<PAGE>
As filed with the Securities and Exchange Commission
on November 12, 1998
Securities Act File No. 33-51308
Investment Company Act File No. 811-7142
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 26 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. 28 / X /
(Check appropriate box or boxes)
GE FUNDS
...............................................................
(Exact Name of Registrant as Specified in Charter)
3003 Summer Street
Stamford, Connecticut 06905
....................................................
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code:
(203) 326-4040
Matthew J. Simpson, Esq.
Vice President, Associate General Counsel & Assistant Secretary
GE Investment Management Incorporated
3003 Summer Street
Stamford, Connecticut 06905
.........................................................
(Name and Address of Agent for Service)
Copies to:
Burton M. Leibert, Esq.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019-6099
<PAGE>
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
It is proposed that this filing will become effective (check appropriate box):
o immediately upon filing pursuant to paragraph (b) ---
o on (date) pursuant to paragraph (b) ---
o 60 days after filing pursuant to paragraph (a)(1) ---
o on (date) pursuant to paragraph (a)(1) ---
o 75 days after filing pursuant to paragraph (a)(2) X
---
o on (date) pursuant to paragraph (a)(2) of Rule 485 ---
If appropriate, check the following box:
This post-effective amendment designates a new effective date for
a previously filed post-effective amendment. ---
This post-effective amendment includes an updated prospectus only for those
series of Registrant (the shares of) which are currently offered to the public.
GE International Fixed Income Fund and GE Small-Cap Growth Equity Fund, series
of Registrant (the shares of) which are not currently being offered to the
public, remain registered and unaffected by this post-effective amendment.
<PAGE>
The information in this Prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This Prospectus is not an offer
to sell these securitiies and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
[GE LOGO]
GE FUNDS PROSPECTUS
(Date)
EQUITY FUNDS INCOME FUNDS
o GE U.S. Equity Fund o GE Fixed Income Fund
o GE Premier Growth Equity Fund o GE Government Securities Fund
o GE Value Equity Fund o GE Short-Term Government Fund
o GE Mid-Cap Growth Fund o GE Tax-Exempt Fund
o GE Mid-Cap Value Equity Fund o GE High Yield Fund
o GE Small-Cap Value Equity Fund
o GE Global Equity Fund ASSET ALLOCATION FUND
o GE International Equity Fund o GE Strategic Investment Fund
o GE Europe Equity Fund
o GE Emerging Markets Fund MONEY MARKET FUND
o GE Money Market Fund
Like all mutual funds, 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.
These mutual funds are not insured by the Federal Deposit Insurance Corporation
or any other government agency. They are not deposits or other obligations of
any bank and are not guaranteed. They are subject to investment risks, including
possible loss of principal invested.
<PAGE>
THE GE FAMILY OF FUNDS
A Tradition of Financial Services
For many years, General Electric Company's ("GE") tradition of ingenuity and
customer focus has included financial services. In the late 1920s, through a
desire to promote the financial well-being of its employees, GE began managing
assets for its employee pension plan. By the mid-1930s, GE pioneered some of the
nation's earliest mutual funds, the Elfun Funds -- to be followed years later by
the GE Savings and Security Program Funds. The success of these Funds spurred
growth; eventually GE expanded its mutual fund offerings to include a wide
variety of investment products called the GE Family of Funds, created
specifically for the general public. Today, GE's investment advisers manage $[]
billion in individual and institutional assets with over $[] billion in mutual
funds alone.
The GE Family of Funds contains a variety of investment options, including
mutual funds for taxable and tax-deferred investments, funds created
specifically for variable life and annuity investments, institutional funds and
asset allocation funds. The GE Funds presented in this prospectus include a
diversified family of [19] mutual funds that cover a wide range of investment
objectives, from capital preservation and liquidity to long-term growth. The GE
Family of Funds is a part of GE Financial Assurance -- a dynamic family of
investment and insurance companies devoted to providing investment and insurance
alternatives to investors seeking to accumulate, preserve, and protect wealth
over their lifetimes.
Sound Investment Approaches
When you invest with GE, you draw on the strengths of a trusted firm with a long
history of providing investment management services. GE Investment Management
Incorporated, the investment adviser to the GE Family of Funds, bases its
investment philosophy on two enduring principles. First, GE Investment
Management believes that a disciplined, consistent approach to investing can add
value to an investment portfolio over the long term. Its commitment to in-depth
research, sound judgment and hard work provides investors with an opportunity to
take advantage of attractive investments around the world. Second, GE Investment
Management follows the same principles of integrity and quality that have guided
GE over the past century and have made it the world-class company that it is
today. Whether you are creating a new investment portfolio or adding to an
established one, the GE Family of Funds offer an array of professionally managed
investment options that are intended to help investors meet a lifetime of
financial needs.
Investor Advantages
High quality products and customer service are at the heart of the GE Family of
Funds. Whether you are planning for retirement, funding a child's education,
saving for a new home, creating a legacy for your family or pursuing other
important goals, you need an investment strategy designed to suit your
objectives. That is why GE offers a wide range of mutual fund choices and
customer services designed with the single purpose of making investing as
simple, flexible and convenient as possible.
2
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One of your most important investment considerations should be balancing risk
and return. Different types of investments tend to respond differently to shifts
in the economic and financial environment. So, diversifying your investments
among different asset classes -- such as stocks, bonds and cash -- and within an
asset class -- such as small-cap and large-cap stocks -- can help you manage
risk and achieve the results you need to comfortably reach your financial goals.
At GE we believe in the power and wisdom of professional investment guidance.
Talk to your investment professional about creating or updating your
personalized investment strategy and about how the GE Family of Funds can play a
role in your investment future. Also, visit the GE Family of Funds on the
internet at www.ge.com/mutualfunds.
3
<PAGE>
TABLE OF CONTENTS
GE Funds
The GE Family of Funds Page
Equity Funds
GE U.S. Equity Fund
GE Premier Growth Equity Fund
GE Value Equity Fund
GE Mid-Cap Growth Fund
GE Mid-Cap Value Equity Fund
GE Small-Cap Value Equity Fund
GE Global Equity Fund
GE International Equity Fund
GE Europe Equity Fund
GE Emerging Markets Fund
Income Funds
GE Fixed Income Fund
GE Government Securities Fund
GE Short-Term Government Fund
GE Tax-Exempt Fund
GE High Yield Fund
Allocation Fund
GE Strategic Investment Fund
Money Market Fund
GE Money Market Fund
Fund Expenses
More on Strategies and Risks
Investment Techniques and Strategies
Charting the Risks
Risk Definitions
About the Investment Adviser
About the Funds' Portfolio Managers
About the Sub-Advisers
How to Invest
How to Buy Shares
Offering Price
Sales Charges
How to Redeem Shares
How to Exchange Shares
Dividends, Capital Gains and Other Tax Information
Calculating Share Value
Appendix: Financial Highlights
Additional information regarding the Funds is contained in the Statement of
Additional Information dated ____, which is incorporated by reference into
(legally forms a part of) this Prospectus.
The Risks of Investing in Mutual Funds
No single GE Fund is intended to be a complete investment program, but
individual Funds may help you diversify other types of investments in your
portfolio. The GE Funds have the following risks:
o the value of Equity Funds, Income Fund and GE Strategic Investment
Fund shares will rise and fall
o you could lose money
o you cannot be certain a Fund will achieve its investment objective
4
<PAGE>
EQUITY FUNDS
WHO MAY WANT TO INVEST IN A GE EQUITY FUND
The GE Equity Funds may be appropriate for your investment portfolio if you:
o have a long-term investment goal
o are willing to accept higher short-term risk for potential
long-term returns
o want to diversify a portfolio composed mostly of fixed income
investments
The GE Equity Funds are not appropriate if you want:
o to avoid potentially significant changes in share price
o a short-term investment
o regular income
Equity funds generally invest in equity securities. Equity securities may
include common stocks, preferred stocks, Depositary Receipts, convertible
preferred stocks, convertible bonds, convertible debentures, convertible notes,
rights and warrants of U.S. and foreign companies. Stocks represent an ownership
interest in a corporation. Equity funds have more potential for capital growth
than other funds, but they have the greatest risk.
The following are important definitions of various securities for you to refer
to as you read about the GE Equity Funds:
Foreign securities include interests in or obligations of entities located
outside of the United States. The determination of where an issuer of a security
is located will be made by reference to the country in which the issuer (a) is
organized, (b) derives at least 50% of its revenues or profits from goods
produced or sold, investments made or services performed, (c) has at least 50%
of its assets situated, or (d) has the principal trading market for its
securities. Foreign securities may be denominated in non-U.S. currencies and
traded outside the United States or may be in the form of Depositary Receipts.
Foreign securities include Depositary receipts, which represent interests in an
account at a bank or trust company which holds equity securities. These may
include American Depositary Receipts (held at U.S. banks and traded in the
United States), European Depositary Receipts, Global Depositary Receipts or
other similar instruments.
Debt securities are bonds and other securities that are used by issuers to
borrow money from investors. Holders of debt securities have a higher priority
claim to assets than do equity holders. Typically, the debt issuer pays the
investor a fixed, variable or floating rate of interest and must repay the
borrowed amount at maturity. Some debt securities, such as zero coupon bonds,
are sold at a discount from their face values instead of paying interest.
Convertible securities may be debt or equity securities that pay interest or
dividends and that may be converted on specified terms into the stock of the
issuer.
Preferred securities are classes of stock that pay dividends at a specified
rate. Dividends are paid on preferred stocks before they are paid on common
stocks. In addition, preferred stockholders have priority over common
stockholders as to the proceeds from the liquidation of a company's assets.
5
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TYPES OF INVESTMENT STYLES THE FUNDS MAY USE
Growth investing involves buying stocks with above-average growth rates.
Typically, growth stocks are the stocks of the fastest growing companies in the
most rapidly growing sectors of the economy. Generally, growth stock valuation
levels will be higher than value stocks and the market averages.
Value investing involves buying stocks that are out of favor and/or undervalued
in comparison to their peers and/or their prospects for growth. Generally, value
stock valuation levels are lower than growth stocks.
6
<PAGE>
GE U.S. EQUITY FUND
Investment Objective: Seeks long-term growth of capital.
The Strategy
GE U.S. Equity Fund invests primarily in equity securities of U.S. companies.
The portfolio managers use a Multi-Style(Registered) investment strategy that
combines growth and value investment management styles. As a result, the
portfolio has characteristics similar to the Standard & Poor's 500 Composite
Stock Index. Stock selection is key to the performance of the Fund.
Through fundamental company research the portfolio managers seek to identify
securities of large companies with characteristics such as:
o attractive valuations
o financial strength
o high quality management focused on generating shareholder value
The Fund also may invest to a lesser extent in foreign securities and debt
securities. The Fund generally intends to hold its investments for a long time,
which results in a relatively low portfolio turnover rate. The portfolio
managers may use various investment techniques to adjust the Fund's investment
exposure, but there is no guarantee that these techniques will work.
The Risks
The principal risk of investing in this Fund is stock market risk. To the extent
that the portfolio managers invest in foreign securities or debt securities, the
Fund would be subject to foreign exposure risk, interest rate risk and credit
risk.
If you would like additional information regarding the Fund's investment
strategies and risks, please refer to "More on Strategies and Risks" later in
this Prospectus.
7
<PAGE>
Fund Performance
The bar chart and table below illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to a common measure of
performance. The bar chart illustrates how the Fund's performance varies from
year to year over the periods shown. The bar chart does not reflect the impact
of sales charges, which lower the Fund's returns.
Calendar Year Total Returns Chart
- --------------------------------------------------------------------------------
Class [ ] Shares
- --------------------------------------------------------------------------------
During the periods presented in the bar chart, the Fund's highest return for a
quarter was ___% for the quarter ended (date). The Fund's lowest return for a
quarter was ____% for the quarter ended (date). The Fund's year-to-date return
was ____% as of December 31, 1998.
The following table illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of the Standard & Poor's 500
Composite Stock Index ("S&P 500 Index"), a widely recognized, unmanaged index of
common stock prices. The table reflects the impact of the Fund's expenses and
sales charges for each share class. It assumes that you sold your shares at the
end of each period.
Average Annual Total Return Table
Average Annual Total Return As of December 31, 1998
- --------------------------------------------------------------------------------
1 Year Since Inception*
GE US Equity Fund
Class A
Class B
Class C
Class D
S&P 500 Index
Both the bar chart and table assume reinvestment of dividends and distributions.
As with all mutual funds, past performance is not an indication of future
performance.
*Fund's Inception: January 1, 1994
[Sidebar]
All mutual funds use a standard formula to calculate total return. Total return
measures the price change in a share assuming the reinvestment of all dividend
income and capital gain distributions.
8
<PAGE>
GE PREMIER GROWTH EQUITY FUND
Investment Objective: Seeks long-term growth of capital and future income rather
than current income.
The Strategy
GE Premier Growth Equity Fund invests primarily in a limited number of equity
securities of large- and medium-sized companies with above-average growth
histories and growth potential. Stock selection is key to the performance of the
Fund. The portfolio manager chooses equity securities from a number of
industries based on the merits of individual companies. The portfolio manager
seeks to identify stocks of growth companies with characteristics such as:
o above-average annual growth rates
o financial strength
o leadership in their respective industries
o high quality management focused on generating shareholder value
The Fund also may invest to a lesser extent in foreign securities and debt
securities. The Fund generally intends to hold its investments for a long time,
which results in a relatively low portfolio turnover rate. The portfolio manager
may use various investment techniques to adjust the Fund's investment exposure,
but there is no guarantee that these techniques will work.
The Risks
The principal risks of investing in this Fund are stock market risk,
concentration risk and style risk. To the extent that the portfolio manager
invests in foreign securities or debt securities, the Fund would be subject to
foreign securities risk, interest rate risk and credit risk.
If you would like additional information regarding the Fund's investment
strategies and risks, please refer to "More on Strategies and Risks" later in
this Prospectus.
9
<PAGE>
Fund Performance
The bar chart and table below illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to a common measure of
performance. The bar chart illustrates how the Fund's performance varies from
year to year over the periods shown. The bar chart does not reflect the impact
of sales charges, which lower the Fund's returns.
Calendar Year Total Returns Chart
- --------------------------------------------------------------------------------
Class [ ] Shares
- --------------------------------------------------------------------------------
During the periods presented in the bar chart, the Fund's highest return for a
quarter was ___% for the quarter ended (date). The Fund's lowest return for a
quarter was ____% for the quarter ended (date). The Fund's year-to-date return
was ____% as of December 31, 1998.
The following table illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of the Standard & Poor's 500
Composite Stock Index ("S&P 500 Index"), a widely recognized, unmanaged index of
common stock prices. The table reflects the impact of the Fund's expenses and
sales charges for each share class. It assumes that you sold your shares at the
end of each period.
Average Annual Total Return Table
Average Annual Total Return As of December 31, 1998
- --------------------------------------------------------------------------------
1 Year Since Inception*
GE Premier Growth Equity Fund
Class A
Class B
Class C
Class D
S&P 500 Index
Both the bar chart and table assume reinvestment of dividends and distributions.
As with all mutual funds, past performance is not an indication of future
performance.
*Fund's Inception: December 31, 1996
[Sidebar]
All mutual funds use a standard formula to calculate total return. Total return
measures the price change in a share assuming the reinvestment of all dividend
income and capital gain distributions.
10
<PAGE>
GE VALUE EQUITY FUND
Investment objective: Seeks long-term growth of capital and future income.
The Strategy
GE Value Equity Fund invests primarily in equity securities of large U.S.
companies that are undervalued by the market but have solid growth prospects. A
company may be undervalued for reasons such as market overreaction to recent
company, industry or economic problems. Stock selection is key to the
performance of the Fund. The portfolio manager seeks to identify securities of
companies with characteristics such as:
o low prices in relation to their peers and the overall market
o the potential for long-term earnings growth
o higher-than-average dividend yields
o strong management
o financial strength
o attractive upside potential and limited downside risk
The Fund also may invest to a lesser extent in foreign securities and debt
securities. The Fund generally intends to hold its investments for a long time,
which results in a relatively low portfolio turnover rate. The portfolio manager
may use various investment techniques to adjust the Fund's investment exposure,
but there is no guarantee that these techniques will work.
The Risks
The principal risks of investing in this Fund are stock market risk and style
risk. To the extent that the portfolio manager invests in foreign securities or
debt securities, the Fund would be subject to foreign securities risk, interest
rate risk and credit risk.
If you would like additional information regarding the Fund's investment
strategies and risks, please refer to "More on Strategies and Risks" later in
this Prospectus.
11
<PAGE>
Fund Performance
The bar chart and table below illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to a common measure of
performance. The bar chart illustrates how the Fund's performance varies from
year to year over the periods shown. The bar chart does not reflect the impact
of sales charges, which lower the Fund's returns.
Calendar Year Total Returns Chart
- --------------------------------------------------------------------------------
Class [ ] Shares
- --------------------------------------------------------------------------------
During the periods presented in the bar chart, the Fund's highest return for a
quarter was ___% for the quarter ended (date). The Fund's lowest return for a
quarter was ____% for the quarter ended (date). The Fund's year-to-date return
was ____% as of December 31, 1998.
The following table illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of the Standard & Poor's
500/Barra Value Index ("S&P Value Index"). The table reflects the impact of the
Fund's expenses and sales charges for each share class. It assumes that you sold
your shares at the end of each period.
Average Annual Total Return Table
Average Annual Total Return As of December 31, 1998
- --------------------------------------------------------------------------------
1 Year Since Inception*
GE Value Equity Fund
Class A
Class B
Class C
Class D
S&P Value Index
Both the bar chart and table assume reinvestment of dividends and distributions.
As with all mutual funds, past performance is not an indication of future
performance.
*Fund's Inception: September 8, 1993
[Sidebar]
All mutual funds use a standard formula to calculate total return. Total return
measures the price change in a share assuming the reinvestment of all dividend
income and capital gain distributions.
12
<PAGE>
GE MID-CAP GROWTH FUND
Investment Objective: Seeks long-term growth of capital.
The Strategy
GE Mid-Cap Growth Fund invests primarily in equity securities of mid-cap
companies with above-average growth potential. The Fund defines a mid-cap
company as one with a market capitalization within the capitalization range of
the Standard & Poor's MidCap 400 Index. As of (date), the market capitalization
of companies in the index ranged from ____ to ____. The portfolio manager will
not sell a stock merely because the market capitalization of a company in the
portfolio moves above or below the maximum or minimum capitalization of the
index. Stock selection is key to the performance of the Fund. The portfolio
manager seeks to identify securities of growth companies with characteristics
such as:
o above-average revenue and earnings growth
o attractive products or services
o financial strength
o strong competitive positions within their industries
o high quality management focused on generating shareholder value
The Fund also may invest to a lesser extent in securities with capitalizations
outside the mid-cap range, foreign securities and debt securities. The portfolio
manager may use various investment techniques to adjust the Fund's investment
exposure, but there is no guarantee that these techniques will work.
The Risks
The principal risks of investing in this Fund are stock market risk and style
risk. To the extent that the portfolio manager invests in foreign securities or
debt securities, the Fund would be subject to foreign exposure risk, interest
rate risk and credit risk.
If you would like additional information regarding the Fund's investment
strategies and risks, please refer to "More on Strategies and Risks" later in
this Prospectus.
13
<PAGE>
Fund Performance
The bar chart and table below illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to a common measure of
performance. The bar chart illustrates how the Fund's performance varies from
year to year over the periods shown. The bar chart does not reflect the impact
of sales charges, which lower the Fund's returns.
Calendar Year Total Returns Chart
- --------------------------------------------------------------------------------
Class [ ] Shares
- --------------------------------------------------------------------------------
During the periods presented in the bar chart, the Fund's highest return for a
quarter was ___% for the quarter ended (date). The Fund's lowest return for a
quarter was ____% for the quarter ended (date). The Fund's year-to-date return
was ____% as of December 31, 1998.
The following table illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of the Standard & Poor's
MidCap 400 Stock Index ("S&P MidCap Index"). The table reflects the impact of
the Fund's expenses and sales charges for each share class. It assumes that you
sold your shares at the end of each period.
Average Annual Total Return Table
Average Annual Total Return As of December 31, 1998
- --------------------------------------------------------------------------------
1 Year Since Inception*
GE Mid-Cap Growth Fund
Class A
Class B
Class C
Class D
S&P MidCap Index
Both the bar chart and table assume reinvestment of dividends and distributions.
As with all mutual funds, past performance is not an indication of future
performance.
*Fund's Inception: September 8, 1993
[Sidebar]
All mutual funds use a standard formula to calculate total return. Total return
measures the price change in a share assuming the reinvestment of all dividend
income and capital gain distributions.
14
<PAGE>
GE MID-CAP VALUE EQUITY FUND
Investment Objective: Seeks long-term growth of capital.
The Strategy
The GE Mid-Cap Value Equity Fund invests primarily in equity securities of
mid-cap companies that the portfolio manager believes are undervalued by the
market and have above-average growth potential. The dollar-weighted median
market capitalization of the companies in the Fund's portfolio will fall within
the mid-cap range defined by the Morningstar rating agency, currently between $1
and $5 billion.
Stock selection is key to the performance of the Fund. The Fund is
value-oriented and seeks to identify undervalued companies where a catalyst
exists to recognize value or improve a company's profitability. Examples
of these catalysts are:
o new management
o industry consolidation
o company restructuring
o change in the company's fundamentals
The Fund also may invest to a lesser extent in foreign securities and debt
securities. The portfolio manager may use various investment techniques to
adjust the Fund's investment exposure, but there is no guarantee that these
techniques will work.
The Risks
The principal risks of investing in this Fund are stock market risk and style
risk. To the extent that the portfolio manager invests in foreign securities or
debt securities, the Fund would be subject to foreign exposure risk, interest
rate risk and credit risk.
If you would like additional information regarding the risks associated with
this Fund, please refer to "More on Strategies and Risks" later in this
Prospectus.
15
<PAGE>
Manager's Prior Performance
The performance information provided below includes a composite of the
performance of certain private accounts and mutual funds ("Accounts") managed by
Jon Bosse, the portfolio manager primarily responsible for the day-to-day
management of the GE Mid-Cap Value Equity Fund. Each of the Accounts included in
the composite has objectives, policies and strategies substantially similar to
those of the Fund. The Accounts were managed by Mr. Bosse while he was employed
with NWQ, the sub-adviser of the Fund, since October 1996 and during his
previous employment with ARCO Investment Management Company ("ARCO") since
January 1990. As is the case with the Fund, Mr. Bosse was primarily responsible
for management of the Accounts and no other person had a significant role in
achieving the performance described below.
Unlike management of the private accounts included in the composite, Mr. Bosse's
management of the Fund will be subject to certain legal restrictions (e.g.,
limits on percentage of assets invested in a single issuer and industry and
requirements on distributing income to shareholders) that did not apply to the
private accounts. The Fund also will incur certain operating expenses that were
not borne by the private accounts. In addition, the Fund will likely experience
cash flows different from those of the private accounts. All of these factors
may adversely affect the performance of the Fund and cause it to differ from
that of the composite described below.
[SIDEBAR: The Portfolio Manager Performance Composite represents the
performance of the Accounts net of fees and other expenses, not the
performance of the Fund, and should not be considered an indication of
future performance of the Fund.]
Portfolio Manager Performance Composite
Calendar Year Return
- ------------------------ ----------------------- -------------------------------
Period Composite S&P MidCap 400 Index
- ------------------------ ----------------------- -------------------------------
1998 -- --
1997 35.01% 32.25%
1996 27.83% 19.20%
1995 38.54% 30.95%
1994 8.59% -3.58%
1993 19.71% 13.95%
1992 30.25% 11.91%
1991 53.57% 50.10%
1990 0.74% -5.13%
- ------------------------ ----------------------- -------------------------------
Average Annual Return (as of 9/30/98)
- ------------------------ ----------------------- -------------------------------
Period Composite S&P MidCap 400 Index
- ------------------------ ----------------------- -------------------------------
1 Year -6.95% -6.30%
3 Years 18.83% 14.11%
5 Years 19.55% 13.68%
Since 1/1/90 22.54% 14.85%
- ------------------------ ----------------------- -------------------------------
Note A -- Performance Results. Performance results provided in the composite for
the period from January 1, 1990 to August 31, 1996 reflect the performance of a
single private account managed by Mr. Bosse ("ARCO Account") while he was
employed as a portfolio manager at ARCO. Performance results for the month of
September 1996 reflect the performance during that month of the portfolio of
securities held in the ARCO Account at August 31, 1996 (when Mr. Bosse ceased
employment at ARCO), assuming that no changes in the portfolio were made through
the end of the month and dividend income from the portfolio securities was
reinvested. Because no actual portfolio of securities was managed
during this one month period, performance results for September 1996
16
<PAGE>
should be considered hypothetical. Performance results from October 1, 1996
(when Mr. Bosse commenced employment at NWQ and purchased for an NWQ private
account the same portfolio of securities held in the ARCO Account at August 31,
1996), reflect the performance of Accounts managed by Mr. Bosse while employed
with NWQ.
Note B -- Composite. The performance results of the ARCO private account,
including the hypothetical performance for September 1996, have been adjusted to
reflect the maximum investment management fee of 1% per year that is applicable
to the NWQ private accounts. The composite performance is compared to the
performance of the S&P MidCap 400 Index, which is an unmanaged index of 400
domestic stocks selected for market size, liquidity and industry group
representation. The information provided above for both the composite and the
Index reflect the reinvestment of dividends and distributions. Unlike the Index
performance information, however, the performance of the composite is net of
applicable fees and other expenses. Expenses of the GE Mid-Cap Value Equity Fund
are expected to differ from those of the Accounts.
17
<PAGE>
GE SMALL-CAP VALUE EQUITY FUND
Investment Objective: Seeks long-term growth of capital.
The Strategy
GE Small-Cap Value Equity Fund invests primarily in equity securities of
small-cap companies that are undervalued by the market but have solid growth
prospects. A company may be undervalued for reasons such as market overreaction
to recent company, industry or economic problems. The Fund defines a small-cap
company as one with a market capitalization within the capitalization range of
the Russell 2000 Index. As of (date), the market capitalization of companies in
the index ranged from ____ to ____. The portfolio managers will not sell a stock
merely because the market capitalization of a company in the portfolio moves
above or below the maximum or minimum capitalization of the index. Stock
selection is key to the performance of the Fund.
The portfolio managers seek to identify securities of companies with
characteristics such as:
o high quality management
o attractive products or services
o appropriate capital structure
o strong competitive positions in their industries
o management focused on generating shareholder value
The Fund also may invest to a lesser extent in securities with capitalizations
outside the small-cap range, debt securities and foreign securities. The Fund
generally intends to hold its investments for a long time, which results in a
relatively low portfolio turnover rate. The portfolio managers may use various
investment techniques to adjust the Fund's investment exposure, but there is no
guarantee that these techniques will work.
The Risks
The principal risks of investing in this Fund are stock market risk and style
risk. To the extent that the portfolio managers invest in foreign securities or
debt securities, the Fund would be subject to foreign exposure risk, interest
rate risk and credit risk.
If you would like additional information regarding the Fund's investment
strategies, please refer to "More on Strategies and Risks" later in this
Prospectus.
18
<PAGE>
Prior Performance of Similar Accounts
The performance information provided below includes a composite of the
performance of certain private accounts ("Accounts") managed by the Investment
Committee of Palisade Capital Management, L.L.C. ("Palisade"), the sub-adviser
of the GE Small-Cap Value Equity Fund. Each of the Accounts included in the
composite has objectives, policies and strategies substantially similar to those
of the Fund. The Accounts were managed by the Investment Committee while at
Palisade and during its previous employment with Smith Barney, Inc.
The Investment Committee, which has operated together since September 1, 1993,
consists of Jack Feiler, Martin L. Berman, Steven E. Berman, Richard Meisenberg
and Mark Degenhart. As is the case with the Fund, Mr. Feiler was primarily
responsible for management of the Accounts and worked with the Investment
Committee in developing and executing the Accounts' investment programs. No
person other than the members of the Investment Committee had a significant role
in achieving the performance described below.
Unlike management of the Accounts, the Investment Committee's management of the
Fund will be subject to certain legal restrictions (e.g., limits on percentage
of assets invested in a single issuer and industry and requirements on
distributing income to shareholders) that did not apply to the Accounts. The
Fund also will incur certain operating expenses that were not borne by the
Accounts. In addition, the Fund will likely experience cash flows different from
those of the Accounts. All of these factors may adversely affect the performance
of the Fund and cause it to differ from that of the composite described below.
[SIDEBAR: The Investment Committee Performance Composite represents the
performance of the Accounts net of fees and other expenses, not the
performance of the Fund, and should not be considered an indication of future
performance of the Fund.]
Investment Committee Performance Composite
Calendar Year Return
- -------------------------- ------------------------- ---------------------------
Period Composite Russell 2000 Index
- -------------------------- ------------------------- ---------------------------
1998
1997 26.26% 22.37%
1996 23.17% 16.49%
1995 32.04% 28.44%
1994 3.59% -1.82%
1993* 5.77% 5.51%
- -------------------------- ------------------------- ---------------------------
* Represents performance from 9/1/93 through 12/31/93.
Average Annual Return (as of 9/30/98)
- -------------------------- ------------------------- ---------------------------
Period Composite Russell 2000 Index
- -------------------------- ------------------------- ---------------------------
1 Year 26.26% 22.37%
3 Years 27.11% 22.35%
5 Years
Since 9/1/93 20.94% 16.32%
- -------------------------- ------------------------- ---------------------------
Note A -- Performance Results. Performance results provided above for the period
from September 1, 1993 to April 1, 1995 (commencement of Palisade's operations)
reflect the performance of the Accounts while the Investment Committee was
employed as a separate operating group within Smith Barney Inc. Thereafter,
performance results reflect the performance of the Accounts managed by the
Investment Committee while at Palisade.
Note B -- Composite. The composite performance is compared to the performance of
the Russell 2000 Index, which is an unmanaged index of issuers with total market
capitalizations between $[ ] million and $[ ] billion as of September 30, 1998.
The information provided above for both the composite and the Index reflect the
reinvestment of dividends and distributions. Unlike the Index performance
information, however, the performance of the composite is net of fees and other
expenses applicable to the Accounts. Expenses of the GE Small-Cap Value Equity
Fund are expected to differ from those of the Accounts.
GE GLOBAL EQUITY FUND
Investment Objective: Seeks long-term growth of capital.
19
<PAGE>
The Strategy
GE Global Equity Fund invests primarily in equity securities of companies in
developed and developing countries, including the United States. The portfolio
managers focus on companies that they expect to grow faster than relevant
markets and whose security price does not fully reflect its potential growth.
Under normal circumstances, the Fund's assets are invested primarily in
countries included in the Morgan Stanley Capital International World Index and
in no fewer than three different countries. The portfolio managers consider the
following factors in determining where an issuer is located: country of
organization, primary securities trading market, location of assets, or country
where the issuer derives at least half of its revenues and profits. Stock
selection is key to the performance of the Fund.
The portfolio managers seek to identify securities of growth companies with
characteristics such as:
o low prices relative to their long-term cash earnings potential
o potential for significant improvement in the company's business
o financial strength
o sufficient liquidity
The Fund also may invest to a lesser extent in debt securities. The portfolio
managers may use various investment techniques to adjust the Fund's investment
exposure, but there is no guarantee that these techniques will work.
The Risks
The principal risks of investing in this Fund are stock market risk, foreign
exposure risk, style risk and emerging markets risk. To the extent that the
portfolio managers invest in debt securities, the Fund would be subject to
interest rate risk and credit risk.
If you would like additional information regarding the Fund's investment
strategies and risks, please refer to "More on Strategies and Risks" later in
this Prospectus.
20
<PAGE>
Fund Performance
The bar chart and table below illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to a common measure of
performance. The bar chart illustrates how the Fund's performance varies from
year to year over the periods shown. The bar chart does not reflect the impact
of sales charges, which lower the Fund's returns.
Calendar Year Total Returns Chart
- --------------------------------------------------------------------------------
Class [ ] Shares
- --------------------------------------------------------------------------------
During the periods presented in the bar chart, the Fund's highest return for a
quarter was ___% for the quarter ended (date). The Fund's lowest return for a
quarter was ____% for the quarter ended (date). The Fund's year-to-date return
was ____% as of December 31, 1998.
The following table illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of the Morgan Stanley Capital
International World Index ("MSCIW Index"). The table reflects the impact of the
Fund's expenses and sales charges for each share class. It assumes that you sold
your shares at the end of each period.
Average Annual Total Return Table
Average Annual Total Return As of December 31, 1998
- --------------------------------------------------------------------------------
1 Year Since Inception*
GE Global Equity Fund
Class A
Class B
Class C
Class D
MSCIW Index
Both the bar chart and table assume reinvestment of dividends and distributions.
As with all mutual funds, past performance is not an indication of future
performance.
*Fund's Inception: January 1, 1994
[Sidebar]
All mutual funds use a standard formula to calculate total return. Total return
measures the price change in a share assuming the reinvestment of all dividend
income and capital gain distributions.
