions, (3) for duration management, (4) when
such transactions are an economically appropriate way to reduce risks inherent
in the management of a Fund, and (5) for non-hedging purposes such as seeking
additional income or otherwise seeking to increase total return.

F-33

<PAGE>

Other

3. Fees and Compensation Paid to Affiliates

Advisory and Administration Fees

Global Income Fund: .60%

Value Equity Fund: .65%

Directors' Fees

The Funds pay no
compensation to their Directors who are employees of Life of Virginia or GEIM.
Directors who are not employees of Life of Virginia or GEIM receive an annual
fee of $6,000 plus $500 per Directors' board meeting attended in person and an
additional fee of $250 for each Directors' conference call meeting attended.

4. Sub-advisory Fees

Effective May 1, 1997, GE Investments (US) Limited ("GEIUS")
is the investment sub-adviser to the Global Income Fund and NWQ Investment
Management Company ("NWQ") is the investment sub-adviser to the Value Equity
Fund.

For their services GEIM pays GEIUS and NWQ 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:

Global Income Fund: .05%

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

5. Aggregate Unrealized Appreciation and Depreciation

Aggregate gross unrealized appreciation/(depreciation) of investments for each
Fund at August 31, 1997, were as follows:

Net
Gross Gross Unrealized
Unrealized Unrealized Appreciation/
Appreciation Depreciation (Depreciation)
- --------------------------------------------------------------------------------
Global Income Fund $ 6,405 $ 107,856 $(101,451)

Value Equity Fund 874,186 6,394 867,792

The aggregate cost of each Fund's investments was substantially the same for
book and federal income tax purposes at August 31, 1997.

6. Investment Transactions

The cost of purchases and the proceeds from sales of investments, other than
U.S. Government securities, short term securities and options, for the period
ended August 31, 1997, were:

Purchases Sales
--------- -----

Global Income Fund $ 10,163,281 $ 5,620,861

Value Equity Fund 5,907,172 424,463

F-34

<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. dated April 17, 1997 incorporated herein by reference to
post-effective amendment # 19 to this Form N-1A registration statement
(File No. 2-91369), filed with the Securities and Exchange Commission on
July 11, 1997.

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(a) 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.

6(b) Distribution Agreement between GE Investments Funds, Inc. and GE
Investment Services Inc. dated October 24, 1997.

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.

9 Transfer Agency Agreement between GE Investments Funds, Inc. and State
Street Bank and Trust Company dated October 24,1997.

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.

11(b) Consent of Ernst & Young, LLP.

11(c) Consent of KPMG Peat Marwick LLP.

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.

<PAGE>

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.

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. 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
Registrant. 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 Registrant's stock through the Separate Accounts to support the
variable life insurance and/or variable annuity contracts which they offer.
Additional information about persons controlled by or under common control with
the Registrant is incorporated herein by reference to pages 10-12 and to exhibit
21 of GE's Form 10-K (File No. 1-35) filed with the commission on December 31,
1996.

The Life Insurance Company of Virginia and Great Northern Insured Annuity
Corporation each are an indirect, wholly-owned subsidiary of General Electric
Capital Corporation ("GE Capital"). GE Capital, a diversified financial services
company, is a wholly-owned subsidiary of General Electric Company.

Item 26. Number of Holders of Securities

Number of Record Holders
Title of Class as of September 30, 1997
- -------------- ------------------------

Capital Stock, Class A 5

Capital Stock, Class B 4

Capital Stock, Class C 5

Capital Stock, Class D 4

Capital Stock, Class E 4

Capital Stock, Class F 4

Capital Stock, Class G 4

Capital Stock, Class H 4

<PAGE>

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.

Item 28. Business and Other Connections of Investment Adviser

Reference is made to "Management of the Company" in the Prospectus forming Part
A, and "The Management of the Company" in the Statement of Additional
Information forming Part B, of this Registration Statement.

The list required by this Item 28 of officers and directors of GEIM, the Funds'
investment adviser, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by those
officers and directors during the past two years, is incorporated by reference
to Schedules A and D of the Forms ADV filed by GEIM pursuant to the Investment
Advisers Act of 1940, as amended (SEC File No. 801-31947).

Item 29. Principal Underwriters

(a) GE Investment Services Inc. ("GEIS") also serves as distributor for the
investment portfolios of GE Funds, GE Institutional Funds and for Elfun
Tax-Exempt Income Fund, Elfun Income Fund, Elfun Global Fund, Elfun Money Market
Fund, Elfun Trusts and Elfun Diversified Fund.

(b) The information required by this Item 29 with respect to each director
and Officer of GEIS is incorporated by reference to Schedule A of Form BD filed
by GEIS pursuant to the Securities Exchange Act of 1934 (SEC File No. 8-45710).

<PAGE>

Item 30. Location of Accounts and Records

All accounts, books and other documents required to be maintained by Registrant
pursuant to Section 31(a) of the Investment Company Act of 1940, as amended (the
"1940 Act"), and the rules thereunder, are maintained at the offices of:
Registrant located at 3003 Summer Street, Stamford, Connecticut 06905; State
Street Bank and Trust Company ("State Street"), Registrant's custodian and
transfer agent, located at 225 Franklin Street, Boston, Massachusetts 02101; and
National Financial Data Services Inc., an indirect subsidiary of State Street,
located at P.O. Box 419631, Kansas, MO 64141-6631.

Item 31. Management Services

None.

Item 32. Undertakings

(a) Not applicable.

(b) 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 21.

(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. certifies that it
meets all of the requirements for effectiveness of this registration statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Post-Effective Amendment No. 21 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Stamford, State of
Connecticut, on the 23th day of October, 1997.

GE Investments Funds, Inc.

/s/ Paul E. Rutledge
By:_____________________________________
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> <C> <C>
/s/ Paul E. Rutledge
__________________________________ President (Principal Executive Officer) 10/23/97
Paul E. Rutledge and Director

/s/ Jeffrey A. Groh
__________________________________ Treasurer (Principal Financial 10/23/97
Jeffrey A. Groh and Accounting Officer)

/s/ Michael J. Cosgrove
__________________________________ Director 10/23/97
Michael J. Cosgrove

/s/ John R. Costantino
__________________________________ Director 10/23/97
John R. Costantino

/s/ William J. Lucas
__________________________________ Director 10/23/97
William J. Lucas

__________________________________ Director
Robert P. Martin, Jr.

__________________________________ Director
J. Clifford Miller, III

__________________________________ Director
J. Garnett Nelson

__________________________________ Director
Lee A. Putney

/s/ Robert P. Quinn
__________________________________ Director 10/23/97
Robert P. Quinn

<PAGE>

Exhibit Index

6(b) Distribution Agreement between GE Investments Funds, Inc. and GE
Investment Services Inc. dated October 24, 1997.

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

9 Transfer Agency Agreement between GE Investments Funds, Inc. and State
Street Bank and Trust Company dated October 24, 1997.

11(a) Consent of Sutherland, Asbill & Brennan LLP.

11(b) Consent of Ernst & Young, LLP.

11(c) Consent of KPMG Peat Marwick LLP.

</TABLE>

Exhibit 6(b)

DISTRIBUTION AGREEMENT

October 24, 1997

GE Investment Services Inc.
3003 Summer Street
Stamford, Connecticut 06905

Ladies and Gentlemen:

This is to confirm that, in consideration of the agreements set out below, GE
Investments Funds, Inc., a corporation organized under the laws of the State of
Virginia (the "Company"), has agreed that GE Investment Services Inc. ("GEIS")
will be, for the period of this Agreement, the distributor of shares of
beneficial interest of each series of the Company (individually a "Fund" and
collectively the "Funds").

1. Services as Distributor.

1.1 GEIS agrees to solicit orders for the sale of shares of the Company and
to undertake advertising and promotion that it believes reasonable in connection
with the solicitation.

1.2 GEIS will act as agent for the distribution of shares of the Company
covered by, and in accordance with, the Company's Registration Statement on Form
N-1A then in effect under the Securities Act of 1933, as amended (the
"Securities Act"), the Registration Statement on Form N-1A, together with the
Prospectus (the "Prospectus") and statement of additional information (the
"Statement") included as part of the Registration Statement on Form N-1A, any
amendments to the Registration Statement on Form N-1A, and any supplements to,
or material incorporated by reference into the Prospectus or Statement, being
referred to collectively in this Agreement as the "Registration Statement."

1.3 All activities by GEIS as distributor of shares of the Company will
comply with all applicable laws, rules and regulations, including, without
limitation, all rules and regulations made or adopted pursuant to the Securities
Act or the Investment Company Act of 1940, as amended (the "1940 Act"), by the
Securities and Exchange Commission (the "Commission") or any securities
association registered under the Securities Exchange Act of 1934, as amended
(the "Exchange Act").

1.4 (a) GEIS will have the right to purchase from the Company the shares
needed, but not more than the shares needed (except for clerical errors in
transmission), to fill unconditional orders for shares placed through GEIS. The
price that GEIS will pay for the shares so purchased from the Company will be
the current public offering price on which the orders were based, as described
in paragraph (b) of this Section 1.4.

(b) The public offering price of the shares of the Company will be the
net asset value determined as set forth in the Registration Statement, plus
any applicable sales charge.

(c) GEIS will have the right to enter into selected dealer agreements.
All dealers of Company shares will act in accordance with the Registration
Statement then in effect under the Securities Act. All activities by
dealers of Company shares will comply with all applicable laws, rules and
regulations, including, without limitation, all rules and regulations made
or adopted pursuant to the Securities Act and the 1940 Act by the
Commission or any securities association registered under the Exchange Act.

(d) The Company's transfer and dividend agent, or any other agent
designated in writing by the Company, will be promptly advised by GEIS of
all purchase orders for shares of the Company. The Company may cease, on

1
<PAGE>

the basis of market, economic or political conditions, or on the basis of
any other abnormal conditions, to accept any orders for Company shares or
continue to sell shares until the Directors deem it advisable to accept the
orders and to make the sales. The Company will promptly advise GEIS of the
determination to recommence accepting orders or selling shares. The Company
(or its agent) will confirm orders for shares upon their receipt, or in
accordance with any exemptive order of the Commission, and will make
appropriate book entries pursuant to the instructions of GEIS. GEIS agrees
to cause payment for shares and instructions as to book entries to be
delivered promptly to the Company (or its agent).

1.5 The outstanding shares of the Company are subject to redemption as set
forth in the Company's Articles of Incorporation dated as of May 14, 1984, as
amended from time to time (the "Articles of Incorporation"), and in accordance
with the applicable provisions set forth in the Prospectus. The price to be paid
to redeem the shares will be equal to their net asset value, determined as set
forth in the Prospectus.

1.6 GEIS will provide one or more persons, during normal business hours, to
respond to telephone questions with respect to the Company.

1.7 The Company agrees, at its own expense, to execute any and all
documents, to furnish any and all information, and to take any other actions,
that may be reasonably necessary in connection with (a) registering shares under
the Securities Act to the extent necessary to have available for sale the number
of shares as may reasonably be expected to be purchased and (b) the
qualification and maintenance of the qualification of shares of the Company for
sale in such states as GEIS may designate, except that the Company will not be
obligated to execute a general consent to service of process in any state.

1.8 The Company will furnish GEIS from time to time, for use in connection
with the sale of shares of the Company such information with respect to the
Company and its shares as GEIS may reasonably request, all of which information
must be signed by one or more of the Company's duly authorized officers; and the
Company warrants that the statements contained in any such information, when so
signed by the Company's officers, will be true and correct. The Company will
also furnish GEIS upon request with: (a) financial statements of the Company or
any series of the Company audited at least annually by independent public
accountants regularly retained by the Company, (b) quarterly earnings statements
of the Company or any series of the Company prepared by the Company, (c) a
monthly itemized list of the securities in the portfolio of the Company or any
series of the Company, (d) monthly balance sheets with respect to the Company or
any series of the Company as soon as practicable after the end of each month and
(e) from time to time any additional information regarding the financial
condition of the Company or any series of the Company as GEIS may reasonably
request.