21
<PAGE>
GE INTERNATIONAL EQUITY FUND
Investment Objective: Seeks long-term growth of capital.
The Strategy
GE International Equity Fund invests primarily in equity securities of companies
in developed and developing countries, other than the United States. The
portfolio managers focus on companies that they expect to grow faster than
relevant markets and whose security price does not fully reflect its potential
growth. Under normal circumstances, the Fund's assets are invested primarily in
no fewer than three different countries. The portfolio managers consider the
following factors in determining where an issuer is located: country of
organization, primary securities trading market, location of assets, or country
where the issuer derives at least half of its revenues and profits. Stock
selection is key to the performance of the Fund.
The portfolio managers seek to identify securities of growth companies with
characteristics such as:
o low prices relative to their long-term cash earnings potential
o potential for significant improvement in the company's business
o financial strength
o sufficient liquidity
The Fund also may invest to a lesser extent in debt securities. The portfolio
managers may use various investment techniques to adjust the Fund's investment
exposure, but there is no guarantee that these techniques will work.
The Risks
The principal risks of investing in this Fund are foreign exposure risk, stock
market risk, style risk and emerging markets risk. To the extent that the
portfolio managers invest in debt securities, the Fund would be subject to
interest rate risk and credit risk.
If you would like additional information regarding the investment strategies and
risks associated with this Fund, please refer to "More on Strategies and Risks"
later in this Prospectus.
22
<PAGE>
Fund Performance
The bar chart and table below illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to a common measure of
performance. The bar chart illustrates how the Fund's performance varies from
year to year over the periods shown. The bar chart does not reflect the impact
of sales charges, which lower the Fund's returns.
Calendar Year Total Returns Chart
- --------------------------------------------------------------------------------
Class [ ] Shares
- --------------------------------------------------------------------------------
During the periods presented in the bar chart, the Fund's highest return for a
quarter was ___% for the quarter ended (date). The Fund's lowest return for a
quarter was ____% for the quarter ended (date). The Fund's year-to-date return
was ____% as of December 31, 1998.
The following table illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of the Morgan Stanley Capital
International EAFE Index ("MSCI EAFE Index"). The table reflects the impact of
the Fund's expenses and sales charges for each share class. It assumes that you
sold your shares at the end of each period.
Average Annual Total Return Table
Average Annual Total Return As of December 31, 1998
- --------------------------------------------------------------------------------
1 Year Since Inception*
GE International Equity Fund
Class A
Class B
Class C
Class D
MSCI EAFE Index
Both the bar chart and table assume reinvestment of dividends and distributions.
As with all mutual funds, past performance is not an indication of future
performance.
*Fund's Inception: March 2, 1994
[Sidebar]
All mutual funds use a standard formula to calculate total return. Total return
measures the price change in a share assuming the reinvestment of all dividend
income and capital gain distributions.
23
<PAGE>
GE EUROPE EQUITY FUND
Investment Objective: Seeks long-term growth of capital.
The Strategy
The GE Europe Equity Fund invests primarily in equity securities of developed
European companies. The portfolio managers focus on companies that are expected
to grow faster than relevant markets and whose security price does not fully
reflect its potential growth. Under normal circumstances, the Fund's assets are
invested primarily in no fewer than three different countries. The portfolio
managers consider the following factors in determining whether a company is
located in Europe: country of organization, primary securities trading market,
location of assets, or country where the issuer derives at least half of its
revenues and profits. Stock selection is key to the performance of the Fund.
[Sidebar: Europe includes Austria, Belgium, Denmark, Finland, France, Germany,
Greece, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain,
Sweden, Switzerland and the United Kingdom.]
The portfolio managers seek to identify growth companies with characteristics
such as:
o low prices relative to their long-term cash earnings potential
o potential for significant improvement in the company's business
o financial strength
o sufficient liquidity
The Fund may also invest to a lesser extent in securities of companies
representing European emerging market countries, developed or emerging countries
outside of Europe (including the United States) and debt securities. European
emerging market countries include the Czech Republic, Poland, Hungary, Turkey,
Russian and other former republics of the Soviet Union. The portfolio managers
may use various investment techniques to adjust the Fund's investment exposure,
but there is no guarantee that these techniques will work.
The Risks
The principal risks of investing in this Fund are stock market risk and foreign
exposure risk. To the extent that the portfolio managers invest in securities of
emerging market countries and debt securities, the Fund would be subject to
emerging markets risk, interest rate risk and credit risk.
Because the Fund targets a single region, investors should expect the Fund to be
more volatile than a more geographically diversified equity fund. Fund
performance is closely tied to economic and political conditions within Europe.
If you would like additional information regarding the risks associated with
this Fund, please refer to "More on Strategies and Risks" later in this
Prospectus.
24
<PAGE>
Fund Background
Because the Fund is new, it does not have any performance history. Performance
information will be included in the Fund's next available annual or semi-annual
report.
25
<PAGE>
GE EMERGING MARKETS FUND
Investment Objective: Seeks long-term growth of capital.
The Strategy
The Emerging Markets Fund invests primarily in equity securities of companies
located in emerging markets. The portfolio managers focus on companies that are
expected to grow faster than relevant markets and whose security price does not
fully reflect its potential growth. Under normal circumstances, the Fund's
assets are invested in no fewer than three different countries. The portfolio
managers consider which emerging market countries in which to invest based on
certain factors, including investment restrictions, tax barriers, local market
cycles, economic outlook for growth, currency exchange rates and the political
environment. The portfolio managers consider the following factors in
determining whether a company is located in an emerging market country: country
of organization, primary securities trading market, location of assets, or
country where the issuer derives at least half of its revenues and profits.
An emerging market country is any country having an economy and market that are
(or would be) considered by the World Bank to be emerging or developing, or
listed in the Morgan Stanley Capital International Emerging Markets Index.
Emerging market countries are located in regions such as Asia, Latin America,
the Middle East, Southern Europe, Eastern Europe (including the former republics
of the Soviet Union and the Eastern Bloc) and Africa.
The portfolio managers seek to identify growth companies with characteristics
such as:
o low prices relative to their long-term cash earnings potential
o potential for significant improvement in the company's business
o financial strength
o sufficient liquidity
The Fund may also invest to a lesser extent in securities of companies located
in countries other than emerging market countries (including the United States)
and debt securities. The portfolio managers may use various investment
techniques to adjust the Fund's investment exposure, but there is no guarantee
that these techniques will work.
The Risks
The principal risks of investing in this Fund are stock market risk, foreign
exposure risk and emerging markets risk. To the extent that the portfolio
managers invest in debt securities, the Fund would be subject to interest rate
risk and credit risk.
If you would like additional information regarding the risks associated with
this Fund, please refer to "More on Strategies and Risks" later in this
Prospectus.
26
<PAGE>
Investment Background
Because the Fund is new, it does not have any performance history. Performance
information will be included in the Fund's next available annual or semi-annual
report.
27
<PAGE>
INCOME FUNDS
WHO MAY WANT TO INVEST IN A GE INCOME FUND
The GE Income Funds may be appropriate for your investment portfolio if you:
o seek regular income
o seek lower volatility than equity funds over the long term
o want to diversify a portfolio composed mostly of equity investments
The GE Tax-Exempt Fund may be appropriate for your investment portfolio if you:
o are in a high tax bracket
o want income that is exempt from federal income tax
The GE Income Funds are not appropriate if you want:
o high potential capital appreciation
Income funds generally invest in debt securities. Debt securities are bonds and
other securities that are used by issuers to borrow money from investors.
Holders of debt securities have a higher priority claim to assets than do equity
holders. Typically, the debt issuer pays the investor a fixed, variable or
floating rate of interest and must repay the borrowed amount at maturity. Some
debt securities, such as zero coupon bonds, are sold at a discount from their
face values instead of paying interest. Income funds provide regular income and
some provide federally tax-exempt income.
The following are important definitions of various securities for you to refer
to as you read about the GE Income Funds:
Asset-backed securities represent a participation in, or are secured by and
payable from, a stream of payments generated by particular assets, such as
credit card receivables or auto loans.
Cash and cash equivalents are highly liquid and highly rated instruments such as
commercial paper and bank deposits.
Corporate bonds are debt securities issued by companies.
Foreign debt securities are issued by foreign corporations or governments. They
may include the following:
o Eurodollar Bonds, which are dollar-denominated securities issued
outside the U.S. by foreign corporations and financial institutions or
by foreign branches of U.S. corporations and financial institutions
o Yankee Bonds, which are dollar-denominated securities issued by
foreign issuers in the U.S.
o Securities denominated in currencies other than U.S. dollars
o [Brady bonds]
High yield securities are debt securities of corporations, preferred stock and
convertible preferred stock that are rated Ba through C by Moody's or BB through
D by S&P or, if not rated by Moody's or S&P, are considered by
28
<PAGE>
portfolio management to be of speculative quality. High yield securities include
bonds rated below investment grade, sometimes called "junk bonds" and may have
speculative elements.
Investment grade securities are debt securities rated in one of the four highest
categories by Moody's S&P or another nationally recognized statistical rating
organization.
Mortgage-backed securities include securities issued by the Government National
Mortgage Association (Ginnie Mae), the Federal National Mortgage Association
(Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) and other
private issuers.
Money market securities are short-term debt securities of the U.S. government,
banks and corporations.
Municipal securities are debt obligations of local, state or regional
governments. Municipal securities include both municipal bonds (securities with
maturities of less than five years) and municipal notes (securities with
maturities of less than five years). They may be a general obligation of the
municipality that issued them or they may be secured by the revenues of a
special project or facility. Income derived from investments in municipal
securities is typically exempt from Federal income tax, however, capital gains
are subject to Federal tax.
Repurchase agreements (repos) are used to invest cash on a short-term basis. A
seller (bank or broker-dealer) sells securities, usually government securities,
to the Fund, agreeing to buy them back at a designated price and time -- usually
the next day. The Funds enter into only fully collateralized repos.
U.S. Government Securities are issued or guaranteed by the U.S. Government or on
of its agencies or instrumentalities. Some U.S. Government Securities are backed
by the full faith and credit of the federal government. Other U.S Government
Securities are backed by the issuer's right to borrow from the U.S. Treasury and
some are backed only by the credit of the issuing organization. All U.S.
Government Securities are considered highly creditworthy.
[Sidebar:
Maturity - the date on which a debt security matures or when the issuer must pay
back the principal amount of the security.
Duration - a mathematical calculation of the average life of a bond [or
portfolio of bonds] that serves as a useful measure of its price risk. Each year
of duration approximates an expected one percent change in the bond's price for
every one percent change in the interest rate.
Average weighted maturity - the length of time in days or years until the
average security in a money market or bond fund will mature or be redeemed by
its issuer. The average maturity is weighted according to the dollar amounts
invested in the various securities in the fund. This measure indicates an income
fund's sensitivity to changes in interest rates. In general, the longer a fund's
average weighted maturity, the more its share price will fluctuate in response
to changing interest rates.]
29
<PAGE>
GE FIXED INCOME FUND
Investment Objective: Seeks maximum income consistent with prudent investment
management and the preservation of capital.
The Strategy
GE Fixed Income Fund invests primarily in a variety of debt securities, such as
mortgage-backed securities, corporate bonds, U.S. Government securities, and
money market instruments. The Fund normally has an maturity of approximately
five to ten years.
The portfolio managers seek to identify debt securities with characteristics
such as:
o attractive yields and prices
o the potential for capital appreciation
o reasonable credit quality
The Fund also may invest to a lesser extent in asset-backed securities and
foreign securities. The portfolio managers may use various investment techniques
to adjust the Fund's investment exposure, but there is no guarantee that these
techniques will work.
The Risks
The principal risks of investing in this Fund are interest rate risk, credit
risk and prepayment risk. To the extent that the portfolio managers invest in
foreign securities, the Fund would be subject to foreign exposure risk.
If you would like additional information regarding the risks associated with
this Fund, please refer to "More on Strategies and Risks" later in this
Prospectus.
30
<PAGE>
Fund Performance
The bar chart and table below illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to a common measure of
performance. The bar chart illustrates how the Fund's performance varies from
year to year over the periods shown. The bar chart does not reflect the impact
of sales charges, which lower the Fund's returns.
Calendar Year Total Returns Chart
- --------------------------------------------------------------------------------
Class [ ] Shares
- --------------------------------------------------------------------------------
During the periods presented in the bar chart, the Fund's highest return for a
quarter was ___% for the quarter ended (date). The Fund's lowest return for a
quarter was ____% for the quarter ended (date). The Fund's year-to-date return
was ____% as of December 31, 1998.
The following table illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of the Lehman Brothers
Aggregate Bond Index ("LB Aggregate Bond Index"). The table reflects the impact
of the Fund's expenses and sales charges for each share class. It assumes that
you sold your shares at the end of each period.
Average Annual Total Return Table
Average Annual Total Return As of December 31, 1998
- --------------------------------------------------------------------------------
1 Year Since Inception*
GE Fixed Income Fund
Class A
Class B
Class C
Class D
LB Aggregate Bond Index
Both the bar chart and table assume reinvestment of dividends and distributions.
As with all mutual funds, past performance is not an indication of future
performance.
*Fund's Inception: March 2, 1994
[Sidebar]
All mutual funds use a standard formula to calculate total return. Total return
measures the price change in a share assuming the reinvestment of all dividend
income and capital gain distributions.
31
<PAGE>
GE GOVERNMENT SECURITIES FUND
Investment Objective: Seeks a high level of current income consistent with
safety of principal.
The Strategy
GE Government Securities Fund invests primarily in U.S. Government securities
with remaining maturities of one year or more. The Fund normally has an average
duration of about three to six years. The Fund invests in securities issued by
the:
o U.S. Treasury
o Government National Mortgage Association (Ginnie Mae)
o Federal National Mortgage Association (Fannie Mae)
o Federal Home Loan Mortgage Corporation (Freddie Mac)
o other U.S. Government agencies
The portfolio managers seek to identify debt securities with characteristics
such as:
o attractive yields and prices
o the potential for capital appreciation
o reasonable credit quality
The Fund also may invest to a lesser extent in corporate debt securities,
privately issued mortgage-backed securities, asset-backed securities and foreign
securities. The portfolio managers may use various investment techniques to
adjust the Fund's investment exposure, but there is no guarantee that these
techniques will work.
No more than 25% of the Fund's assets may be invested in debt securities rated A
or lower by Moody's or S&P and no more than 10% of the Fund's assets may be
invested in debt securities rated Baa by Moody's or BBB by S&P or comparably
rated by another nationally recognized statistical rating organization.
The Risks
The principal risks of investing in this Fund are interest rate risk, credit
risk and prepayment risk. To the extent that the portfolio managers invest in
foreign securities, the Fund also would be subject to foreign exposure risk.
If you would like additional information regarding the investment strategies and
risks associated with this Fund, please refer to "More on Strategies and Risks"
later in this Prospectus.
32
<PAGE>
Fund Performance
The bar chart and table below illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to a common measure of
performance. The bar chart illustrates how the Fund's performance varies from
year to year over the periods shown. The bar chart does not reflect the impact
of sales charges, which lower the Fund's returns.
Calendar Year Total Returns Chart
- --------------------------------------------------------------------------------
Class [ ] Shares
- --------------------------------------------------------------------------------
During the periods presented in the bar chart, the Fund's highest return for a
quarter was ___% for the quarter ended (date). The Fund's lowest return for a
quarter was ____% for the quarter ended (date). The Fund's year-to-date return
was ____% as of December 31, 1998.
The following table illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of the Lehman Brothers
Government Bond Index ("LB Government Index"). The table reflects the impact of
the Fund's expenses and sales charges for each share class. It assumes that you
sold your shares at the end of each period.
Average Annual Total Return Table
Average Annual Total Return As of December 31, 1998
- --------------------------------------------------------------------------------
1 Year Since Inception*
GE Government Securities Fund
Class A
Class B
Class C
Class D
LB Government Index
Both the bar chart and table assume reinvestment of dividends and distributions.
As with all mutual funds, past performance is not an indication of future
performance.
*Fund's Inception: [], 1987
[Sidebar]
All mutual funds use a standard formula to calculate total return. Total return
measures the price change in a share assuming the reinvestment of all dividend
income and capital gain distributions.
33
<PAGE>
GE SHORT-TERM GOVERNMENT FUND
Investment Objective: Seeks a high level of income consistent with prudent
investment management and the preservation of capital.
The Strategy
GE Short-Term Government Fund invests primarily in U.S. Government securities
and repurchase agreements secured by U.S. Government securities. The Fund
normally has an average maturity of not more than three years. The Fund invests
in securities issued or secured by the:
o U.S. Treasury
o Government National Mortgage Association (Ginnie Mae)
o Federal National Mortgage Association (Fannie Mae)
o Federal Home Loan Mortgage Corporation (Freddie Mac)
o other U.S. Government agencies
The portfolio managers seek to identify debt securities with
characteristics such as:
o attractive yields and prices
o the potential for capital appreciation
o reasonable credit quality
The Fund also may invest to a lesser extent in a variety of debt securities
including corporate debt securities, mortgage-backed securities, asset-backed
securities and foreign securities. The portfolio managers may use various
investment techniques to adjust the Fund's investment exposure, but there is no
guarantee that these techniques will work.
The Risks
The principal risks of investing in this Fund are interest rate risk, credit
risk and prepayment risk.
If you would like additional information regarding the investment strategies and
risks associated with this Fund, please refer to "More on Strategies and Risks"
later in this Prospectus.
34
<PAGE>
Fund Performance
The bar chart and table below illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to a common measure of
performance. The bar chart illustrates how the Fund's performance varies from
year to year over the periods shown. The bar chart does not reflect the impact
of sales charges, which lower the Fund's returns.
Calendar Year Total Returns Chart
- --------------------------------------------------------------------------------
Class [ ] Shares
- --------------------------------------------------------------------------------
During the periods presented in the bar chart, the Fund's highest return for a
quarter was ___% for the quarter ended (date). The Fund's lowest return for a
quarter was ____% for the quarter ended (date). The Fund's year-to-date return
was ____% as of December 31, 1998.
The following table illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of the Lehman Brothers 1-3
Year Government Bond Index ("LB 1-3 Year Government Bond Index"). The table
reflects the impact of the Fund's expenses and sales charges for each share
class. It assumes that you sold your shares at the end of each period.
Average Annual Total Return Table
Average Annual Total Return As of December 31, 1998
- --------------------------------------------------------------------------------
1 Year Since Inception*
GE Short-Term Government Fund
Class A
Class B
Class C
Class D
LB 1-3 Year Government Bond Index
Both the bar chart and table assume reinvestment of dividends and distributions.
As with all mutual funds, past performance is not an indication of future
performance.
*Fund's Inception: March 2, 1994
[Sidebar]
All mutual funds use a standard formula to calculate total return. Total return
measures the price change in a share assuming the reinvestment of all dividend
income and capital gain distributions.
35
<PAGE>
GE TAX-EXEMPT FUND
Investment Objective: Seeks as high a level of income exempt from Federal income
taxation as is consistent with preservation of capital.
The Strategy
GE Tax-Exempt Fund invests primarily in investment-grade municipal securities.
The portfolio manager manages the Fund so that at least 80% of the Fund's income
is exempt from federal personal income tax and the federal alternative minimum
tax. Investment-grade debt securities are rated Baa or better by Moody's and BBB
or better by S&P or are comparably rated by another nationally recognized
statistical rating organization, or are of similar quality to such securities.
The Fund generally will have an effective duration of 75% to 125% of the
duration of the Lehman Brothers 10-Year Municipal Index.
The portfolio manager seeks to identify debt securities with characteristics
such as:
o attractive yields and prices
o the potential for capital appreciation
o reasonable credit quality
The Fund also may invest to a lesser extent in below investment-grade debt
securities, sometimes called "junk bonds", tax-free or taxable money market
securities and may hold cash. The portfolio manager may use various investment
techniques to adjust the Fund's investment exposure, but there is no guarantee
that these techniques will work.
The Risks
The principal risks of investing in this Fund are municipal securities risk,
interest rate risk and credit risk.
If you would like additional information regarding the investment strategies and
risks associated with this Fund, please refer to "More on Strategies and Risks"
later in this Prospectus.
36
<PAGE>
[Sidebar]
Tax-Exempt Investing
Tax-exempt investing usually benefits investors in higher tax brackets.
Fund Performance
The bar chart and table below illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to a common measure of
performance. The bar chart illustrates how the Fund's performance varies from
year to year over the periods shown. The bar chart does not reflect the impact
of sales charges, which lower the Fund's returns.
Calendar Year Total Returns Chart
- --------------------------------------------------------------------------------
Class [ ] Shares
- --------------------------------------------------------------------------------
During the periods presented in the bar chart, the Fund's highest return for a
quarter was ___% for the quarter ended (date). The Fund's lowest return for a
quarter was ____% for the quarter ended (date). The Fund's year-to-date return
was ____% as of December 31, 1998.
The following table illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of the Lehman Brothers 10-Year
Municipal Index ("LB 10-Year Muni Index"). The table reflects the impact of the
Fund's expenses and sales charges for each share class. It assumes that you sold
your shares at the end of each period.
Average Annual Total Return Table
Average Annual Total Return As of December 31, 1998
- --------------------------------------------------------------------------------
1 Year Since Inception*
GE Tax-Exempt Fund
Class A
Class B
Class C
Class D
LB 10-Year Muni Index
Both the bar chart and table assume reinvestment of dividends and distributions.
As with all mutual funds, past performance is not an indication of future
performance.
*Fund's Inception: September 8, 1993
[Sidebar]
All mutual funds use a standard formula to calculate total return. Total return
measures the price change in a share assuming the reinvestment of all dividend
income and capital gain distributions.
37
<PAGE>
GE HIGH YIELD FUND
Investment Objective: Seeks to achieve above-average total return over a market
cycle of three to five years, consistent with reasonable risk.
The Strategy
The GE High Yield Fund invests primarily in high yield securities (including
bonds rated below investment grade, sometimes called "junk bonds"). The
portfolio managers will not sell a particular security only because it is no
longer classified as high yield. The Fund may also invest in U.S. Government
Securities, mortgage-backed securities, investment grade securities, municipal
securities, agency securities (securities that are not guaranteed by the U.S.
Government, but which are issued, sponsored or guaranteed by a federal agency or
federally sponsored agency), and short-term fixed income securities, such as
certificates of deposit, treasury bills and commercial paper. The portfolio's
average weighted maturity will ordinarily be greater than five years.
The portfolio managers use equity and fixed income valuation techniques and
analyses of economic and industry trends to determine the portfolio structure.
Individual securities are selected and monitored by fixed income portfolio
managers who specialize in corporate bonds and use in-depth financial analysis
to uncover opportunities in undervalued issues.
The fund also may invest to a lesser extent in foreign securities. The Fund also
may use derivatives to pursue its portfolio strategy. The portfolio manager may
use various investment techniques to adjust the Fund's investment exposure, but
there is no guarantee that these techniques will work.
The Risks
The principal risk of investing in this Fund is high yield securities risk. The
Fund is also subject to interest rate risk, issuer risk, credit risk and
prepayment risk. To the extent that the portfolio managers invest in foreign
securities and derivatives, the Fund would be subject to foreign exposure risk
and derivative securities risk.
If you would like additional information regarding the risks associated with
this Fund, please refer to "More on Strategies and Risks" later in this
Prospectus.
38
<PAGE>
Sub-Adviser's Prior Performance
The performance information provided below is a composite of the performance of
certain mutual funds ("MAS Managed Funds") managed by Miller Anderson &
Sherrerd, LLP ("MAS"), the sub-adviser of the GE High Yield Fund. Each of the
MAS Managed Funds included in the composite has objectives, policies and
strategies substantially similar to those of the Fund.
[SIDEBAR: The Sub-Adviser Performance Composite represents the performance of
the MAS Managed Funds net of fees and other expenses, not the performance of
the Fund, and should not be considered an indication of future performance of
the Fund.]
Sub-Adviser Performance Composite
Calendar Year Return
- ------------------ --------------------------- ---------------------------------
Period Composite Salomon Brothers High
Yield Market Index
- ------------------ --------------------------- ---------------------------------
1998 -- --
1997 15.95% 13.19%
1996 15.29% 11.29%
1995 23.94% 19.71%
1994 -7.06% -1.24%
1993 24.67% 17.38%
1992 18.51% 17.85%
1991 44.17% 39.93%
1990 -10.94% -7.04%
1989* -5.70% 0.55%
- ------------------ --------------------------- ---------------------------------
* Represents performance from February 28, 1989, the date the initial
MAS Managed Fund commenced operations, through December 31, 1989.
Average Annual Return (as of 9/30/98)
- ------------------ -------------------------- ----------------------------------
Period Composite Salomon Brothers High
Yield Market Index
- ------------------ -------------------------- ----------------------------------
1 Year -1.17% 2.48%
3 Years 10.49% 9.24%
5 Years 9.67% 9.09%
Since 2/28/89 10.91% 10.90%
- ------------------ -------------------------- ----------------------------------
Note A -- Composite. The composite performance is compared to the performance of
the Salomon Brothers High Yield Market Index, which is a broad based unmanaged
index that includes below investment grade corporate bonds issued in the U.S.
and publicly traded with remaining maturities of at least one year. The
information provided above for both the composite and the Index reflect the
reinvestment of dividends and distributions. Unlike the Index performance
information, however, the performance of the composite is net of fees and
other expenses applicable to the MAS Managed Funds. Expenses of the GE High
Yield Fund are expected to differ from those of the MAS Managed Funds.
39
<PAGE>
ASSET ALLOCATION FUNDS
WHO MAY WANT TO INVEST IN AN ASSET ALLOCATION FUND
The GE Strategic Investment Fund may be appropriate for your investment
portfolio if you:
o seek both capital appreciation and current income
o want a single diversified investment
Asset allocation funds are designed to meet the needs of investors who prefer to
have their asset allocation decisions made by professional money managers. They
provide an investor with a means to diversify by investing in a core portfolio
that holds both equity securities and debt securities. Although an investor may
achieve the same level of diversification by buying individual GE Equity or
Income Funds, the GE Strategic Investment Fund presents a diversification
alternative within one fund.
The following are important definitions for you to refer to as you read about
the GE Strategic Investment Fund:
Debt securities are bonds and other securities that are used by issuers to
borrow money from investors. Typically, the issuer pays the investor a fixed,
variable or floating rate of interest and must repay the borrowed amount at
maturity. Some debt securities, such as zero coupon bonds, are sold at a
discount from their face values instead of paying interest. For a more complete
list of debt securities, please see ____.
Equity securities may include common stocks, preferred stocks, Depositary
Receipts, convertible preferred stocks, convertible bonds, convertible
debentures, convertible notes, rights and warrants of U.S. and foreign
companies. Stocks represent an ownership interest in a corporation. For a more
complete list of equity securities, please see ____.
Foreign securities include interests in or obligations of entities located
outside of the United States. The determination of where an issuer of a security
is located will be made by reference to the country in which the issuer (a) is
organized, (b) derives at least 50% of its revenues or profits from goods
produced or sold, investments made or services performed, (c) has at least 50%
of its assets situated or (d) has the principal trading market for its
securities. Foreign securities may be denominated in non-U.S. currencies and
traded outside the United States or may be in the form of Depositary Receipts.
Depositary Receipts represent an interest in an account at a bank or trust
company which holds equity securities. These may include American Depositary
Receipts (held at U.S. banks and traded in the United States), European
Depositary Receipts, Global Depositary Receipts or other similar instruments.
40
<PAGE>
GE STRATEGIC INVESTMENT FUND
Investment Objective: Seeks to maximize total return.
The Strategy
The GE Strategic Investment Fund invests in both equity securities and debt
securities. The portfolio managers follow an asset allocation process
established by GE Investment Management's Asset Allocation Committee to
diversify holdings across asset classes. It is likely that the Fund will also
maintain a weighting in U.S. equity securities, debt securities and foreign
securities based on the relative attractiveness of the asset classes. The Fund
invests in equity securities for their capital appreciation potential and debt
securities for their income potential. Within each asset class, the portfolio
managers use active security selection to choose securities based on the merits
of individual issuers.
The portfolio managers seek to identify equity securities of companies with
characteristics such as:
o strong earnings growth
o attractive prices
o a presence in successful industries
o high quality management
The portfolio managers seek to identify debt securities with characteristics
such as:
o attractive yields and prices
o the potential for capital appreciation
o reasonable credit quality
The Fund's asset allocation process may result in a high portfolio turnover
rate, which may cause the Fund to experience increased transaction costs and
shareholders to incur increased taxes on their investment in the Fund. The
portfolio managers may use various investment techniques to adjust the Fund's
investment exposure, but there is no guarantee that these techniques will work.
The Risks
The principal risks of investing in this Fund are stock market risk, foreign
exposure risk, interest rate risk, credit risk and prepayment risk.
If you would like additional information regarding the Fund's investment
strategies and risks, please refer to "More on Strategies and Risks" later in
this Prospectus.
41
<PAGE>
Fund Performance
The bar chart and table below illustrate the short-term variability in the
Fund's performance. The bar chart illustrates how the Fund's performance varies
from year to year over the periods shown. The bar chart does not reflect the
impact of sales charges, which lower the Fund's returns.
During the periods presented in the bar chart, the Fund's highest return for a
quarter was ___% for the quarter ended (date). The Fund's lowest return for a
quarter was ____% for the quarter ended (date). The Fund's year-to-date return
was ____% as of (the most recent calendar quarter).
Calendar Year Total Returns Chart
- --------------------------------------------------------------------------------
Class [ ] Shares
- --------------------------------------------------------------------------------
The following table illustrates how the Fund's average annual returns for
different calendar periods compare to the return of the Standard & Poor's 500
Composite Stock Index ("S&P 500 Index") and the return of the Lehman Brothers
Aggregate Bond Index ("LB Aggregate Bond Index"). The table reflects the impact
of the Fund's expenses and sales charges for each share class. It assumes that
you sold your shares at the end of each period.
Average Annual Total Return Chart
Average Annual Total Return As of (date)
- --------------------------------------------------------------------------------
1 year 3 years*
GE Strategic Investment Fund
Class A
Class B
Class C
Class D
S&P 500 Index
LB Aggregate Bond Index
S&P 500 Index & LB Aggregate Bond Index**
Both the bar chart and table assume reinvestment of dividends and distributions.
As with all mutual funds, past performance is not an indication of future
performance.
*Fund's inception: February 22, 1993 (Class C)
**The S&P 500 Index and the LB Aggregate Bond Index simulates a blended return
which is representative of the approximate asset allocation mix of the GE
Strategic Investment Fund for the periods presented (composed of 60% S&P 500
Index, 40% LB Aggregate Bond Index). The actual asset allocation mix of the Fund
may have varied from time to time.
[Sidebar]
All mutual Funds must use the same formula to calculate total return. Total
return measures the price change in a share assuming the reinvestment of all
dividend income and capital gain distributions.
42
<PAGE>
MONEY MARKET FUNDS
Who May Want to Invest in the GE Money Market Fund
The GE Money Market Fund may be appropriate for your portfolio if you:
o want regular income
o are investing for a short-term goal
o want an investment that seeks to maintain a stable share price
The GE Money Market Fund is not appropriate if you:
o want a long-term investment
o seek capital appreciation
Money Market Funds invest in short-term, high quality debt securities. They seek
to provide stability of principal and regular income. The income provided by a
money market Fund varies with interest rate movements.
The following are important definitions for you to refer to as you read about
the GE Money Market Fund:
U.S. Government Securities in which money market funds invest typically are
Treasury bills and notes maturing within 397 days and Federal agency discount
notes.
Bank Deposits are cash, checks or drafts deposited in a financial institution
for credit to a customer's account. Banks differentiate between demand deposits
(checking accounts on which the customer may draw) and time deposits, which pay
interest and have a specified maturity or require 30 days' notice before
withdrawal.
Certificates of Deposit include short-term debt securities issued by banks.
Eurodollar Deposits are deposits issued in U.S. dollars by foreign banks and
foreign branches of U.S. banks.
Variable Rate Securities carry interest rates that may be adjusted periodically
to market rates. Interest rate adjustments could increase or decrease the income
generated by the securities.
Commercial paper includes short-term debt securities issued by banks,
corporations and other borrowers.
Repurchase Agreements (repos) are transactions in which a security (usually a
government security) is purchased with a simultaneous commitment to sell it back
to the seller (a commercial bank or recognized securities dealer) at an agreed
upon price on an agreed upon date - usually the next day.
Foreign debt securities are issued by foreign corporations and governments.
They may include the following:
o Eurodollar Bonds, which are dollar-denominated securities issued
outside the U.S. by foreign corporations and financial institutions
and by foreign branches of U.S. corporations and financial
institutions
o Yankee Bonds, which are dollar-denominated securities issued by
foreign issuers in the U.S.
o Securities denominated in currencies other than U.S. dollars
43
<PAGE>
GE MONEY MARKET FUND
Investment Objective: Seeks a high level of current income consistent with the
preservation of capital and maintenance of liquidity.
The Strategy
The GE Money Market Fund invests primarily in short-term, U.S.
dollar-denominated money market securities. The Fund's investments may include
government securities, repurchase agreements, commercial paper, variable rate
securities, foreign securities and deposits of domestic and foreign banks. The
portfolio manager limits investments to high quality securities with maturities
of up to 13 months and limits the average maturity to 90 days.
The portfolio manager may use various investment techniques to adjust the Fund's
investment exposure, but there is no guarantee that these strategies will work.
The Risks
The principal risks of investing in this Fund are interest rate risk, credit
risk and foreign exposure risk.
An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation (FDIC) or any other government agency. Although the Fund
seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Fund. The Fund's yield will change
due to movements in current short-term interest rates and market conditions. A
change in interest rates or default on the Fund's investments could cause the
Fund's share price to decline below $1.00.
If you would like additional information regarding the investment strategies and
risks associated with this Fund, please refer to "More on Strategies and Risks"
later in this Prospectus.
44
<PAGE>
Fund Performance
The bar chart and table below illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to a common measure of
performance. The bar chart illustrates how the Fund's performance varies from
year to year over the periods shown. The bar chart does not reflect the impact
of sales charges, which lower the Fund's returns.
Calendar Year Total Returns Chart
- --------------------------------------------------------------------------------
Class [ ] Shares
- --------------------------------------------------------------------------------
During the periods presented in the bar chart, the Fund's highest return for a
quarter was ___% for the quarter ended (date). The Fund's lowest return for a
quarter was ____% for the quarter ended (date). The Fund's year-to-date return
was ____% as of December 31, 1998.
The following table illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of the90 Day Treasury Bill
Rate ("90 Day T-Bill"). The table reflects the impact of the Fund's expenses. It
assumes that you sold your shares at the end of each period.
Average Annual Total Return Table
Average Annual Total Return As of December 31, 1998
- --------------------------------------------------------------------------------
1 Year 3 Year Since Inception*
GE Money Market Fund
7-Day Yield
90 Day T-Bill
Both the bar chart and table assume reinvestment of dividends and distributions.
As with all mutual funds, past performance is not an indication of future
performance.
*Fund's Inception: February 22, 1993
[Sidebar]
All mutual funds use a standard formula to calculate total return. Total return
measures the price change in a share assuming the reinvestment of all dividend
income and capital gain distributions.
45
<PAGE>
FUND EXPENSES
This summary shows what it will cost you directly or indirectly to invest in a
Fund. Fund expenses come out of the Fund's assets and are reflected in the
Fund's share price and dividends. Shareholder fees, if any, are paid directly
from your account and are not reflected in the share price. The figures below
show actual expenses during the fiscal year ended September 30, 1998 and are
calculated as a percentage of average net assets.
For Equity Funds, Income Funds, GE Strategic Investment Fund, and GE Money
Market Fund:
Shareholder Transaction Expenses*
<TABLE>
<CAPTION>
GE GE GE
GE Premier GE GE Mid-Cap Small-Cap GE GE GE
U.S. Growth Value Mid-Cap Value Value Global International Europe
Equity Equity Equity Growth Equity Equity Equity Equity Equity
Fund Fund Fund Fund Fund Fund Fund Fund Fund
- ---------------------------- -------- -------- -------- --------- --------- ---------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge
(load) Imposed on
Purchases of Shares (as a
percentage of offering
price):
Class A** 5.75% 5.75% 5.75% 5.75% 5.75% 5.75% 5.75% 5.75% 5.75%
Classes B, C and D None None None None None None None None None
Maximum Sales Charge
(load) Imposed on
Reinvested Dividends (as a
percentage of offering
price):
All Classes None None None None None None None None None
Maximum Contingent
Deferred Sales Charge (as
a percentage of redemption
proceeds):**
Class A 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0%
Class B 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
Classes C and D None None None None None None None None None
Redemption Fee:
All Classes None None None None None None None None None
Exchange Fee:
All Classes None None None None None None None None None
- ---------------------------- -------- -------- -------- --------- --------- ---------- -------- ------------ --------
<CAPTION>
- ---------------------------- ---------- --------- ------------ ------------ ---------- -------- ------------ --------
GE GE GE GE GE GE GE
Emerging Fixed Government Short-Term GE High Strategic Money
Markets Income Securities Government Tax-Exempt Yield Investment Market
Fund Fund Fund Fund Fund Fund Fund Fund+
- ---------------------------- ---------- --------- ------------ ------------ ---------- -------- ------------ --------
- ---------------------------- ---------- --------- ------------ ------------ ---------- -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge
(load) Imposed on
Purchases of Shares (as a
percentage of offering
price):
Class A** 5.75% 4.25% 4.25% 2.50% 4.25% 5.75% 5.75% N/A
Classes B, C and D None None None None None None None N/A
Maximum Sales Charge
(load) Imposed on
Reinvested Dividends (as a
percentage of offering
price):
All Classes None None None None None None None N/A
Maximum Contingent
Deferred Sales Charge (as
a percentage of redemption
proceeds):**
Class A 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% N/A
Class B 4.0% 3.0% 3.0% 3.0% 3.0% 4.0% 4.0% N/A
Classes C and D None None None None None None None N/A
Redemption Fee:
All Classes None None None None None None None N/A
Exchange Fee:
All Classes None None None None None None None N/A
- ---------------------------- -------- -------- -------- --------- --------- ---------- -------- ------------ --------
</TABLE>
* Certain broker-dealers and financial institutions also may charge their
clients fees in connection with investments in the Funds, which fees are not
reflected in the fee table.
** The sales charge and contingent deferred sales charge ("CDSC") set out in the
above table are the maximum charges imposed on purchases or redemptions of
shares and investors may pay actual charges that are less depending on the
amount purchased and in the case of the Class B shares, the length of time the
shares are held. A
46
<PAGE>
maximum CDSC of 5% will be imposed on Class B shares issued or exchanged in
connection with the combination of Investors Trust, a family of mutual funds
formerly distributed by GNA Distributors, Inc. ("Investors Trust"), an affiliate
of GE Investment Management, the Trust's investment adviser and administrator,
with certain GE Funds. See "How To Invest: How to Redeem Shares."
*** Except for redemptions pursuant to a systematic withdrawal plan, the Trust
will impose a redemption fee in the form of a CDSC, equal to 1% of the net asset
value of Class A shares if the shares being redeemed are redeemed within one
year of purchase and were subject to no front-end sales load upon purchase by
virtue of being part of a purchase of $1 million or more.
+ GE Money Market Fund does not currently offer multiple classes of shares and
accordingly does not participate in the Multiple Distribution System (as defined
below). No sales charges, redemption fees or exchange fees are assessed by the
Trust with respect to shares of GE Money Market Fund.
Annual Fund Operating Expenses
(as a percentage of average net assets)
<TABLE>
<CAPTION>
GE GE GE
GE Premier GE GE Mid-Cap Small-Cap GE GE GE
U.S. Growth Value Mid-Cap Value Value Global International Europe
Equity Equity Equity Growth Equity Equity Equity Equity Equity
Fund Fund* Fund Fund* Fund** Fund** Fund Fund** Fund**
- ---------------------------- -------- -------- -------- --------- --------- ---------- -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Advisory and
Administration fees:***
All Classes .40% .60% .55% .60% .80% .70% .75% .80% 1.05%
Distribution and Service
(12b-1) fees:
Class A .50% .50% .50% .50% .50% .50% .50% .50% .50%
Class B 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Class C .25% .25% .25% .25% .25% .25% .25% .25% .25%
Class D None None None None None None None None None
Other expenses:****
All Classes .20% .27% .23% .26% .40% .30% .24% .27% .40%
Total Operating Expenses: +
Class A 1.10% 1.37% 1.28% 1.36% 1.70% 1.5% 1.49% 1.57% 1.95%
(after reimbursement) 1.00% 1.37% 1.28% 1.35% 1.40% 1.40% 1.49% 1.57% 1.70%
Class B 1.60% 1.87% 1.78% 1.86% 2.20% 2.0% 1.99% 2.07% 2.45%
(after reimbursement) 1.50% 1.87% 1.78% 1.85% 1.9% 1.9% 1.99% 2.07% 2.20%
Class C .85% 1.12% 1.03% 1.11% 1.45% 1.25% 1.24% 1.32% 1.70%
(after reimbursement) .75% 1.12% 1.03% 1.10% 1.15% 1.15% 1.24% 1.32% 1.45%
Class D .60% .87% .78% .86% 1.20% 1.0% .99% 1.07% 1.45%
(after reimbursement) .50% .87% .78% .85% .90% .90% .99% 1.07% 1.20%
</TABLE>
- --------------------------------------------------------------------------------
* With respect to GE Premier Growth Equity Fund, GE Mid-Cap Growth Fund and GE
International Equity Fund, administration fees (amounting to .05%) and advisory
fees are imposed pursuant to separate contracts.
** Other Expenses for the GE Mid-Cap Value Equity Fund, GE Small-Cap Value
Equity Fund and GE Europe Equity Fund are based on estimated amounts to be
charged in the current fiscal year.
*** The nature of the services provided to, and the advisory and administration
fees paid by, each Fund are described under "About the Investment Adviser."
****"Other expenses" includes fees for shareholder services other than those
borne by a Fund (under a shareholder servicing and distribution plan adopted by
the Trust), such as custodial fees, legal and accounting fees, printing costs
and registration fees, the costs of regulatory compliance and membership in the
mutual fund industry trade organization, the costs associated with maintaining
the Trust's legal existence and the costs involved in communicating with
shareholders of the Funds.
+ See the "+" footnote on page [].
47
<PAGE>
Annual Fund Operating Expenses
(as a percentage of average net assets)
<TABLE>
<CAPTION>
GE GE GE GE GE GE GE
Emerging Fixed Government Short-Term GE High Strategic Money
Markets Income Securities Government Tax-Exempt Yield Investment Market
Fund** Fund Fund Fund* Fund Fund** Fund Fund
- ---------------------------- ---------- --------- ------------ ------------ ---------- -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Advisory and
Administration fees:***
All Classes 1.20% .35% .40% .30% .35% .60% .35% .25%
Distribution and Service None
(12b-1) fees:
Class A .50% .50% .50% .50% .50% .50% .50%
Class B 1.00% 1.00% 1.00% .85% 1.00% 1.00% 1.00%
Class C .25% .25% .25% .25% .25% .25% .25%
Class D None None None None None None None
Other expenses:****
All Classes .40% .22% .21% .31% .28% .30% .21% .21%
Total Operating Expenses:+ .46%
Class A 2.10% 1.07% 1.11% 1.11% 1.13% 1.40% 1.06%
(after reimbursement) 1.85% 1.05% 1.10% .95% 1.10% 1.20% 1.06%
Class B 2.60% 1.57% 1.61% 1.46% 1.63% 1.90% 1.56%
(after reimbursement) 2.35% 1.55% 1.60% 1.30% 1.60% 1.70% 1.56%
Class C 1.85% .82% .86% .86% .88% 1.15% .81%
(after reimbursement) 1.60% .80% .85% .70% .85% .95% .81%
Class D 1.60% .57% .61% .61% .63% .90% .56%
(after reimbursement) 1.35% .55% .60% .45% .60% .70% .56%
</TABLE>
- --------------------------------------------------------------------------------
* With respect to GE Short-Term Government Fund, administration fees (amounting
to .05%) and advisory fees are imposed pursuant to separate contracts.
** Other Expenses for the GE Emerging Markets Fund and GE High Yield Fund are
based on estimated amounts to be charged in the current fiscal year.
*** The nature of the services provided to, and the advisory and administration
fees paid by, each Fund are described under "About the Investment Adviser."
****"Other expenses" includes fees for shareholder services other than those
borne by a Fund (under a shareholder servicing and distribution plan adopted by
the Trust), such as custodial fees, legal and accounting fees, printing costs
and registration fees, the costs of regulatory compliance and membership in the
mutual fund industry trade organization, the costs associated with maintaining
the Trust's legal existence and the costs involved in communicating with
shareholders of the Funds.
+ The fee table reflects contractual arrangements with GE Investment Management
to (i) reduce "Advisory and Administration Fees" of each class of the GE Mid-Cap
Value Equity Fund, GE Europe Equity Fund and GE Emerging Markets Fund by .15%
and the GE High Yield Fund by .10% and (ii) limit "Other Expenses" of each class
of: the GE Global Equity Fund to .35%; GE Premier Growth Equity Fund, GE Mid-Cap
Growth Fund, GE Value Equity Fund, GE International Equity Fund, GE Europe
Equity Fund, GE Strategic Investment Fund and GE Emerging Markets Fund to .30%;
GE Mid-Cap Value Equity Fund, GE Short-Term Government Fund and GE Money Market
Fund to .25%; GE Small-Cap Value Equity Fund, GE Fixed Income Fund, GE
Government Securities Fund, and GE High Yield Fund to .20%; and GE U.S. Equity
Fund to .10%, on an annualized basis through the fiscal year ended September 30,
1999. The figures with respect to the GE Small-Cap Value Equity Fund reflect a
determination by the Fund's investment adviser and administrator to reduce or
otherwise limit "Other Expenses" of each Class of the Fund by an additional
0.10% through January 31, 2000. GE Investment Management and each Funds' Board
will consider renewal of the contractual arrangements each year. Long-term
shareholders of Class A, Class B and Class C shares may pay more than the
economic equivalent of the maximum front-end sales charge currently permitted by
the rules of the National Association of Securities Dealers, Inc. governing
investment company sales charges.
48
<PAGE>
THE IMPACT OF FUND EXPENSES
Examples +
These example are intended to help you compare the cost of investing in a Fund
with the cost of investing in other mutual funds. Although actual costs may be
higher or lower, you would pay the following expenses on a $10,000 investment,
assuming a 5% annual return and that the Fund's operating expenses remain the
same. The examples also assume that you either redeemed all of your shares at
the end of each period shown or you did not redeem your shares. The examples
should not be considered to be a representation of past or future expenses of a
Fund. Actual expenses may be greater or less than those shown.
<TABLE>
<CAPTION>
You would pay the following You would pay the following
expenses on a $10,000 investment, expenses on a $10,000
assuming redemption: investment assuming no redemption:
1 Year 3 Years 5 Years 10 Years** 1 Year 3 Years 5 Years 10 Years**
------------------------------------ ------------------------------------
<S> <C> <C>
GE U.S. Equity Fund:
Class A
Class B
Class C
Class D
GE Premier Growth Equity Fund:
Class A
Class B
Class C
Class D
GE Value Equity Fund:
Class A
Class B
Class C
Class D
GE Mid-Cap Growth Fund:
Class A
Class B
Class C
Class D
GE Mid-Cap Value Equity Fund:
Class A
Class B
Class C
Class D
GE Small-Cap Value Equity Fund:
Class A
Class B
Class C
Class D
GE Global Equity Fund:
Class A
Class B
Class C
Class D
GE International Equity Fund:
Class A
Class B
Class C
Class D
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
You would pay the following You would pay the following
expenses on a $10,000 investment, expenses on a $10,000
assuming redemption: investment assuming no redemption:
1 Year 3 Years 5 Years 10 Years** 1 Year 3 Years 5 Years 10 Years**
------------------------------------ ------------------------------------
<S> <C> <C>
GE Europe Equity Fund:
Class A
Class B
Class C
Class D
GE Emerging Markets Fund:
Class A
Class B
Class C
Class D
GE Fixed Income Fund:
Class A
Class B
Class C
Class D
GE Government Securities Fund:
Class A
Class B
Class C
Class D
GE Short-Term Government Fund:
Class A
Class B
Class C
Class D
GE Tax-Exempt Fund:
Class A
Class B
Class C
Class D
GE High Yield Fund:
Class A
Class B
Class C
Class D
GE Strategic Investment Fund:
Class A
Class B
Class C
Class D
GE Money Market Fund
</TABLE>
- --------------------------------------------------------------------------------
* Expenses shown above would be increased by the imposition of the 1% CDSC for
redemptions of shares which were not subject to a front-end sales charge by
virtue of being part of a purchase of $1 million or more.
** Expenses for Class B shares shown above reflect the conversion of Class B
shares into Class A shares after six years. Class B shares received as a result
of the Reorganization (as defined below) will convert to Class A shares after
eight years.
+ Please see the "+" on page [] above.
50
<PAGE>
MORE ON STRATEGIES AND RISKS
Like all mutual funds, investing in the GE Funds involves risk factors and
special considerations. A Fund's risk is defined primarily by its principal
investment strategies, which are described earlier in this Prospectus.
Investments in a Fund are not insured against loss of principal. As with any
mutual fund, there can be no assurance that a Fund will achieve its investment
objective. Investing in shares of a Fund should not be considered a complete
investment program. For more information about the risks associated with the
Funds, please see the Statement of Additional Information (SAI), which is
incorporated by reference into this Prospectus.
MORE ON RISKS
Credit Risk: The price of a bond is affected by the issuer's or counterparty's
credit quality. Changes in financial condition and general economic conditions
can affect credit quality and therefore the ability to honor financial
obligations. Lower quality bonds are generally more sensitive to these changes
than higher quality bonds. Even within securities considered investment grade,
differences exist in credit quality and some investment grade debt securities
may have speculative characteristics. A security's price may be adversely
affected by the market's opinion of the security's credit quality level even if
the issuer or counterparty has suffered no degradation in ability to honor the
obligation.
Below investment-grade securities, sometimes called "junk bonds," are
considered speculative. These securities have greater risk of default than
higher rated securities. The market value of below investment-grade securities
is more sensitive to individual corporate developments and economic changes
than higher rated securities. The market for below investment-grade securities
may be less active than for higher rated securities, which can adversely affect
the price at which these securities may be sold. Less active markets may
diminish a Fund's ability to obtain accurate market quotations when valuing the
portfolio securities and calculating a Fund's net asset value. In addition, a
Fund may incur additional expenses if a holding defaults and a Fund has to seek
recovery of its principal investment.
Emerging Markets Risk: Emerging markets securities bear all foreign exposure
risks discussed below. In addition, there are greater risks involved in
investing in emerging markets than in developed foreign markets. Specifically,
the economic structures in emerging markets countries are less diverse and
mature than those in developed countries, and their political systems are less
stable. Investments in emerging markets countries may be affected by national
policies that restrict foreign investment. Emerging markets countries may have
less developed legal structures, and the small size of their securities markets
and low trading volumes can make investments illiquid and more volatile than
investments in developed countries. As a result, a Fund investing in emerging
markets countries may be required to establish special custody or other
arrangements before investing.
Foreign Exposure Risk: Investing in foreign securities, including depositary
receipts, or securities of U.S. entities with significant foreign operations,
involves additional risks which can affect a Fund's performance. Foreign
markets, particularly emerging markets, may be less liquid, more volatile and
subject to less government supervision than U.S. markets There may be
difficulties enforcing contractual obligations, and it may take more time for
transactions to clear and settle. Less information may be available about
foreign entities. The costs of buying and selling foreign securities, including
tax, brokerage and custody costs, generally are higher than those involving
domestic transactions. The specific risks of investing in foreign securities
include:
51
<PAGE>
Currency Risk: The values of foreign investments may be affected by
changes in currency rates or exchange control regulations. If the
local currency gains strength against the U.S. dollar, the value of
the foreign security increases in U.S. dollar terms. Conversely, if
the local currency weakens against the U.S. dollar, the value of the
foreign security declines in U.S. dollar terms. U.S.
dollar-denominated securities of foreign issuers, including Depositary
Receipts, also are subject to currency risk based on their related
investments.
Political/Economic Risk: Changes in economic, tax or foreign
investment policies, government stability, war or other political or
economic actions may have an adverse effect on a Fund's foreign
investments.
Regulatory Risk: Foreign companies often are not subject to uniform
accounting, auditing and financial reporting standards or to other
regulatory practices and requirements common to U.S. companies.
Style Risk: Stocks with different characteristics tend to shift in and out of
favor depending upon market and economic conditions as well as investor
sentiment. A Fund may underperform other equity funds that employ a different
style. Examples of different styles include growth and value investing, as well
as those focusing on large, medium, or small company stocks.
Growth investing risk: Growth oriented funds will typically
underperform when value investing is in favor.
Value investing risk: Value oriented funds will typically
underperform when growth investing is in favor.
Mid-Cap Company Risk: Investments in securities of mid-cap companies
entails greater risks than investments in larger, more established
companies. Mid-cap companies tend to have more narrow product lines,
more limited financial resources and a more limited trading market for
their stocks, as compared with larger companies. As a result, their
stock prices may decline significantly as market conditions change.
Small-Cap Company Risk: Investing in securities of small-cap companies
may involve greater risks than investing in larger, more established
issuers. Smaller companies may have limited product lines, markets or
financial resources. Their securities may trade less frequently and in
more limited volume than securities of larger, more established
companies. In addition, smaller companies are typically subject to
greater changes in earnings and business prospects than are larger
companies. Consequently, the prices of small company stocks tend to
rise and fall in value more than other stocks. Although investing in
small-cap companies offers potential for above-average returns, the
companies may not succeed and the value of stock shares could decline
significantly.
Derivative Securities Risk: Derivative securities (securities whose values are
based on other securities, currencies or indices) include options (on stocks,
indices, currencies, futures contracts or bonds), forward currency exchange
contracts, futures contracts, swaps and structured securities. Derivative
securities may be used as a direct investment or as a hedge for a Fund's
portfolio or a portion of a portfolio. Hedging involves using a security to
offset investment risk. Hedging may include reducing the risk of a position
held in a portfolio. Hedging and other investment techniques also may be used
to increase a Fund's exposure to a particular investment strategy. If the
52
<PAGE>
portfolio managers' judgment of market conditions proves incorrect or
the strategy does not correlate well with a Fund's investments, the use of
derivatives could result in a loss regardless of whether the intent was to
reduce risk or increase return and may increase a Fund's volatility. In
addition, in the event that non-exchange traded derivatives are used, these
derivatives could result in a loss if the counterparty to the transaction does
not perform as promised.
Illiquid Securities Risk: Illiquid securities may be difficult to resell in the
ordinary course of business in seven days or less. When investments cannot be
sold readily at the desired time or price, a Fund may have to accept a lower
price or may not be able to sell the security at all, or forego other
investment opportunities, all of which may have an impact on the Fund.
Interest Rate Risk: Bond prices rise when interest rates decline and decline
when interest rates rise. The longer the duration of a bond, the more a change
in interest rates affects the bond's price. Short-term and long-term interest
rates may not move the same amount and may not move in the same direction.
Stock Market Risk: A Fund's share price will move up and down in reaction to
stock market movements. Stock prices change daily in response to company
activity and general economic and market conditions. A Fund's investments in
common stocks and other equity securities are subject to stock market risk,
which is the risk that the value of equity securities may decline. Also, equity
securities are subject to the risk that a particular issuer's securities may
decline in value, even during periods when equity securities in general are
rising. Additional stock market risks may be introduced when a particular
equity security is traded on a foreign market. For more detail on the related
risks involved in foreign markets, see Foreign exposure risks.
Municipal Securities Risk: Municipal securities are backed by the entities that
issue them and/or other revenue streams. Like other debt securities, prices of
municipal debt securities are affected inversely by changes in interest rates
and by changes in the credit rating or financial condition of the issuer.
Income derived from investments in municipal securities typically is exempt
from Federal income tax, however capital gains are subject to Federal tax. Some
municipal securities are insured and guarantee the timely payment of interest
and repayment of principal.
Prepayment Risk: Prices and yields of mortgage-backed securities assume the
securities will be redeemed at a given time. When interest rates decline,
mortgage-backed securities experience higher prepayments because the underlying
mortgages are repaid earlier than expected. A Fund's portfolio manager may be
forced to invest the proceeds from prepaid mortgage-backed securities at lower
rates, which results in a lower return for the Fund. When interest rates
increase, mortgage-backed securities experience lower prepayments because the
underlying mortgages may be repaid later than expected. This typically reduces
the value of the underlying securities.
Repurchase and Reverse Repurchase Agreements Risk: A Fund entering into a
repurchase agreement may suffer a loss if the other party to the transaction
defaults on its obligations and could be delayed or prevented from exercising
its rights to dispose of the underlying securities. The value of the underlying
securities might decline while the Fund seeks to assert its rights. The Fund
could incur additional expenses in asserting its rights or may lose all or part
of the income from the agreement. A reverse repurchase agreement involves the
risk that the market value of the securities retained by a Fund may decline
below the price of the securities the Fund has sold but is obligated to
repurchase at a higher price under the agreement.
53
<PAGE>
Restricted Securities Risk: Restricted securities may be subject to legal
restraints and, therefore, are less liquid than other securities. The prices
received from reselling restricted securities in privately negotiated
transactions may be less than those originally paid by a Fund. Companies whose
securities are restricted are not subject to the same investor protection
requirements as publicly traded securities.
OTHER RISK CONSIDERATIONS:
EURO Conversion: On January 1, 1999, eleven of the fifteen member countries of
the European Economic and Monetary Union (Participating Countries) established
fixed conversion rates between their existing sovereign currencies and the
EURO, a new common currency in Europe. The introduction of the EURO may result
in uncertainties for securities of European companies, European markets and the
operation of the Funds. The redenomination of certain European debt and equity
securities over a period of time may result in differences in various
accounting, tax and/or legal treatments that would not otherwise occur. Market
disruptions may occur that could adversely affect the value of European
securities and currencies held by the Funds. Other risks relate to the ability
of financial institution systems to process EURO transactions.
GE Investment Management is working to address EURO conversion issues in a
broad range of areas, including internal business applications, trading systems
and accounting systems. In addition, GE Investment Management has worked
closely with the Funds' major service providers to address the issue. It is
possible, however, that the markets for securities in which certain Funds
invest may be adversely affected by the conversion to the EURO. Furthermore,
individual issuers may suffer increased costs and decreased earnings due to the
long-term impact of EURO conversion.
Year 2000
Like other business organizations and individuals around the world, each of the
Funds could be adversely affected if the computer systems used by its
Investment Managers and external service providers do not properly process and
calculate date-related information from and after January 1, 2000. This is
commonly known as the "Year 2000 Problem." GE Investment Management is engaged
in a multi-year effort to address the Year 2000 Problem in a broad range of
areas, including internal business applications, process-enabling systems and
facilities. In addition, efforts are underway to track each of the Funds' major
service providers to see what they have completed, or has been undertaken to
address the Year 2000 Problem. At this time, however, there can be no assurance
that these steps will be sufficient to avoid any adverse impact on the Funds.
Furthermore, it is possible that the markets for securities in which the Funds
invest may be detrimentally affected by computer failures throughout the
financial services industry beginning January 1, 2000. Corporate and
governmental data processing errors may result in production problems for
individual companies and overall economic uncertainties. Earnings of individual
issuers may be affected by remediation costs. In addition, it has been reported
that foreign institutions have made less progress in addressing the Year 2000
Problem than major U.S. entities, which could have a greater impact on certain
GE Funds' investments that are more sensitive to these risks.
54
<PAGE>
MORE ON INVESTMENT STRATEGIES
A Fund is permitted to use other securities and investment strategies in
pursuit of its investment objective, subject to limits established by the
Funds' Board of Trustees. Certain instruments and investment strategies may
expose the Funds to other risks and considerations, which are discussed in the
Funds' SAI.
Holding Cash and Temporary Defensive Positions: Under normal circumstances,
each Fund may hold cash and/or money market instruments (i) pending investment,
(ii) for cash management purposes, and (iii) to meet operating expenses. A Fund
may from time to time take temporary defensive positions when the portfolio
manager believes that adverse market, economic, political or other conditions
exist. In these circumstances, the portfolio manager may (i) hold cash and/or
invest in money market instruments, or (ii) restrict the securities markets in
which a Fund's assets are invested by investing those assets in securities
markets deemed to be conservative in light of the Fund's investment objective
and strategies. To the extent that a Fund, other than the GE Money Market Fund,
holds cash or invests in money market instruments, it may not achieve its
investment objective.
The following tables summarize each Fund's investment policies and limitations.
Percentage figures refer to the percentage of a Fund's assets that may be
invested in accordance with the indicated policy.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Repurchase Reverse Non-Publicly Structured Purchasing Purchasing and
Agreements Repurchase Traded and and and Writing Writing
Agreements Illiquid Indexed Securities Securities
Securities Securities Options Index Options
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
GE U.S. Equity Fund Yes No Yes No Yes Yes
- ---------------------------------------------------------------------------------------------------------------------
GE Premier Growth Equity Fund Yes No Yes No Yes Yes
- ---------------------------------------------------------------------------------------------------------------------
GE Value Equity Fund Yes Yes Yes No Yes Yes
- ---------------------------------------------------------------------------------------------------------------------
GE Mid-Cap Growth Fund Yes No Yes No Yes Yes
- ---------------------------------------------------------------------------------------------------------------------
GE Mid-Cap Value Equity Fund Yes No Yes Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------------
GE Small-Cap Value Equity Yes Yes Yes No Yes Yes
Fund
- ---------------------------------------------------------------------------------------------------------------------
GE Global Equity Fund Yes No Yes No Yes Yes
- ---------------------------------------------------------------------------------------------------------------------
GE International Equity Fund Yes No Yes No Yes Yes
- ---------------------------------------------------------------------------------------------------------------------
GE Europe Equity Fund Yes Yes Yes Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------------
GE Emerging Markets Fund Yes Yes Yes No Yes Yes
- ---------------------------------------------------------------------------------------------------------------------
GE Fixed Income Fund Yes No Yes Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------------
GE Government Securities Fund Yes Yes Yes Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------------
GE Short-Term Government Fund Yes No Yes Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------------
GE Tax-Exempt Fund Yes Yes Yes No Yes Yes
- ---------------------------------------------------------------------------------------------------------------------
GE High Yield Fund Yes Yes Yes Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------------
GE Strategic Investment Fund Yes No Yes Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------------
GE Money Market Fund Yes Yes No No No No
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
55
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Futures Forward Options Maximum Maximum Maximum When-Issued
and Currency on Investment in Investment in Investment and
Options Transactions Foreign Debt Securities Below-Investment in Delayed
on Futures Currencies Grade Debt Foreign Delivery
Securities Securities Securities
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
GE U.S. Equity Fund Yes Yes Yes 35% 5% 15%* Yes
- ---------------------------------------------------------------------------------------------------------------------
GE Premier Growth Yes Yes No 35% 5% 25%* Yes
Equity Fund
- ---------------------------------------------------------------------------------------------------------------------
GE Value Equity Yes Yes Yes 35% 5% 25%* Yes
Fund
- ---------------------------------------------------------------------------------------------------------------------
GE Mid-Cap Growth Yes Yes Yes 35%(maximum of 10% in BB or B 35%* Yes
Fund 25% in BBB by by S&P or Ba or
S&P, Baa by B by Moody's or
Moody's or equivalent
equivalent)
- ---------------------------------------------------------------------------------------------------------------------
GE Mid-Cap Value Yes Yes Yes 35% 15% in 15% Yes
Equity Fund securities
rated BBB or
below by S&P or
Baa or below by
Moody's or
equivalent
- ---------------------------------------------------------------------------------------------------------------------
GE Small-Cap Value No No No 35% 10% 10%* Yes
Equity Fund
- ---------------------------------------------------------------------------------------------------------------------
GE Global Equity Yes Yes Yes 35% 5% No limit Yes
Fund
- ---------------------------------------------------------------------------------------------------------------------
GE International Yes Yes Yes 35% 5% No limit Yes
Equity Fund
- ---------------------------------------------------------------------------------------------------------------------
GE Europe Equity Yes Yes Yes 35% 15% No limit Yes
Fund
- ---------------------------------------------------------------------------------------------------------------------
GE Emerging Yes Yes Yes 35% 10% in BB or B No limit Yes
Markets Fund by S&P or BA or
B by Moody's or
equivalent
- ---------------------------------------------------------------------------------------------------------------------
GE Fixed Income Yes Yes Yes 100% (maximum 10% in BB or B 35%* Yes
Fund of 25% BBB by by S&P or Ba or
S&P or Baa by B by Moody's or
Moody's or equivalent
equivalent)
- ---------------------------------------------------------------------------------------------------------------------
GE Government Yes Yes Yes 100% (maximum None 35%* Yes
Securities Fund of 10% in BBB
by S&P or Baa
by Moody's or
equivalent;
maximum of 25%
in A or lower
by S&P, Moody's
or equivalent)
- ---------------------------------------------------------------------------------------------------------------------
GE Short-Term Yes Yes Yes 100% None 35%* Yes
Government Fund
- ---------------------------------------------------------------------------------------------------------------------
GE Tax-Exempt Fund Yes No No 100% (maximum 5% in debt None Yes
of 10% in BBB downgraded
by S&P or Baa below
by Moody's or investment
equivalent) grade
subsequent to
purchase
- ---------------------------------------------------------------------------------------------------------------------
GE High Yield Fund Yes Yes Yes 100% 100% 35% Yes
- ---------------------------------------------------------------------------------------------------------------------
GE Strategic Yes Yes Yes 100% (maximum 10% in BB or B 30%* Yes
Investment Fund of 25% BBB by by S&P or Ba or
S&P or Baa by B by Moody's or
Moody's or equivalent
equivalent)
- ---------------------------------------------------------------------------------------------------------------------
GE Money Market No No No 100% None 25%* Yes
Fund
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------
* This limitation excludes ADRs and U.S. Listed Securities and Nasdaq Traded
Securities.