1.9 The Company represents to GEIS that the Registration Statement filed by
the Company with the Commission under the Securities Act has been carefully
prepared in conformity with the requirements of the Securities Act and the 1940
Act and the respective rules and regulations of the Commission thereunder. The
Company represents and warrants to GEIS that the Registration Statement, upon
its becoming effective, will contain all statements required to be stated
therein in conformity with the Securities Act and the rules and regulations of
the Commission thereunder; that all statements of fact contained in the
Registration Statement will be true and correct when the Registration Statement
becomes effective; and that the Registration Statement, upon its becoming
effective, will not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading. The Company may, but will not be obligated
to, propose from time to time such amendment or amendments to the Registration
Statement and such supplement or supplements to the Prospectus as may, in the
Company's judgment, be necessary or advisable. If the Company does not propose
an amendment or amendments or supplement or supplements within 15 days after
receipt by the Company of a written request from GEIS to do so, GEIS may, at its
option, terminate this Agreement in accordance with the requirements of Section
2 of this Agreement or decline to make offers of the Company's securities until
the amendments are made. The Company will not file any amendment to the
Registration Statement or supplement to the Prospectus without giving GEIS
reasonable notice thereof in advance; provided, however, that nothing contained
in this Agreement will in any way limit the Company's right to file at any time
such amendments to the Registration Statement or supplements to the Prospectus,
of whatever character, as the Company may deem advisable, this right being in
all respects absolute and unconditional.

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<PAGE>

1.10 (a) The Company authorizes GEIS to use any prospectus with respect to
the Company or series of the Company in the forms furnished to GEIS from time to
time in connection with the sale of Company shares and agrees to furnish such
quantities of the prospectus as GEIS may reasonably request. GEIS will devote
reasonable time and effort to effect sales of Company shares, but will not be
obligated to sell any specific number of shares. The services of GEIS under this
Agreement are not to be deemed exclusive and nothing contained in this Agreement
should be deemed to prevent GEIS from entering into distribution arrangements
with other investment companies so long as the performance of its obligations
under this Agreement is not impaired by GEIS's doing so.

(b) In selling the shares of the Company, GEIS and selected dealers
will use their best efforts in all respects duly to conform with the
requirements of all federal and state laws and regulations of the National
Association of Securities Dealers, Inc. (the "NASD") relating to the sale
of the shares. Neither GEIS nor any other person is authorized by the
Company to give any information or to make any representations, other than
those contained in the Registration Statement or in any sales literature
specifically approved by the Company.

(c) GEIS will adopt and follow procedures, as approved by the Company,
for the confirmation of sales to purchasers of Company shares, the
collection of amounts payable by those purchasers, and the cancellation of
unsettled transactions, as may be necessary to comply with the requirements
of the NASD and applicable rules and regulations of the Commission.

(d) GEIS represents to the Company that GEIS is a broker-dealer
registered with the Commission under the Exchange Act, is a member of the
NASD, and is registered or licensed under the laws of all jurisdictions in
which its activities require it to be so registered or licensed. GEIS shall
maintain such registration or license in effect at all times during the
term of this Agreement and will immediately notify the Company of the
occurrence of any event that would disqualify GEIS from serving as the
distributor of shares of the Funds by operation of Section 9(a) of the 1940
or otherwise.

1.11 (a) The Company agrees promptly to notify GEIS of the commencement of
any litigation or proceedings against the Company or any of its officers or
directors in connection with the issuance and sale of any shares of the Company.

(b) The Company agrees to indemnify and hold GEIS, its several
officers and directors, and any person who controls GEIS within the meaning
of Section 15 of the Securities Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending those claims, demands or liabilities and any
counsel fees incurred in connection with them) that GEIS, its officers and
directors, or the controlling person may incur under the Securities Act or
under common law or otherwise, arising out of or based upon any untrue
statement, or alleged untrue statement, of a material fact contained in the
Registration Statement or the Prospectus or arising out of or based upon
any omission, or alleged omission, to state a material fact required to be
stated in either the Registration Statement or Prospectus or necessary to
make the statements in either not misleading; provided, however, that the
Company's agreement to indemnify GEIS, its officers and directors, and the
controlling person will not be deemed to cover any claims, demands,
liabilities or expenses arising out of any untrue statement or alleged
untrue statement or omission or alleged omission in the Registration
Statement or Prospectus made in reliance upon and in conformity with
written information furnished to the Company by GEIS specifically for use
in the preparation of the Registration Statement.

(c) The Company's agreement to indemnify GEIS, its officers and
directors, and any controlling person, described in paragraph (b) of this
Section 1.11, is expressly conditioned upon the Company's being notified of
any action brought against GEIS, its officers or directors, or any
controlling person, such notification to be given by letter or by telegram
addressed to the Company at its principal office in Stamford, Connecticut
within ten days after the summons or other first legal process is served.
The failure to notify the Company in this manner of any such action will
relieve the Company from any liability that the Company may have to the
person against whom the action is brought by reason of any such untrue, or
alleged untrue, statement or omission, or alleged omission, otherwise than
on account of the Company's indemnity agreement contained in this Section
1.11.

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<PAGE>

(d) The Company will be entitled to assume the defense of any suit
brought to enforce any claim, demand or liability contemplated by this
Section 1.11, but, in such case, the defense will be conducted by counsel
of good standing chosen by the Company and approved by GEIS (who will not,
except with the consent of GEIS, be counsel to the Company). In the event
the Company elects to assume the defense of any such suit and retain
counsel of good standing approved by GEIS, the defendant or defendants in
the suit will bear the fees and expenses of any additional counsel retained
by any of them; but in case the Company does not elect to assume the
defense of any such suit, or in case GEIS does not approve of counsel
chosen by the Company, the Company will reimburse GEIS, its officers and
directors, or the controlling person or persons named as defendant or
defendants in the suit, for the fees and expenses of any counsel retained
by GEIS or them.

(e) The Company's indemnification agreement contained in this Section
1.11 and the Company's representations and warranties in this Agreement
will remain operative and in full force and effect regardless of any
investigation made by or on behalf of GEIS, its officers and directors, or
any controlling person, and will survive the delivery of any shares of the
Company. The Company's agreement of indemnity will inure exclusively to
GEIS's benefit, to the benefit of its several officers and directors, and
their respective estates, and to the benefit of any controlling persons and
their successors, except that the Company will not be obligated to
indemnify any entity or person pursuant to this Section 1.11 against any
liability to which GEIS, its officers and directors, or any controlling
person would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in performance of, or reckless disregard of, the
obligations and duties set forth in this Agreement.

1.12 (a) GEIS agrees to indemnify and hold the Company, its several
officers and directors, and any person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act, free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending those claims, demands or liabilities and any
counsel fees incurred in connection with them) that the Company, its officers or
directors, or the controlling person, may incur under the Securities Act, or
under common law or otherwise, but only to the extent that the liability or
expense incurred by the Company, its officers or directors, or the controlling
person resulting from the claims or demands arise out of or are based upon any
untrue, or alleged untrue statement of a material fact contained in information
furnished in writing by GEIS to the Company specifically for use in the
Registration Statement and used in the Company's answers to any of the items of
the Registration Statement or in the corresponding statements made in the
Prospectus, or arise out of or are based upon any omission, or alleged omission,
to state a material fact in connection with the information furnished in writing
by GEIS to the Company and required to be stated in the answers or necessary to
make the information not misleading.

(b) GEIS's agreement to indemnify the Company, its officers and
directors, and any controlling person under this Section 1.12 is expressly
conditioned upon GEIS being notified of any action brought against the
Company, its officers or directors, or any controlling person, such
notification to be given by letter or telegram addressed to GEIS at its
principal office in Stamford, Connecticut and sent to GEIS by the person
against whom the action is brought, within ten days after the summons or
other first legal process is served. The failure to notify GEIS of any such
action will not relieve GEIS from any liability that GEIS may have to the
Company, its officers or directors, or to the controlling person otherwise
than on account of GEIS's indemnity agreement contained in this Section
1.12.

(c) GEIS will have the right to control the defense of any action
contemplated by this Section 1.12, with counsel of its own choosing,
satisfactory to the Company, unless the action referred to in paragraph (a)
of this Section 1.12 is not based solely upon an alleged misstatement or
omission on GEIS's part. In such event, the Company, its officers or
directors or the controlling person will each have the right to participate
in the defense or preparation of the defense of the action.

(d) GEIS will not be obligated to indemnify any entity or person
pursuant to this Section 1.12 against any liability to which the Company,
its officers and directors, or any controlling person would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in
performance of, or reckless disregard of, the obligations and duties set
forth in this Agreement.

4
<PAGE>

1.13 No shares of the Company may be offered by GEIS, selected dealers or
the Company under any of the provisions of this Agreement, and no orders for the
purchase or sale of shares of the Company pursuant to this Agreement may be
accepted by the Company if and so long as the effectiveness of the Registration
Statement is suspended under any of the provisions of the Securities Act or if
and so long as a current prospectus as required by Section 10 of the Securities
Act is not on file with the Commission; provided, however, that nothing
contained in this Section 1.13 will in any way restrict or have an application
to or bearing upon the CompanyOs obligation to redeem its shares from any
shareholder in accordance with the provisions of Section 1.5 of this Agreement
and provided, further, that GEIS may continue to offer shares of the Company
until GEIS has been notified in writing of the occurrence of any of the
foregoing events.

1.14 The Company agrees to advise GEIS immediately in writing:

(a) of any request by the Commission for amendments to the
Registration Statement or the Prospectus or any additional information
regarding the Company;

(b) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceeding for that purpose;

(c) of the happening of any event that makes untrue any statement of a
material fact made in the Registration Statement or the Prospectus or that
requires the making of any change in the Registration Statement or the
Prospectus in order to make the statements therein not misleading; and

(d) of all actions of the Commission with respect to any amendments to
the Registration Statement or the Prospectus that may from time to time be
filed with the Commission.

2. Term.

This Agreement will become effective as of October 24, 1997 and thereafter
will continue automatically for successive annual periods, so long as its
continuance is specifically approved at least annually (a) by the Directors of
the Company or (b) by a vote of a majority (as defined in the 1940 Act) of the
Company's outstanding voting securities, provided that in either event the
continuance is also approved by a majority of the Directors who are not parties
to this Agreement or interested persons (as defined in the 1940 Act) of any
party by vote cast in person at a meeting called for the purpose of voting on
the approval. This Agreement is terminable without penalty, (a) on not less than
60 days' notice (i) by action of the Directors who are not interested persons
(as defined in the 1940 Act) of the Company, or (ii) by the vote of holders of a
majority of the Company's shares, or (b) upon not less than 60 days' written
notice by GEIS. This Agreement will also terminate automatically in the event of
its assignment (as defined in the 1940 Act and the rules under the 1940 Act).

3. Amendments.

This Agreement may be amended by the parties only if the amendment is
specifically approved by (a) the Directors of the Company, or by the vote of a
majority of outstanding voting securities of the Company, and (b) a majority of
those Directors of the Company who are not parties to this Agreement or
interested persons (as defined in the 1940 Act) of any party cast in person at a
meeting called for the purpose of voting on the approval.

4. Miscellaneous.

4.1 (a) The Company will bear all costs and expenses including fees and
disbursements of its counsel and independent accountants, in connection with the
preparation and filing of any registration statements and prospectus under the
Securities Act and the 1940 Act, and all amendments and supplements thereto, and
the expense of preparing, printing, mailing and otherwise distributing
prospectuses, annual or interim reports or proxy materials to shareholders.

5
<PAGE>

(b) The Company will bear all costs and expenses of qualification of
its shares for sale in such states of the United States or other
jurisdictions as selected by GEIS pursuant to Section 1.7 of this Agreement
and the cost and expenses payable to each for continuing qualification
therein.