56
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Leading Rule Debt Depositary Securities Municipal Floating Participation
Portfolio 144A Obligations Receipts of Other Leases and Interests
Securities Securities of Investment Variable in
Supranational Funds Rate Municipal
Agencies Instruments Obligations
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GE U.S. Equity Fund Yes Yes Yes Yes No No No* No
- -----------------------------------------------------------------------------------------------------------------------
GE Premier Growth Yes Yes Yes Yes Yes No No* No
Equity Fund
- ---------------------------------------------------------------------------------------------------------------------
GE Value Equity Yes Yes Yes Yes Yes No No* No
Fund
- ---------------------------------------------------------------------------------------------------------------------
GE Mid-Cap Growth Yes Yes Yes Yes Yes No No* No
Fund
- ---------------------------------------------------------------------------------------------------------------------
GE Mid-Cap Value Yes Yes Yes Yes Yes No No* No
Equity Fund
- ---------------------------------------------------------------------------------------------------------------------
GE Small-Cap Value Yes Yes Yes Yes Yes No No* No
Equity Fund
- ---------------------------------------------------------------------------------------------------------------------
GE Global Equity Yes Yes Yes Yes Yes No No* No
Fund
- ---------------------------------------------------------------------------------------------------------------------
GE International Yes Yes Yes Yes Yes No No* No
Equity Fund
- ---------------------------------------------------------------------------------------------------------------------
GE Europe Equity Yes Yes Yes Yes Yes No Yes No
Fund
- ---------------------------------------------------------------------------------------------------------------------
GE Emerging Yes Yes Yes Yes Yes No No* No
Markets Fund
- ---------------------------------------------------------------------------------------------------------------------
GE Fixed Income Yes Yes Yes Yes Yes No Yes No
Fund
- ---------------------------------------------------------------------------------------------------------------------
GE Government Yes Yes Yes Yes Yes No Yes No
Securities Fund
- ---------------------------------------------------------------------------------------------------------------------
GE Short-Term Yes Yes Yes Yes Yes No Yes No
Government Fund
- ---------------------------------------------------------------------------------------------------------------------
GE Tax-Exempt Fund Yes Yes Yes No Yes Yes Yes Yes
- ---------------------------------------------------------------------------------------------------------------------
GE High Yield Fund Yes Yes Yes Yes Yes No Yes No
- ---------------------------------------------------------------------------------------------------------------------
GE Strategic Yes Yes Yes Yes Yes Yes Yes Yes
Investment Fund
- ---------------------------------------------------------------------------------------------------------------------
GE Money Market Yes Yes Yes No No No Yes No
Fund
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------
* Excludes commercial paper and notes with variable and floating rates of
interest.
57
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Zero Municipal Custodial Mortgage Government Asset Mortgage Short
Coupon Obligation Receipts on Related Stripped Backed Dollar Sales
Obligations Components Municipal Securities, Mortgage Securities Rolls Against
Obligation including Related and the Box
CMOs Securities Receivable-Backed
Securities
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GE U.S. Equity Fund Yes No No No No No No No
- ------------------------------------------------------------------------------------------------------------------------------------
GE Premier Growth No No No No No No No No
Equity Fund
- ------------------------------------------------------------------------------------------------------------------------------------
GE Value Equity No No No No No No No Yes
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
GE Mid-Cap Growth No No No No No No No Yes
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
GE Mid-Cap Value Yes No No No No No No Yes
Equity Fund
- ------------------------------------------------------------------------------------------------------------------------------------
GE Small-Cap Value No No No No No No No Yes
Equity Fund
- ------------------------------------------------------------------------------------------------------------------------------------
GE Global Equity No No No No No No No Yes
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
GE International No No No No No No No Yes
Equity Fund
- ------------------------------------------------------------------------------------------------------------------------------------
GE Europe Equity No No No No No No No Yes
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
GE Emerging No No No No No No No Yes
Markets Fund
- ------------------------------------------------------------------------------------------------------------------------------------
GE Fixed Income Yes No No Yes Yes Yes Yes No
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
GE Government Yes No No Yes Yes Yes Yes Yes
Securities Fund
- ------------------------------------------------------------------------------------------------------------------------------------
GE Short-Term Yes No No Yes Yes Yes Yes No
Government Fund
- ------------------------------------------------------------------------------------------------------------------------------------
GE Tax-Exempt Fund Yes Yes Yes No No No No Yes
- ------------------------------------------------------------------------------------------------------------------------------------
GE High Yield Fund Yes No No Yes Yes Yes Yes Yes
- ------------------------------------------------------------------------------------------------------------------------------------
GE Strategic Yes Yes Yes Yes Yes Yes Yes No
Investment Fund
- ------------------------------------------------------------------------------------------------------------------------------------
GE Money Market No No No No No No No No
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
58
<PAGE>
ABOUT THE INVESTMENT ADVISER
Investment Adviser and Administrator
GE Investment Management Incorporated, located at 3003 Summer Street, P.O. Box
7900, Stamford, Connecticut 06904, is the investment adviser and administrator
of each Fund. GEIM is a wholly-owned subsidiary of GE and a registered
investment adviser. GE Investment Management's principal officers, directors
and portfolio managers hold similar positions with General Electric Investment
Corporation (GEIC), a wholly-owned subsidiary of GE. Today, GE Investment
Management and GEIC manage roughly $[] billion in assets, including $15 billion
in mutual funds.
Each Fund pays GE Investment Management up to the following maximum annual fee
for investment management services:
GE Premier Growth Fund 0.60%
GE U.S. Equity Fund 0.40%
GE Mid-Cap Growth Fund 0.60%
GE Mid-Cap Value Equity Fund* 0.80%
GE Value Equity Fund 0.55%
GE Small-Cap Value Equity Fund 0.70%
GE Global Equity Fund 0.75%
GE International Equity Fund 0.80%
GE Europe Equity Fund* 1.05%
GE Emerging Markets Fund* 1.20%
GE Strategic Investment Fund 0.35%
GE Fixed Income Fund 0.35%
GE Government Securities Fund 0.40%
GE Short-Term Government Fund 0.30%
GE Tax-Exempt Fund 0.35%
GE High Yield Fund* 0.60%
GE Money Market Fund 0.25%
- -----------------
* These figures do not reflect (i) a .15% reduction of investment management
fees for the GE Mid-Cap Value Equity Fund, GE Europe Equity Fund and GE Emerging
Markets Fund and (ii) a .10% reduction of investment management fees for the GE
High Yield Fund, on an annualized basis through September 30, 1999.
59
<PAGE>
About The Funds' Portfolio Managers
Eugene Bolton is Director and Executive Vice President of GE Investment
Management. He manages the overall U.S. equity investments for GE Investment
Management. He leads a team of portfolio managers for GE U.S. Equity Fund and
GE Mid-Cap Growth Fund. He as served in those capacities since each Fund's
inception. Mr. Bolton joined GE Investment Management in 1984 as Chief
Financial Officer and has been a portfolio manager since 1986.
David B. Carlson is Senior Vice President of GE Investment Management. He is
portfolio manager for GE Premier Growth Equity Fund and manages equity
investments for GE Strategic Investment Fund. He has served in those capacities
since each Fund's inception. Since joining GE Investment Management in 1982,
Mr. Carlson has held several positions.
Peter J. Hathaway is Senior Vice President of GE Investment Management and
portfolio manager for GE Value Equity Fund. Mr. Hathaway has served in that
capacity since the Fund's inception and has over 36 years of investment
experience. He has held several positions since joining GE Investment
Management in 1985.
Ralph R. Layman is Director and Executive Vice President of GE Investment
Management. Mr. Layman leads a team of portfolio managers for GE International
Equity Fund and GE Emerging Markets Fund. He also serves as co-portfolio
manager for GE Global Equity Fund and GE Strategic Investment Fund. He has
served in those capacities since each Fund's inception. Mr. Layman joined GE
Investment Management in 1991 as Executive Vice President for International
Investments.
Robert A. MacDougall is Director and Executive Vice President of GE Investment
Management. He leads a team of portfolio managers for GE Government Securities
Fund, GE Fixed Income Fund, GE Short-Term Government Fund and GE Money Market
Fund. Mr. MacDougall also manages fixed income investments for GE Strategic
Investment Fund. He has served in those capacities since each Fund's inception.
Mr. MacDougall joined GE Investment Management in 1986 as Vice President.
Elaine G. Harris is Senior Vice President of GE Investment Management and
portfolio manager of GE Mid-Cap Growth Fund and GE Mid-Cap Value Equity Fund.
She has served in those capacities since each Fund's inception. Ms. Harris has
over 14 years of investment experience and has held several positions since
joining GE Investment Management in 1993.
Michael J. Solecki is Vice President of GE Investment Management, portfolio
manager of GE Europe Equity Fund and co-portfolio manager of GE Global Equity
Fund. He has served in that capacity since inception. He has held several
positions since joining GE Investment Management in 1990.
60
<PAGE>
About the Sub-Advisers
GE Investment Management believes that it has the responsibility to make the
best managers available to Fund shareholders at all times. Whether that means
accessing GE Investment Management's wealth of internal talent or using
external talent (Sub-Advisers), GE Investment Management closely monitors all
portfolio management teams to be certain that it is delivering the best
investment management possible to Fund shareholders. When GE Investment
Management feels the need to access specialists outside, it carefully
investigates and engages Sub-Advisers with strong performance records and
styles that match the investment objectives of the Funds . GE Investment
Management is proud to engage the following Sub-Advisers to conduct the
investment programs for the following Funds.
GE Small-Cap Value Equity Fund
Palisade Capital Management, L.L.C. (Palisade)
One Bridge Plaza
Fort Lee, NJ 07024
Palisade Capital Management has a history of managing small-cap equity
portfolios and for several years has provided pension fund services to GE
Investment Management. The company has managed various institutional and
private accounts with total assets in excess of $[] billion as of December 31,
1998. Palisade has managed the Small-Cap Value Equity Fund since inception.
Although Palisade has no previous experience managing mutual fund portfolios,
Palisade translates its experience from various institutional and private
accounts to mutual funds.
The Fund is managed by an investment advisory committee (the "Investment
Committee") composed of the following members: Jack Feiler, Martin L. Berman,
Steven E. Berman, Richard Meisenberg and Mark Degenhart. Mr. Feiler, Chief
Investment Officer at Palisade, has day-to-day responsibility for managing the
Fund and works with the Investment Committee in developing and executing the
Fund's investment program. Mr. Feiler has more than 30 years of investment
experience and has served as the principal small-cap portfolio manager at
Palisade since the commencement of Palisade's operations in April 1995. Prior
to joining Palisade, Mr. Feiler was a Senior Vice President-Investments at
Smith Barney from 1990 to 1995.
GE Tax-Exempt Fund
Brown Brothers Harriman & Co. (BBH)
59 Wall Street
New York, NY 10005
BBH has a long history of managing fixed-income portfolios and provides
investment management services to a wide range of mutual funds and institutional
clientele. As of (date), BBH managed $_____ in mutual fund assets.
Barbara A. Brinkley of BBH is portfolio manager of the GE Tax-Exempt Fund and
has served in that capacity since inception. Ms. Brinkley joined BBH in 1976
and has held several positions within the municipal securities department
throughout her career.
61
<PAGE>
GE High Yield Fund
Miller Anderson & Sherrerd, LLP (MAS)
One Tower Bridge
West Conshohocken, PA 19428
MAS is a Pennsylvania limited liability partnership founded in 1969, and is a
wholly-owned by subsidiaries of Morgan Stanley Dean Witter & Co. As of December
31, 1998, MAS had $[ ] billion of assets under management.
Robert E. Angevine, Thomas L. Bennett and Stephen F. Esser are co-portfolio
managers of the GE High Yield Fund and have served in that capacity since the
Fund's inception. Mr. Angevine has more than 18 years of investment experience
and joined Morgan Stanley Asset Management Inc., an affiliate of MAS, in 1988.
Mr. Angevine is currently a Principal of Morgan Stanley & Co. Incorporated. Mr.
Bennett has more than 19 years of investment experience and joined MAS in 1984.
Mr. Bennett is currently a Managing Director of Morgan Stanley & Co.
Incorporated. Mr. Esser has more than 13 years of investment experience and
joined MAS in 1988. Mr. Esser is currently a Managing Director of Morgan
Stanley & Co. Incorporated.
GE Mid-Cap Value Equity Fund
NWQ Investment Management Company (NWQ)
2049 Century Park East-4th Floor
Los Angeles, CA 90067
NWQ is a wholly-owned subsidiary of United Asset Management Corporation, a
company whose principal business is managing investments for institutional
clients through 50 operating subsidiaries and acquiring investment management
firms. NWQ is a manager of domestic investment portfolios for individual,
union, corporate, municipal, endowment and foundation clients with 17 years of
experience. As of December 31, 1998, NWQ had in excess of $[] billion of assets
under management.
Jon D. Bosse is the Fund's portfolio manager and has served in that capacity
since the Fund's inception. Mr. Bosse has more than 12 years of investment
experience and has held the position of Director of Equity Research and
Managing Director at NWQ since 1996. Prior to his joining NWQ, 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 is a Chartered
Financial Analyst and a member of the Association for Investment Management and
Research and the Los Angeles Society of Financial Analysts.
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HOW TO INVEST
How to Buy Shares
The GE Funds offer several ways to purchase shares. You may open an account and
make an investment through your investment professional, by mail, bank wire,
electronic funds transfer or by telephone, as described below.
Minimum Investments
By mail By wire Automatically
Initial Investment $500 $1,000 $25
Subsequent Investments $100 $1,000 $25
Minimums are reduced for Direct Deposit, Automatic Investment and Payroll
Savings Plans. Accounts that fall below the $500 account minimum may be
automatically redeemed by a Fund on 30 days' notice.
Through an Authorized Firm- If You Invest With an Investment Professional
Your investment professional can help you set up your new account and make
subsequent investments for you.
By Mail - If You Invest on Your Own
o Read this prospectus.
o If opening a new account, complete and sign the attached application. You may
obtain an application by calling the Funds' Distributor at the number listed on
the back cover.
o Send a check drawn on a U.S. bank in U.S. dollars payable to GE Funds.
o If adding to an existing account, include your account number on the check.
Mail to:
GE Funds
P.O. Box 419631
Kansas City, MO 64141-6631
Overnight delivery:
GE Funds
c/o National Financial Data Services Inc.
330 West 9th Street
Kansas City, MO 64105
Telephone: (816) 843-7335
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Once You Have Opened an Account- You Have Additional Options
By Wire
o Wire to the address below. Include your name, the name of the Fund
and your account number.
o Wire orders received by the close of
regular trading on the New York Stock Exchange (NYSE) are executed at
that day's offering price. Wire orders received after the close of
regular trading on the NYSE receive the next business days' offering
price.
Wire Address:
State Street Bank and Trust Company
ABA #0110-0002-8
DDA No. 9904-641-9
Direct Deposit or Payroll Savings Plan
o You must have an existing account.
o You may invest automatically with money deducted from your Federal
paycheck, Social Security check, GE employee payroll check or through
your company's payroll savings plan.
o To establish a direct deposit arrangement or to invest through a
payroll savings plan, contact your payroll department or Federal
agency.
o You may elect to modify or terminate your participation in the
Direct Deposit or Payroll Savings Plans by notifying the Funds in
writing.
o The Funds may modify or terminate your participation in a Plan upon
notice.
Automatic Investment Plan
o You may have funds transferred directly from your bank account each
month. Call (800) 242-0134 to make arrangements.
Purchases in Kind - If You Invest More than $10 Million
Large investments in a Fund ($10 million or more) may be detrimental to
existing shareholders because they can significantly increase transaction costs
charged to existing shareholders. In these circumstances, the Fund may require
that you purchase Fund shares "in kind," or provide the Fund with securities
instead of cash. The Funds' distributor would inform you of the securities
acceptable to the Fund. The securities would be accepted by the Fund at their
market value in return for Fund shares of equal value. You may have to pay
associated brokerage commissions for the securities that you purchase.
Retirement Plans
Shares of the Funds, other than the Tax-Exempt Fund, are available for purchase
through individual retirement accounts ("IRAs") and other retirement plans. An
IRA application and further details about the procedures to be followed by IRAs
and other retirement plans are available from your investment professional or
the Distributor.
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When We Receive Your Order to Buy or Sell Shares
Purchase and redemption requests received in good order will be executed at the
next offering price calculated after receipt of an investment or transaction
instructions. Offering price is equal to the net asset value next determined
plus any applicable sales charge.
Purchase and redemption orders are executed only on days when the NYSE is open
for trading. If the NYSE closes early, the deadlines for purchase and
redemption orders will be accelerated to the earlier closing time. If you hold
more than one Class of shares of a Fund, you must specify which class you
intend to purchase or sell. For Funds declaring daily income dividends, you
will begin to earn income as of the first business day after payment for your
order has been received by the Fund.
Sales Charges
Sales Charges and expenses are determined by the share class you purchase. Each
GE Fund offers four share classes to investors, with the exception of the GE
Money Market Fund.
Choosing a Share Class
You should select the share class that best suits your needs. Class A shares
carry an initial sales charge, Class B shares are subject to a contingent
deferred sales charge (CDSC) based on the amount of time you hold your shares,
Class C shares are offered only to GE employees and retirees and have no sales
charges, and finally, Class D shares are available only to certain
institutional investors.
Purchasing Class A Shares
Class A shares have initial sales charges, which are included in the offering
price. Initial sales charges on Class A shares may be reduced, waived or may
vary with the amount invested. The initial sales charge varies with the amount
invested, as shown below:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
GE U.S. Equity Fund, GE Premier Growth Equity Fund, GE Value Equity Fund, GE
Mid-Cap Growth Fund, GE Mid-Cap Value Equity Fund, GE Small-Cap Value Equity
Fund, GE Global Equity Fund, GE International Equity Fund, GE Europe Equity
Fund, GE Emerging Markets Fund, GE High Yield Fund and GE Strategic Investment
Fund
- -------------------------------------------------------------------------------------------------------------------
Maximum Dealers'
Your investment** Front-End Sales Charge Reallowance*
- -------------------------------------------------------------------------------------------------------------------
(As a % of Offering Price) (As a % of Your Net (As a % of Offering Price)
Investment)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.25%
- -------------------------------------------------------------------------------------------------------------------
$50,000 but less than 4.25% 4.44% 3.75%
$100,000_
- -------------------------------------------------------------------------------------------------------------------
$100,000 but less than 3.25% 3.36% 2.75%
$250,000_
- -------------------------------------------------------------------------------------------------------------------
$250,000 but less than 2.50% 2.56% 2.00%
$500,000_
- -------------------------------------------------------------------------------------------------------------------
$500,000 but less than 2.00% 2.04% 1.55%
$1,000,000_
- -------------------------------------------------------------------------------------------------------------------
$1,000,000 or more*** 0 0 +
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
GE Fixed Income Fund, GE Government Securities Fund and GE Tax-Exempt Fund
- -------------------------------------------------------------------------------------------------------------------
Maximum Dealers'
Your Investment** Front-End Sales Charge Reallowance*
- -------------------------------------------------------------------------------------------------------------------
(As a % of Offering Price) (As a % of Your Net (As a % of Offering Price)
Investment)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 4.25% 4.44% 3.75%
- -------------------------------------------------------------------------------------------------------------------
$100,000 but less than 3.25% 3.36% 2.75%
$250,000_
- -------------------------------------------------------------------------------------------------------------------
$250,000 but less than 2.50% 2.56% 2.00%
$500,000
- -------------------------------------------------------------------------------------------------------------------
$500,000 but less than 2.00% 2.04% 1.55%
$1,000,000_
- -------------------------------------------------------------------------------------------------------------------
$1,000,000 or more*** 0_ _ 0_ +_
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
GE Short-Term Government Fund
- -------------------------------------------------------------------------------------------------------------------
Maximum Dealers'
Your Investment** Front-End Sales Charge Reallowance*
- -------------------------------------------------------------------------------------------------------------------
(As a % of Offering Price) (As a % of Your Net (As a % of Offering Price)
Investment)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 2.50% 2.56% 2.25%
- -------------------------------------------------------------------------------------------------------------------
$100,000 but less than 2.25% 2.30% 2.00%
$250,000
- -------------------------------------------------------------------------------------------------------------------
$250,000 but less than 1.75% 1.78% 1.50%
$500,000
- -------------------------------------------------------------------------------------------------------------------
$500,000 but less than 1.25% 1.27% 1.00%
$1,000,000
- -------------------------------------------------------------------------------------------------------------------
$1,000,000 or more*** 0 0 +__
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
*According to the SEC, dealers who receive more than 90% of the sales charge
may be considered underwriters.
**Under the Distributor's guidelines, purchases of $250,000 or more will be made
in Class A shares only.
***Purchases of Class A shares at net asset value are subject to a 1% contingent
deferred sales charge if redeemed within one year of purchase. The CDSC is
calculated by multiplying the CDSC percentage by the lesser of the share class'
net asset value at the time of purchase or its net asset value at the time of
redemption. + For purchases that exceed $1 million, the Distributor will pay a
concession of 1.00% of any amounts under $5 million, 0.50% of the next $45
million and 0.25% thereafter, to the selling dealer.
[Sidebar: Class A shares may be appropriate for long-term investors who are
comfortable with traditional front loads and for investors who are eligible for
quantity discounts or waivers.]
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<PAGE>
Reduced Sales Charges for Class A Shares
Purchasesof Class A shares have reduced sales charges in the
following situations:
o "Combined Right Of Accumulation" Policy -- you may group
prior investments made by you and/or members of your
immediate family in Class A shares of the same or other GE
Funds to count towards volume discounts on new purchases.
Contact your investment professional or the Distributor for
details.
o "Letter Of Intent" Purchase - if you intend to make
purchases in GE Funds of over $50,000 within a 13 month
period, you may sign a letter of intent and receive a volume
discount on each purchase as if you were making a single
purchase. (Please complete and sign the letter of intent
section on the Fund application.) If you fail to complete the
letter of intent, the higher sales charges applicable to your
investment will be assessed retroactively. The Funds'
Transfer Agent will hold 5.75% of the amount specified in the
letter of intent as Fund shares in escrow, which will be used
to cover the applicable sales charge if the letter is not
completed. Contact your investment professional or the
Distributor for details.
Sales Charge Waivers for Class A Shares
The sales charge on Class A shares is waived if the purchase:
o is at least $1 million
o represents reinvested dividends or capital gains
o is made by banks, insurance companies and corporations
purchasing shares for their own account
o is made by financial institutions investing on behalf of
their clients
o is made by tax-exempt investors (including those in defined
benefit or defined contribution plans), investment companies
not managed or sponsored by GE Investment Management or any
of its affiliates, or certain customers of financial
intermediaries
o represents a contribution of a retirement plan with at
least 250 eligible employees
o is made through by employees whose defined contribution
plan is invested in GE Funds through GE Investment
Distributors
o is made by officers, directors, employees and registered
representatives of authorized firms that have agreements with
GE Investments Distributors or other financial institutions
selling Fund shares
o is made through offerings to selected customers of certain
subsidiaries and divisions of GE
o is made by employees and their family members of certain
vendors of GE's employee retirement plan
o is made by certain investors who previously purchased
shares during special limited offerings
o is through certain GE LifeStyle Funds
o is through broker-dealers for supplemental savings plans
for individuals who are employed by a single employer with
750 or more eligible investors
o is made through certain broker-dealers, financial
institutions , recordkeepers and other financial
intermediaries who charge a management, consulting or other
fee for their services and who have an agreement with or
among the Funds, GE Investment Management, GE Investment
Distributors to compensate them for certain services.
67
<PAGE>
For more information on Class A sales charge waivers, please contact
your investment professional.
[Side Bar: How Contingent Deferred Sales Charges Are Calculated
Contingent deferred sales charges (CDSCs) on Class B shares decline based on
the amount of time you held the shares. The CDSC is calculated by multiplying
the CDSC percentage by the lesser of the share class' net asset value at the
time of purchase or its net asset value at the time of redemption. To ensure
that you pay the lowest CDSC possible, the Funds use the shares with the lowest
CDSC to fill your redemption requests.]
Purchasing Class B Shares
Class B shares have no initial sales charge but may be subject to a CDSC. Class
B shares convert automatically to Class A shares after six years to take
advantage of lower fund expenses. Class B shares acquired initially through
Investors Trust Funds convert to Class A shares after eight years. Purchases of
Fund shares by investors not eligible for Class C or D shares of $250,000 or
more should be made in Class A shares.
Redemptions subject to CDSC
Class B shares redeemed during each of the time periods described below will
have a CDSC. Shares purchased initially through Investors Trust Funds are
subject to a longer CDSC period.
If you initially purchased through GE Funds:
- ------------------------------------------------------------------------------
Funds Contingent Deferred Sales Charge (CDSC)
- ------------------------------------------------------------------------------
GE U.S. Equity Fund o 4% in the first year
GE Premier Growth Equity Fund o 3% in the second year
GE Value Equity Fund o 2% in the third year
GE Mid-Cap Growth Fund o 1% in the fourth
GE Mid-Cap Value Equity Fund year
GE Small Cap Value Equity Fund o 0% thereafter
GE Global Equity Fund
GE International Equity Fund
GE Europe Equity Fund
GE Emerging Markets Fund
GE High Yield Fund
GE Strategic Investment Fund
- ------------------------------------------------------------------------------
GE Fixed Income Fund o 3% in the first and
GE Government Securities Fund second years
GE Short-Term Government Fund o 2% in the third year
GE Tax-Exempt Fund o 1% in the fourth year
o 0% thereafter
- -------------------------------------------------------------------------------
If you initially purchased through Investors Trust Funds:
- -------------------------------------------------------------------------------
Funds Contingent Deferred
Sales Charge (CDSC)
- -------------------------------------------------------------------------------
Any Fund's Class B shares acquired as a result of o 5% in the first year
combining Investors Trust Funds with certain GE o 4% in the second year
Funds. o 3% in the third year
o 2% in the fourth year
o 1% in the fifth year
o 0% thereafter
- -------------------------------------------------------------------------------
68
<PAGE>
[Sidebar: Class B Shares may be appropriate if you are opposed to front-end
sales loads or if you are not planning to redeem shares in the short term.]
69
<PAGE>
If You Work for GE...
A Special Class of Shares Just for You and Your Family
As a GE employee or retiree, you and your family members (including your
spouse, parents, children, siblings, grandparents and grandchildren) can
purchase a special class of Fund shares without paying any sales charge. This
investment opportunity puts more of your dollars to work toward achieving your
investment goals than if you were to purchase a fund with a front-end sales
charge or CDSC. Class C shares may not be available to investors purchasing
shares through asset management programs sponsored by certain investment
professionals.
Purchasing Class C Shares
Class C shares have no initial sales charges or CDSC. Class C shares may be
purchased only by:
o employees, retirees, officers or directors of GE, or affiliate
companies and members of their families
o certain investors who purchased shares during special limited
offerings
o investors and their family members who purchased shares of the Funds
issued before November 29, 1993
Institutional Investors ...
Purchasing Class D Shares
Class D shares have no initial sales charges or CDSC. Class D shares may be
purchased by:
o financial institutions and corporations purchasing shares for their
own account
o fiduciaries investing on behalf of clients
o certain tax-exempt investors
o investment companies not managed by GE Investment Management
o clients of certain financial intermediaries who invest at least
$250,000
How To Redeem Shares
If You Invested With an Investment Professional
Shares purchased with the assistance of an investment professional may be
redeemed either by the investment professional or the shareholder of record.
Please see your account statement for the telephone number of you investment
professional. Or call Shareholder Services at (800) 242-0134.
By Mail
Send a signed written request, stating the share class and number of shares or
specific dollar amount you want to sell. Your signature(s) must appear exactly
as it does on the account registration.
Signature(s) must each be guaranteed for any redemption:
o exceeding $50,000
o mailed to a different address from that on record
o paid to someone else
o wired to a financial institution
o mailed to an address that has been changed within the last 30 days
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<PAGE>
Mail to:
GE Funds
P.O. Box 419631
Kansas City, MO 64141-6631
Overnight Delivery:
GE Funds
c/o National Financial Data Services Inc.
330 West 9th Street
Kansas City, MO 64105
Telephone: (816) 843-7335
By Telephone
Shares may be redeemed by telephone up to a maximum of $50,000 per day
utilizing the Funds' automated system or by agent during business hours. The
telephone option must have been selected during initial account setup or
subsequently by written request signed by all registered shareholders.
Call toll-free (800) 242-0134
By Wire
You may redeem your shares by telephone and have the proceeds of the sale wired
to your bank instead of receiving a check. Wire instructions must have been
selected during initial account setup or subsequently by written request signed
by all registered shareholders with a signature guarantee.
o Minimum wire amount: $1,000
o A $10 fee per wire will be charged to your account
By Systematic Withdrawal Plan
You may select a specific amount to be redeemed from your account on a regular
basis.
o Your account balance must be at least $10,000
o Maximum of 10% of the value of your account each year and a minimum
of $50 per withdrawal
o You may sell shares monthly or quarterly
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<PAGE>
CDSC Waivers on Certain Redemptions:
CDSCs are waived on shares:
o acquired through dividends or capital gains reinvestment
o redeemed because of death or disability
o that are mandatory retirement distributions on IRA accounts
o that represent the minimum required distribution from an
IRA effected pursuant to a Systematic Withdrawal Plan
o that are redemptions of Class A shares originally purchased
in amounts of $1 million or more without paying an initial
sales charge that being redeemed within one year pursuant to
a Systematic Withdrawal Plan
Checkwriting
Checkwriting privileges may be elected at no cost by shareholders of the Money
Market Fund. Checks may be made payable to any person in amounts of $100 or
more. The Transfer Agent will redeem shares in an amount sufficient to cover
the amount of a check. Please contact the Distributor at the number listed on
the back cover for additional details.
How To Exchange Shares
You can exchange shares of a class of one GE Fund for the same class of another
GE Fund. You can also exchange shares from GE Money Market Fund for Class A or
Class B shares of another GE Fund. An exchange is a sale and purchase of shares
for tax purposes. You may have a taxable gain or loss when you exchange your
shares. To exchange shares:
o by phone, call (800) 242-0234. (This option is not available for
certain corporate or trust accounts.)
o in writing, send your request to GE Funds at the above address.
You must be eligible to purchase the shares that you wish to exchange into and
should review the description of the Fund that you will purchase. If you
exchange Class A or B shares for Money Market Fund shares, you will be subject
to the applicable CDSC at the time that you sell your Money Market Fund shares.
The time that you hold Money Market Fund shares is not included in the holding
period for purposes of calculating the applicable CDSC on a redemption.
Special Considerations for Selling Shares
o If you own more than one share class of a Fund, specify which share class you
want to sell. Otherwise, the selling transaction may be delayed.
o When using a check to sell shares of GE Money Market Fund, the minimum check
amount is $100.
o If you have purchased shares of a Fund by personal check, redemption of these
shares can only be processed after your check is cleared by your bank. This
could take up to 15 days or more.
o If your account balance falls below $500, the transfer agent may request that
you bring your balance up to the $500 minimum or request that you close your
account. If you take no action within 30 days, the transfer agent may sell your
shares and mail the proceeds to you. This $500 minimum balance requirement is
waived for qualified plans, Direct Deposit accounts, Payroll Savings Plan
accounts and Automatic Investment Plan accounts.
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<PAGE>
Reinstatement of Shares
For 60 days after you sell shares, you have the right to "reinstate" your
investment at the then current NAV and pay no sales charge. For Class A and B
shares, any CDSC associated with the redemption will be reinstated to your
account in direct proportion to the amount reinvested. Reinstatement will occur
at the then-current net asset value and may have tax consequences. You must
request share reinstatement in writing.
[Sidebar: Reinstatement
After having sold Fund shares, investors may change their mind and decide to
invest again in the Funds. If you do so within 60 days, normal sales charges
will not be incurred and any CDSC paid upon withdrawal will be credited back to
your account. This action is called "reinstatement of shares".]
Redemptions in Kind
Large redemptions that exceed $250,000 or 1% of a Fund's assets may be
considered detrimental to the Fund's existing shareholders. Therefore, the Fund
may require that you take a "distribution in kind" upon redemption and may give
you portfolio securities instead of cash proceeds. Such Fund portfolio
securities will have to be sold through a broker and you may incur transaction
costs when you sell them.
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Distribution and Shareholder Service Expenses
To pay for the cost of promoting the Funds and servicing your shareholder
account, Class A, Class B and Class C shares of the Funds have adopted a Rule
12b-1 plan which requires fees be paid out of the assets of each class. Over
time the fees will increase your cost of investing and may exceed the cost of
paying other types of sales charges. The following table shows the distribution
and service fees associated with investing in each class of shares.
<TABLE>
<CAPTION>
Distribution and Shareholder Service Fees
- -------------------------------------------------------------------------------------------------------------------
All GE Funds except GE Short-Term Government GE Short-Term Government Fund
Fund and GE Money Market Fund*
- -------------------------------------------------------------------------------------------------------------------
Distribution Fee Service Fee Distribution Fee Service Fee
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A 0.25% 0.25% 0.25% 0.25%
- -------------------------------------------------------------------------------------------------------------------
Class B 0.75% 0.25% 0.60% 0.25%
- -------------------------------------------------------------------------------------------------------------------
Class C None 0.25% None 0.25%
- -------------------------------------------------------------------------------------------------------------------
Class D None None None None
- -------------------------------------------------------------------------------------------------------------------
*No distribution and service fees are paid by the GE Money Market Fund
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
DIVIDENDS, CAPITAL GAINS AND OTHER TAX INFORMATION
Most GE Funds pay dividends from net investment income and from net capital
gains once each year. Unless you instruct a Fund to mail dividends from net
investment income and net capital gains to you, they will be reinvested in your
account. There are no fees or charges to reinvest dividends.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Fund Distribution Schedule
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
GE U.S. Equity Fund o Dividends are declared and paid annually.
GE Premier Growth Equity Fund
GE Value Equity Fund o Short-term and long-term capital gains, if any, are paid
GE Mid-Cap Growth Fund annually.
GE Mid-Cap Value Equity Fund
GE Small-Cap Value Equity Fund
GE Global Equity Fund
GE International Equity Fund
GE Europe Equity Fund
GE Emerging Markets Fund
GE Strategic Investment Fund
- ----------------------------------------------------------------------------------------------------------------------
GE Fixed Income Fund o Dividends are declared daily and paid monthly.
GE Government Securities Fund* o Short-term and long-term capital gains, if any, are paid
GE Short-Term Government Fund annually.
GE Tax-Exempt Fund
GE High Yield Fund
GE Money Market Fund
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
*The Government Securities Fund pays a dividend based on periodic projections.
Total distributions could exceed taxable income earned by the Fund potentially
creating a return of capital.
GE Funds are subject to a 4% excise tax on undistributed net investment income
and net capital gains. To avoid this tax, the Funds may pay dividends from net
investment income and net capital gains more frequently.
Taxes
Tax issues can be complicated. We suggest you see your investment professional
or tax advisor for any questions you may have.
Dividends and distributions from net investment income and short-term capital
gains are taxed as ordinary income. Long-term capital gains distributions are
taxed at the long-term capital gains rate, whether you reinvest your
distributions or have them paid to you.
Distributions from GE Tax-Exempt Fund
In general, income from the GE Tax-Exempt Fund is exempt from Federal income
tax but may be subject to state and local taxes. Because the Fund may invest in
taxable securities, some dividends from net investment income may be subject to
Federal and state income taxes. Short-term and long-term capital gains
distributed by the Fund are taxable.
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<PAGE>
Tax Statement
You will receive an annual statement summarizing your dividend and capital
gains distributions. Please consult a tax advisor if you have questions about
your specific tax situation.
Backup Withholding
If you do not provide complete and certified taxpayer identification
information, each Fund is obligated by law to withhold 31% of most Fund
distributions.
CALCULATING SHARE VALUE
Fund shares are sold at net asset value ("NAV") plus any applicable sales
charge. The NAV of each share class is calculated at the close of regular
trading on the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time,
each day the NYSE is open for trading. The NAV per share class for Funds (other
than the Money Market Fund) is determined by adding the value of the Fund's
investments, cash, and other assets attributable to that class, subtracting its
liabilities, and then dividing the result by the number of that class'
outstanding shares.
A Fund's portfolio securities are valued most often on the basis of market
quotations. Foreign securities are valued on the basis of quotations from the
primary market in which they are traded. Some debt securities are valued using
dealers and pricing services. Municipal bond valuations are based on prices
supplied by a qualified municipal pricing service. The prices are composed of
the mean average of the bid and ask prices on the secondary market. All
portfolio securities of the Money Market Fund and any short-term securities
held by any other Fund with remaining maturities of sixty days or less are
valued on the basis of amortized cost. A Fund's written or purchased options
are valued at the last sales price of the day. If no sales occurred, the
options are valued at the last traded bid price. A Fund's NAV may change on
days when shareholders will not be able to purchase or redeem the Fund's
shares.
If quotations are not readily available for any security, or if the value of a
security has been materially affected by events occurring after the closing of
a market, the security may be valued by using procedures approved by a Fund's
Board of Trustees that they believe accurately reflects "fair value".
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APPENDIX
Financial Highlights
The financial highlights tables that follow are intended to help you understand
a Fund's financial performance for the period of the Fund's operations. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned or
lost on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by __________, whose report,
along with the Funds' financial statements, are included in the Funds' Annual
Report, which is available upon request.
GE U.S. Equity Fund
Net Asset Value, Beginning of Period
Income from Investment Operations
Net Investment Income
Net Gains or Losses on Securities (both realized and unrealized)
Total From Investment Operations
Less Distributions
Dividends (from net investment income)
Distributions (from capital gains)
Returns of Capital
Total Distributions
Net Asset Value, End of Period
Total Return
Ratio/Supplemental Data
Net Assets, End of Period
Ratio of Expenses to Average Net Assets
Ratio of Net Income to Average Net Assets
Portfolio Turnover Rate
GE Premier Growth Equity Fund
Net Asset Value, Beginning of Period
Income from Investment Operations
Net Investment Income
Net Gains or Losses on Securities (both realized and unrealized)
Total From Investment Operations
Less Distributions
Dividends (from net investment income)
Distributions (from capital gains)
Returns of Capital
Total Distributions
Net Asset Value, End of Period
Total Return
Ratio/Supplemental Data
Net Assets, End of Period
Ratio of Expenses to Average Net Assets
Ratio of Net Income to Average Net Assets
Portfolio Turnover Rate
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GE Value Equity Fund
Net Asset Value, Beginning of Period
Income from Investment Operations
Net Investment Income
Net Gains or Losses on Securities (both realized and unrealized)
Total From Investment Operations
Less Distributions
Dividends (from net investment income)
Distributions (from capital gains)
Returns of Capital
Total Distributions
Net Asset Value, End of Period
Total Return
Ratio/Supplemental Data
Net Assets, End of Period
Ratio of Expenses to Average Net Assets
Ratio of Net Income to Average Net Assets
Portfolio Turnover Rate
GE Mid-Cap Growth Fund
Net Asset Value, Beginning of Period
Income from Investment Operations
Net Investment Income
Net Gains or Losses on Securities (both realized and unrealized)
Total From Investment Operations
Less Distributions
Dividends (from net investment income)
Distributions (from capital gains)
Returns of Capital
Total Distributions
Net Asset Value, End of Period
Total Return
Ratio/Supplemental Data
Net Assets, End of Period
Ratio of Expenses to Average Net Assets
Ratio of Net Income to Average Net Assets
Portfolio Turnover Rate
GE Mid-Cap Value Equity Fund
Net Asset Value, Beginning of Period
Income from Investment Operations
Net Investment Income
Net Gains or Losses on Securities (both realized and unrealized)
Total From Investment Operations
Less Distributions
Dividends (from net investment income)
Distributions (from capital gains)
Returns of Capital
Total Distributions
Net Asset Value, End of Period
Total Return
78
<PAGE>
Ratio/Supplemental Data
Net Assets, End of Period
Ratio of Expenses to Average Net Assets
Ratio of Net Income to Average Net Assets
Portfolio Turnover Rate
79
<PAGE>
GE Small-Cap Value Equity Fund
Net Asset Value, Beginning of Period
Income from Investment Operations
Net Investment Income
Net Gains or Losses on Securities (both realized and unrealized)
Total From Investment Operations
Less Distributions
Dividends (from net investment income)
Distributions (from capital gains)
Returns of Capital
Total Distributions
Net Asset Value, End of Period
Total Return
Ratio/Supplemental Data
Net Assets, End of Period
Ratio of Expenses to Average Net Assets
Ratio of Net Income to Average Net Assets
Portfolio Turnover Rate
GE Global Equity Fund
Net Asset Value, Beginning of Period
Income from Investment Operations
Net Investment Income
Net Gains or Losses on Securities (both realized and unrealized)
Total From Investment Operations
Less Distributions
Dividends (from net investment income)
Distributions (from capital gains)
Returns of Capital
Total Distributions
Net Asset Value, End of Period
Total Return
Ratio/Supplemental Data
Net Assets, End of Period
Ratio of Expenses to Average Net Assets
Ratio of Net Income to Average Net Assets
Portfolio Turnover Rate
GE International Equity Fund
Net Asset Value, Beginning of Period
Income from Investment Operations
Net Investment Income
Net Gains or Losses on Securities (both realized and unrealized)
Total From Investment Operations
Less Distributions
Dividends (from net investment income)
Distributions (from capital gains)
Returns of Capital
Total Distributions
Net Asset Value, End of Period
Total Return
80
<PAGE>
Ratio/Supplemental Data
Net Assets, End of Period
Ratio of Expenses to Average Net Assets
Ratio of Net Income to Average Net Assets
Portfolio Turnover Rate
GE Europe Equity Fund
Net Asset Value, Beginning of Period
Income from Investment Operations
Net Investment Income
Net Gains or Losses on Securities (both realized and unrealized)
Total From Investment Operations
Less Distributions
Dividends (from net investment income)
Distributions (from capital gains)
Returns of Capital
Total Distributions
Net Asset Value, End of Period
Total Return
Ratio/Supplemental Data
Net Assets, End of Period
Ratio of Expenses to Average Net Assets
Ratio of Net Income to Average Net Assets
Portfolio Turnover Rate
GE Emerging Markets Fund
Net Asset Value, Beginning of Period
Income from Investment Operations
Net Investment Income
Net Gains or Losses on Securities (both realized and unrealized)
Total From Investment Operations
Less Distributions
Dividends (from net investment income)
Distributions (from capital gains)
Returns of Capital
Total Distributions
Net Asset Value, End of Period
Total Return
Ratio/Supplemental Data
Net Assets, End of Period
Ratio of Expenses to Average Net Assets
Ratio of Net Income to Average Net Assets
Portfolio Turnover Rate
GE Fixed Income Fund
Net Asset Value, Beginning of Period
Income from Investment Operations
Net Investment Income
Net Gains or Losses on Securities (both realized and unrealized)
Total From Investment Operations
Less Distributions
81
<PAGE>
Dividends (from net investment income)
Distributions (from capital gains)
Returns of Capital
Total Distributions
Net Asset Value, End of Period
Total Return
Ratio/Supplemental Data
Net Assets, End of Period
Ratio of Expenses to Average Net Assets
Ratio of Net Income to Average Net Assets
Portfolio Turnover Rate
82
<PAGE>
GE Government Securities Fund
Net Asset Value, Beginning of Period
Income from Investment Operations
Net Investment Income
Net Gains or Losses on Securities (both realized and unrealized)
Total From Investment Operations
Less Distributions
Dividends (from net investment income)
Distributions (from capital gains)
Returns of Capital
Total Distributions
Net Asset Value, End of Period
Total Return
Ratio/Supplemental Data
Net Assets, End of Period
Ratio of Expenses to Average Net Assets
Ratio of Net Income to Average Net Assets
Portfolio Turnover Rate
GE Short-Term Government Fund
Net Asset Value, Beginning of Period
Income from Investment Operations
Net Investment Income
Net Gains or Losses on Securities (both realized and unrealized)
Total From Investment Operations
Less Distributions
Dividends (from net investment income)
Distributions (from capital gains)
Returns of Capital
Total Distributions
Net Asset Value, End of Period
Total Return
Ratio/Supplemental Data
Net Assets, End of Period
Ratio of Expenses to Average Net Assets
Ratio of Net Income to Average Net Assets
Portfolio Turnover Rate
GE Tax-Exempt Fund
Net Asset Value, Beginning of Period
Income from Investment Operations
Net Investment Income
Net Gains or Losses on Securities (both realized and unrealized)
Total From Investment Operations
Less Distributions
Dividends (from net investment income)
Distributions (from capital gains)
Returns of Capital
Total Distributions
Net Asset Value, End of Period
Total Return
83
<PAGE>
Ratio/Supplemental Data
Net Assets, End of Period
Ratio of Expenses to Average Net Assets
Ratio of Net Income to Average Net Assets
Portfolio Turnover Rate
84
<PAGE>
GE High Yield Fund
Net Asset Value, Beginning of Period
Income from Investment Operations
Net Investment Income
Net Gains or Losses on Securities (both realized and unrealized)
Total From Investment Operations
Less Distributions
Dividends (from net investment income)
Distributions (from capital gains)
Returns of Capital
Total Distributions
Net Asset Value, End of Period
Total Return
Ratio/Supplemental Data
Net Assets, End of Period
Ratio of Expenses to Average Net Assets
Ratio of Net Income to Average Net Assets
Portfolio Turnover Rate
GE Strategic Investment Fund
Net Asset Value, Beginning of Period
Income from Investment Operations
Net Investment Income
Net Gains or Losses on Securities (both realized and unrealized)
Total From Investment Operations
Less Distributions
Dividends (from net investment income)
Distributions (from capital gains)
Returns of Capital
Total Distributions
Net Asset Value, End of Period
Total Return
Ratio/Supplemental Data
Net Assets, End of Period
Ratio of Expenses to Average Net Assets
Ratio of Net Income to Average Net Assets
Portfolio Turnover Rate
GE Money Market Fund
Net Asset Value, Beginning of Period
Income from Investment Operations
Net Investment Income
Net Gains or Losses on Securities (both realized and unrealized)
Total From Investment Operations
Less Distributions
Dividends (from net investment income)
Distributions (from capital gains)
Returns of Capital
Total Distributions
Net Asset Value, End of Period
Total Return
85
<PAGE>
Ratio/Supplemental Data
Net Assets, End of Period
Ratio of Expenses to Average Net Assets
Ratio of Net Income to Average Net Assets
Portfolio Turnover Rate
86
<PAGE>
[Inside Back Cover]
87
<PAGE>
[Back Cover]
Investment Adviser Transfer Agent and Custodian
GE Investment Management Incorporated State Street Bank and Trust Company
3003 Summer Street 225 Franklin Street
P.O. Box 7900 Boston, MA 02101
Stamford, CT 06904
Distributor
GE Investment Distributors, Inc.
777 Long Ridge Road
Stamford, CT 06927
If you wish to know more, you will find additional information about the GE
Funds in the following documents:
Annual/Semi-Annual Reports to Shareholders:
These reports detail the Funds' actual investments as of the report date.
Reports usually include performance numbers, a discussion of market conditions
and investment strategies that affected Fund performance during the Funds' last
fiscal year.
Statement of Additional Information (SAI):
The SAI contains additional information about the Funds and their investment
strategies and policies and is incorporated by reference (legally considered
part of the prospectus). The SAI is on file with the Securities and Exchange
Commission (SEC).
You may visit the SEC's Internet Website (http://www.sec.gov) to view the SAI
and other information. Also, you can obtain copies of this information by
sending your request and duplicating fee to the SEC's Public Reference Section,
Washington, D.C. 20549-6009. You may review and copy information about the
Funds, including the SAI, at the SEC's Public Reference Room in Washington,
D.C. To find out more about the public reference room, call the SEC at
1-800-SEC-0330.
You may obtain a free copy of the SAI or the Funds' annual/semiannual report
and make shareholder inquiries by contacting [your investment professional] or:
GE Investment Distributors, Inc.
777 Long Ridge Road, Building B
Stamford, CT 06927
Telephone:
Website: http://www.ge.com/mutualfunds
Investment Company Act file number : 811-7142
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<PAGE>
The information in this Statement of Additional Information is not complete
and may be changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
Statement of Additional Information is not an offer to sell these securities
and is not soliciting an offer to buy these securities in any state where the
offer or sale is not permitted.
STATEMENT OF ADDITIONAL INFORMATION
January [ ], 1999
GE FUNDS
- --------
3003 Summer Street, Stamford, Connecticut 06905
For information, call (800) 242-0134
* GE Premier Growth Equity Fund
* GE U.S. Equity Fund * GE International Fixed Income Fund
* GE Small-Cap Growth Equity Fund * GE Strategic Investment Fund
* GE Small-Cap Value Equity Fund * GE Tax-Exempt Fund
* GE Mid-Cap Growth Fund * GE High Yield Fund
* GE Mid-Cap Value Equity Fund * GE Fixed Income Fund
* GE Value Equity Fund * GE Government Securities Fund
* GE Global Equity Fund * GE Short-Term Government Fund
* GE International Equity Fund * GE Money Market Fund
* GE Europe Growth Fund
* GE Emerging Markets Fund
Contents
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Page
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Investment Strategies and Risks................................................
Investment Restrictions........................................................
Management of the Trust........................................................
Purchase, Redemption and Exchange of Shares....................................
Net Asset Value................................................................
Dividends, Distributions and Taxes.............................................
The Funds' Performance.........................................................
Principal Stockholders.........................................................
Fund History and Additional Information........................................
Financial Statements...........................................................
Appendix.................................................................. A-1
This Statement of Additional Information ("SAI") supplements
the information contained in the current Prospectus of GE Funds (the "Trust")
dated January [ ], 1999 (the "Prospectus"), and should be read in conjunction
with the Prospectus. This SAI, although not a prospectus, is incorporated in its
entirety by reference into the Prospectus. Copies of the Prospectus describing
each series of the Trust listed above ("Funds") may be obtained without charge
by calling the Trust at the telephone number listed above. The Trust's financial
statements for the fiscal year ended September 30, 1998 and the Auditor's Report
thereon are incorporated by reference to the Trust's Annual Report, which may be
obtained without charge by calling the Trust at the telephone number listed
above. Information regarding the status of shareholder accounts may be obtained
by calling the Trust at the telephone number listed above or by writing to the
Trust at P.O. Box 120065, Stamford, CT 06912-0065. Terms that are defined in
the Prospectus shall have the same meanings in this SAI.
<PAGE>
INVESTMENT STRATEGIES AND RISKS
The Funds Prospectus discusses the investment objectives and
principal investment strategies of the following diversified open-end Funds: GE
Premier Growth Equity Fund (the "Premier Fund"), GE U.S. Equity Fund (the "U.S.
Equity Fund"), GE Small-Cap Value Equity Fund (the "Small-Cap Value Fund"), GE
Mid-Cap Growth Fund (the "Mid-Cap Growth Fund"), GE Mid-Cap Value Equity Fund
(the "Mid-Cap Value Fund"), GE Value Equity Fund (the "Value Equity Fund"), GE
Global Equity Fund (the "Global Fund"), GE International Equity Fund (the
"International Fund"), GE Europe Growth Fund (the "Europe Fund"), GE Emerging
Markets Fund (the "Emerging Markets Fund"), GE Strategic Investment Fund (the
"Strategic Fund"), GE Tax-Exempt Fund (the "Tax-Exempt Fund"), GE High Yield
Fund (the "High Yield Fund"), GE Fixed Income Fund (the "Income Fund"), GE
Government Securities Fund (the "Government Securities Fund"), GE Short-Term
Government Fund (the "Short-Term Government Fund") and GE Money Market Fund (the
"Money Market Fund"). GE International Fixed Income Fund (the "International
Income Fund") and GE Small-Cap Growth Equity Fund (the "Small-Cap Growth Fund"),
each an additional series of the Trust, are not currently offered by the Trust.
GE U.S. Equity Fund
The investment objective of GE U.S. Equity Fund is long-term growth of capital,
which objective the Fund seeks to achieve through investment primarily in equity
securities of U.S. companies. In pursuing its objective, the Fund, under normal
conditions, invests at least 65% of its assets in equity securities.
GE Premier Growth Equity Fund
The investment objective of GE Premier Growth Equity Fund is long-term growth
of capital and future income rather than current income. The Fund seeks to
achieve this objective through investment primarily in growth-oriented equity
securities which, under normal market conditions, will represent at least 65% of
the Fund's assets.
GE Mid-Cap Growth Fund
The investment objective of GE Mid-Cap Growth Fund is long-term growth of
capital. The Fund seeks to achieve this objective by investing primarily in the
equity securities of companies with medium-sized market capitalizations
("mid-cap") that have the potential for above-average growth. The Fund, under
normal market conditions, invests at least 65% of its total assets in a
portfolio of equity securities of mid-cap companies traded on U.S. securities
exchanges or in the U.S. over-the-counter market.
GE Mid-Cap Value Equity Fund
The investment objective of the GE Mid-Cap Value Equity Fund is long-term growth
of capital. In seeking its investment objective, the Fund will invest primarily
in equity securities of mid-cap companies that the portfolio manager believes
are undervalued by the market and have above-average growth potential.
GE Small-Cap Value Equity Fund
The investment objective of the GE Small-Cap Value Equity Fund is long-term
growth of capital. The Fund seeks to achieve its objective by investing, under
normal market conditions, at least 65% of its total assets in a portfolio of
equity securities of small-capitalization companies traded on U.S. securities
exchanges or in the U.S. over-the-counter market.
GE Value Equity Fund
The investment objective of the GE Value Equity Fund is long-term growth of
capital and future income. The Fund seeks to achieve its objective by investing
primarily in equity securities of companies with large sized market
capitalizations that GEIM considers to be undervalued by the market. Undervalued
securities are those selling for low prices given the fundamental
characteristics of their issuers. During normal market conditions, the Fund
invests at least 65% of its assets in common stocks, preferred stocks,
convertible bonds, convertible debentures, convertible notes, convertible
preferred stocks and warrants or rights issued by U.S. and foreign companies.
2
<PAGE>
GE Global Equity Fund
The investment objective of GE Global Equity Fund is long-term growth of
capital, which the Fund seeks to achieve by investing principally in foreign
equity securities. In seeking its objective, the Fund invests primarily in a
portfolio of securities issued by companies located in developed and developing
countries throughout the world. Although the Fund is subject to no prescribed
limits on geographic asset distribution, under normal circumstances, at least
65% of the Fund's assets are invested in the aggregate in no fewer than three
different countries.
GE International Equity Fund
The investment objective of GE International Equity Fund is long-term growth
of capital, which the Fund seeks to achieve by investing primarily in foreign
equity securities. The Fund may invest in securities of companies and
governments located in developed and developing countries outside the United
States. The Fund intends to position itself broadly among countries and,
under normal circumstances, at least 65% of the Fund's assets will be invested
in securities of issuers collectively in no fewer than three different
countries other than the United States. The International Fund, under normal
conditions, invests at least 65% of its assets in common stocks, preferred
stocks, convertible debentures, convertible notes, convertible preferred stocks
and warrants or rights issued by companies believed by GEIM to have a potential
for superior growth in sales and earnings.
GE Europe Equity Fund
The investment objective of the GE Europe Equity Fund is long-term growth of
capital. In seeking its investment objective, the Fund will invest primarily
in equity securities of European companies.
GE Emerging Markets Fund
The investment objective of the GE Emerging Markets Fund is to seek long-term
growth of capital. In seeking its investment objective, the Fund will invest
primarily in equity securities of emerging market companies.
GE Fixed Income Fund
The investment objective of GE Fixed Income Fund is to seek maximum income
consistent with prudent investment management and the preservation of capital.
Capital appreciation with respect to the Fund's portfolio securities may occur
but is not an objective of the Fund.
GE Goverment Securities Fund
The investment objective of GE Government Securities Fund is a high level of
current income consistent with safety of principal. The Fund invests at least
65% of the value of its total assets in U.S. Goverment Securities, except
during times when it adopts a temporary defensive position by investing more
heavily in cash or high-quality money market instruments due to prevailing
market or economic conditions.
3
<PAGE>
GE Short-Term Government Fund
The investment objective of GE Short-Term Government Fund is to seek a high
level of income consistent with prudent investment management and the
preservation of capital. In seeking to achieve its investment objective, the
Fund will invest at least 65% of its total assets in Government Securities
including repurchase agreements secured by Government Securities.
GE Tax-Exempt Fund
The investment objective of GE Tax-Exempt Fund is to seek as high a level of
income exempt from Federal income taxation as is consistent with preservation of
capital. The Tax-Exempt Fund operates subject to a fundamental investment policy
providing that it will invest its assets so that, during any fiscal year, at
least 80% of the income generated by the Fund is exempt from Federal personal
income taxes and the Federal alternative minimum tax. Under normal conditions,
the Fund may hold up to 10% of its total assets in cash or money market
instruments, including taxable money market instruments.
GE High Yield Fund
The investment objective of GE High Yield Fund is to seek above-average total
return over a market cycle of three to five years, consistent with reasonable
risk. In seeking to achieve its investment objective, the Fund will invest
primarily in high yield securities (including bonds rated below investment
grade, sometimes called "junk bonds").
GE Strategic Investment Fund
The investment objective of GE Strategic Investment Fund is to maximize total
return, consisting of capital appreciation and current income. In seeking its
objective, the Fund follows an asset allocation strategy that provides
diversification across a range of asset classes and contemplates shifts
among them from time to time.
GEIM has broad latitude in selecting the classes of investments to which the
Strategic Fund's assets are committed. Although the Fund has the authority
to invest solely in equity securities, solely in debt securities, solely
in money market instruments or in any combination of these classes of
investments, GEIM anticipates that at most times the Fund will be invested
in a combination of equity and debt instruments.
4
<PAGE>
GE Money Market Fund
The investment objective of GE Money Market Fund is to seek a high level of
current income consistent with the preservation of capital and the maintenance
of liquidity. In seeking its objective, the Fund invests in the following U.S.
dollar denominated, short-term money market instruments: (1) Government
Securities; (2) debt obligations of banks, savings and loan institutions,
insurance companies and mortgage bankers; (3) commercial paper and notes,
including those with floating or variable rates of interest; (4) debt
obligations of foreign branches of U.S. banks, U.S. branches of foreign banks
and foreign branches of foreign banks; (5) debt obligations issued or guaranteed
by one or more foreign governments or any of their political subdivisions,
agencies or instrumentalities, including obligations of supranational
entities; (6) debt securities issued by foreign issuers; and (7) repurchase
agreements.
5
<PAGE>
Supplemental information concerning certain of the securities
and other instruments in which the Funds may invest, the investment policies and
strategies that the Funds may utilize and certain risks attendant to those
investments, policies and strategies are discussed below. Some or all of the
Funds may invest in the types of instruments and engage in the types of
strategies described in detail below. A Fund will not purchase all of the
following types of securities or employ all of the following strategies unless
doing so is consistent with its investment objective.
Money Market Instruments. The types of money market
instruments in which each Fund, other than the Money Market Fund, may invest
directly or indirectly through its investment in the GEI Short-Term Investment
Fund (the "Investment Fund"), described below, are as follows: (i) securities
issued or guaranteed by the U.S. Government or one of its agencies or
instrumentalities ("Government Securities"), (ii) debt obligations of banks,
savings and loan institutions, insurance companies and mortgage bankers, (iii)
commercial paper and notes, including those with variable and floating rates of
interest, (iv) debt obligations of foreign branches of U.S. banks, U.S. branches
of foreign banks and foreign branches of foreign banks, (v) debt obligations
issued or guaranteed by one or more foreign governments or any of their
political subdivisions, agencies or instrumentalities, including obligations of
supranational entities, (vi) debt securities issued by foreign issuers and (vii)
repurchase agreements.
6
<PAGE>
Each Fund, other than the Money Market Fund, may also invest
in the Investment Fund, an investment fund created specifically to serve as a
vehicle for the collective investment of cash balances of the Funds (other than
the Money Market Fund) and other accounts advised by GE Investment Management
Incorporated ("GEIM") or its affiliate, General Electric Investment Corporation
("GEIC"). The Investment Fund invests exclusively in the money market
instruments described in (i) through (vii) above. The Investment Fund is advised
by GEIM. No advisory fee is charged by GEIM to the Investment Fund, nor will a
Fund incur any sales charge, redemption fee, distribution fee or service fee in
connection with its investments in the Investment Fund. Each Fund, other than
the Money Market Fund, may invest up to 25% (5% in the case of the Tax-Exempt
Fund) of its assets in the Investment Fund.
Each of the Funds may invest in the following types of
Government Securities: debt obligations of varying maturities issued by the U.S.
Treasury or issued or guaranteed by the Federal Housing Administration, Farmers
Home Administration, Export-Import Bank of the United States, Small Business
Administration, Government National Mortgage Association ("GNMA"), General
Services Administration, Central Bank for Cooperatives, Federal Farm Credit
Banks Funding Corporation, Federal Home Loan Banks, Federal Home Loan Mortgage
Corporation ("FHLMC"), Federal Intermediate Credit Banks, Federal Land Banks,
Federal National Mortgage Association ("FNMA"), Federal Deposit Insurance
Corporation, Maritime Administration, Tennessee Valley Authority, District of
Columbia Armory Board, Student Loan Marketing Association and Resolution Trust
Corporation. Direct obligations of the U.S. Treasury include a variety of
securities that differ in their interest rates, maturities and dates of
issuance. Certain of the Government Securities that may be held by the Funds are
instruments that are supported by the full faith and credit of the United
States, whereas other Government Securities that may be held by the Funds are
supported by the right of the issuer to borrow from the U.S. Treasury or are
supported solely by the credit of the instrumentality. Because the U.S.
Government is not obligated by law to provide support to an instrumentality that
it sponsors, a Fund will invest in obligations issued by an instrumentality of
the U.S. Government only if the Investment Manager1 determines that the
instrumentality's credit risk does not make its securities unsuitable for
investment by the Fund.
Each Fund, other than the Money Market Fund, may invest in
money market instruments issued or guaranteed by foreign governments or by any
of their political subdivisions, authorities, agencies or instrumentalities.
Money market instruments held by a Fund, other than the Money Market Fund, may
be rated no lower than A-2 by Standard & Poor's ("S&P") or Prime-2 by Moody's
Investor's Service ("Moody's") or the equivalent from another NRSRO, or if
unrated, must be issued by an issuer having an outstanding unsecured debt issue
then rated within the three highest categories. A description of the rating
systems of Moody's and S&P is contained in the Appendix. At no time will the
investments of a Fund, other than the Tax-Exempt Fund and the Money Market Fund,
in bank obligations, including time deposits, exceed 25% of the value of the
Fund's assets.
Temporary Defensive Positions. During periods when the
Investment Manager
- -------------------
(1) As used in this SAI, the term "Investment Manage" shall refer to GE
Investment Management Incorporated ("GEIM"), the Funds' investment adviser
and administrator, Brown Brothers Harriman & Co., Oalisade Capital
Management, L.L.C., Miller Anderson & Sherrerd, LLP or NWQ, the sub advisers
to the Tax-Exempt Fund, the Small-Cap Value Fund, the High Yield Fund and the
Mid-Cap Value Fund, respectively.
7
<PAGE>
believes there are unstable market, economic, political or currency conditions
domestically or abroad, the Investment Manager may assume, on behalf of a Fund,
a temporary defensive posture and (i) without limitation hold cash and/or invest
in money market instruments, or (ii) restrict the securities markets in which
the Fund's assets will be invested by investing those assets in securities
markets deemed by the Investment Manager to be conservative in light of the
Fund's investment objective and policies. Under normal circumstances, each Fund
may invest a portion of its total assets in cash and/or money market instruments
for cash management purposes, pending investment in accordance with the Fund's
investment objective and policies and to meet operating expenses. To the extent
that a Fund, other than the Money Market Fund, holds cash or invests in money
market instruments, it may not achieve its investment objective. For temporary
defensive purposes, the Premier Growth Equity Fund may invest in fixed income
securities without limitation.
Bank Obligations. Domestic commercial banks organized under
Federal law are supervised and examined by the U.S. Comptroller of the Currency
and are required to be members of the Federal Reserve System and to be insured
by the Federal Deposit Insurance Corporation ("FDIC"). Foreign branches of U.S.
banks and foreign banks are not regulated by U.S. banking authorities and
generally are not bound by mandatory reserve requirements, loan limitations,
accounting, auditing and financial reporting standards comparable to U.S. banks.
Obligations of foreign branches of U.S. banks and foreign banks are subject to
the risks associated with investing in foreign securities generally. These
obligations entail risks that are different from those of investments in
obligations in domestic banks, including foreign economic and political
developments outside the United States, foreign governmental restrictions that
may adversely affect payment of principal and interest on the obligations,
foreign exchange controls and foreign withholding or other taxes on income.
A U.S. branch of a foreign bank may or may not be subject to
reserve requirements imposed by the Federal Reserve System or by the state in
which the branch is located if the branch is licensed in that state. In
addition, branches licensed by the Comptroller of the Currency and branches
licensed by certain states ("State Branches") may or may not be required to: (1)
pledge to the regulator by depositing assets with a designated bank within the
state, an amount of its assets equal to 5% of its total liabilities; and (2)
maintain assets within the state in an amount equal to a specified percentage of
the aggregate amount of liabilities of the foreign bank payable at or through
all of its agencies or branches within the state. The deposits of State Branches
may not necessarily be insured by the FDIC. In addition, less information may be
available to the public about a U.S. branch of a foreign bank than about a U.S.
bank.