4.2 (a) The Company represents that a copy of the Articles of Incorporation
is on file with the Secretary of the State of Virginia. The Company further
represents that a copy of the Articles of Incorporation is maintained by the
Company.

(b) The Company and GEIS agree that the obligations of the Company
under this Agreement will not be binding upon any of the Directors,
shareholders, nominees, officers, employees or agents, whether past,
present or future, of the Company, individually, but are binding only upon
the assets and property of the Company, as provided in the Articles of
Incorporation. The execution and delivery of this Agreement have been
authorized by the Directors of Company, and signed by an authorized officer
of the Company, acting as such, and neither the authorization by the
Directors nor the execution and delivery by the officer will be deemed to
have been made by any of them individually or to impose any liability on
any of them personally, but will bind only the property of the Company as
provided in the Articles of Incorporation. No series of the Company will be
liable for any claims against any other series.

* * * * *

If the terms and conditions described above are in accordance with your
understanding, kindly indicate your acceptance of this Agreement by signing and
returning to us the enclosed copy of this Agreement.

Very truly yours,

GE INVESTMENTS FUNDS, INC.

By:___________________________________
Name:
Title:

Accepted:

GE INVESTMENT SERVICES INC.

By:___________________________________
Name:
Title:

Exhibit 8(d)

CUSTODIAN CONTRACT
Between
EACH OF THE PARTIES INDICATED ON APPENDIX A
and
STATE STREET BANK AND TRUST COMPANY

<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>

Page
----

<S> <C> <C>
1. Employment of Custodian and Property to be Held by It....................................................1

2. Duties of the Custodian with Respect to Property of the Fund Held By
the Custodian in the United States.......................................................................2

2.1 Holding Securities..............................................................................2
2.2 Delivery of Securities..........................................................................2
2.3 Registration of Securities......................................................................6
2.4 Bank Accounts...................................................................................7
2.5 Availability of Federal Funds...................................................................8
2.6 Collection of Income............................................................................8
2.7 Payment of Fund Monies..........................................................................9
2.8 Liability for Payment in Advance of Receipt of Securities Purchased............................11
2.9 Appointment of Agents..........................................................................11
2.10 Deposit of Securities in Securities System.....................................................11
2.10A Fund Assets Held in the Custodian's Direct Paper System........................................14
2.11 Segregated Account.............................................................................15
2.12 Ownership Certificates for Tax Purposes........................................................16
2.13 Proxies........................................................................................16
2.14 Communications Relating to Fund Portfolio Securities...........................................16
2.15 Reports to Fund by Independent Public Accountants..............................................17

3. Duties of the Custodian with Respect to Property of the Fund Held
Outside of the United States............................................................................18

3.1 Appointment of Foreign Sub-Custodians..........................................................18
3.2 Assets to be Held..............................................................................18
3.3 Foreign Securities Depositories................................................................18
3.4 Segregation of Securities......................................................................19
3.5 Agreements with Foreign Banking Institutions...................................................19
3.6 Access of Independent Accountants of the Fund..................................................20
3.7 Reports by Custodian...........................................................................20
3.8 Transactions in Foreign Custody Account........................................................20
3.9 Liability of Foreign Sub-Custodians............................................................21
3.10 Liability of Custodian.........................................................................21
3.11 Reimbursement for Advances.....................................................................22
3.12 Monitoring Responsibilities....................................................................23
3.13 Branches of U.S. Banks.........................................................................23

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4. Payments for Repurchases or Redemptions and Sales of Shares of the Fund.................................24

5. Proper Instructions.....................................................................................25

6. Actions Permitted Without Express Authority.............................................................25

7. Evidence of Authority...................................................................................26

8. Duties of Custodian with Respect to the Books of Account and Calculations
of Net Asset Value and Net Income.......................................................................26

9. Records.................................................................................................27

10. Opinion of Fund's Independent Accountant................................................................27

11. Compensation of Custodian...............................................................................28

12. Responsibility of Custodian.............................................................................28

13. Effective Period, Termination and Amendment.............................................................29

14. Successor Custodian.....................................................................................31

15. Interpretive and Additional Provisions..................................................................32

16. Massachusetts Law to Apply..............................................................................32

17. Prior Contracts.........................................................................................33

18. Notices.................................................................................................33

19. The Parties.............................................................................................33

</TABLE>

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<PAGE>

CUSTODIAN CONTRACT

This Contract between State Street Bank and Trust Company, a Massachusetts
trust Company, a Massachusetts trust company, having its principal place of
business at 225 Franklin Street, Boston, Massachusetts, 02110, hereinafter
called the "Custodian" and each Fund listed on Appendix A which evidences its
agreement to be bound hereby by executing a copy of this Contract (each such
Fund individually hereinafter referred to as the "Fund").

WITNESSETH: That in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:

1. Employment of Custodian and Property to be Held by It

The Fund hereby employs the Custodian as the custodian of its assets,
including securities it desires to be held in places within the United States
("domestic securities") and securities it desires to be held outside the United
States ("foreign securities") pursuant to the provisions of the Fund Agreement.
The Fund agrees to deliver to the Custodian all securities and cash owned by it,
and all payments of income, payments of principal or capital distributions
received by it with respect to all securities owned by the Fund from time to
time, and the cash consideration received by it for such new or treasury shares
of beneficial interest ("Shares"), of the Fund as may be issued or sold from
time to time. The Custodian shall not be responsible for any property of the
Fund held or received by the Fund and not delivered to the Custodian.

Upon receipt of "Proper Instructions" (within the meaning of Article 5),
the Custodian shall from time to time employ one or more sub-custodians located
in the United States, but only in accordance with an applicable vote by the
Board of Directors of the Fund, and provided that the Custodian shall have no
more or less responsibility or liability to the Fund on account of any

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<PAGE>

actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian. The Custodian may employ as sub-custodians
for the Fund's securities and other assets the foreign banking institutions and
foreign securities depositories designated in Schedule "A" hereto but only in
accordance with the provisions of Article 3.

2. Duties of the Custodian with Respect to Property of the Fund Held By the
Custodian in the United States

2.1 Holding Securities. The Custodian shall hold and physically segregate for
the account of the Fund all non-cash property, to be held by it in the
United States, including all domestic securities owned by the Fund, other
than (a) securities which are maintained pursuant to Section 2.10 in a
clearing agency which acts as a securities depository or in a book-entry
system authorized by the U.S. Department of the Treasury, collectively
referred to herein as "Securities System" and (b) commercial paper of an
issuer for which State Street Bank and Trust Company acts as issuing and
paying agent ("Direct Paper") which is deposited and/or maintained in the
Direct Paper System of the Custodian pursuant to Section 2.10A. The
Custodian shall disclose the Securities System in use at the time that this
Contract is executed and shall disclose from time to time at the Fund's
request any changes thereto.

2.2 Delivery of Securities. The Custodian shall promptly release and deliver
domestic securities owned by the Fund held by the Custodian or in a
Securities System account of the Custodian or in the Custodian's Direct
Paper book-entry system account ("Direct Paper System Account") only upon
receipt of Proper Instructions, which may be

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<PAGE>

continuing instructions when deemed appropriate by the parties, and only in
the following cases:

1) Upon sale of such securities for the account of the Fund and receipt
of payment therefor;

2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund;

3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.10 hereof;

4) To the depository agent in connection with tender or other similar
offers for portfolio securities of the Fund;

5) To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any
such case, the cash or other consideration is to be delivered to the
Custodian;

6) To the issuer thereof, or its agent, for transfer into the name of the
Fund or into the name of any nominee or nominees of the Custodian or
into the name or nominee name of any agent appointed pursuant to
Section 2.9 or into the name or nominee name of any sub-custodian
appointed pursuant to Article 1; or for exchange for a different
number of bonds, certificates or other evidence representing the same
aggregate face amount or number of units; provided that, in any such
case, the new securities are to be delivered to the Custodian;

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<PAGE>

7) Upon the sale of such securities for the account of the Fund, to the
broker or its clearing agent, against a receipt, for examination in
accordance with "street delivery" custom; provided that in any such
case, the Custodian shall have no responsibility or liability for any
loss arising from the delivery of such securities prior to receiving
payment for such securities except as may arise from the Custodian's
own negligence or willful misconduct:

8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of such securities, or pursuant to provisions
for conversion contained in such securities, or pursuant to any
deposit agreement; provided that, in any such case, the new securities
and cash, if any, are to be delivered to the Custodian;

9) In the case of warrants, rights or similar securities, the surrender
thereof in the exercise of such warrants, rights or similar securities
or the surrender of interim receipts or temporary securities for
definitive securities; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the Custodian;

10) For delivery in connection with any loans of securities made by the
Fund, but only against receipt of adequate collateral as agreed upon
from time to time by the Custodian and the Fund, which may be in the
form of cash or obligations issued by the United States government,
its agencies or

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<PAGE>

instrumentalities, except that in connection with any loans for which
collateral is to be credited to the Custodian's account in the
book-entry system authorized by the U.S. Department of the Treasury,
the Custodian will not be held liable or responsible for the delivery
of securities owned by the Fund prior to the receipt of such
collateral;

11) For delivery as security in connection with any borrowings by the Fund
requiring a pledge of assets by the Fund, but only against receipt of
amounts borrowed;

12) For delivery in accordance with the provisions of any agreement among
the Fund, the Custodian and a broker-dealer registered under the
Securities Exchange Act of 1934 (the "Exchange Act") and a member of
The National Association of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange, or of
any similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund;

13) For delivery in accordance with the provisions of any agreement among
the Fund, the Custodian, and a Futures Commission Merchant registered
under the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any Contract
Market, or any similar organization or organizations, regarding
account deposits in connection with transactions by the Fund;

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<PAGE>

14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to the
holders of shares in connection with distributions in kind, as may be
described from time to time in the Fund's currently effective
prospectus and statement of additional information ("prospectus"), in
satisfaction of requests by holders of Shares for repurchase or
redemption; and

15) For any other proper corporate purpose, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of
the Board of Directors or of the Executive Committee signed by an
officer of the Fund and certified by the Secretary or an Assistant
Secretary, specifying the securities to be delivered, setting forth
the purpose for which such delivery is to be made, declaring such
purpose to be a proper corporate purpose, and naming the person or
persons to whom delivery of such securities shall be made.

2.3 Registration of Securities. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the Fund
or in the name of any nominee of the Fund or of any nominee of the
Custodian which nominee shall be assigned exclusively to the Fund, unless
the Fund has authorized in writing the appointment of a nominee to be used
in common with other registered investment companies having the same
investment adviser as the Fund, or in the name or nominee name of any agent
appointed pursuant to Section 2.9 or in the name or nominee name of any
sub-custodian appointed pursuant to Article 1. All securities accepted by
the Custodian on behalf of the

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<PAGE>

Fund under the terms of this Contract shall be in "street name" or other
good delivery form. If, however, the Fund directs the Custodian to maintain
securities in "street name", the Custodian shall utilize its best efforts
only to timely collect income due the Fund on such securities and to notify
the Fund on a best efforts basis only of relevant corporate actions
including, without limitation, pendency of calls, maturities, tender or
exchange offers.

2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of the Fund, subject
only to draft or order by the Custodian acting pursuant to the terms of
this Contract, and shall hold in such account or accounts, subject to the
provisions hereof, all cash received by it from or for the account of the
Fund, other than cash maintained by the Fund in a bank account established
and used in accordance with Rule 17f-3 under the Investment Company Act of
1940. Funds held by the Custodian for the Fund may be deposited by it to
its credit as Custodian in the Banking Department of the Custodian or in
such other banks or trust companies as it may in its discretion deem
necessary or desirable; provided, however, that every such bank or trust
company shall be qualified to act as a custodian under the Investment
Company Act of 1940 and that each such bank or trust company and the funds
to be deposited with each such bank or trust company shall be approved by
vote of a majority of the Board of Directors of the Fund. Such funds shall
be deposited by the Custodian in its capacity as Custodian and shall be
withdrawable by the Custodian only in that capacity.

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<PAGE>

2.5 Availability of Federal Funds. Upon mutual agreement between the Fund and
the Custodian, the Custodian shall, upon the receipt of Proper
Instructions, make federal funds available to the Fund as of specified
times agreed upon from time to time by the Fund and the Custodian in the
amount of checks received in payment for Shares of the Fund which are
deposited into the Fund's account.

2.6 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to United States registered securities held hereunder to which
the Fund shall be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all income and
other payments with respect to United States bearer securities if, on the
date of payment by the issuer, such securities are held by the Custodian or
its agent thereof and shall credit such income, as collected, to the Fund's
custodian account. Without limiting the generality of the foregoing, the
Custodian shall detach and present for payment all coupons and other income
items requiring presentation as and when they become due and shall collect
interest when due on securities held hereunder. Income due the Fund on
United States securities loaned pursuant to the provisions of Section 2.2
(10) shall be the responsibility of the Fund. The Custodian will have no
duty or responsibility in connection therewith, other than to provide the
Fund with such information or data as may be necessary to assist the Fund
in arranging for the timely delivery to the Custodian of the income to
which the Fund is properly entitled.

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<PAGE>

2.7 Payment of Fund Monies. Upon receipt of Proper Instructions, which may be
continuing instructions when deemed appropriate by the parties, the
Custodian shall pay out monies of the Fund in the following cases only:

1) Upon the purchase of domestic securities, options, futures contracts
or options on futures contracts for the account of the Fund but only
(a) against the delivery of such securities, or evidence of title to
such options, futures contracts or options on futures contracts, to
the Custodian (or any bank, banking firm or trust company doing
business in the United States or abroad which is qualified under the
Investment Company Act of 1940, as amended, to act as a custodian and
has been designated by the Custodian as its agent for this purpose)
registered in the name of the Fund or in the name of a nominee of the
Custodian referred to in Section 2.3 hereof or in proper form for
transfer; (b) in the case of a purchase effected through a Securities
System, in accordance with the conditions set forth in Section 2.10
hereof; (c) in the case of a purchase involving the Direct Paper
System, in accordance with the conditions set forth in Section 2.10A;
(d) in the case of repurchase agreements entered into between the Fund
and the Custodian, or another bank, or a broker-dealer which is a
member of NASD, (i) against delivery of the securities either in
certificate form or through an entry crediting the Custodian's account
at the Federal Reserve Bank with such securities or (ii) against
delivery of the receipt evidencing purchase by the Fund of securities
owned by the Custodian

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<PAGE>

along with written evidence of the agreement by the Custodian to
repurchase such securities from the Fund or (e) for transfer to a time
deposit account of the Fund in any bank, whether domestic or foreign;
such transfer may be effected prior to receipt of a confirmation from
a broker and/or the applicable bank pursuant to Proper Instructions
from the Fund as defined in Article 5;

2) In connection with conversion, exchange or surrender of securities
owned by the Fund as set forth in Section 2.2 hereof;

3) For the redemption or repurchase of Shares issued by the Fund as set
forth in Article 4 hereof;

4) For the payment of any expense or liability incurred by the Fund,
including but not limited to the following payments for the account of
the Fund: interest, taxes, management, accounting, transfer agent and
legal fees, and operating expenses of the Fund whether or not such
expenses are to be in whole or part capitalized or treated as deferred
expenses;

5) For the payment of any dividends declared pursuant to the governing
documents of the Fund;

6) For payment of the amount of dividends received in respect of
securities sold short;

7) For any other proper purpose, but only upon receipt of, in addition to
Proper Instructions, a certified copy of a resolution of the Board of
Directors or of the Executive Committee of the Fund signed by an
officer

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<PAGE>

of the Fund and certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth the purpose for
which such payment is to be made, declaring such purpose to be a
proper purpose, and naming the person or persons to whom such payment
is to be made.

2.8 Liability for Payment in Advance of Receipt of Securities Purchased.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of domestic securities for the
account of the Fund is made by the Custodian in advance of receipt of the
securities purchased in the absence of specific written instructions from
the Fund to so pay in advance, the Custodian shall be absolutely liable
to the Fund for such securities to the same extent as if the securities
had been received by the Custodian.

2.9 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of
1940, as amended, to act as a custodian, as its agent to carry out such
of the provisions of this Article 2 as the Custodian may from time to
time direct; provided, however, that the appointment of any agent shall
not relieve the Custodian of its responsibilities or liabilities
hereunder.

2.10 Deposit of Securities in Securities Systems. The Custodian may deposit
and/or maintain domestic securities owned by the Fund in a clearing
agency registered with the Securities and Exchange Commission under
Section 17A of the Securities Exchange Act of 1934, which acts as a
securities depository, or in the book-entry system authorized by the U.S.

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Department of the Treasury and certain federal agencies, collectively
referred to herein as "Securities System" in accordance with applicable
Federal Reserve Board and Securities and Exchange Commission rules and
regulations, if any, and subject to the following provisions:

1) The Custodian may keep domestic securities of the Fund in a
Securities System provided that such securities are represented in
an account ("Account") of the Custodian in the Securities System
which shall not include an assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for customers;

2) The records of the Custodian with respect to domestic securities
of the Fund which are maintained in a Securities System shall
identify by book-entry those securities belonging to the Fund;

3) The Custodian shall pay for domestic securities purchased for the
account of the Fund upon (i) receipt of advice from the Securities
System that such securities have been transferred to the Account,
and (ii) the making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of the Fund. The
Custodian shall transfer domestic securities sold for the account
of the Fund upon (i) receipt of advice from the Securities System
that payment for such securities has been transferred to the
Account, and (ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account of
the Fund. Copies of all advices from the Securities System of
transfers of

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<PAGE>

domestic securities for the account of the Fund shall identify the
Fund, be maintained for the Fund by the Custodian and be provided
to the Fund at its request. Upon request, the Custodian shall
furnish the Fund confirmation of each transfer to or from the
account of the Fund in the form of a written advice or notice and
shall furnish to the Fund copies of daily transaction sheets
reflecting each day's transactions in the Securities System for
the account of the Fund.

4) The Custodian shall provide the Fund with any report obtained by
the Custodian on the Securities System's accounting system,
internal accounting control and procedures for safeguarding
domestic securities deposited in the Securities System;

5) The Custodian shall have received the initial or annual
certificate, as the case may be, required by Article 13 hereof;

6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage to
the Fund resulting from use of the Securities System by reason of
any negligence, misfeasance or misconduct of the Custodian or any
of its agents or of any of its or their employees or from failure
of the Custodian or any such agent to enforce effectively such
rights as it may have against the Securities System; at the
election of the Fund, it shall be entitled to be subrogated to the
rights of the Custodian with respect to any claim against the
Securities System or any other person which the Custodian may have

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<PAGE>

as a consequence of any such loss or damage if and to the extent
that the Fund has not been made whole for any such loss or damage.

2.10A Fund Assets Held in the Custodian's Direct Paper System The Custodian may
deposit and/or maintain securities owned by the Fund in the Direct Paper
System of the Custodian subject to the following provisions:

1) No transaction relating to securities in the Direct Paper System
will be effected in the absence of Proper Instructions;

2) The Custodian may keep securities of the Fund in the Direct Paper
System only if such securities are represented in an account
("Account") of the Custodian in the Direct Paper System which
shall not include any assets of the Custodian other than assets
held as a fiduciary, custodian or otherwise for customers;

3) The records of the Custodian with respect to securities of the
Fund which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Fund;

4) The Custodian shall pay for securities purchased for the account
of the Fund upon the making of an entry on the records of the
Custodian to reflect such payment and transfer of securities to
the account of the Fund. The Custodian shall transfer securities
sold for the account of the Fund upon the making of an entry on
the records of the Custodian to reflect such transfer and receipt
of payment for the account of the Fund;

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<PAGE>

5) The Custodian shall furnish the Fund confirmation of each transfer
to or from the account of the Fund, in the form of a written
advice or notice, of Direct Paper on the next business day
following such transfer and shall furnish to the Fund copies of
daily transaction sheets reflecting each day's transaction in the
Direct Paper System for the account of the Fund;

6) The Custodian shall provide the Fund with any report on its system
of internal accounting control as the Fund may reasonably request
from time to time;

2.11 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts for
and on behalf of the Fund, into which account or accounts may be
transferred cash and/or securities, including securities maintained in an
account by the Custodian pursuant to Section 2.10 hereof, (i) in
accordance with the provisions of any agreement among the Fund, the
Custodian and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant registered under
the Commodity Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or any registered
contract market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions by
the Fund, (ii) for purposes of segregating cash or government securities
in connection with options purchased, sold or written by the Fund or
commodity futures contracts or options thereon purchased or sold by the
Fund, (iii) for the purposes of compliance by the Fund with the

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<PAGE>

procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange Commission
relating to the maintenance of segregated accounts by registered
investment companies and (iv) for other proper purposes, but only, in the
case of clause (iv), upon receipt of, in addition to Proper Instructions,
a certified copy of a resolution of the Board of Directors or of the
Executive Committee signed by an officer of the Fund and certified by the
Secretary or an Assistant Secretary, setting forth the purpose or
purposes of such segregated account and declaring such purposes to be
proper trust purposes.

2.12 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and state
tax purposes in connection with receipt of income or other payments with
respect to domestic securities of the Fund held by it and in connection
with transfers of such securities.

2.13 Proxies. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder of
such securities, if the securities are registered otherwise than in the
name of the Fund or a nominee of the Fund, all proxies, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Fund such proxies, all proxy soliciting materials
and all notices relating to such securities.

2.14 Communications Relating to Fund Portfolio Securities Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly to the
Fund all written information (including, without limitation, pendency of
calls and maturities of domestic securities and expirations of rights in
connection therewith and

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<PAGE>

notices of exercise of call and put options written by the Fund and the
maturity of futures contracts purchased or sold by the Fund) received
by the Custodian from issuers of the domestic securities being held for
the Fund. With respect to tender or exchange offers, the Custodian
shall transmit promptly to the Fund all written information received by
the Custodian from issuers of the domestic securities whose tender or
exchange is sought and from the party (or his agents) making the tender
or exchange offer. If the Fund desires to take action with respect to
any tender offer, exchange offer or any other similar transaction, the
Fund shall notify the Custodian at least three business days prior to
the date on which the Custodian is to take such action or, if later
than three business days prior, the Custodian shall use its reasonable
best efforts to take such action.

2.15 Reports to Fund by Independent Public Accountants

The Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public accountants on
the accounting system, internal accounting control and procedures for
safeguarding securities, futures contracts and options on futures
contracts, including domestic securities deposited and/or maintained in
a Securities System, relating to the services provided by the Custodian
under this Contract; such reports shall be of sufficient scope and in
sufficient detail, as may reasonably be required by the Fund to provide
reasonable assurance that any material inadequacies would be disclosed
by such examination, and, if there are no such inadequacies, the
reports shall so state.

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3. Duties of the Custodian with Respect to Property of the Fund Held Outside of
the United States

3.1 Appointment of Foreign Sub-Custodians

The Fund hereby authorizes and instructs the Custodian to employ as
sub-custodians for the Fund's securities and other assets maintained
outside the United States the foreign banking institutions and foreign
securities depositories designated on Schedule A hereto ("foreign
sub-custodians"). Upon receipt of "Proper Instructions", as defined in
Section 5 of this Contract, together with a certified resolution of the
Fund's Board of Directors, the Custodian and the Fund may agree to amend
Schedule A hereto from time to time to designate additional foreign
banking institutions and foreign securities depositories to act as
sub-custodian. Upon receipt of Proper Instructions, the Fund may instruct
the Custodian to cease the employment of any one or more such
sub-custodians for maintaining custody of the Fund's assets.