Debt Instruments. A debt instrument held by a Fund will be
affected by general changes in interest rates that will in turn result in
increases or decreases in the market value of those obligations. The market
value of debt instruments in a Fund's portfolio can be expected to vary
inversely to changes in prevailing interest rates. In periods of declining
interest rates, the yield of a Fund holding a significant amount of debt
instruments will tend to be somewhat higher than prevailing market rates, and in
periods of rising interest rates, the Fund's yield will tend to be somewhat
lower. In addition, when interest rates are falling, money received by such a
Fund from the continuous sale of its shares will likely be invested in portfolio
instruments producing lower yields than the balance of its portfolio, thereby
reducing the Fund's current yield. In
8
<PAGE>
periods of rising interest rates, the opposite result can be expected to occur.
Ratings as Investment Criteria. The ratings of nationally
recognized statistical rating organizations ("NRSROs") such as S&P or Moody's
represent the opinions of those organizations as to the quality of securities
that they rate. Although these ratings, which are relative and subjective and
are not absolute standards of quality, are used by the Investment Manager as
initial criteria for the selection of portfolio securities on behalf of the
Funds, the Investment Manager also relies upon its own analysis to evaluate
potential investments.
Subsequent to its purchase by a Fund, an issue of securities
may cease to be rated or its rating may be reduced below the minimum required
for purchase by the Fund. Although neither event will require the sale of the
securities by a Fund, other than the Money Market Fund, the Investment Manager
will consider the event in its determination of whether the Fund should continue
to hold the securities. In the event the rating of a security held by the Money
Market Fund falls below the minimum acceptable rating or the issuer of the
security defaults, the Money Market Fund will dispose of the security as soon as
practicable, unless the Board determines that disposal of the security would not
be in the best interests of the Money Market Fund. To the extent that a NRSRO's
ratings change as a result of a change in the NRSRO or its rating system, the
Funds will attempt to use comparable ratings as standards for their investments
in accordance with their investment objectives and policies.
Certain Investment Grade Debt Obligations. Although
obligations rated BBB by S&P or Baa by Moody's are considered investment grade,
they may be viewed as being subject to greater risks than other investment grade
obligations. Obligations rated BBB by S&P are regarded as having only an
adequate capacity to pay principal and interest and those rated Baa by Moody's
are considered medium-grade obligations that lack outstanding investment
characteristics and have speculative characteristics as well.
Low-rated Debt Securities. Certain Funds are authorized to
invest in securities rated lower than investment grade (sometimes referred to as
"junk bonds"). Low-rated and comparable unrated securities (collectively
referred to as "low-rated" securities) likely have quality and protective
characteristics that, in the judgment of a rating organization, are outweighed
by large uncertainties or major risk exposures to adverse conditions, and are
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. Securities
in the lowest rating categories may be in default or may present substantial
risks of default.
The market values of certain low-rated securities tend to be
more sensitive to individual corporate developments and changes in economic
conditions than higher-rated securities. In addition, low-rated securities
generally present a higher degree of credit risk. Issuers of low-rated
securities are often highly leveraged and may not have more traditional methods
of financing available to them, so that their ability to service their debt
obligations during an economic downturn or during sustained periods of rising
interest rates may be impaired. The risk of loss due to default by these issuers
is significantly greater because low-rated securities generally are unsecured
and frequently are subordinated to the prior payment of senior indebtedness. A
Fund may incur additional expenses to the extent that it is required to seek
recovery upon a default in the payment of principal or interest on its portfolio
holdings. The
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existence of limited markets for low-rated securities may diminish the Trust's
ability to obtain accurate market quotations for purposes of valuing the
securities held by a Fund and calculating the Fund's net asset value.
Repurchase and Reverse Repurchase Agreements. Each Fund may
engage in repurchase agreement transactions with respect to instruments in which
the Fund is authorized to invest. The Funds may engage in repurchase agreement
transactions with certain member banks of the Federal Reserve System and with
certain dealers listed on the Federal Reserve Bank of New York's list of
reporting dealers. Under the terms of a typical repurchase agreement, which is
deemed a loan for purposes of the Investment Company Act of 1940, as amended
("1940 Act"), a Fund would acquire an underlying obligation for a relatively
short period (usually from one to seven days) subject to an obligation of the
seller to repurchase, and the Fund to resell, the obligation at an agreed-upon
price and time, thereby determining the yield during the Fund's holding period.
This arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The value of the securities
underlying a repurchase agreement of a Fund are monitored on an ongoing basis by
the Investment Manager to ensure that the value is at least equal at all times
to the total amount of the repurchase obligation, including interest. The
Investment Manager also monitors, on an ongoing basis to evaluate potential
risks, the creditworthiness of those banks and dealers with which a Fund enters
into repurchase agreements. Income derived by the Tax-Exempt Fund when engaging
in a repurchase agreement is not exempt from Federal income taxation.
The Small-Cap Value Fund, the Value Equity Fund, the Emerging
Markets Fund, the High Yield Fund, the Tax-Exempt Fund, the Government
Securities Fund and the Money Market Fund may engage in reverse repurchase
agreements, subject to their investment restrictions. A reverse repurchase
agreement, which is considered a borrowing by a Fund, involves a sale by the
Fund of securities that it holds concurrently with an agreement by the Fund to
repurchase the same securities at an agreed upon price and date. A Fund uses the
proceeds of reverse repurchase agreements to provide liquidity to meet
redemption requests and to make cash payments of dividends and distributions
when the sale of the Fund's securities is considered to be disadvantageous.
Cash, Government Securities or other liquid assets equal in value to a Fund's
obligations with respect to reverse repurchase agreements are segregated and
maintained with the Trust's custodian or designated sub-custodian.
A Fund entering into a repurchase agreement will bear a risk
of loss in the event that the other party to the transaction defaults on its
obligations and the Fund is delayed or prevented from exercising its rights to
dispose of the underlying securities. The Fund will be, in particular, subject
to the risk of a possible decline in the value of the underlying securities
during the period in which the Fund seeks to assert its right to them, the risk
of incurring expenses associated with asserting those rights and the risk of
losing all or a part of the income from the agreement.
A reverse repurchase agreement involves the risk that the
market value of the securities retained by a Fund may decline below the price of
the securities the Fund has sold but is obligated to repurchase under the
agreement. In the event the buyer of securities under a reverse repurchase
agreement files for bankruptcy or becomes insolvent, a Fund's use of the
proceeds of the agreement may be restricted pending a determination by the
party, or its trustee or receiver, whether to enforce the Fund's obligation to
repurchase the securities.
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Non-publicly Traded and Illiquid Securities. Each Fund, other
than the Money Market Fund, may invest up to 10% of its assets in non-publicly
traded securities. Non-publicly traded securities are securities that are
subject to contractual or legal restrictions on transfer, excluding for purposes
of this restriction, Rule 144A Securities that have been determined to be liquid
by the Board based upon the trading markets for the securities. In addition,
each Fund, other than the Money Market Fund, may invest up to 15% (10% in the
case of the Tax-Exempt Fund) of its assets in "illiquid securities"; the Money
Market Fund may not, under any circumstance, invest in illiquid securities.
Illiquid securities are securities that cannot be disposed of by a Fund within
seven days in the ordinary course of business at approximately the amount at
which the Fund has valued the securities. Illiquid securities that are held by a
Fund may take the form of options traded over-the-counter, repurchase agreements
maturing in more than seven days, certain mortgage related securities and
securities subject to restrictions on resale that the Investment Manager has
determined are not liquid under guidelines established by the Board.
Non-publicly traded securities may be less liquid than
publicly traded securities. Although these securities may be resold in privately
negotiated transactions, the prices realized from these sales could be less than
those originally paid by a Fund. In addition, companies whose securities are not
publicly traded are not subject to the disclosure and other investor protection
requirements that may be applicable if their securities were publicly traded. A
Fund's investments in illiquid securities are subject to the risk that should
the Fund desire to sell any of these securities when a ready buyer is not
available at a price that the Investment Manager deems representative of their
value, the value of the Fund's net assets could be adversely affected.
Rule 144A Securities. Each of the Funds may purchase Rule 144A
Securities. Certain Rule 144A Securities may be considered illiquid and
therefore subject to a Fund's limitation on the purchase of illiquid securities,
unless the Board determines on an ongoing basis that an adequate trading market
exists for the Rule 144A Securities. A Fund's purchase of Rule 144A Securities
could have the effect of increasing the level of illiquidity in the Fund to the
extent that qualified institutional buyers become uninterested for a time in
purchasing Rule 144A Securities held by the Fund. The Board has established
standards and procedures for determining the liquidity of a Rule 144A Security
and monitors the Investment Manager's implementation of the standards and
procedures. The ability to sell to qualified institutional buyers under Rule
144A is a recent development and GEIM cannot predict how this market will
develop.
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When-Issued and Delayed-Delivery Securities. To secure prices
or yields deemed advantageous at a particular time, a Fund may purchase
securities on a when-issued or delayed-delivery basis, in which case, delivery
of the securities occurs beyond the normal settlement period; no payment for or
delivery of the securities is made by, and no income accrues to, the Fund,
however, prior to the actual delivery or payment by the other party to the
transaction. Each Fund will enter into when-issued or delayed-delivery
transactions for the purpose of acquiring securities and not for the purpose of
leverage. When-issued securities purchased by a Fund may include securities
purchased on a "when, as and if issued" basis under which the issuance of the
securities depends on the occurrence of a subsequent event, such as approval of
a merger, corporate reorganization or debt restructuring. Cash or other liquid
assets in an amount equal to the amount of each Fund's when-issued or
delayed-delivery purchase commitments will be segregated with the Trust's
custodian, or with a designated subcustodian, in order to avoid or limit any
leveraging effect that may arise in the purchase of a security pursuant to such
a commitment.
Securities purchased on a when-issued or delayed-delivery
basis may expose a Fund to risk because the securities may experience
fluctuations in value prior to their delivery. Purchasing securities on a
when-issued or delayed- delivery basis can involve the additional risk that the
return available in the market when the delivery takes place may be higher than
that applicable at the time of the purchase. This characteristic of when-issued
and delayed-delivery securities could result in exaggerated movements in a
Fund's net asset value.
When a Fund engages in when-issued or delayed-delivery
securities transactions, it relies on the selling party to consummate the trade.
Failure of the seller to do so may result in the Funds incurring a loss or
missing an opportunity to obtain a price considered to be advantageous.
Warrants. Because a warrant, which is a security permitting,
but not obligating, its holder to subscribe for another security, does not carry
with it the right to dividends or voting rights with respect to the securities
that the warrant holder is entitled to purchase, and because a warrant does not
represent any rights to the assets of the issuer, a warrant may be considered
more speculative than certain other types of investments. In addition, the value
of a warrant does not necessarily change with the value of the underlying
security and a warrant ceases to have value if it is not exercised prior to its
expiration date. The investment by a Fund in warrants valued at the lower of
cost or market, may not exceed 5% of the value of the Fund's net assets. The
Money Market Fund may not invest in any form of warrants. Warrants acquired by a
Fund in units or attached to securities may be deemed to be without value.
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Smaller Capitalization Companies. Investing in securities of
small- and medium- capitalization companies may involve greater risks than
investing in larger, more established issuers. Such smaller capitalization
companies may have limited product lines, markets or financial resources and
their securities may trade less frequently and in more limited volume than the
securities of larger or more established companies. In addition, these companies
are typically subject to a greater degree of changes in earnings and business
prospects than are larger, more established issuers. As a result, the prices of
securities of smaller capitalization companies may fluctuate to a greater degree
than the prices of securities of other issuers. Although investing in securities
of smaller capitalization companies offers potential for above-average returns,
the risk exists that the companies will not succeed and the prices of the
companies' shares could significantly decline in value.
Investment in Foreign Securities. Investing in securities
issued by foreign companies and governments, including securities issued in the
form of depositary receipts, involves considerations and potential risks not
typically associated with investing in obligations issued by the U.S. Government
and U.S. corporations. Less information may be available about foreign companies
than about U.S. companies, and foreign companies generally are not subject to
uniform accounting, auditing and financial reporting standards or to other
regulatory practices and requirements comparable to those applicable to U.S.
companies. The values of foreign investments are affected by changes in currency
rates or exchange control regulations, restrictions or prohibitions on the
repatriation of foreign currencies, application of foreign tax laws, including
withholding taxes, changes in governmental administration or economic or
monetary policy (in the United States or abroad) or changed circumstances in
dealings between nations. Costs are also incurred in connection with conversions
between various currencies. In addition, foreign brokerage commissions are
generally higher than those charged in the United States and foreign securities
markets may be less liquid, more volatile and less subject to governmental
supervision than in the United States. Investments in foreign countries could be
affected by other factors not present in the United States, including
expropriation, confiscatory taxation, lack of uniform accounting and auditing
standards, limitations on the use or removal of funds or other assets (including
the withholding of dividends), and potential difficulties in enforcing
contractual obligations, and could be subject to extended clearance and
settlement periods.
Certain Funds may invest in securities of foreign issuers in
the form of ADRs and European Depositary Receipts ("EDRs"), which are sometimes
referred to as Continental Depositary Receipts ("CDRs"). ADRs are publicly
traded on exchanges or over-the-counter in the United States and are issued
through "sponsored" or "unsponsored" arrangements. In a sponsored ADR
arrangement, the foreign issuer assumes the obligation to pay some or all of the
depositary's transaction fees, whereas under an unsponsored arrangement, the
foreign issuer assumes no obligations and the depositary's transaction fees are
paid directly by the ADR holders. In addition, less information is available in
the United States about an unsponsored ADR than about a sponsored ADR. Each of
these Funds may invest in ADRs through both sponsored and unsponsored
arrangements. EDRs and CDRs are generally issued by foreign banks and evidence
ownership of either foreign or domestic securities.
The recent introduction of a single European currency, the
EURO, on January 1, 1999 for participating European countries in the Economic
and Monetary Union ("Participating
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Countries") presents unique risks and uncertainties for investors in those
countries, including (i) whether the payment and operational systems of banks
and other financial institutions will be ready by the scheduled launch date;
(ii) the creation of suitable clearing and settlement payment schemes for the
EURO; (iii) the legal treatment of outstanding financial contracts after January
1, 1999 that refer to existing currencies rather than the EURO; (iv) the
fluctuation of the EURO relative to non-EURO currencies during the transition
period from January 1, 1999 to December 31, 2000 and beyond; and (v) whether the
interest rate, tax and labor regimes of the Participating Countries will
converge over time. Further, the conversion of the currencies of other Economic
and Monetary Union countries, such as the United Kingdom, and the admission of
other countries, including Central and Eastern European countries, to the
Economic and Monetary Union could adversely affect the EURO. These or other
factors may cause market disruptions before or after the introduction of the
EURO and could adversely affect the value of European securities and currencies
held by the Funds.
Currency Exchange Rates. A Fund's share value may change
significantly when the currencies, other than the U.S. dollar, in which the
Fund's portfolio investments are denominated, strengthen or weaken against the
U.S. dollar. Currency exchange rates generally are determined by the forces of
supply and demand in the foreign exchange markets and the relative merits of
investments in different countries as seen from an international perspective.
Currency exchange rates can also be affected unpredictably by intervention by
U.S. or foreign governments or central banks or by currency controls or
political developments in the United States or abroad.
Investing in Developing Countries. Investing in securities
issued by companies located in developing countries involves not only the risks
described above with respect to investing in foreign securities, but also other
risks, including exposure to economic structures that are generally less diverse
and mature than, and to political systems that can be expected to have less
stability than, those of developed countries. Other characteristics of
developing countries that may affect investment in their markets include certain
national policies that may restrict investment by foreigners in issuers or
industries deemed sensitive to relevant national interests and the absence of
developed legal structures governing private and foreign investments and private
property. The typically small size of the markets for securities issued by
companies located in developing countries and the possibility of a low or
nonexistent volume of trading in those securities may also result in a lack of
liquidity and in price volatility of those securities.
Lending Portfolio Securities. Each Fund is authorized to lend
its portfolio securities to well-known and recognized U.S. and foreign brokers,
dealers and banks. These loans, if and when made, may not exceed 30% (5% in the
case of the Tax-Exempt Fund) of a Fund's assets taken at value. The Fund's loans
of securities will be collateralized by cash, letters of credit or Government
Securities. Cash or instruments collateralizing a Fund's loans of securities are
segregated and maintained at all times with the Trust's custodian, or with a
designated sub-custodian, in an amount at least equal to the current market
value of the loaned securities. In lending securities, a Fund will be subject to
risks, which, like those associated with other extensions of credit, include
possible loss of rights in the collateral should the borrower fail financially.
Income derived by the Tax-Exempt Fund on any loan of its portfolio securities
will not be exempt from Federal income taxation.
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If a Fund loans its portfolio securities, it will adhere to
the following conditions whenever its portfolio securities are loaned: (1) the
Fund must receive at least 100% cash collateral or equivalent securities from
the borrower; (2) the borrower must increase the collateral whenever the market
value of the securities loaned rises above the level of the collateral; (3) the
Fund must be able to terminate the loan at any time; (4) the Fund must receive
reasonable interest on the loan, as well as any dividends, interest or other
distributions on the loaned securities, and any increase in market value; (5)
the Fund may pay only reasonable custodian fees in connection with the loan; and
(6) voting rights on the loaned securities may pass to the borrower except that,
if a material event adversely affecting the investment in the loaned securities
occurs, the Trust's Board of Trustees (the "Board") must terminate the loan and
regain the right to vote the securities. From time to time, a Fund may pay a
part of the interest earned from the investment of collateral received for
securities loaned to the borrower and/or a third party that is unaffiliated with
the Fund and is acting as a "finder."
Securities of Other Investment Companies. Certain Funds may
invest in investment funds that invest principally in securities in which the
Fund is authorized to invest. Currently, under the 1940 Act, a Fund may hold
securities of another investment company in amounts which (a) do not exceed 3%
of the total outstanding voting stock of such company, (b) do not exceed 5% of
the value of the Fund's total assets and (c) when added to all other investment
company securities held by the Fund, do not exceed 10% of the value of the
Fund's total assets. Investments by a Fund (other than the Money Market Fund) in
the Investment Fund is not considered an investment in another investment
company for purposes of this restriction. To the extent a Fund invests in other
investment companies, the Fund's shareholders will incur certain duplicative
fees and expenses, including investment advisory fees.
Purchasing Put and Call Options on Securities. Each Fund,
other than the Money Market Fund, may purchase put and call options that are
traded on a U.S. or foreign securities exchange or in the over-the-counter
market. A Fund may utilize up to 10% of its assets to purchase put options on
portfolio securities and may do so at or about the same time that it purchases
the underlying security or at a later time. By buying a put, a Fund will seek to
limit its risk of loss from a decline in the market value of the security until
the put expires. Any appreciation in the value of the underlying security,
however, will be partially offset by the amount of the premium paid for the put
option and any related transaction costs. A Fund may utilize up to 10% of its
assets to purchase call options on portfolio securities. Call options may be
purchased by a Fund in order to acquire the underlying securities for a price
that avoids any additional cost that would result from a substantial increase in
the market value of a security. A Fund may also purchase call options to
increase its return at a time when the call is expected to increase in value due
to anticipated appreciation of the underlying security. Prior to their
expirations, put and call options may be sold by a Fund in closing sale
transactions, which are sales by the Fund, prior to the exercise of options that
it has purchased, of options of the same series. Profit or loss from the sale
will depend on whether the amount received is more or less than the premium paid
for the option plus the related transaction costs. The aggregate value of the
securities underlying the calls or obligations underlying the puts, determined
as of the date the options are sold, shall not exceed 25% of the net assets of a
Fund. In addition, the premiums paid by a Fund in purchasing options on
securities, options on securities indices, options on foreign currencies and
options on futures contracts will not exceed 20% of the Fund's net assets.
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Covered Option Writing. Each Fund, other than the Money Market
Fund, may write covered put and call options on securities. A Fund will realize
fees (referred to as "premiums") for granting the rights evidenced by the
options. A put option embodies the right of its purchaser to compel the writer
of the option to purchase from the option holder an underlying security at a
specified price at any time during the option period. In contrast, a call option
embodies the right of its purchaser to compel the writer of the option to sell
to the option holder an underlying security at a specified price at any time
during the option period.
The Funds with option-writing authority will write only
options that are covered. A call option written by a Fund will be deemed covered
(1) if the Fund owns the securities underlying the call or has an absolute and
immediate right to acquire those securities without additional cash
consideration upon conversion or exchange of other securities held in its
portfolio, (2) if the Fund holds a call at the same exercise price for the same
exercise period and on the same securities as the call written, (3) in the case
of a call option on a stock index, if the Fund owns a portfolio of securities
substantially replicating the movement of the index underlying the call option,
or (4) if at the time the call is written, an amount of cash, securities issued
or guaranteed by the U.S. Government or one of its agencies or instrumentalities
("Government Securities") or other liquid assets equal to the fluctuating market
value of the optioned securities, is segregated with the Trust's custodian or
with a designated sub-custodian. A put option will be deemed covered (1) if, at
the time the put is written, an amount of cash, Government Securities or other
liquid assets having a value at least equal to the exercise price of the
underlying securities is segregated with the Trust's custodian or with a
designated sub-custodian, or (2) if the Fund continues to own an equivalent
number of puts of the same "series" (that is, puts on the same underlying
securities having the same exercise prices and expiration dates as those written
by the Fund), or an equivalent number of puts of the same "class" (that is, puts
on the same underlying securities) with exercise prices greater than those that
it has written (or if the exercise prices of the puts it holds are less than the
exercise prices of those it has written, the difference is segregated with the
Trust's custodian or with a designated sub-custodian).
The principal reason for writing covered call options on a
securities portfolio is to attempt to realize, through the receipt of premiums,
a greater return than would be realized on the securities alone. In return for a
premium, the writer of a covered call option forfeits the right to any
appreciation in the value of the underlying security above the strike price for
the life of the option (or until a closing purchase transaction can be
effected). Nevertheless, the call writer retains the risk of a decline in the
price of the underlying security. Similarly, the principal reason for writing
covered put options is to realize income in the form of premiums. The writer of
a covered put option accepts the risk of a decline in the price of the
underlying security. The size of the premiums that a Fund may receive may be
adversely affected as new or existing institutions, including other investment
companies, engage in or increase their option-writing activities.
Options written by a Fund will normally have expiration dates
between one and nine months from the date written. The exercise price of the
options may be below, equal to or above the market values of the underlying
securities at the times the options are written. In the case of call options,
these exercise prices are referred to as "in-the-money," "at-the-money" and
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"out-of-the-money," respectively.
So long as the obligation of a Fund as the writer of an option
continues, the Fund may be assigned an exercise notice by the broker-dealer
through which the option was sold, requiring the Fund to deliver, in the case of
a call, or take delivery of, in the case of a put, the underlying security
against payment of the exercise price. This obligation terminates when the
option expires or the Fund effects a closing purchase transaction. A Fund can no
longer effect a closing purchase transaction with respect to an option once it
has been assigned an exercise notice. To secure its obligation to deliver the
underlying security when it writes a call option, or to pay for the underlying
security when it writes a put option, a Fund will be required to deposit in
escrow the underlying security or other assets in accordance with the rules of
the Options Clearing Corporation (the "Clearing Corporation") and of the
securities exchange on which the option is written.
A Fund may engage in a closing purchase transaction to realize
a profit, to prevent an underlying security from being called or put or, in the
case of a call option, to unfreeze an underlying security (thereby permitting
its sale or the writing of a new option on the security prior to the outstanding
option's expiration). To effect a closing purchase transaction, a Fund would
purchase, prior to the holder's exercise of an option that the Fund has written,
an option of the same series as that on which the Fund desires to terminate its
obligation. The obligation of a Fund under an option that it has written would
be terminated by a closing purchase transaction, but the Fund would not be
deemed to own an option as the result of the transaction. An option position may
be closed out only if a secondary market exists for an option of the same series
on a recognized securities exchange or in the over-the-counter market. In light
of the need for a secondary market in which to close an option position, the
Funds are expected to purchase only call or put options issued by the Clearing
Corporation. The Investment Manager expects that the Funds will write options,
other than those on Government Securities, only on national securities
exchanges. Options on Government Securities may be written by the Funds in the
over-the-counter market.
A Fund may realize a profit or loss upon entering into closing
transactions. When a Fund has written an option, for example, it will realize a
profit if the cost of the closing purchase transaction is less than the premium
received upon writing the original option; the Fund will incur a loss if the
cost of the closing purchase transaction exceeds the premium received upon
writing the original option. When a Fund has purchased an option and engages in
a closing sale transaction, whether the Fund realizes a profit or loss will
depend upon whether the amount received in the closing sale transaction is more
or less than the premium the Fund initially paid for the original option plus
the related transaction costs.
Option writing for a Fund may be limited by position and
exercise limits established by U.S. securities exchanges and the National
Association of Securities Dealers, Inc. and by requirements of the Internal
Revenue Code of 1986, as amended (the "Code") for qualification as a regulated
investment company. In addition to writing covered put and call options to
generate current income, a Fund may enter into options transactions as hedges to
reduce investment risk, generally by making an investment expected to move in
the opposite direction of a portfolio position. A hedge is designed to offset a
loss on a portfolio position with a gain on the hedge position; at the same
time, however, a properly correlated hedge will result in
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a gain on the portfolio's position being offset by a loss on the hedge position.
A Fund will engage in hedging transactions only when deemed
advisable by the Investment Manager. Successful use by a Fund of options will
depend on the Investment Manager's ability to predict correctly movements in the
direction of the securities underlying the option used as a hedge. Losses
incurred in hedging transactions and the costs of these transactions will affect
a Fund's performance.
Securities Index Options. In seeking to hedge all or a portion
of its investments, each Fund, other than the Money Market Fund, may purchase
and write put and call options on securities indices listed on U.S. or foreign
securities exchanges or traded in the over-the-counter market, which indices
include securities held in the Fund's portfolio. The Funds with such option
writing authority may write only covered options. A Fund may also use securities
index options as a means of participating in a securities market without making
direct purchases of securities.
A securities index measures the movement of a certain group of
securities by assigning relative values to the securities included in the index.
Options on securities indexes are generally similar to options on specific
securities. Unlike options on securities, however, options on securities indices
do not involve the delivery of an underlying security; the option in the case of
an option on a securities index represents the holder's right to obtain from the
writer in cash a fixed multiple of the amount by which the exercise price
exceeds (in the case of a call) or is less than (in the case of a put) the
closing value of the underlying securities index on the exercise date. A Fund
may purchase and write put and call options on securities indexes or securities
index futures contracts that are traded on a U.S. exchange or board of trade or
a foreign exchange, to the extent permitted under rules and interpretations of
the Commodity Futures Trading Commission ("CFTC"), as a hedge against changes in
market conditions and interest rates, and for duration management, and may enter
into closing transactions with respect to those options to terminate existing
positions. A securities index fluctuates with changes in the market values of
the securities included in the index. Securities index options may be based on a
broad or narrow market index or on an industry or market segment.
The delivery requirements of options on securities indices
differ from options on securities. Unlike a securities option, which
contemplates the right to take or make delivery of securities at a specified
price, an option on a securities index gives the holder the right to receive a
cash "exercise settlement amount" equal to (1) the amount, if any, by which the
fixed exercise price of the option exceeds (in the case of a put) or is less
than (in the case of a call) the closing value of the underlying index on the
date of exercise, multiplied by (2) a fixed "index multiplier." Receipt of this
cash amount will depend upon the closing level of the securities index upon
which the option is based being greater than, in the case of a call, or less
than, in the case of a put, the exercise price of the option. The amount of cash
received will be equal to the difference between the closing price of the index
and the exercise price of the option expressed in dollars times a specified
multiple. The writer of the option is obligated, in return for the premium
received, to make delivery of this amount. The writer may offset its position in
securities index options prior to expiration by entering into a closing
transaction on an exchange or it may allow the option to expire unexercised.
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The effectiveness of purchasing or writing securities index
options as a hedging technique will depend upon the extent to which price
movements in the portion of a securities portfolio being hedged correlate with
price movements of the securities index selected. Because the value of an index
option depends upon movements in the level of the index rather than the price of
a particular security, whether a Fund realizes a gain or loss from the purchase
or writing of options on an index depends upon movements in the level of prices
in the market generally or, in the case of certain indices, in an industry or
market segment, rather than movements in the price of a particular security. As
a result, successful use by a Fund of options on securities indices is subject
to the Investment Manager's ability to predict correctly movements in the
direction of the market generally or of a particular industry. This ability
contemplates different skills and techniques from those used in predicting
changes in the price of individual securities.
Securities index options are subject to position and exercise
limits and other regulations imposed by the exchange on which they are traded.
The ability of a Fund to engage in closing purchase transactions with respect to
securities index options depends on the existence of a liquid secondary market.
Although a Fund will generally purchase or write securities index options only
if a liquid secondary market for the options purchased or sold appears to exist,
no such secondary market may exist, or the market may cease to exist at some
future date, for some options. No assurance can be given that a closing purchase
transaction can be effected when the Investment Manager desires that a Fund
engage in such a transaction.
Over-the-Counter ("OTC") Options. Certain Funds may purchase
OTC or dealer options or sell covered OTC options. Unlike exchange-listed
options where an intermediary or clearing corporation, such as the Clearing
Corporation, assures that all transactions in such options are properly
executed, the responsibility for performing all transactions with respect to OTC
options rests solely with the writer and the holder of those options. A listed
call option writer, for example, is obligated to deliver the underlying stock to
the clearing organization if the option is exercised, and the clearing
organization is then obligated to pay the writer the exercise price of the
option. If a Fund were to purchase a dealer option, however, it would rely on
the dealer from whom it purchased the option to perform if the option were
exercised. If the dealer fails to honor the exercise of the option by the Fund,
the Fund would lose the premium it paid for the option and the expected benefit
of the transaction.
Listed options generally have a continuous liquid market while
dealer options have none. Consequently, a Fund will generally be able to realize
the value of a dealer option it has purchased only by exercising it or reselling
it to the dealer who issued it. Similarly, when a Fund writes a dealer option,
it generally will be able to close out the option prior to its expiration only
by entering into a closing purchase transaction with the dealer to which the
Fund originally wrote the option. Although the Funds will seek to enter into
dealer options only with dealers who will agree to and that are expected to be
capable of entering into closing transactions with the Funds, there can be no
assurance that a Fund will be able to liquidate a dealer option at a favorable
price at any time prior to expiration. The inability to enter into a closing
transaction may result in material losses to a Fund. Until a Fund, as a covered
OTC call option writer, is able to effect a closing purchase transaction, it
will not be able to liquidate securities (or other assets) used to cover the
written option until the option expires or is exercised. This requirement may
impair a Fund's ability to sell portfolio securities or, with respect to
currency options,
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currencies at a time when such sale might be advantageous. In the event of
insolvency of the other party, the Fund may be unable to liquidate a dealer
option.
Futures and Related Options. Each Fund, other than the
Small-Cap Value Fund and the Money Market Fund, may enter into interest rate,
financial and stock or bond index futures contracts or related options that are
traded on a U.S. or foreign exchange or board of trade approved by the Commodity
Futures Trading Commission or in the over-the-counter market. If entered into,
these transactions will be made solely for the purpose of hedging against the
effects of changes in the value of portfolio securities due to anticipated
changes in interest rates and/or market conditions, to gain market exposure for
accumulating and residual cash positions, for duration management, or when the
transactions are economically appropriate to the reduction of risks inherent in
the management of the Fund involved. No Fund will enter into a transaction
involving futures and options on futures for speculative purposes.
An interest rate futures contract provides for the future sale
by one party and the purchase by the other party of a specified amount of a
particular financial instrument (debt security) at a specified price, date, time
and place. Financial futures contracts are contracts that obligate the holder to
deliver (in the case of a futures contract that is sold) or receive (in the case
of a futures contract that is purchased) at a future date a specified quantity
of a financial instrument, specified securities, or the cash value of a
securities index. A municipal bond index futures contract is based on an index
of long-term, tax-exempt municipal bonds and a corporate bond index futures
contract is based on an index of corporate bonds. Stock index futures contracts
are based on indices that reflect the market value of common stock of the
companies included in the indices. An index futures contract is an agreement
pursuant to which two parties agree to take or make delivery of an amount of
cash equal to the difference between the value of the index at the close of the
last trading day of the contract and the price at which the index contract was
originally written. An option on an interest rate or index futures contract
generally gives the purchaser the right, in return for the premium paid, to
assume a position in a futures contract at a specified exercise price at any
time prior to the expiration date of the option.
A Fund may not enter into futures and options contracts for
which aggregate initial margin deposits and premiums paid for unexpired options
exceed 5% of the fair market value of the Fund's total assets, after taking into
account unrealized losses or profits on futures contracts or options on futures
contracts into which it has entered. The current view of the staff of the
Securities and Exchange Commission ("SEC") is that a Fund's long and short
positions in futures contracts as well as put and call options on futures
written by it must be collateralized with cash or other liquid assets and
segregated with the Trust's custodian or a designated sub-custodian or "covered"
in a manner similar to that for covered options on securities.