3.2 Assets to be Held. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5 under
the Investment Company Act of 1940, and (b) cash and cash equivalents in
such amounts as the Custodian or the Fund may determine to be reasonably
necessary to effect the Fund's foreign securities transactions.

3.3 Foreign Securities Depositories. Except as may otherwise be agreed upon
in writing by the Custodian and the Fund, assets of the Fund shall be
maintained in foreign securities depositories only through arrangements
implemented by the foreign banking institutions serving as sub-custodians
pursuant to the terms hereof. Where possible, such

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<PAGE>

arrangements shall include entry into agreements containing the
provisions set forth in Section 3.5 hereof.

3.4 Segregation of Securities. The Custodian shall identify on its books as
belonging to the Fund, the foreign securities of the Fund held by each
foreign sub-custodian. Each agreement pursuant to which the Custodian
employs a foreign banking institution shall require that such institution
establish a custody account for the Custodian on behalf of the Fund and
physically segregate in that account, securities and other assets of the
Fund, and, in the event that such institution deposits the Fund's
securities in a foreign securities depository, that it shall identify on
its books as belonging to the Custodian, as agent for the Fund, the
securities so deposited.

3.5 Agreements with Foreign Banking Institutions. Each agreement with a
foreign banking n shall be substantially in the form set forth in Exhibit
1 hereto and shall provide that: (a) the Fund's assets will not be
subject to any right, charge, security interest, lien or claim of any
kind in favor of the foreign banking institution or its creditors or
agent, except a claim of payment for their safe custody or
administration; (b) beneficial ownership of the Fund's assets will be
freely transferable without the payment of money or value other than for
custody or administration; (c) adequate records will be maintained
identifying the assets as belonging to the Fund; (d) officers of or
auditors employed by, or other representatives of the Custodian,
including to the extent permitted under applicable law the independent
public accountants for the Fund, will be given access to the books and
records of the foreign banking institution relating to its actions under
its

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agreement with the Custodian; and (e) assets of the Fund held by the
foreign sub-custodian will be subject only to the instructions of the
Custodian or its agents.

3.6 Access of Independent Accountants of the Fund. Upon request of the Fund,
the Custodian will use its best efforts to arrange for the independent
accountants of the Fund to be afforded access to the books and records of
any foreign banking institution employed as a foreign sub-custodian
insofar as such books and records relate to the performance of such
foreign banking institution under its agreement with the Custodian.

3.7 Reports by Custodian. The Custodian will supply to the Fund from time to
time, as mutually agreed upon, statements in respect of the securities
and other assets of the Fund held by foreign sub-custodians, including
but not limited to an identification of entities having possession of the
Fund's securities and other assets and advices or notifications of any
transfers of securities to or from each custodial account maintained by a
foreign banking institution for the Custodian on behalf of the Fund
indicating, as to securities acquired for the Fund, the identity of the
entity having physical possession of such securities.

3.8 Transactions in Foreign Custody Account

(a) Except as otherwise provided in paragraph (b) of this Section 3.8,
the provision of Sections 2.2 and 2.7 of this Contract shall apply,
mutatis mutandis to the foreign securities of the Fund held outside the
United States by foreign sub-custodians. (b) Notwithstanding any
provision of this Contract to the contrary, settlement and payment for
securities received for the account of the Fund and delivery of
securities maintained for the account of the Fund may be effected in
accordance with the customary

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established securities trading or securities processing practices and
procedures in the jurisdiction or market in which the transaction occurs,
including, without limitation, delivering securities to the purchaser
thereof or to a dealer therefor (or an agent for such purchaser or
dealer) against a receipt with the expectation of receiving later payment
for such securities from such purchaser or dealer. (c) Securities
maintained in the custody of a foreign sub-custodian may be maintained in
the name of such entity's nominee to the same extent as set forth in
Section 2.3 of this Contract, and the Fund agrees to hold any such
nominee harmless from any liability as a holder of record of such
securities.

3.9 Liability of Foreign Sub-Custodians. Each agreement pursuant to which the
Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable care
in the performance of its duties and to indemnify, and hold harmless, the
Custodian and each Fund from and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the institution's
performance of such obligations. At the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with respect to
any claims against a foreign banking institution as a consequence of any
such loss, damage, cost, expense, liability or claim if and to the extent
that the Fund has not been made whole for any such loss, damage, cost,
expense, liability or claim.

3.10 Liability of Custodian. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the custody

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of a foreign banking institution, a foreign securities depository or a
branch of a U.S. bank as contemplated by paragraph 3.13 hereof, the
Custodian shall not be liable for any loss, damage, cost, expense,
liability or claim resulting from nationalization, expropriation,
currency restrictions, or acts of war or terrorism or any loss where the
sub-custodian has otherwise exercised reasonable care. Notwithstanding
the foregoing provisions of this paragraph 3.10, in delegating custody
duties to State Street London Ltd., the Custodian shall not be relieved
of any responsibility to the Fund for any loss due to such delegation,
except such loss as may result from (a) political risk (including, but
not limited to, exchange control restrictions, confiscation,
expropriation, nationalization, insurrection, civil strife or armed
hostilities) or (b) other losses (excluding a bankruptcy or insolvency of
State Street London Ltd. not caused by political risk) due to Acts of
God, nuclear incident or other losses under circumstances where the
Custodian and State Street London Ltd. have exercised reasonable care.

3.11 Reimbursement for Advances. If the Fund requires the Custodian to advance
cash or securities for any purpose including the purchase or sale of
foreign exchange or of contracts for foreign exchange, or in the event
that the Custodian or its nominee shall incur or be assessed any taxes,
charges, expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from its or
its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Fund
shall be security therefor and should the Fund fail to repay the
Custodian promptly, the Custodian shall be entitled to utilize

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available cash and to dispose of the Fund assets to the extent necessary
to obtain reimbursement.

3.12 Monitoring Responsibilities. The Custodian shall furnish annually to the
Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection
with the initial approval of this Contract. In addition, the Custodian
will promptly inform the Fund in the event that the Custodian learns of a
material adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or in the
case of any foreign sub-custodian not the subject of an exemptive order
from the Securities and Exchange Commission is notified by such foreign
sub-custodian that there appears to be a substantial likelihood that its
shareholders' equity will decline below $200 million (U.S. dollars or the
equivalent thereof) or that its shareholders' equity has declined below
$200 million (in each case computed in accordance with generally accepted
U.S. accounting principles).

3.13 Branches of U.S. Banks

(a) Except as otherwise set forth in this Contract, the provisions hereof
shall not apply where the custody of the Fund assets are maintained in a
foreign branch of a banking institution which is a "bank" as defined by
Section 2(a)(5) of the Investment Company Act of 1940 meeting the
qualification set forth in Section 26(a) of said Act. The appointment of
any such branch as a sub-custodian shall be governed by paragraph 1 of
this Contract.

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(b) Cash held for the Fund in the United Kingdom shall be maintained in
an interest bearing account established for the Fund with the
Custodian's London branch, which account shall be subject to the
direction of the Custodian, State Street London Ltd. or both.

4. Payments for Repurchases or Redemptions and Sales of Shares the Fund

From such funds as may be available for the purpose but subject to the
limitations of the Articles of Incorporation and any applicable votes of the
Board of Directors of the Fund pursuant thereto, the Custodian shall, upon
receipt of instructions from the Transfer Agent, make funds available for
payment to holders of Shares who have delivered to the Transfer Agent a request
for redemption or repurchase of their Shares. In connection with the redemption
or repurchase of Shares of the Fund, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares of the Fund, the Custodian shall honor checks drawn on
the Custodian by a holder of Shares, which checks have been furnished by the
Fund to the holder of Shares, when presented to the Custodian in accordance with
such procedures and controls as are mutually agreed upon from time to time
between the Fund and the Custodian.

The Custodian shall receive from the distributor for the Fund's Shares or
from the Transfer Agent of the Fund and deposit into the Fund's account such
payments as are received for Shares of the Fund issued or sold from time to time
by the Fund. The Custodian will provide timely notification to the Fund and the
Transfer Agent of any receipt by it of payments for Shares of the Fund.

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5. Proper Instructions

Proper Instructions as used herein means a writing signed or initialled by
one or more person or persons as the Board of Directors shall have from time to
time authorized. Each such writing shall set forth the specific transaction or
type of transaction involved, including a specific statement of the purpose for
which such action is requested. Oral instructions will be considered Proper
Instructions if the Custodian reasonably believes them to have been given by a
person authorized to give such instructions with respect to the transaction
involved. The Fund shall cause all oral instructions to be confirmed in writing.
Upon receipt of a certificate of the Secretary or an Assistant Secretary as to
the authorization by the Board of Directors of the Fund accompanied by a
detailed description of procedures approved by the Board of Directors, Proper
Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Board of Directors
and the Custodian are satisfied that such procedures afford adequate safeguards
for the Fund's assets. For purposes of this Section, Proper Instructions shall
include instructions received by the Custodian pursuant to any three-party
agreement which requires a segregated asset account in accordance with Section
2.11.

6. Actions Permitted without Express Authority

The Custodian may in its discretion, without express authority from the
Fund:

1) make payments to others for minor expenses of handling securities or
other similar items relating to its duties under this Contract or to itself in
reimbursement for such payments, provided, that all such payments shall be
accounted for to the Fund:

2) surrender securities in temporary form for securities in definitive
form;

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3) endorse for collection, in the name of the Fund, checks, drafts and
other negotiable instruments; and

4) in general, attend to all non-discretionary details in connection with
the sale, exchange, substitution, purchase, transfer and other dealings with the
securities and property of the Fund except as otherwise directed by the Board of
Directors of the Fund.

7. Evidence of Authority

The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of the Fund. The
Custodian may receive and accept a certified copy of a vote of the Board of
Directors of the Fund as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or of any action
by the Board of Directors pursuant to the Articles of Incorporation as described
in such vote, and such vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.

8. Duties of Custodian with Respect to the Books of Account and Calculation of
Net Asset Value and Net Income

Unless otherwise directed in writing by the Fund, the Custodian shall keep
the books of account of the Fund and shall compute the net asset value per share
of the outstanding shares of the Fund. The Custodian shall also calculate daily
the net income of the Fund as described in the Fund's currently effective
prospectus and shall advise the Fund and the Transfer Agent daily of the total
amounts of such net income and, if instructed in writing by an officer of the
Fund to do so, shall advise the Transfer Agent periodically of the division of
such net income among its

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various components. The calculations of the net asset value per share and the
daily income of the Fund shall be made at the time or times described from time
to time in the Fund's currently effective prospectus.

9. Records

The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder,
applicable federal and state tax laws and any other law or administrative rules
or procedures which may be applicable to the Fund. All such records shall be the
property of the Fund and shall at all times during the regular business hours of
the Custodian be open for inspection by duly authorized officers, employees or
agents of the Fund and employees and agents of the Securities and Exchange
Commission. The Custodian shall, at the Fund's request, supply the Fund with a
tabulation of securities owned by the Fund and held by the Custodian and shall,
when requested to do so by the Fund and for such compensation as shall be agreed
upon between the Fund and the Custodian, include certificate numbers in such
tabulations.

10. Opinion of Fund's Independent Accountant

The Custodian shall take all reasonable action, as the Fund may from time
to time request, to obtain from year to year favorable opinions from the Fund's
independent accountants with respect to its activities hereunder in connection
with the preparation of the Fund's Form N-1A, and Form N-SAR or other annual
reports to the Securities and Exchange Commission and with respect to any other
requirements of such Commission.

- 27 -

<PAGE>

11. Compensation of Custodian

The Custodian shall be entitled to reasonable compensation for its services
and expenses as Custodian, as agreed upon from time to time between the Fund and
the Custodian.

12. Responsibility of Custodian

So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties, including any
futures commission merchant acting pursuant to the terms of a three-party
futures or options agreement. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Contract, but shall be
kept indemnified by and shall be without liability to the Fund for any action
taken or omitted by it in good faith without negligence. It shall be entitled to
rely on and may act upon advice of counsel reasonably acceptable to the Fund
(who may be counsel for the Fund) on all matters, and shall be without liability
for any action reasonably taken or omitted pursuant to such advice.
Notwithstanding the foregoing, the responsibility of the Custodian with respect
to redemptions effected by check shall be in accordance with a separate
Agreement entered into between the Custodian and the Fund.

The Custodian shall be liable for the acts or omissions of a foreign
banking institution appointed pursuant to the provisions of Article 3 to the
same extent as set forth in Article 1 hereof with respect to sub-custodians
located in the United States and, regardless of whether assets are maintained in
the custody of a foreign banking institution, a foreign securities

- 28 -

<PAGE>

depository or a branch of a U.S. bank as contemplated by paragraph 3.11 hereof,
the Custodian shall not be liable for any loss, damage, cost, expense, liability
or claim resulting from, or caused by, the direction of or authorization by the
Fund to maintain custody or any securities or cash of the Fund in a foreign
country including, but not limited to, losses resulting from nationalization,
expropriation, currency restrictions, or acts of war or terrorism.

If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned to
the Fund being liable for the payment of money or incurring liability of some
other form, the Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.

If the Fund requires the Custodian to advance cash or securities for any
purpose or in the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Fund shall be
security therefor and should the Fund fail to repay the Custodian promptly, the
Custodian shall be entitled to utilize available cash and to dispose of the Fund
assets to the extent necessary to obtain reimbursement.

13. Effective Period, Termination and Amendment

This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual

- 29 -

<PAGE>

agreement of the parties hereto and may be terminated by either party by an
instrument in writing delivered or mailed, postage prepaid to the other party,
such termination to take effect not sooner than thirty (30) days after the date
of such delivery or mailing; provided, however that the Custodian shall not act
under Section 2.10 hereof in the absence of receipt of an initial certificate of
the Secretary or an Assistant Secretary that the Board of Directors of the Fund
has approved the initial use of a particular Securities System and the receipt
of an annual certificate of the Secretary or an Assistant Secretary that the
Board of Directors has reviewed the use by the Fund of such Securities System,
as required in each case by Rule 17f-4 under the Investment Company Act of 1940,
as amended and that the Custodian Shall not act under Section 2.10A hereof in
the absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of Directors has approved the initial use of
the Direct Paper System and the receipt of an annual certificate of the
Secretary or an Assistant Secretary that the Board of Directors has reviewed the
use by the Fund of the Direct Paper System; provided further, however, that the
Fund shall not amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of the Articles of
Incorporation, and further provided, that the Fund may at any time by action of
its Board of Directors (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the Currency or
upon the happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.

- 30 -

<PAGE>

Upon termination of the Contract, the Fund shall pay to the Custodian such
compensation as may be due as of the date of such termination and shall likewise
reimburse the Custodian for its costs, expenses and disbursements.

14. Successor Custodian

If a successor custodian shall be appointed by the Board of Directors of
the Fund, the Custodian shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed and in the form for
transfer, all securities then held by it hereunder and shall transfer to an
account of the successor custodian all of the Fund's securities held in a
Securities System.

If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Board of
Directors of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.

In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and other
properties held by the Custodian and all instruments held by the Custodian
relative thereto and all other property held by it under this Contract and to
transfer to an account of such successor custodian all of the Fund's securities
held in any

- 31 -

<PAGE>

Securities System. Thereafter, such bank or trust company shall be the successor
of the Custodian under this Contract.

In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Directors to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.

15. Interpretive and Additional Provisions

In connection with the operation of this Contract, the Custodian and the
Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Fund Agreement of the Fund. No interpretive or additional provisions made as
provided in the preceding sentence shall be deemed to be an amendment of this
Contract.

16. Massachusetts Law to Apply

This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of the Commonwealth of Massachusetts.

- 32 -

<PAGE>

17. Prior Contracts

This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund and the Custodian relating to the custody of the
Fund's assets.

18. Notices

Written notices issued pursuant to this agreement shall be personally
delivered or mailed postage prepaid to the respective parties as follows:

To the Fund: c/o General Electric Investment Corp.
3003 Summer Street
Stamford, CT 06904
Attn: Manager, Pension Accounting and
Trading Support
Telephone: 203-326-2398 Facsimile: 203-326-4268

To the Custodian: State Street Bank and Trust Company
Master Trust Division
One Monarch Drive
North Quincy, MA 02171
Attn: Judith Hackstaff
Telephone: 617-847-2703 Facsimile: 617-786-5046

or to such other address as a party may hereafter specify in writing.

19. The Parties

All references herein to the "Fund" are to each of the Funds listed on
Appendix A individually, as if this Contract were between such individual Fund
and the Custodian. In the case of a series Fund or trust, all references to the
"Fund" are to the individual series or portfolio of such Fund or trust, or to
such Fund or trust on behalf of the individual series or portfolio, as
appropriate. With respect to any Fund listed on Appendix A which is organized as
a trust, references herein to Board of Directors and Articles of Incorporation
shall be deemed a reference

- 33 -

<PAGE>

to Board of Trustees and Declaration of Trust respectively and reference to
shares of capital stock shall be deemed a reference to shares of beneficial
interest.

IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the First day of July, 1989.

ATTEST STATE STREET BANK AND TRUST COMPANY

/s/ Jack Saraf By: /s/
- ----------------------------- --------------------------------
Jack Saraf Assistant Secretary
Vice President

ATTEST (FOR EACH OF THE S&S FUNDS NAMED ON
APPENDIX A HERETO)

/s/ Alan M. Lewis By: /s/ Michael J. Cosgrove
- ----------------------------- --------------------------------
Alan M. Lewis Michael J. Cosgrove

ATTEST (FOR EACH OF THE ELFUN FUNDS NAMED ON
APPENDIX A HERETO)

/s/ Alan M. Lewis By: /s/ Michael J. Cosgrove
- ----------------------------- --------------------------------
Alan M. Lewis Michael J. Costrove

- 34 -

<PAGE>

Appendix A

This Appendix supersedes all previous Appendices created with respect to the
Custodian Contract between State Street and the parties listed in Appendix A
thereto, dated July 1, 1989 (as thereafter amended). It is intended that the
Custodian Contract apply to each Fund set forth below.

Fund Name
- ---------

GE S&S Program Mutual Fund

GE S&S Long-Term Interest Fund

Elfun Diversified Fund

Elfun Global Fund

Elfun Money Market Fund

Elfun Trusts

Elfun Tax Exempt Income Fund

Elfun Income Fund

GE Funds:

GE Premier Growth Equity Fund

GE U.S. Equity Fund

GE Global Equity Fund

GE Fixed Income Fund

GE Tax-Exempt Fund

GE Money Market Fund

GE Strategic Investment Fund

GE International Equity Fund

GE Short-Term Government Fund

GE Mid-Cap Growth Fund

GE International Fixed Income Fund

GE Value Equity Fund

GE Government Securities Fund

Variable Investment Trust:

GE U.S. Equity Portfolio

GE International Equity Portfolio

GE Strategic Investment Portfolio

GE Fixed Income Portfolio

GE Money Market Portfolio

GE Institutional Funds:

Emerging Markets Fund

International Equity Fund

Mid-Cap Growth Fund

Premier Growth Equity Fund

Value Equity Fund

U.S. Equity Fund

S&P 500 Index Fund

Strategic Investment Fund

Income Fund

Money Market Fund

<PAGE>

GE LifeStyle Funds:

GE Conservative Strategy Fund

GE Moderate Strategy Fund

GE Aggressive Strategy Fund

GE Conservative Allocation Fund

GE Moderate Allocation Fund

GE Aggressive Allocation Fund

GE Investment Funds, Inc.:

S&P 500 Index Fund

Government Securities Fund

U.S. Equity Fund

Fixed Income Fund

Premier Growth Equity Fund

Total Return Fund

Money Market Fund

Real Estate Securities Fund

International Equity Fund

Global Income Fund

Value Equity Fund

ATTEST STATE STREET BANK AND TRUST COMPANY

/s/ By: /s/ Drew Pace
- ----------------------------- --------------------------------
Name: Drew Pace
Title: Senior Vice President

ATTEST (FOR EACH OF THE FUNDS HEREINABOVE
DESCRIBED)

/s/ Jeanne La Porta By: /s/ Michael J. Cosgrove
- ----------------------------- --------------------------------
Name:
Title:

September __, 1997

Exhibit 9

TRANSFER AGENCY AND SERVICE AGREEMENT

between

GE INVESTMENTS FUNDS, INC.

and

STATE STREET BANK AND TRUST COMPANY

1G-Domestic-Corp/Series
<PAGE>

TABLE OF CONTENTS

Page
----

1. Terms of Appointment; Duties of the Bank 3
2. Fees and Expenses 5
3. Representations and Warranties of the Bank 5
4. Representations and Warranties of the Fund 5
5. Wire Transfer Operating Guidelines 6
6. Data Access and Proprietary Information 7
7. Indemnification 8
8. Standard of Care 9
9. Covenants of the Fund and the Bank 9
10. Termination of Agreement 9
11. Additional Funds 10
12. Assignment 10
13. Amendment 11
14. Massachusetts Law to Apply 10
15. Force Majeure 10
16. Consequential Damages 10
17. Merger of Agreement 10
18. Counterparts 10
19. Reproduction of Documents 11

<PAGE>

TRANSFER AGENCY AND SERVICE AGREEMENT

AGREEMENT made as of the ____ day of October, 1997, by and between GE
INVESTMENTS FUNDS, INC., a Virginia corporation, having its principal office and
place of business at 3003 Summer Street, Stamford, Connecticut 06905 (the
"Fund"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company
having its principal office and place of business at 225 Franklin Street,
Boston, Massachusetts 02110 (the "Bank").

WHEREAS, the Fund is authorized to issue shares in separate series, with each
such series representing interests in a separate portfolio of securities and
other assets; and

WHEREAS, the Fund intends to initially offer shares in eleven series, such
series shall be named in the attached Schedule A which may be amended by the
parties from time to time (each such series, together with all other series
subsequently established by the Fund and made subject to this Agreement in
accordance with Article 10, being herein referred to as a "Portfolio", and
collectively as the "Portfolios");

WHEREAS, the Fund on behalf of the Portfolios desires to appoint the Bank as its
transfer agent, dividend disbursing agent, custodian of certain retirement plans
and agent in connection with certain other activities, and the Bank desires to
accept such appointment;

NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:

l. Terms of Appointment; Duties of the Bank

1.1 Subject to the terms and conditions set forth in this Agreement, the
Fund, on behalf of the Portfolios, hereby employs and appoints the Bank
to act as, and the Bank agrees to act as its transfer agent for the
Fund's authorized and issued shares of its common stock, $0.01 par value,
("Shares"), dividend disbursing agent, custodian of certain retirement
plans and agent in connection with any accumulation, open-account or
similar plans provided to the shareholders of each of the respective
Portfolios of the Fund ("Shareholders") and set out in the currently
effective prospectus and statement of additional information
("prospectus") of the Fund on behalf of the applicable Portfolio,
including without limitation any periodic investment plan or periodic
withdrawal program.