No consideration is paid or received by a Fund upon trading a futures contract.
Upon entering into a futures contract, cash, short-term Government Securities or
other U.S. dollar-denominated, high-grade, short-term money market instruments
equal to approximately 1% to 10% of the contract amount will be segregated with
the Trust's custodian or a designated sub-custodian. This amount, which is
subject to change by the exchange on which the contract is traded, is known as
"initial margin" and is in the nature of a performance bond or good faith
deposit on the contract that is returned to the Fund upon termination of the
futures contract, so long as all contractual obligations have been satisfied;
the broker will have access to amounts in the margin
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account if the Fund fails to meet its contractual obligations. Subsequent
payments, known as "variation margin," to and from the broker, will be made
daily as the price of the securities underlying the futures contract fluctuates,
making the long and short positions in the contract more or less valuable, a
process known as "marking-to-market." At any time prior to the expiration of a
futures contract, a Fund may elect to close a position by taking an opposite
position, which will operate to terminate the Fund's existing position in the
contract.
Although the Trust intends that the Funds enter into futures
contracts only if an active market exists for the contracts, no assurance can be
given that an active market will exist for the contracts at any particular time.
Most U.S. futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once the daily
limit has been reached in a particular contract, no trades may be made on that
day at a price beyond that limit. Futures contract prices may move to the daily
limit for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and subjecting some futures
traders to substantial losses. In such a case, and in the event of adverse price
movements, a Fund would be required to make daily cash payments of variation
margin. In such circumstances, an increase in the value of the portion of the
portfolio being hedged, if any, may partially or completely offset losses on the
futures contract.
If a Fund has hedged against the possibility of an increase in
interest rates and rates decrease instead, the Fund will lose part or all of the
benefit of the increased value of securities that it has hedged because it will
have offsetting losses in its futures positions. In addition, in such
situations, if the Fund had insufficient cash, it may have to sell securities to
meet daily variation margins requirements at a time when it may be
disadvantageous to do so. These sales of securities may, but will not
necessarily, be at increased prices that reflect the decline in interest rates.
An option on a futures contract, unlike a direct investment in
such a contract, gives the purchaser the right, in return for the premium paid,
to assume a position in the futures contract at a specified exercise price at
any time prior to the expiration date of the option. Upon exercise of an option,
the delivery of the futures position by the writer of the option to the holder
of the option will be accompanied by delivery of the accumulated balance in the
writer's futures margin account, which represents the amount by which the market
price of the futures contract exceeds, in the case of a call, or is less than,
in the case of a put, the exercise price of the option on the futures contract.
The potential loss related to the purchase of an option on futures contracts is
limited to the premium paid for the option (plus transaction costs). Because the
price of the option to the purchaser is fixed at the point of sale, no daily
cash payments are made to reflect changes in the value of the underlying
contract. The value of the option, however, does change daily and that change
would be reflected in the net asset value of the Fund holding the options.
The use of futures contracts and options on futures contracts
as a hedging device involves several risks. No assurance can be given that a
correlation will exist between price movements in the underlying securities or
index and price movements in the securities that are the subject of the hedge.
Positions in futures contracts and options on futures contracts may be closed
out only on the exchange or board of trade on which they were entered, and no
assurance can be given that an active market will exist for a particular
contract or option at any particular
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time. Furthermore, because any income earned from transactions in futures
contracts and related options will be taxable, the Investment Manager of the
Tax-Exempt Fund anticipates that the Fund will invest in these instruments only
in unusual circumstances, such as when the Investment Manager anticipates a
significant change in interest rates or market conditions. Losses incurred in
hedging transactions and the costs of these transactions will affect a Fund's
performance.
Forward Currency Transactions. Each Fund, other than the
Small-Cap Value Fund, the Tax-Exempt Fund and the Money Market Fund, may hold
currencies to meet settlement requirements for foreign securities and each Fund,
other than the Premier Fund, the Small-Cap Value Fund, the Mid-Cap Value Fund,
the Tax-Exempt Fund and the Money Market Fund, may engage in currency exchange
transactions to protect against uncertainty in the level of future exchange
rates between a particular foreign currency and the U.S. dollar or between
foreign currencies in which the Fund's securities are or may be denominated. No
Fund will enter into forward currency transactions for speculative purposes.
Forward currency contracts are agreements to exchange one
currency for another at a future date. The date (which may be any agreed-upon
fixed number of days in the future), the amount of currency to be exchanged and
the price at which the exchange will take place will be negotiated and fixed for
the term of the contract at the time that a Fund enters into the contract.
Forward currency contracts (1) are traded in a market conducted directly between
currency traders (typically, commercial banks or other financial institutions)
and their customers, (2) generally have no deposit requirements and (3) are
typically consummated without payment of any commissions. A Fund, however, may
enter into forward currency contracts requiring deposits or involving the
payment of commissions. To assure that a Fund's forward currency contracts are
not used to achieve investment leverage, cash or other liquid assets will be
segregated with the Trust's custodian or a designated sub-custodian in an amount
at all times equal to or exceeding the Fund's commitment with respect to the
contracts.
Upon maturity of a forward currency contract, a Fund may (1)
pay for and receive the underlying currency, (2) negotiate with the dealer to
roll over the contract into a new forward currency contract with a new future
settlement date or (3) negotiate with the dealer to terminate the forward
contract into an offset with the currency trader providing for the Fund's paying
or receiving the difference between the exchange rate fixed in the contract and
the then current exchange rate. The Trust may also be able to negotiate such an
offset on behalf of a Fund prior to maturity of the original forward contract.
No assurance can be given that new forward contracts or offsets will always be
available to a Fund.
In hedging a specific portfolio position, a Fund may enter
into a forward contract with respect to either the currency in which the
position is denominated or another currency deemed appropriate by the Investment
Manager. A Fund's exposure with respect to forward currency contracts is limited
to the amount of the Fund's aggregate investments in instruments denominated in
foreign currencies.
The cost to a Fund of engaging in currency transactions varies
with factors such as the currency involved, the length of the contract period
and the market conditions then prevailing. Because transactions in currency
exchange are usually conducted on a principal basis, no fees or commissions are
involved. The use of forward currency contracts does not eliminate fluctuations
in the underlying prices of the securities, but it does establish a rate of
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exchange that can be achieved in the future. In addition, although forward
currency contracts limit the risk of loss due to a decline in the value of the
hedged currency, at the same time, they limit any potential gain that might
result should the value of the currency increase. If a devaluation is generally
anticipated, a Fund may not be able to sell currency at a price above the
anticipated devaluation level. A Fund will not enter into a currency transaction
if, as a result, it will fail to qualify as a regulated investment company under
the Code, for a given year.
In entering into forward currency contracts, a Fund will be
subject to a number of risks and special considerations. The market for forward
currency contracts, for example, may be limited with respect to certain
currencies. The existence of a limited market may in turn restrict the Fund's
ability to hedge against the risk of devaluation of currencies in which the Fund
holds a substantial quantity of securities. The successful use of forward
currency contracts as a hedging technique draws upon the Investment Manager's
special skills and experience with respect to those instruments and will usually
depend upon the Investment Manager's ability to forecast interest rate and
currency exchange rate movements correctly. Should interest or exchange rates
move in an unexpected manner, a Fund may not achieve the anticipated benefits of
forward currency contracts or may realize losses and thus be in a less
advantageous position than if those strategies had not been used. Many forward
currency contracts are subject to no daily price fluctuation limits so that
adverse market movements could continue with respect to those contracts to an
unlimited extent over a period of time. In addition, the correlation between
movements in the prices of those contracts and movements in the prices of the
currencies hedged or used for cover will not be perfect.
The ability to dispose of a Fund's positions in forward
currency contracts depends on the availability of active markets in those
instruments, and the Investment Manager cannot predict the amount of trading
interest that may exist in the future in forward currency contracts. Forward
currency contracts may be closed out only by the parties entering into an
offsetting contract. As a result, no assurance can be given that a Fund will be
able to utilize these contracts effectively for the intended purposes.
Options on Foreign Currencies. Each Fund, other than the
Premier Fund, the Small-Cap Value Fund, the Mid-Cap Value Fund, the Tax-Exempt
Fund and the Money Market Fund, may purchase and write put and call options on
foreign currencies for the purpose of hedging against declines in the U.S.
dollar value of foreign currency denominated securities and against increases in
the U.S. dollar cost of securities to be acquired by the Fund. The Funds with
such option writing authority may write only covered options. No Fund will enter
into a transaction involving options on foreign currencies for speculative
purposes. Options on foreign currencies to be written or purchased by a Fund are
traded on U.S. or foreign exchanges or in the over-the-counter market. The Trust
will limit the premiums paid on a Fund's options on foreign currencies to 5% of
the value of the Fund's total assets.
Certain transactions involving options on foreign currencies
are undertaken on contract markets that are not regulated by the CFTC. Options
on foreign currencies traded on national securities exchanges are within the
jurisdiction of the SEC, as are other securities traded on those exchanges. As a
result, many of the protections provided to traders on organized exchanges will
be available with respect to those transactions. In particular, all foreign
currency option positions entered into on a national securities exchange are
cleared and guaranteed by the Clearing Corporation, thereby reducing the risk of
counterparty default. In addition, a liquid
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secondary market in options traded on a national securities exchange may exist,
potentially permitting a Fund to liquidate open positions at a profit prior to
exercise or expiration, or to limit losses in the event of adverse market
movements.
The purchase and sale of exchange-traded foreign currency
options are subject to the risks of the availability of a liquid secondary
market as described above, as well as the risks regarding adverse market
movements, margining of options written, the nature of the foreign currency
market, possible intervention by governmental authorities and the effects of
other political and economic events. In addition, exercise and settlement of
exchange-traded foreign currency options must be made exclusively through the
Clearing Corporation, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the Clearing Corporation may,
if it determines that foreign governmental restrictions or taxes would prevent
the orderly settlement of foreign currency option exercises, or would result in
undue burdens on the Clearing Corporation or its clearing members, impose
special procedures on exercise and settlement, such as technical changes in the
mechanics of delivery of currency, the fixing of dollar settlement prices or
prohibitions on exercise.
Like the writing of other kinds of options, the writing of an
option on a foreign currency constitutes only a partial hedge, up to the amount
of the premium received; a Fund could also be required, with respect to any
option it has written, to purchase or sell foreign currencies at disadvantageous
exchange rates, thereby incurring losses. The purchase of an option on a foreign
currency may constitute an effective hedge against fluctuation in exchange
rates, although in the event of rate movements adverse to a Fund's position, the
Fund could forfeit the entire amount of the premium plus related transaction
costs.
Options on foreign currencies may be traded on foreign
exchanges, to the extent permitted by the CFTC. These transactions are subject
to the risk of governmental actions affecting trading in or the prices of
foreign currencies or securities. The value of these positions could also be
adversely affected by (1) other complex foreign political and economic factors,
(2) lesser availability of data on which to make trading decisions than in the
United States, (3) delays in a Fund's ability to act upon economic events
occurring in foreign markets during non-business hours in the United States, (4)
the imposition of different exercise and settlement terms and procedures and
margin requirements than in the United States and (5) lesser trading volume.
Structured and Indexed Securities. Certain Funds may also
invest in structured and indexed securities, the value of which is linked to
currencies, interest rates, commodities, indexes or other financial indicators
("reference instruments"). The interest rate or the principal amount payable at
maturity or redemption may be increased or decreased depending on changes in the
value of the reference instrument. Structured or indexed securities may be
positively or negatively indexed, so that appreciation of the reference
instrument may produce an increase or a decrease in interest rate or value at
maturity of the security. In addition, the change in the interest rate or value
at maturity of the security may be some multiple of the change in value of the
reference instrument. Thus, in addition to the credit risk of the security's
issuer, the Funds will bear the market risk of the reference instrument.
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Mortgage Related Securities. Certain Funds may invest in
mortgage related securities which represent pools of mortgage loans assembled
for sale to investors by various governmental agencies, such as GNMA, by
government related organizations, such as FNMA and FHLMC, as well as by private
issuers, such as commercial banks, savings and loan institutions, mortgage
bankers and private mortgage insurance companies.
The average maturity of pass-through pools of mortgage related
securities in which certain of the Funds may invest varies with the maturities
of the underlying mortgage instruments. In addition, a pool's stated maturity
may be shortened by unscheduled payments on the underlying mortgages. Factors
affecting mortgage prepayments include the level of interest rates, general
economic and social conditions, the location of the mortgaged property and age
of the mortgage. Because prepayment rates of individual mortgage pools vary
widely, the average life of a particular pool cannot be predicted accurately.
Mortgage related securities may be classified as private,
governmental or government-related, depending on the issuer or guarantor.
Private mortgage related securities represent pass-through pools consisting
principally of conventional residential mortgage loans created by
non-governmental issuers, such as commercial banks, savings and loan
associations and private mortgage insurance companies. Governmental mortgage
related securities are backed by the full faith and credit of the United States.
GNMA, the principal U.S. guarantor of these securities, is a wholly-owned U.S.
government corporation within the Department of Housing and Urban Development.
Government-related mortgage related securities are not backed by the full faith
and credit of the United States. Issuers include FNMA and FHLMC. FNMA is a
government-sponsored corporation owned entirely by private stockholders, which
is subject to general regulation by the Secretary of Housing and Urban
Development. Pass-through securities issued by FNMA are guaranteed as to timely
payment of principal and interest by FNMA. FHLMC is a corporate instrumentality
of the United States, the stock of which is owned by the Federal Home Loan
Banks. Participation certificates representing interests in mortgages from
FHLMC's national portfolio are guaranteed as to the timely payment of interest
and ultimate collection of principal by FHLMC.
Private, governmental or government-related entities may
create mortgage loan pools offering pass-through investments in addition to
those described above. The mortgages underlying these securities may be
alternative mortgage instruments, that is, mortgage instruments whose principal
or interest payments may vary or whose terms to maturity may be shorter than
previously customary. The Investment Manager assesses new types of mortgage
related securities as they are developed and offered to determine their
appropriateness for investment by the relevant Fund.
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Several risks are associated with mortgage related securities
generally. The monthly cash inflow from the underlying loans, for example, may
not be sufficient to meet the monthly payment requirements of the mortgage
related security. Prepayment of principal by mortgagors or mortgage foreclosures
will shorten the term of the underlying mortgage pool for a mortgage related
security. Early returns of principal will affect the average life of the
mortgage related securities remaining in these Funds. The occurrence of mortgage
prepayments is affected by factors including the level of interest rates,
general economic conditions, the location and age of the mortgage and other
social and demographic conditions. In periods of rising interest rates, the rate
of prepayment tends to decrease, thereby lengthening the average life of a pool
of mortgage related securities. Conversely, in periods of falling interest rates
the rate of prepayment tends to increase, thereby shortening the average life of
a pool. Reinvestment of prepayments may occur at higher or lower interest rates
than the original investment, thus affecting the yield of these Funds. Because
prepayments of principal generally occur when interest rates are declining, the
Fund will likely have to reinvest the proceeds of prepayments at lower interest
rates than those at which its assets were previously invested, resulting in a
corresponding decline in the Fund's yield. Thus, mortgage related securities may
have less potential for capital appreciation in periods of falling interest
rates than other fixed income securities of comparable maturity, although those
other fixed income securities may have a comparable risk of decline in market
value in periods of rising interest rates. To the extent that these Funds
purchase mortgage related securities at a premium, unscheduled prepayments,
which are made at par, will result in a loss equal to any unamortized premium.
Adjustable rate mortgage related securities ("ARMs") have
interest rates that reset at periodic intervals, thereby allowing certain Funds
to participate in increases in interest rates through periodic adjustments in
the coupons of the underlying mortgages, resulting in both higher current yields
and lower price fluctuation than would be the case with more traditional
long-term debt securities. Furthermore, if prepayments of principal are made on
the underlying mortgages during periods of rising interest rates, these Funds
generally will be able to reinvest these amounts in securities with a higher
current rate of return. None of these Funds, however, will benefit from
increases in interest rates to the extent that interest rates rise to the point
at which they cause the current yield of ARMs to exceed the maximum allowable
annual or lifetime reset limits (or "caps") for a particular mortgage. In
addition, fluctuations in interest rates above these caps could cause ARMs to
behave more like long-term fixed rate securities in response to extreme
movements in interest rates. As a result, during periods of volatile interest
rates, these Funds' net asset values may fluctuate more than if they did not
purchase ARMs. Moreover, during periods of rising interest rates, changes in the
coupon of the adjustable rate mortgages will slightly lag changes in market
rates, creating the potential for some principal loss for shareholders who
redeem their shares of these Funds before the interest rates on the underlying
mortgages are adjusted to reflect current market rates.
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Collateralized mortgage related securities ("CMOs") are
obligations fully collateralized by a portfolio of mortgages or mortgage related
securities. Payments of principal and interest on the mortgages are passed
through to the holders of the CMOs on the same schedule as they are received,
although certain classes of CMOs have priority over others with respect to the
receipt of prepayments on the mortgages. Therefore, depending on the type of
CMOs in which these Funds invest, the investment may be subject to a greater or
lesser risk of prepayment than other types of mortgage related securities.
Mortgage related securities may not be readily marketable. To
the extent any of these securities are not readily marketable in the judgment of
the Investment Manager, each of these Funds limits its investments in these
securities, together with other illiquid instruments, to not more than 15% (10%
in the case of the Tax-Exempt Fund) of the value of its net assets.
Supranational Agencies. Each Fund may invest up to 10% of its
assets in debt obligations of supranational agencies such as: the International
Bank for Reconstruction and Development (commonly referred to as the World
Bank), which was chartered to finance development projects in developing member
countries; the European Community, which is a twelve-nation organization engaged
in cooperative economic activities; the European Coal and Steel Community, which
is an economic union of various European nations' steel and coal industries; and
the Asian Development Bank, which is an international development bank
established to lend funds, promote investment and provide technical assistance
to member nations in the Asian and Pacific regions. Debt obligations of
supranational agencies are not considered Government Securities and are not
supported, directly or indirectly, by the U.S. Government.
Municipal Obligations. The term "Municipal Obligations" as
used in the Prospectus and this SAI means debt obligations issued by, or on
behalf of, states, territories and possessions of the United States and the
District of Columbia and their political subdivisions, agencies and
instrumentalities or multistate agencies or authorities, the interest from which
debt obligations is, in the opinion of bond counsel to the issuer, excluded from
gross income for Federal income tax purposes. Municipal Obligations generally
are understood to include debt obligations issued to obtain funds for various
public purposes, including the construction of a wide range of public
facilities, refunding of outstanding obligations, payment of general operating
expenses and extensions of loans to public institutions and facilities. Private
activity bonds that are issued by or on behalf of public authorities to finance
privately operated facilities are considered to be Municipal Obligations if the
interest paid on them qualifies as excluded from gross income (but not
necessarily from alternative minimum taxable income) for Federal income tax
purposes in the opinion of bond counsel to the issuer.
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Opinions relating to the validity of Municipal Obligations and
to the exemption of interest on them from Federal income taxes are rendered by
bond counsel to the respective issuers at the time of issuance. Neither the
Trust nor the Investment Manager will review the proceedings relating to the
issuance of Municipal Obligations or the basis for opinions of counsel. The
Strategic Fund and Tax-Exempt Fund may invest without limit in debt obligations
that are repayable out of revenues generated from economically related projects
or facilities or debt obligations whose issuers are located in the same state.
Sizable investments in these obligations could involve an increased risk to the
Funds should any of the related projects or facilities experience financial
difficulties.
Municipal Obligations may be issued to finance life care
facilities, which are an alternative form of long-term housing for the elderly
that offer residents the independence of a condominium life-style and, if
needed, the comprehensive care of nursing home services. Bonds to finance these
facilities have been issued by various state industrial development authorities.
Because the bonds are secured only by the revenues of each facility and not by
state or local government tax payments, they are subject to a wide variety of
risks, including a drop in occupancy levels, the difficulty of maintaining
adequate financial reserves to secure estimated actuarial liabilities, the
possibility of regulatory cost restrictions applied to health care delivery and
competition from alternative health care or conventional housing facilities.
Even though Municipal Obligations are interest-bearing
investments that promise a stable flow of income, their prices are inversely
affected by changes in interest rates and, therefore, are subject to the risk of
market price fluctuations. The values of Municipal Obligations with longer
remaining maturities typically fluctuate more than those of similarly rated
Municipal Obligations with shorter remaining maturities. The values of fixed
income securities also may be affected by changes in the credit rating or
financial condition of the issuing entities.
Tax legislation in recent years has included several
provisions that may affect the supply of, and the demand for, Municipal
Obligations, as well as the tax-exempt nature of interest paid on those
obligations. Neither the Trust nor the Investment Manager can predict with
certainty the effect of recent tax law changes upon the Municipal Obligation
market, including the availability of instruments for investment by a Fund. In
addition, neither the Trust nor the Investment Manager can predict whether
additional legislation adversely affecting the Municipal Obligation market will
be enacted in the future. The Trust monitors legislative developments and
considers whether changes in the objective or policies of a Fund need to be made
in response to those developments. If any laws are enacted that would reduce the
availability of Municipal Obligations for investment by the Tax-Exempt Fund so
as to affect the Fund's shareholders adversely, the Trust will reevaluate the
Fund's investment objective and policies and might submit possible changes in
the Fund's structure to the Fund's shareholders for their consideration. If
legislation were enacted that would treat a type of Municipal Obligation as
taxable for Federal income tax purposes, the Trust would treat the security as a
permissible taxable money market instrument for the Fund within the applicable
limits set forth in the Prospectus.
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Municipal leases are Municipal Obligations that may take the
form of a lease or an installment purchase contract issued by state and local
governmental authorities to obtain funds to acquire a wide variety of equipment
and facilities such as fire and sanitation vehicles, computer equipment and
other capital assets. Interest payments on qualifying municipal leases are
exempt from Federal income taxes and state income taxes within the state of
issuance. Although municipal lease obligations do not normally constitute
general obligations of the municipality, a lease obligation is ordinarily backed
by the municipality's agreement to make the payments due under the lease
obligation. These obligations have evolved to make it possible for state and
local government authorities to acquire property and equipment without meeting
constitutional and statutory requirements for the issuance of debt. Thus,
municipal leases have special risks not normally associated with Municipal
Obligations. These obligations frequently contain "non-appropriation" clauses
that provide that the governmental issuer of the obligation has no obligation to
make future payments under the lease or contract unless money is appropriated
for those purposes by the legislative body on a yearly or other periodic basis.
In addition to the non-appropriation risk, municipal leases represent a type of
financing that has not yet developed the depth of marketability associated with
other Municipal Obligations. Some municipal lease obligations may be, and could
become, illiquid. Moreover, although municipal leases will be secured by the
leased equipment, the disposition of the equipment in the event of foreclosure
might prove to be difficult.
Municipal lease obligations may be deemed to be illiquid as
determined by or in accordance with methods adopted by the Board. In determining
the liquidity and appropriate valuation of a municipal lease obligation, the
following factors relating to the security are considered, among others: (1) the
frequency of trades and quotes; (2) the number of dealers willing to purchase or
sell the security; (3) the willingness of dealers to undertake to make a market;
(4) the nature of the marketplace trades; and (5) the likelihood that the
obligation will continue to be marketable based on the credit quality of the
municipality or relevant obligor.
Municipal leases held by a Fund will be considered illiquid
securities unless the Board determines on an ongoing basis that the leases are
readily marketable. An unrated municipal lease with a non-appropriation risk
that is backed by an irrevocable bank letter of credit or an insurance policy
issued by a bank or insurer deemed by the Investment Manager to be of high
quality and minimal credit risk, will not be deemed to be illiquid solely
because the underlying municipal lease is unrated, if the Investment Manager
determines that the lease is readily marketable because it is backed by the
letter of credit or insurance policy.
Municipal leases that a Fund may acquire will be both rated
and unrated. Rated leases that may be held by a Fund include those rated
investment grade at the time of investment or those issued by issuers whose
senior debt is rated investment grade at the time of investment. A Fund may
acquire unrated issues that the Investment Manager deems to be comparable in
quality to rated issues in which a Fund is authorized to invest. A determination
that an unrated lease obligation is comparable in quality to a rated lease
obligation and that there is a reasonable likelihood that the lease will not be
canceled will be subject to oversight and approval by the Board.
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To limit the risks associated with municipal leases, a Fund
will invest no more than 5% of its total assets in those leases. In addition, a
Fund will purchase lease obligations that contain non-appropriation clauses when
the lease payments will commence amortization of principal at an early date
resulting in an average life of five years or less for the lease obligation.
The Strategic Fund and Tax-Exempt Fund intend to invest in
Municipal Obligations of a broad range of issuers, consistent with prudent
regional diversification. Investors in certain states may be subject to state
taxation on all or a portion of the income and capital gains produced by such
securities.
Floating and Variable Rate Instruments. Certain Funds may
invest in floating and variable rate instruments. Income securities may provide
for floating or variable rate interest or dividend payments. The floating or
variable rate may be determined by reference to a known lending rate, such as a
bank's prime rate, a certificate of deposit rate or the London InterBank Offered
Rate (LIBOR). Alternatively, the rate may be determined through an auction or
remarketing process. The rate also may be indexed to changes in the values of
interest rate or securities indexes, currency exchange rate or other
commodities. Variable and floating rate securiteis tend to be less sensitive
than fixed rate securities to interest rate changes and to have higher yields
when interest rates increase. However, during periods of rising interest rates,
changes in the interest rate of an adjustable rate security may lag changes in
market rates.
The amount by which the rates paid on an income security may
increase or decrease may be subject to periodic or lifetime caps. Fluctuations
in interest rates above these caps could cause adjustable rate securities to
behave more like fixed rate securiteis in response to extreme movements in
interest rates.
Floating and variable rate income securities include
securities whose rates vary inversely with changes in market rates of interest.
Such securities may also pay a rate of interest determined by applying a
multiple to the variable rate. The extent of increases and decreases in the
value of securities whose rates vary inversely with changes in market rates of
interest generally will be larger than comparable changes in the value of an
equal principal amount of a fixed rate security having similar credit quality,
redemption provisions and maturity.
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Certain Funds may purchase floating and variable rate demand
bonds and notes, which are Municipal Obligations ordinarily having stated
maturities in excess of one year but which permit their holder to demand payment
of principal at any time or at specified intervals. Variable rate demand notes
include master demand notes, which are obligations that permit a Fund to invest
fluctuating amounts, which may change daily without penalty, pursuant to direct
arrangements between the Fund, as lender, and the borrower. These obligations
have interest rates that fluctuate from time to time and frequently are secured
by letters of credit or other credit support arrangements provided by banks. Use
of letters of credit or other credit support arrangements will not adversely
affect the tax-exempt status of variable rate demand notes. Because they are
direct lending arrangements between the lender and borrower, variable rate
demand notes generally will not be traded and no established secondary market
generally exists for them, although they are redeemable at face value. If
variable rate demand notes are not secured by letters of credit or other credit
support arrangements, a Fund's right to demand payment will be dependent on the
ability of the borrower to pay principal and interest on demand. Each obligation
purchased by a Fund will meet the quality criteria established by the Investment
Manager for the purchase of Municipal Obligations. The Investment Manager
considers on an ongoing basis the creditworthiness of the issuers of the
floating and variable rate demand obligations in the relevant Fund's portfolio.
Participation Interests. Certain Funds may purchase from
financial institutions participation interests in certain Municipal Obligations.
A participation interest gives the Fund an undivided interest in the Municipal
Obligation in the proportion that the Fund's participation interest bears to the
total principal amount of the Municipal Obligation. These instruments may have
fixed, floating or variable rates of interest. If the participation interest is
unrated, or has been given a rating below one that is otherwise permissible for
purchase by a Fund, the participation interest will be backed by an irrevocable
letter of credit or guarantee of a bank that the Board has determined meets
certain quality standards, or the payment obligation otherwise will be
collateralized by Government Securities. A Fund will have the right, with
respect to certain participation interests, to demand payment, on a specified
number of days' notice, for all or any part of the Fund's participation interest
in the Municipal Obligation, plus accrued interest. The Trust intends that a
Fund exercise its right to demand payment only upon a default under the terms of
the Municipal Obligation, or to maintain or improve the quality of its
investment portfolio. A Fund will invest no more than 5% of the value of its
total assets in participation interests.
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Zero Coupon Obligations. Certain Funds may invest in zero
coupon obligations. Zero coupon securities generally pay no cash interest (or
dividends in the case of preferred stock) to their holders prior to maturity.
Accordingly, such securities usually are issued and traded at a deep discount
from their face or par value and generally are subject to greater fluctuations
of market value in response to changing interest rates than securities of
comparable maturities and credit quality that pay cash interest (or dividends in
the case of preferred stock) on a current basis. Although each of these Funds
will receive no payments on its zero coupon securities prior to their maturity
or disposition, it will be required for federal income tax purposes generally to
include in its dividends each year an amount equal to the annual income that
accrues on its zero coupon securities. Such dividends will be paid from the cash
assets of the Fund, from borrowings or by liquidation of portfolio securities,
if necessary, at a time that the Fund otherwise would not have done so. To the
extent these Funds are required to liquidate thinly traded securities, the Funds
may be able to sell such securities only at prices lower than if such securities
were more widely traded. The risks associated with holding securities that are
not readily marketable may be accentuated at such time. To the extent the
proceeds from any such dispositions are used by these Funds to pay
distributions, each of those Funds will not be able to purchase additional
income-producing securities with such proceeds, and as a result its current
income ultimately may be reduced.
The Tax-Exempt Fund, the Short-Term Government Fund, the High
Yield Fund and the Strategic Fund may each invest up to 10% of its assets in
zero coupon Municipal Obligations. Zero coupon Municipal Obligations are
generally divided into two categories: "Pure Zero Obligations," which are those
that pay no interest for their entire life and "Zero/Fixed Obligations," which
pay no interest for some initial period and thereafter pay interest currently.
In the case of a Pure Zero Obligation, the failure to pay interest currently may
result from the obligation's having no stated interest rate, in which case the
obligation pays only principal at maturity and is sold at a discount from its
stated principal. A Pure Zero Obligation may, in the alternative, provide for a
stated interest rate, but provide that no interest is payable until maturity, in
which case accrued, unpaid interest on the obligation may be capitalized as
incremental principal. The value to the investor of a zero coupon Municipal
Obligation consists of the economic accretion either of the difference between
the purchase price and the nominal principal amount (if no interest is stated to
accrue) or of accrued, unpaid interest during the Municipal Obligation's life or
payment deferral period.
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Municipal Obligation Components. Certain Funds may invest in
Municipal Obligations, the interest rate on which has been divided by the issuer
into two different and variable components, which together result in a fixed
interest rate. Typically, the first of the components (the "Auction Component")
pays an interest rate that is reset periodically through an auction process,
whereas the second of the components (the "Residual Component") pays a residual
interest rate based on the difference between the total interest paid by the
issuer on the Municipal Obligation and the auction rate paid on the Auction
Component. A Fund may purchase both Auction and Residual Components. Because the
interest rate paid to holders of Residual Components is generally determined by
subtracting the interest rate paid to the holders of Auction Components from a
fixed amount, the interest rate paid to Residual Component holders will decrease
as the Auction Component's rate increases and decrease as the Auction
Component's rate increases. Moreover, the extent of the increases and decreases
in market value of Residual Components may be larger than comparable changes in
the market value of an equal principal amount of a fixed rate Municipal
Obligation having similar credit quality, redemption provisions and maturity.
Custodial Receipts. Certain Funds may acquire custodial
receipts or certificates underwritten by securities dealers or banks that
evidence ownership of future interest payments, principal payments, or both, on
certain Municipal Obligations. The underwriter of these certificates or receipts
typically purchases Municipal Obligations and deposits the obligations in an
irrevocable trust or custodial account with a custodian bank, which then issues
receipts or certificates that evidence ownership of the periodic unmatured
coupon payments and the final principal payment on the obligations. Custodial
receipts evidencing specific coupon or principal payments have the same general
attributes as zero coupon Municipal Obligations described above. Although under
the terms of a custodial receipt a Fund would be typically authorized to assert
its rights directly against the issuer of the underlying obligation, the Fund
could be required to assert through the custodian bank those rights as may exist
against the underlying issuers. Thus, in the event the underlying issuer fails
to pay principal and/or interest when due, a Fund may be subject to delays,
expenses and risks that are greater than those that would have been involved if
the Fund had purchased a direct obligation of the issuer. In addition, in the
event that the trust or custodial account in which the underlying security has
been deposited is determined to be an association taxable as a corporation,
instead of a non-taxable entity, the yield on the underlying security would be
reduced in recognition of any taxes paid.