1.2 The Bank agrees that it will perform the following services:

(a) In accordance with procedures established from time to time by
agreement between the Fund on behalf of each of the Portfolios, as
applicable and the Bank, the Bank shall:

(i) Receive for acceptance, orders for the purchase of Shares,
and promptly deliver payment and appropriate documentation
thereof to the Custodian of the Fund authorized pursuant to
the Articles of Incorporation of the Fund (the
"Custodian");

(ii) Pursuant to purchase orders, issue the appropriate number
of Shares and hold such Shares in the appropriate
Shareholder account;

(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation
thereof to the Custodian;

(iv) In respect to the transactions in items (i), (ii) and (iii)
above, the Bank shall execute transactions directly with
broker-dealers authorized by the Fund;

(v) At the appropriate time as and when it receives monies paid
to it by the Custodian with respect to any redemption, pay
over or cause to be paid over in the appropriate manner
such monies as instructed by the redeeming Shareholders;

3
<PAGE>

(vi) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;

(vii) Prepare and transmit payments for dividends and
distributions declared by the Fund on behalf of the
applicable Portfolio;

(viii) Issue replacement certificates for those certificates
alleged to have been lost, stolen or destroyed upon receipt
by the Bank of indemnification satisfactory to the Bank and
protecting the Bank and the Fund, and the Bank at its
option, may issue replacement certificates in place of
mutilated stock certificates upon presentation thereof and
without such indemnity;

(ix) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing and

(x) Record the issuance of shares of the Fund and maintain
pursuant to SEC Rule 17Ad-10(e) a record of the total
number of shares of the Fund which are authorized, based
upon data provided to it by the Fund, and issued and
outstanding. The Bank shall also provide the Fund on a
regular basis with the total number of shares which are
authorized and issued and outstanding and shall have no
obligation, when recording the issuance of shares, to
monitor the issuance of such shares or to take cognizance
of any laws relating to the issue or sale of such shares,
which functions shall be the sole responsibility of the
Fund.

(b) In addition to and neither in lieu nor in contravention of the
services set forth in the above paragraph (a), the Bank shall: (i)
perform the customary services of a transfer agent, dividend
disbursing agent, custodian of certain retirement plans and, as
relevant, agent in connection with accumulation, open-account or
similar plans (including without limitation any periodic
investment plan or periodic withdrawal program), including but not
limited to: maintaining all Shareholder accounts, preparing
Shareholder meeting lists, mailing Shareholder proxies,
Shareholder reports and prospectuses to current Shareholders,
withholding taxes on U.S. resident and non-resident alien
accounts, preparing and filing U.S. Treasury Department Forms 1099
and other appropriate forms required with respect to dividends and
distributions by federal authorities for all Shareholders,
preparing and mailing confirmation forms and statements of account
to Shareholders for all purchases and redemptions of Shares and
other confirmable transactions in Shareholder accounts, preparing
and mailing activity statements for Shareholders, and providing
Shareholder account information and (ii) provide a system which
will enable the Fund to monitor the total number of Shares sold in
each State.

(c) In addition, the Fund shall (i) identify to the Bank in writing
those transactions and assets to be treated as exempt from blue
sky reporting for each State and (ii) verify the establishment of
transactions for each State on the system prior to activation and
thereafter monitor the daily activity for each State. The
responsibility of the Bank for the Fund's blue sky State
registration status is solely limited to the initial establishment
of transactions subject to blue sky compliance by the Fund and the
reporting of such transactions to the Fund as provided above.

(d) Procedures as to who shall provide certain of these services in
Section 1 may be established from time to time by agreement
between the Fund on behalf of each Portfolio and the Bank per the
attached service responsibility schedule. The Bank may at times
perform only a portion of these services and the Fund or its agent
may perform these services on the Fund's behalf.

(e) The Bank shall provide additional services on behalf of the Fund
(e.g., escheatment services) which may be agreed upon in writing
between the Fund and the Bank.

4
<PAGE>

2. Fees and Expenses

2.1 For the performance by the Bank pursuant to this Agreement, the Fund
agrees on behalf of each of the Portfolios to pay the Bank an annual
maintenance fee for each Shareholder account as set out in the initial
fee schedule attached hereto. Such fees and out-of-pocket expenses and
advances identified under Section 2.2 below may be changed from time to
time subject to mutual written agreement between the Fund and the Bank.

2.2 In addition to the fee paid under Section 2.1 above, the Fund agrees on
behalf of each of the Portfolios to reimburse the Bank for out-of-pocket
expenses, including but not limited to confirmation production, postage,
forms, telephone, microfilm, microfiche, mailing and tabulating proxies,
records storage, or advances incurred by the Bank for the items set out
in the fee schedule attached hereto. In addition, any other expenses
incurred by the Bank at the request or with the consent of the Fund, will
be reimbursed by the Fund on behalf of the applicable Portfolio.

2.3 The Fund agrees on behalf of each of the Portfolios to pay all fees and
reimbursable expenses within five days following the receipt of the
respective billing notice. Postage for mailing of dividends, proxies,
Fund reports and other mailings to all shareholder accounts shall be
advanced to the Bank by the Fund at least seven (7) days prior to the
mailing date of such materials.

3. Representations and Warranties of the Bank

The Bank represents and warrants to the Fund that:

3.1 It is a trust company duly organized and existing and in good standing
under the laws of The Commonwealth of Massachusetts.

3.2 It is duly qualified to carry on its business in The Commonwealth of
Massachusetts.

3.3 It is empowered under applicable laws and by its Charter and By-Laws to
enter into and perform this Agreement.

3.4 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.

3.5 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.

4. Representations and Warranties of the Fund

The Fund represents and warrants to the Bank that:

4.1 It is a corporation duly organized and existing and in good standing
under the laws of the State of Virginia.

4.2 It is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement.

4.3 All corporate proceedings required by said Articles of Incorporation and
By-Laws have been taken to authorize it to enter into and perform this
Agreement.

4.4 It is an open-end and diversified management investment company
registered under the Investment Company Act of 1940, as amended.

5
<PAGE>

4.5 A registration statement under the Securities Act of 1933, as amended on
behalf of each of the Portfolios is currently effective and will remain
effective, and appropriate state securities law filings have been made
and will continue to be made, with respect to all Shares of the Fund
being offered for sale.

5. Wire Transfer Operating Guidelines/Articles 4A of the Uniform Commercial
Code

5.1 The Bank is authorized to promptly debit the appropriate Fund
account(s) upon the receipt of a payment order in compliance with
the selected security procedure (the "Security Procedure") chosen
for funds transfer and in the amount of money that the Bank has
been instructed to transfer. The Bank shall execute payment orders
in compliance with the Security Procedure and with the Fund
instructions on the execution date provided that such payment
order is received by the customary deadline for processing such a
request, unless the payment order specifies a later time. All
payment orders and communications received after this the
customary deadline will be deemed to have been received the next
business day.

5.2 The Fund acknowledges that the Security Procedure it has
designated on the Fund Selection Form was selected by the Fund
from security procedures offered by the Bank. The Fund shall
restrict access to confidential information relating to the
Security Procedure to authorized persons as communicated to the
Bank in writing by the Fund. The Fund must notify the Bank
immediately if it has reason to believe unauthorized persons may
have obtained access to such information or of any change in the
Fund's authorized personnel. The Bank shall verify the
authenticity of all Fund instructions according to the Security
Procedure.

5.3 The Bank shall process all payment orders on the basis of the
account number contained in the payment order. In the event of a
discrepancy between any name indicated on the payment order and
the account number, the account number shall take precedence and
govern.

5.4 The Bank reserves the right to decline to process or delay the
processing of a payment order which (a) is in excess of the
collected balance in the account to be charged at the time of the
Bank's receipt of such payment order; (b) if initiating such
payment order would cause the Bank, in the Bank's sole reasonable
judgement, to exceed any volume, aggregate dollar, network, time,
credit or similar limits which are applicable to the Bank; or (c)
if the Bank, in good faith, is unable to satisfy itself that the
transaction has been properly authorized.

5.5 The Bank shall use reasonable efforts to act on all authorized
requests to cancel or amend payment orders received in compliance
with the Security Procedure provided that such requests are
received in a timely manner affording the Bank reasonable
opportunity to act. However, the Bank assumes no liability if the
request for amendment or cancellation cannot be satisfied.

5.6 The Bank shall assume no responsibility for failure to detect any
erroneous payment order provided that the Bank complies with the
payment order instructions as received and the Bank complies with
the Security Procedure. The Security Procedure is established for
the purpose of authenticating payment orders only and not for the
detection of errors in payment orders.

5.7 The Bank shall assume no responsibility for lost interest with
respect to the refundable amount of any unauthorized payment
order, unless the Bank is notified of the unauthorized payment
order within thirty (30) days of notification by the Bank of the
acceptance of such payment order. In no event (including failure
to execute a payment order) shall the Bank be liable for special,
indirect or consequential damages, even if advised of the
possibility of such damages.

5.8 When the Fund initiates or receives Automated Clearing House
credit and debit entries pursuant to these guidelines and the
rules of the National Automated Clearing House Association and the
New England Clearing House Association, the Bank will act as an
Originating Depository Financial Institution and/or receiving
depository Financial Institution, as the case may be, with respect
to such entries. Credits given by the Bank with respect to an ACH
credit entry are pro-

<PAGE>

visional until the Bank receives final settlement for such entry
from the Federal Reserve Bank. If the Bank does not receive such
final settlement, the Fund agrees that the Bank shall receive a
refund of the amount credited to the Fund in connection with such
entry, and the party making payment to the Fund via such entry
shall not be deemed to have paid the amount of the entry.

5.9 Confirmation of Bank's execution of payment orders shall
ordinarily be provided within twenty four (24) hours notice of
which may be delivered through the Bank's proprietary information
systems, or by facsimile or call-back. Fund must report any
objections to the execution of an order within thirty (30) days.

6. Data Access and Proprietary Information

6.1 The Fund acknowledges that the data bases, computer programs, screen
formats, report formats, interactive design techniques, and documentation
manuals furnished to the Fund by the Bank as part of the Fund's ability
to access certain Fund-related data ("Customer Data") maintained by the
Bank on data bases under the control and ownership of the Bank ("Data
Access Services") constitute copyrighted, trade secret, or other
proprietary information (collectively, "Proprietary Information") of
substantial value to the Bank or other third party. In no event shall
Proprietary Information be deemed Customer Data. The Fund agrees to treat
all Proprietary Information as proprietary to the Bank and further agrees
that it shall not divulge any Proprietary Information to any person or
organization except as may be provided hereunder. Without limiting the
foregoing, the Fund agrees for itself and its employees and agents:

(a) to access Customer Data solely from locations as may be designated
in writing by the Bank and solely in accordance with the Bank's
applicable user documentation;

(b) to refrain from copying or duplicating in any way the Proprietary
Information;

(c) to refrain from obtaining unauthorized access to any portion of
the Proprietary Information, and if such access is inadvertently
obtained, to inform in a timely manner of such fact and dispose of
such information in accordance with the Bank's instructions;

(d) to refrain from causing or allowing the data acquired hereunder
from being retransmitted to any other computer facility or other
location, except with the prior written consent of the Bank;

(e) that the Fund shall have access only to those authorized
transactions agreed upon by the parties;

(f) to honor all reasonable written requests made by the Bank to
protect at the Bank's expense the rights of the Bank in
Proprietary Information at common law, under federal copyright law
and under other federal or state law.

Each party shall take reasonable efforts to advise its employees of their
obligations pursuant to this Section 6. The obligations of this Section shall
survive any earlier termination of this Agreement.

6.2 If the Fund notifies the Bank that any of the Data Access Services do not
operate in material compliance with the most recently issued user
documentation for such services, the Bank shall endeavor in a timely
manner to correct such failure. Organizations from which the Bank may
obtain certain data included in the Data Access Services are solely
responsible for the contents of such data and the Fund agrees to make no
claim against the Bank arising out of the contents of such third-party
data, including, but not limited to, the accuracy thereof. DATA ACCESS
SERVICES AND ALL COMPUTER PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN
CONNECTION THEREWITH ARE PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE
BANK EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED
HEREIN INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

7
<PAGE>

6.3 If the transactions available to the Fund include the ability to
originate electronic instructions to the Bank in order to (i) effect the
transfer or movement of cash or Shares or (ii) transmit Shareholder
information or other information, then in such event the Bank shall be
entitled to rely on the validity and authenticity of such instruction
without undertaking any further inquiry as long as such instruction is
undertaken in conformity with security procedures established by the Bank
from time to time.

7. Indemnification

7.1 The Bank shall not be responsible for, and the Fund shall on behalf of
the applicable Portfolio indemnify and hold the Bank harmless from and
against, any and all losses, damages, costs, charges, reasonable counsel
fees, payments, expenses and liability arising out of or attributable to:

(a) All actions of the Bank or its agents or subcontractors required
to be taken pursuant to this Agreement, provided that such actions
are taken in good faith and without negligence or willful
misconduct;

(b) The Fund's lack of good faith, negligence or willful misconduct
which arise out of the breach of any representation or warranty of
the Fund hereunder;

(c) The reliance on or use by the Bank or its agents or subcontractors
of information, records, documents or services which (i) are
received by the Bank or its agents or subcontractors, and (ii)
have been prepared, maintained or performed by the Fund or any
other person or firm on behalf of the Fund including but not
limited to any previous transfer agent or registrar;

(d) The reliance on, or the carrying out by the Bank or its agents or
subcontractors of any instructions or requests of the Fund on
behalf of the applicable Portfolio;

(e) The offer or sale of Shares in violation of federal or state
securities laws or regulations requiring that such Shares be
registered or in violation of any stop order or other
determination or ruling by any federal or any state agency with
respect to the offer or sale of such Shares and

(f) The negotiations and processing of checks made payable to
prospective or existing Shareholders tendered to the Bank for the
purchase of Shares, such checks are commonly known as "third party
checks."

7.2 At any time the Bank may apply to any officer of the Fund for
instructions, and may consult with legal counsel with respect to any
matter arising in connection with the services to be performed by the
Bank under this Agreement, and the Bank and its agents or subcontractors
shall not be liable and shall be indemnified by the Fund on behalf of the
applicable Portfolio for any action taken or omitted by it in reliance
upon such instructions or upon the opinion of such counsel. The Bank, its
agents and subcontractors shall be protected and indemnified in acting
upon any paper or document furnished by or on behalf of the Fund,
reasonably believed to be genuine and to have been signed by the proper
person or persons, or upon any instruction, information, data, records or
documents provided the Bank or its agents or subcontractors by machine
readable input, telex, CRT data entry or other similar means authorized
by the Fund, and shall not be held to have notice of any change of
authority of any person, until receipt of written notice thereof from the
Fund. The Bank, its agents and subcontractors shall also be protected and
indemnified in recognizing stock certificates which are reasonably
believed to bear the proper manual or facsimile signatures of the
officers of the Fund, and the proper countersignature of any former
transfer agent or former registrar, or of a co-transfer agent or
co-registrar.

7.3 In order that the indemnification provisions contained in this Section 7
shall apply, upon the assertion of a claim for which the Fund may be
required to indemnify the Bank, the Bank shall promptly notify the Fund
of such assertion, and shall keep the Fund advised with respect to all
developments concerning such claim. The Fund shall have the option to
participate with the Bank in the defense of such claim or to

<PAGE>

defend against said claim in its own name or in the name of the Bank. The
Bank shall in no case confess any claim or make any compromise in any
case in which the Fund may be required to indemnify the Bank except with
the Fund's prior written consent.

8. Standard of Care

The Bank shall at all times act in good faith and agrees to use its best
efforts within reasonable limits to insure the accuracy of all services
performed under this Agreement, but assumes no responsibility and shall
not be liable for loss or damage due to errors unless said errors are
caused by its negligence, bad faith, or willful misconduct or that of its
employees.

9. Covenants of the Fund and the Bank

9.1 The Fund shall on behalf of each of the Portfolios promptly furnish to
the Bank the following:

(a) A certified copy of the resolution of the Board of Directors of
the Fund authorizing the appointment of the Bank and the execution
and delivery of this Agreement.

(b) A copy of the Articles of Incorporation and By-Laws of the Fund
and all amendments thereto.

9.2 The Bank hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if
any; and for the preparation or use, and for keeping account of, such
certificates, forms and devices.

9.3 The Bank shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Fund Act of 1940, as amended,
and the Rules thereunder, the Bank agrees that all such records prepared
or maintained by the Bank relating to the services to be performed by the
Bank hereunder are the property of the Fund and will be preserved,
maintained and made available in accordance with such Section and Rules,
and will be surrendered promptly to the Fund on and in accordance with
its request.

9.4 The Bank and the Fund agree that all books, records, information and data
pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be voluntarily
disclosed to any other person, except as may be required by law.

9.5 In case of any requests or demands for the inspection of the Shareholder
records of the Fund, the Bank will endeavor to notify the Fund and to
secure instructions from an authorized officer of the Fund as to such
inspection. The Bank reserves the right, however, to exhibit the
Shareholder records to any person whenever it is advised by its counsel
that it may be held liable for the failure to exhibit the Shareholder
records to such person.

10. Termination of Agreement

10.1 This Agreement may be terminated by either party upon one hundred twenty
(120) days written notice to the other.

10.2 Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be
borne by the Fund on behalf of the applicable Portfolio(s). Additionally,
(a) the Bank reserves the right to charge for any other reasonable
expenses associated with such termination for any additional services
required by the Fund, (b) if the Fund should exercise its right to
terminate within twelve (12) months of the execution of this Agreement,
the Bank may impose upon the Fund a charge equivalent to the average of
three (3) months fees.

9
<PAGE>

11. Additional Funds

In the event that the Fund establishes one or more series of Shares in
addition to the series named in the attached Schedule A, with respect to
which it desires to have the Bank render services as transfer agent under
the terms hereof, it shall so notify the Bank in writing, and if the Bank
agrees in writing to provide such services, such series of Shares shall
become a Portfolio hereunder.

12. Assignment

12.1 Except as provided in Section 12.3 below, neither this Agreement nor any
rights or obligations hereunder may be assigned by either party without
the written consent of the other party.

12.2 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.

12.3 The Bank may, without further consent on the part of the Fund,
subcontract for the performance hereof with (i) Boston Financial Data
Services, Inc., a Massachusetts corporation ("BFDS") which is duly
registered as a transfer agent pursuant to Section 17A(c)(2) of the
Securities Exchange Act of 1934, as amended ("Section 17A(c)(2)"), (ii) a
BFDS subsidiary duly registered as a transfer agent pursuant to Section
17A(c)(2) or (iii) a BFDS affiliate; provided, however, that the Bank
shall be as fully responsible to the Fund for the acts and omissions of
any subcontractor as it is for its own acts and omissions.

13. Amendment

This Agreement may be amended or modified by a written agreement executed
by both parties and authorized or approved by a resolution of the Board
of Directors of the Fund.

14. Massachusetts Law to Apply

This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of The Commonwealth of
Massachusetts.

15. Force Majeure

In the event either party is unable to perform its obligations under the
terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other
causes reasonably beyond its control, such party shall not be liable for
damages to the other for any damages resulting from such failure to
perform or otherwise from such causes.

16. Consequential Damages

Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any
consequential damages arising out of any act or failure to act hereunder.

17. Merger of Agreement

This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.

18. Counterparts

This Agreement may be executed by the parties hereto on any number of
counterparts, and all of said counterparts taken together shall be deemed
to constitute one and the same instrument.

10
<PAGE>

19. Reproduction of Documents

This Agreement and all schedules, exhibits, attachments and amendments
hereto may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The parties
hereto each agree that any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative
proceeding, whether or not the original is in existence and whether or
not such reproduction was made by a party in the regular course of
business, and that any enlargement, facsimile or further reproduction
shall likewise be admissible in evidence.

11
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.

GE INVESTMENTS FUNDS, INC.

BY:_________________________________

ATTEST:

_________________________________

STATE STREET BANK AND TRUST
COMPANY

BY:_________________________________
Executive Vice President

ATTEST:

_________________________________

12
<PAGE>

STATE STREET BANK & TRUST COMPANY
FUND SERVICE RESPONSIBILITIES*

Service Performed Responsibility
- ----------------- --------------
Bank Fund
---- ----

1. Receives orders for the purchase X
of Shares.

2. Issue Shares and hold Shares in X
Shareholders accounts.

3. Receive redemption requests. X

4. Effect transactions 1-3 above X
directly with broker-dealers.

5. Pay over monies to redeeming X
Shareholders.

6. Effect transfers of Shares. X

7. Prepare and transmit dividends X
and distributions.

8. Issue Replacement Certificates. N/A

9. Reporting of abandoned property. X

10. Maintain records of account. X

11. Maintain and keep a current and X
accurate control book for each
issue of securities.

12. Mail proxies. X

13. Mail Shareholder reports. X

14. Mail prospectuses to current X
Shareholders.

15. Withhold taxes on U.S. resident X
and non-resident alien accounts.

Service Performed Responsibility
- ----------------- --------------
Bank Fund
---- ----
16. Prepare and file U.S. Treasury X
Department forms.

13
<PAGE>

Service Performed Responsibility
- ----------------- --------------
Bank Fund
---- ----

17. Prepare and mail account and X
confirmation statements for
Shareholders.

18. Provide Shareholder account X
information.

19. Blue sky reporting. X

* Such services are more fully described in Section 1.2 (a), (b) and (c) of the
Agreement.

GE INVESTMENTS FUNDS, INC.

BY:__________________________________

ATTEST:

_____________________________________

STATE STREET BANK AND TRUST COMPANY

BY:__________________________________
Executive Vice President

ATTEST:

_____________________________________

14
<PAGE>

SCHEDULE A

GE INVESTMENTS FUNDS, INC.

S & P 500 Index Fund

Government Securities Fund

Money Market Fund

Total Return Fund

International Equity Fund

Real Estate Securities Fund

Global Income Fund

Value Equity Fund

Income Fund

U.S. Equity Fund

Premier Growth Equity Fund

Exhibit 11(a)

[Letterhead of Sutherland, Asbill & Brennan LLP]

October 16, 1997

Board of Directors
GE Investments Funds, Inc.
3003 Summer Street
Stamford, CT 06905

RE: GE Investments Funds, Inc.
File No. 2-91369
--------------------------

Gentlemen:

We hereby consent to the reference to our name under the captions "Legal
Matters" in the Prospectus and "Legal Counsel" in the Statement of Additional
Information filed as part of the Post-Effective Amendment No. 21 to Form N-1A
for GE Investments Funds, Inc. (File No. 2-91369). In giving this consent, we do
not admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933.

Very truly yours,

SUTHERLAND, ASBILL & BRENNAN LLP

By: /s/ Stephen E. Roth
--------------------------------
Stephen E. Roth

Exhibit 11(b)

Consent of Ernst & Young LLP, Independent Auditors

We consent to the reference to our firm under the captions "Financial
Highlights" and "Financial Statements - Audited Financial Statements" and to the
use of our report dated February 12, 1997, included in the Annual Report (Form
N-SAR) incorporated by reference in the Registration Statement (Form N-1A) of GE
Investments Funds, Inc. (formerly, Life of Virginia Series Fund, Inc.) filed
with the Securities and Exchange Commission in this Post-Effective Amendment No.
21 to the Registration Statement under the Securities Act of 1933 (Registration
No. 2-91369) and in this Amendment No. 22 to the Registration Statement under
the Investment Company Act of 1940 (Registration No. 811-4041).

ERNST & YOUNG LLP

Richmond, Virginia
October 20, 1997

Exhibit 11(c)

Independent Auditors' Consent

To the Shareholders and Board of Directors of the
GE Investments Funds, Inc.:

We consent to the reference to our Firm under the heading "Independent Auditors"
in the Statement of Additional Information.

KPMG Peat Marwick LLP

New York, New York
October 23, 1997