Government Stripped Mortgage Related Securities. Certain Funds
may invest in government stripped mortgage related securities issued and
guaranteed by GNMA, FNMA or FHLMC. These securities represent beneficial
ownership interests in either periodic principal distributions
("principal-only") or interest distributions ("interest-only") on mortgage
related certificates issued by GNMA, FNMA or FHLMC. The certificates underlying
the government stripped mortgage related securities represent all or part of the
beneficial interest in pools of mortgage loans. These Funds will invest in
government stripped mortgage related securities in order to enhance yield or to
benefit from anticipated appreciation in value of the securities at times when
the Investment Manager believes that interest rates will remain stable or
increase. In periods of rising interest rates, the expected increase in the
value of government stripped mortgage related securities may offset all or a
portion of any decline in value of the securities held by these Funds.
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Investing in government stripped mortgage related securities
involves risks normally associated with investing in mortgage related securities
issued by government or government related entities. In addition, the yields on
government stripped mortgage related securities are extremely sensitive to the
prepayment experience on the mortgage loans underlying the certificates
collateralizing the securities. If a decline in the level of prevailing interest
rates results in a rate of principal prepayments higher than anticipated,
distributions of principal will be accelerated, thereby reducing the yield to
maturity on interest-only government stripped mortgage related securities and
increasing the yield to maturity on principal-only government stripped mortgage
related securities. Sufficiently high prepayment rates could result in these
Funds' not fully recovering their initial investment in an interest-only
government stripped mortgage related security. Under current market conditions,
these Funds expect that investments in government stripped mortgage related
securities will consist primarily of interest-only securities. The sensitivity
of an interest-only security that represents the interest portion of a
particular class, as opposed to the interest portion of an entire pool, to
interest rate fluctuations, may be increased because of the characteristics of
the principal portion to which they relate. Government stripped mortgage related
securities are currently traded in an over-the-counter market maintained by
several large investment banking firms. No assurance can be given that these
Funds will be able to effect a trade of a government stripped mortgage related
security at a desired time. These Funds will acquire government stripped
mortgage related securities only if a secondary market for the securities exists
at the time of acquisition. Except for government stripped mortgage related
securities based on fixed rate FNMA and FHLMC mortgage certificates that meet
certain liquidity criteria established by the Board, the Trust treats government
stripped mortgage related securities as illiquid and will limit each of these
Funds' investments in these securities, together with other illiquid
investments, to not more than 15% of its net assets.
Asset-Backed and Receivable-Backed Securities. Certain Funds
may invest in asset-backed and receivable-backed securities. To date, several
types of asset-backed and receivable-backed securities have been offered to
investors including "Certificates for Automobile Receivables" ("CARsSM") and
interests in pools of credit card receivables. CARsSM represent undivided
fractional interests in a trust, the assets of which consist of a pool of motor
vehicle retail installment sales contracts and security interests in the
vehicles securing the contracts. Payments of principal and interest on CARsSM
are passed through monthly to certificate holders and are guaranteed up to
certain amounts and for a certain time period by a letter of credit issued by a
financial institution unaffiliated with the trustee or originator of the trust.
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An investor's return on CARsSM may be affected by early
prepayment of principal on the underlying vehicle sales contracts. If the letter
of credit is exhausted, these Funds may be prevented from realizing the full
amount due on a sales contract because of state law requirements and
restrictions relating to foreclosure sales of vehicles and the availability of
deficiency judgments following these sales, because of depreciation, damage or
loss of a vehicle, because of the application of Federal and state bankruptcy
and insolvency laws or other factors. As a result, certificate holders may
experience delays in payment if the letter of credit is exhausted. Consistent
with each of these Funds' investment objective and policies and subject to the
review and approval of the Board, these Funds may also invest in other types of
asset-backed and receivable-backed securities.
WEBS and Other Index-Related Securities. Each of the Emerging
Markets Fund, International Fund and Strategic Fund may invest in shares in an
investment company whose shares are known as "World Equity Benchmark Shares" or
"WEBS." WEBS have been listed for trading on the American Stock Exchange, Inc.
The Funds also may invest in the CountryBaskets Index Fund, Inc., or another
fund the shares of which are the substantial equivalent of WEBS. Each of the
U.S. Equity Fund, Premier Growth Fund, Value Equity Fund and Strategic Fund may
invest in S&P Depositary Receipts, or "SPDRs." SPDRs are securities that
represent ownership in a long-term unit investment trust that holds a portfolio
of common stocks designed to track the performance of the S&P 500 Index. A Fund
investing in a SPDR would be entitled to receive proportionate quarterly cash
distributions corresponding to the dividends that accrue to the S&P 500 stocks
in the underlying portfolio, less trust expenses.
Mortgage Dollar Rolls. Certain Funds may, with respect to up
to 25% of their total assets, enter into mortgage "dollar rolls" in which the
Fund sells securities for delivery in the current month and simultaneously
contracts with the same counterparty to repurchase similar (same type, coupon
and maturity) but not identical securities on a specified future date. The Fund
loses the right to receive principal and interest paid on the securities sold.
However, the Fund would benefit to the extent of any price received for the
securities sold and the lower forward price for the future purchase (often
referred to as the "drop") or fee income plus the interest earned on the cash
proceeds of the securities sold until the settlement date of the forward
purchase. Unless such benefits exceed the income, capital appreciation and gain
or loss due to mortgage repayments that would have been realized on the
securities sold as part of the mortgage dollar roll, the use of this technique
will diminish the investment performance of the Fund compared with what such
performance would have been without the use of mortgage dollar rolls. The Fund
will hold and maintain in a segregated account until the settlement date cash or
liquid assets in an amount equal to the forward purchase price. The benefits
derived from the use of mortgage dollar rolls may depend upon the Investment
Manager's ability to predict correctly mortgage prepayments and interest rates.
There is no assurance that mortgage dollar rolls can be successfully employed.
For financial reporting and tax purposes, each of these Funds
proposes to treat mortgage dollar rolls as two separate transactions: one
involving the purchase of a security and a separate transaction involving a
sale. The Funds do not currently intend to enter into mortgage dollar rolls that
are accounted for as a financing.
Short Sales Against the Box. Certain Funds may sell securities
"short against the box." Whereas a short sale is the sale of a security a Fund
does not own, a short sale is "against the box" if at all times during which the
short position is open, the Fund owns at least an equal amount of the securities
or securities convertible into, or exchangeable without further consideration
for, securities of the same issue as the securities sold short.
INVESTMENT RESTRICTIONS
Each Fund is subject to fundamental and non-fundamental
investment policies and limitations. Under the 1940 Act, fundamental investment
policies and limitations may not be changed without the vote of a majority of
the outstanding voting securities (as defined in the
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1940 Act) of the Fund.
All Funds except the Tax-Exempt Fund:
The following policies and limitations supplement those
described in the Prospectus and this SAI. Investment restrictions numbered 1
through 10 below have been adopted by the Trust as fundamental policies of all
the Funds, except the Tax-Exempt Fund. Investment restrictions 11 through 17 are
not fundamental policies and may be changed by a vote of the Board at any time.
1. No Fund may borrow money, except that the Small-Cap Growth
Fund, Small-Cap Value Fund, Mid-Cap Value Fund, the Value Equity Fund, the
Emerging Markets Fund, the High Yield Fund, the Government Securities Fund and
the Money Market Fund may enter into reverse repurchase agreements, and except
that each Fund may borrow from banks for temporary or emergency (not leveraging)
purposes, including the meeting of redemption requests and cash payments of
dividends and distributions that might otherwise require the untimely
disposition of securities, in an amount not to exceed 33-1/3% of the value of
the Fund's total assets (including the amount borrowed) valued at market less
liabilities (not including the amount borrowed) at the time the borrowing is
made. Whenever borrowings, including reverse repurchase agreements, of 5% or
more of a Fund's total assets are outstanding, the Fund will not make any
additional investments.
2. No Fund may lend its assets or money to other persons,
except through (a) purchasing debt obligations, (b) lending portfolio securities
in an amount not to exceed 30% of the Fund's assets taken at market value, (c)
entering into repurchase agreements (d) trading in financial futures contracts,
index futures contracts, securities indexes and options on financial futures
contracts, options on index futures contracts, options on securities and options
on securities indexes and (e) entering into variable rate demand notes.
3. No Fund, other than the International Income Fund, may
purchase securities (other than Government Securities) of any issuer if, as a
result of the purchase, more than 5% of the Fund's total assets would be
invested in the securities of the issuer, except that up to 25% of the value of
the total assets of each Fund, other than the Money Market Fund, may be invested
without regard to this limitation. All securities of a foreign government and
its agencies will be treated as a single issuer for purposes of this
restriction.
4. No Fund, other than the International Income Fund, may
purchase more than 10% of the voting securities of any one issuer, or more than
10% of the outstanding securities of any class of issuer, except that (a) this
limitation is not applicable to a Fund's investments in Government Securities
and (b) up to 25% of the value of the assets of a Fund, other than the Money
Market Fund, may be invested without regard to these 10% limitations. All
securities of a foreign government and its agencies will be treated as a single
issuer for purposes of this restriction.
5. No Fund may invest more than 25% of the value of its total
assets in securities of issuers in any one industry. For purposes of this
restriction, the term industry will be deemed to include (a) the government of
any one country other than the United States, but not
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the U.S. Government and (b) all supranational organizations. In addition,
securities held by the Money Market Fund that are issued by domestic banks are
excluded from this restriction.
6. No Fund may underwrite any issue of securities, except to
the extent that the sale of portfolio securities in accordance with the Fund's
investment objective, policies and limitations may be deemed to be an
underwriting, and except that the Fund may acquire securities under
circumstances in which, if the securities were sold, the Fund might be deemed to
be an underwriter for purposes of the Securities Act of 1933, as amended (the
"1933 Act").
7. No Fund may purchase or sell real estate or real estate
limited partnership interests, or invest in oil, gas or mineral leases, or
mineral exploration or development programs, except that a Fund may (a) invest
in securities secured by real estate, mortgages or interests in real estate or
mortgages, (b) purchase securities issued by companies that invest or deal in
real estate, mortgages or interests in real estate or mortgages, (c) engage in
the purchase and sale of real estate as necessary to provide it with an office
for the transaction of business or (d) acquire real estate or interests in real
estate securing an issuer's obligations, in the event of a default by that
issuer.
8. No Fund may make short sales of securities or maintain a
short position, unless at all times when a short position is open, the Fund owns
an equal amount of the securities or securities convertible into or exchangeable
for, without payment of any further consideration, securities of the same issue
as, and equal in amount to, the securities sold short.
9. No Fund may purchase securities on margin, except that a
Fund may obtain any short-term credits necessary for the clearance of purchases
and sales of securities. For purposes of this restriction, the deposit or
payment of initial or variation margin in connection with futures contracts,
financial futures contracts or related options, and options on securities,
options on securities indexes and options on currencies will not be deemed to be
a purchase of securities on margin by a Fund.
10. No Fund may invest in commodities, except that each Fund
(other than the Money Market Fund) may invest in futures contracts (including
financial futures contracts, index futures contracts or securities index futures
contracts) and related options and other similar contracts (including foreign
currency forward, futures and options contracts) as described in this Statement
of Additional Information and in the Prospectus.
11. No Fund may purchase or sell put options, call options,
spreads or combinations of put options, call options and spreads, except that
(a) each Fund, other than the Money Market Fund, may purchase and sell covered
put and call options on securities and stock indexes and futures contracts and
options on futures contracts and (b) the Money Market Fund may acquire "puts"
and "unconditional puts" as defined in Rule 2a-7 under the 1940 Act.
12. No Fund may purchase securities of other investment
companies, other than a security acquired in connection with a merger,
consolidation, acquisition, reorganization or offer of exchange and except as
otherwise permitted under the 1940 Act.
13. No Fund may invest in companies for the purpose of
exercising control or
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management.
14. No Fund may purchase warrants (other than warrants
acquired by the Fund as part of a unit or attached to securities at the time of
purchase) if, as a result, the investments (valued at the lower of cost or
market) would exceed 5% of the value of the Fund's net assets. For purposes of
this restriction, warrants acquired by a Fund in units or attached to securities
may be deemed to be without value. The Money Market Fund may not invest in any
form of warrants.
15. No Fund may purchase illiquid securities if more than 15%
of the total assets of the Fund would be invested in illiquid securities; the
Money Market Fund will not purchase illiquid securities. For purposes of this
restriction, illiquid securities are securities that cannot be disposed of by a
Fund within seven days in the ordinary course of business at approximately the
amount at which the Fund has valued the securities.
16. No Fund may purchase restricted securities if more than
10% of the total assets of the Fund would be invested in restricted securities.
Restricted securities are securities that are subject to contractual or legal
restrictions on transfer, excluding for purposes of this restriction, restricted
securities that are eligible for resale pursuant to Rule 144A under the 1933 Act
("Rule 144A Securities"), that have been determined to be liquid by the Board
based upon the trading markets for the securities.
17. No Fund may issue senior securities except as otherwise
permitted by the 1940 Act and as otherwise permitted herein.
The Tax-Exempt Fund:
Investment restrictions numbered 1 through 9 below have been
adopted by the Trust as fundamental policies of the Tax-Exempt Fund. Investment
restrictions 10 through 15 are not fundamental policies and may be changed by a
vote of the Board at any time. The Tax-Exempt Fund may not:
1. Purchase more than 10% of any class of securities of any
one issuer (except Government Securities and securities fully collateralized by
Government Securities).
2. Invest more than 5% of its total assets in the securities
of any one issuer (except for Government Securities and securities fully
collateralized by Government Securities, and options thereon).
3. Issue senior securities, as defined in the 1940 Act, except
as permitted by Section 18(f)(2) of that Act or as permitted by an SEC exemptive
order.
4. Borrow amounts in excess of 10% of its total assets and
then only as a temporary measure for extraordinary or emergency purposes. This
restriction shall not prohibit entry into reverse repurchase agreements if as a
result the Tax-Exempt Fund's current obligations under such agreements would not
exceed one-third of the current market value of its total assets (less its
liabilities other than under reverse repurchase agreements).
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5. Purchase or sell real estate or real estate limited
partnership interests, or invest in oil, gas or mineral leases, or mineral
exploration or development programs, except that the Tax-Exempt Fund may (a)
invest in securities secured by real estate, mortgages or interests in real
estate or mortgages, (b) purchase securities issued by companies that invest or
deal in real estate, mortgages or interests in real estate or mortgages, (c)
engage in the purchase and sale of real estate as necessary to provide it with
an office for the transaction of business or (d) acquire real estate or interest
in real estate securing an issuer's obligations, in the event of a default by
that issuer.
6. Invest in commodities, except that the Tax-Exempt Fund may
invest in futures contracts (including financial futures contracts, index
futures contracts or securities index futures contracts) and related options and
other similar contracts (including foreign currency forward, futures and options
contracts) as described in this Statement of Additional Information and in the
Prospectus.
7. Make loans, except that this restriction shall not prohibit
the purchase and holding of a portion of an issue of publicly distributed debt
securities, the lending of portfolio securities (not more than 5% of the
Tax-Exempt Fund's net assets), the entry into repurchase agreements (not more
than one-third of the current market value of the Tax-Exempt Fund's total assets
shall constitute secured "loans" by the Tax-Exempt Fund under repurchase
agreements), trading in financial futures contracts, index futures contracts,
securities indexes and options on financial futures contracts, options on index
futures contracts, options on securities and options on securities indexes and
investing in variable rate demand notes.
8. Invest more than 25% of the value of the Tax-Exempt Fund's
total assets in securities of issuers in any one industry, except securities
issued or guaranteed by a state, municipality or other political subdivision,
unless the securities are backed only by the assets and revenues of
non-governmental users. For purposes of this restriction, the term industry will
be deemed to include (a) the government of any one country other than the United
States, but not the U.S. Government, and (b) all supranational organizations.
9. Underwrite any issue of securities, except to the extent
that the sale of portfolio securities in accordance with the Tax-Exempt Fund's
investment objective, policies and limitations may be deemed to be an
underwriting, and except that the Tax-Exempt Fund may acquire securities under
circumstances in which, if the securities were sold, the Tax-Exempt Fund might
be deemed to be an underwriter for purposes of the 1933 Act.
10. Invest in the securities of an issuer for the purpose of
exercising control or management, but the Tax-Exempt Fund may do so where it is
deemed advisable to protect or enhance the value of an existing investment.
11. Purchase securities of any other investment company,
except in the open market in a transaction involving no commission or profit to
a sponsor or dealer (other than the customary brokerage commission) and only to
the extent of 10% of the Tax-Exempt Fund's assets or as part of a merger,
consolidation, acquisition, reorganization or offer of exchange and except as
otherwise permitted under the 1940 Act.
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12. Purchase restricted securities if more than 10% of the
total assets of the Tax-Exempt Fund would be invested in restricted securities.
Restricted securities are securities that are subject to contractual or legal
restrictions on transfer, excluding, for purposes of this restriction,
repurchase agreements having less than seven days to maturity, reverse
repurchase agreements, firm commitment agreements, futures contracts and options
thereon, and Rule 144A Securities that have been determined to be liquid by the
Board based upon the trading markets for the securities.
13. Purchase securities on margin, except any short-term
credits which may be necessary for the clearance of transactions and the initial
or maintenance margin in connection with options and futures contracts and
related options.
14. Make short sales of securities, unless the Tax-Exempt Fund
owns an equal amount of the securities or securities convertible into or
exchangeable without further consideration for securities of the same issue as
the securities sold short; provided that this restriction shall not prohibit the
use of options and futures contracts for hedging purposes.
15. Purchase any security while borrowings representing more
than 5% of the Tax-Exempt Fund's net assets (including loans, reverse repurchase
agreements or other borrowings) are outstanding.
Notes to Investment Restrictions
With respect to investment restriction No. 12 (No. 11 in the
case of the Tax-Exempt Fund), investments by the Funds (other than the Money
Market Fund) in the Investment Fund is not considered an investment in another
investment company for purposes of this restriction.
The percentage limitations in the restrictions listed above
apply at the time of purchases of securities. For purposes of investment
restriction No. 5 (No. 8 in the case of the Tax-Exempt Fund), the Trust may use
the industry classifications reflected by the S&P 500 Composite Stock Index, if
applicable at the time of determination. For all other portfolio holdings, the
Trust may use the Directory of Companies Required to File Annual Reports with
the SEC and Bloomberg Inc. In addition, the Trust may select its own industry
classifications, provided such classifications are reasonable.
Portfolio Transactions and Turnover
Decisions to buy and sell securities for each Fund are made by
the Investment Manager, subject to review by the Board. Transactions on domestic
stock exchanges and some foreign stock exchanges involve the payment of
negotiated brokerage commissions. On exchanges on which commissions are
negotiated, the cost of transactions may vary among different brokers. On most
foreign exchanges, commissions are fixed. No stated commission will be generally
applicable to securities traded in U.S. over-the-counter markets, but the prices
of those securities include undisclosed commissions or mark-ups. The cost of
securities purchased from underwriters include an underwriting commission or
concession, and the prices at which securities are purchased from and sold to
dealers include a dealer's mark-up or
40
<PAGE>
mark-down. Government Securities generally will be purchased on behalf of a Fund
from underwriters or dealers, although certain newly issued Government
Securities may be purchased directly from the U.S. Treasury or from the issuing
agency or instrumentality.
In selecting brokers or dealers to execute securities
transactions on behalf of a Fund, the Investment Manager seeks the best overall
terms available, ("best execution"). In assessing the best overall terms
available for any transaction, the Investment Manager considers factors that it
deems relevant, including the breadth of the market in the security, the price
of the security, the financial condition and execution capability of the broker
or dealer and the reasonableness of the commission, if any, for the specific
transaction and on a continuing basis. In addition, the investment advisory
agreement between the Trust and GEIM relating to each Fund authorizes the
Investment Manager, on behalf of the Fund, in selecting brokers or dealers to
execute a particular transaction, and in evaluating the best overall terms
available, to consider the brokerage and research services (as those terms are
defined in Section 28(e) of the Securities Exchange Act of 1934) provided to the
Fund and/or other accounts over which the Investment Manager or its affiliates
exercise investment discretion. The fees under the investment advisory agreement
relating to a Fund will not be reduced by reason of the Fund's receiving
brokerage and research services. The Board periodically reviews the commissions
paid by a Fund to determine if the commissions paid over representative periods
of time were reasonable in relation to the benefits inuring to the Fund.
Over-the-counter purchases and sales on behalf of the Funds will be transacted
directly with principal market makers except in those cases in which better
prices and executions may be obtained elsewhere. A Fund will not purchase any
security, including Government Securities, during the existence of any
underwriting or selling group relating to the security of which any affiliate of
the Fund or the Investment Manager is a member, except to the extent permitted
under rules, interpretations or exemptions of the SEC. The Investment Manager
may select broker-dealers who are affiliated with the Trust or the Investment
Manager. All brokerage transaction commissions paid to affiliates will be fair
and reasonable to the shareholders.
The Money Market Fund may attempt to increase its yield by
trading to take advantage of short-term market variations, which trading would
result in the Fund's experiencing high portfolio turnover. Because purchases and
sales of money market instruments are usually effected as principal
transactions, however, this type of trading by the Money Market Fund will not
result in the Fund's paying higher brokerage commissions.
During the fiscal period ended September 30, 1998, the
International Fund, the Global Fund, the U.S. Equity Fund, the Strategic Fund,
the Premier Fund, the Mid-Cap Growth Fund, the Small-Cap Value Fund, and the
Value Equity Fund paid $ , $ , $ and $ ,
respectively in commissions to broker-dealers for execution of portfolio
transactions. Of these amounts, $ , $ , $ and $ in brokerage
transactions was paid by the International Fund, the Global Fund, the U.S.
Equity Fund, the Strategic Fund, the Premier Fund, the Mid-Cap Growth Fund, the
Small-Cap Value Fund, and the Value Equity Fund respectively, to a broker that
provided research services during that fiscal year. During the fiscal period
ended September 30, 1997, the International Fund, the Global Fund, the U.S.
Equity Fund, the Strategic Fund, the Premier Fund, the Mid-Cap Growth Fund and
the Value Equity Fund paid $268,970, $204,750,$218,896, $91,950, $14,844,
$151,399 and
41
<PAGE>
$91,033, respectively, in commissions to broker-dealers for execution of
portfolio transactions. During the fiscal year ended September 30, 1996, the
International Fund, the Global Fund, the U.S. Equity Fund and the Strategic Fund
paid $268,291, $100,049, $207,206 and $75,115, respectively, in commissions to
broker-dealers for execution of portfolio transactions. The Income Fund, the
Government Securities Fund, the Short-Term Government Fund and the Money Market
Fund made no payments to broker-dealers for execution of portfolio transactions
during the 1998, 1997 or 1996 fiscal years. The Tax-Exempt Fund made no payments
to broker-dealers for execution of portfolio transactions during the [1998 or]
1997 fiscal years.
42
<PAGE>
For the period from November 1, 1996 to September 26, 1997,
Investors Trust Growth Fund (the "IT Growth Fund"), Investors Trust Value Fund
(the "IT Value Fund") and Investors Trust Government Fund (the "IT Government
Fund"), predecessor funds to the Mid-Cap Growth Fund, the Value Equity Fund and
the Government Securities Fund, paid $31,146, $33,834 and $0, respectively in
commissions to broker-dealers for execution of portfolio transactions. During
the fiscal year ended October 31, 1996, the IT Growth Fund, the IT Value Fund
and the IT Government Fund paid $31,672, $60,237 and $30,581, respectively in
commissions to broker-dealers for execution of portfolio transactions. The
Investors Trust Tax Free Fund (the "IT Tax Free Fund"), predecessor Fund to the
Tax-Exempt Fund, made no payments to broker-dealers for execution of portfolio
transactions during 1997 or 1996. The IT Growth Fund, the IT Value Fund, the IT
Government Fund and the IT Tax Free Fund made no payments for research services
in 1997 or 1996.
MANAGEMENT OF THE TRUST
Trustees and Officers
The Board of Trustees oversees the business affairs of the
Trust. The Trustees approve all significant agreements between the Trust and the
persons and companies that furnish services to the Funds, including agreements
with the Funds' investment adviser and administrator, distributor, custodian and
transfer agent. The day-to-day operations of the Funds have been delegated to
GEIM.
The names of the Trustees and executive officers of the Trust,
their addresses and their principal occupations during the past five years and
their other affiliations are shown below. Each person named as a Trustee also
may serve in a similar capacity for other Funds advised by GEIM or GEIC. The
executive officers of the Trust are employees of organizations that provide
services to the Funds. An asterisk appears before the name of each Trustee who
is an "interested person" of the Trust, as defined in the 1940 Act. The business
address of each Trustee and executive officer who is an "interested person" (as
defined in the 1940 Act) is 3003 Summer Street, Stamford, Connecticut 06905.
43
<PAGE>
<TABLE>
<CAPTION>
Position(s) Held Age and Principal Occupation(s)
Name and Address With Trust During Past Five Years
---------------- ---------- ----------------------
<S> <C> <C>
*Michael J. Cosgrove Chairman of the Age 49. President, GE
Board and President Investment Services Group of
GE Financial Assurance
Holdings, Inc. ("GEFA"), an
indirect wholly-owned
subsidiary of General Electric
Company ("GE"), since February
1997; Executive Vice President
- Mutual Funds of GEIM and
GEIC, wholly-owned
subsidiaries of GE that are
registered as investment
advisers under the Investment
Advisers Act of 1940, as
amended, since March 1993;
Director of GEIC and GEIM
since 1988; from 1988 until
1993, Mr. Cosgrove served as
Executive Vice President -
Finance and Administration of
GEIM and GEIC; Chairman of the
Board, Chief-Executive Officer
and President of GE Investment
Distributors, Inc., a
registered broker-dealer,
since 19__; Chairman of the
Board and Chief Executive
Officer of GE Investment
Retirement Services, Inc.,
since 19__.
*Alan M. Lewis Trustee and Age 52. Executive Vice
Executive Vice President, General Counsel and
President Secretary of GEIM since 1988
and of GEIC since October
1987.
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
Position(s) Held Age and Principal Occupation(s)
Name and Address With Trust During Past Five Years
---------------- ---------- ----------------------
<S> <C> <C>
John R. Costantino Trustee Age 52. Managing Director,
150 East 58th Street Walden Partners, Ltd.,
New York, NY 10055 consultants and investors,
since August 1992; President,
CMG Acquisition Corp., Inc., a
holding company, since 1988;
Vice Chairman, Acoustiguide
Holdings, Inc., a holding
company, since 1989; President
CMG/IKH, Inc., a holding
company, since 1991; Director,
Crossland Federal Savings
Bank, a financial institution;
Director, Brooklyn Bankcorp,
Inc., a financial institution;
Director, IK Holdings, Inc., a
holding company since 1991;
Director, I. Kleinfeld & Son,
Inc., a retailer, since 1991;
Director, High Performance
Appliances, Inc., a
distributor of kitchen
appliances ("HPA"), since
1991; Director, HPA Hong Kong,
Ltd., a service subsidiary of
HPA, since 1991; Director,
Lancit Media Productions,
Ltd., a children's and family
television film and videotape
production company, since
1995.
William J. Lucas Trustee Age 51. Vice President and
Fairfield University Treasurer of Fairfield
North Benson Road University since 1983.
Fairfield, CT 06430
Robert P. Quinn Trustee Age 62. Retired since 1983
45 Shinnecock Road from Salomon Brothers Inc.;
Quogue, NY 11959 Director, GP Financial Corp.,
a holding company, since 1994;
Director, The Greenpoint
Savings Bank, a financial
institution, since 1987.
Jeffrey A. Groh Treasurer Age 36. 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
accountant with Price
Waterhouse LLP.
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
Position(s) Held Age and Principal Occupation(s)
Name and Address With Trust During Past Five Years
---------------- ---------- ----------------------
<S> <C> <C>
Matthew J. Simpson Secretary Age 37. Vice President and
General Counsel, Investment
Services Group of GEFA since
February 1997; Vice President,
Associate General Counsel and
Assistant Secretary of GEIM
and GEIC since October 1992.
</TABLE>
No employee of GE or any of its affiliates receives any compensation from the
Trust for acting as a Trustee or officer of the Trust. Each Trustee of the Trust
who is not a director, officer or employee of GEIM, GEID, GE, or any affiliate
of those companies, receives an annual fee of $10,000 for services as Trustee.
In addition, each Trustee receives $500 for each meeting of the Board attended
by the Trustee and is reimbursed for expenses incurred in connection with
attendance at Board meetings.
Trustees' Compensation
(for the fiscal year ended [September 30, 1998])
<TABLE>
<CAPTION>
Total Compensation from
Total Compensation Investment Companies
Name of Trustee From the Trust Managed by GEIM or GEIC
--------------- -------------- -----------------------
<S> <C> <C>
Michael J. Cosgrove None None+
Alan M. Lewis None None+
John R. Costantino $12,000 $25,000++
William J. Lucas $12,000 $25,000++
Robert P. Quinn $12,000 $25,000++
</TABLE>
-----------------------
+ As of September 30, 1998, Mr. Cosgrove served as Trustee or Director of
four investment companies advised by GEIM and of eight investment
companies advised by GEIC. Mr. Lewis serves as Trustee of three
investment companies advised by GEIM and eight investment companies
advised by GEIC. They are considered to be interested persons of each
investment company advised by GEIM or GEIC, as defined under Section
2(a)(19) of the 1940 Act, and, accordingly, serve as Trustees thereof
without compensation.
++ As of September 30, 1998, Messrs. Costantino, Lucas and Quinn served as
Trustees or Directors of four investment companies advised by GEIM and
the compensation is for their services as Trustees or Directors of these
companies.
Investment Adviser and Administrator
GEIM serves as the Trust's investment adviser and administrator. GEIM
is registered as an investment adviser under the Investment Advisers Act of
1940, as amended, and is located at
46
<PAGE>
3003 Summer Street, Stamford, Connecticut 06905. GEIM, which was formed under
the laws of Delaware in 1988, is a wholly owned subsidiary of GE. GE is a highly
diversified conglomerate comprised of 12 global manufacturing and service sector
businesses. GE's businesses include aircraft engines, appliances, capital
services, lighting, medical systems, broadcasting, plastic manufacturing, power
systems, electrical distribution and control systems, industrial control
systems, information services and transportation systems. GEIM currently
provides advisory services with respect to a number of other mutual funds and
private institutional accounts. The professionals responsible for the investment
operations of GEIM serve in similar capacities with respect to GEIC, a sister
company of GEIM wholly owned by GE, which provides investment advisory services
with respect to GE's pension and benefit plans and a number of funds offered
exclusively to GE employees, retirees and certain related persons. These funds
include the Elfun family of Funds (the first of which, Elfun Trusts, was
established in 1935) and the funds offered as part of GE's 401(k) program (also
known as the GE Savings and Security Program), which are referred to as the GE
S&S Program Mutual Fund and the GE S&S Long Term Interest Fund. The investment
professionals at GEIM and GEIC and their predecessors have managed GE's pension
assets since 1927. GEIM and GEIC managed assets in excess of $[] billion as of
September 30, 1998, of which more than $[] billion was invested in mutual fund
assets.
GEIM Investment Advisory and Administration Agreements
The duties and responsibilities of GEIM are specified in investment
advisory and administration agreements (each, an "Advisory Agreement" and
collectively, the "Advisory Agreements") between GEIM and the Trust on behalf of
the respective Funds. Under each Advisory Agreement, GEIM, subject to the
supervision of the Trust's Board of Trustees, provides a continuous investment
program for the relevant Fund's assets, including investment research and
management. GEIM determines from time to time what investments are purchased,
retained or sold by the Fund and places purchase and sale orders for the Fund's
investments. GEIM provides the Trust with all executive, administrative,
clerical and other personnel necessary to operate each Fund, and pays salaries
and other employment-related costs of employing these persons. GEIM furnishes
the Trust and each Fund with office space, facilities, and equipment and pays
the day-to-day expenses related to the operation of such space, facilities and
equipment. GEIM, as administrator, also: (a) maintains the books and records of
each Fund; (b) prepares reports to shareholders of each Fund; (c) prepares and
files tax returns for each Fund; (d) assists with the preparation and filing of
reports and the Trust's registration statement with the SEC; (e) provides
appropriate officers for the Trust; (f) provides administrative support
necessary for the Board of Trustees to conduct meetings; and (g) supervises and
coordinates the activities of other service providers, including independent
auditors, legal counsel, custodians, accounting service agents and transfer
agents.
GEIM is generally responsible for employing sufficient staff and
consulting with other persons that it determines to be necessary or useful in
the performance of its obligations under each Advisory Agreement. Each Advisory
Agreement obligates GEIM to provide services in accordance with the relevant
Fund's investment objective, policies and restrictions as stated in the Trust's
current registration statement, as amended from time to time, and to keep the
Trust informed of developments materially affecting that Fund, including
furnishing the Trust with whatever information and reports the Board of Trustees
reasonably requests.
47
<PAGE>
Each Advisory Agreement provides that GEIM may render similar advisory
and administrative services to other clients so long as when a Fund or any other
client served by GEIM are prepared to invest in or desire to dispose of the same
security, available investments or opportunities for sales will be allocated in
a manner believed by GEIM to be equitable to the Fund. The Advisory Agreements
also provide that GEIM shall not be liable for any error of judgment or mistake
of law or for any loss incurred by a Fund in connection with GEIM's services
pursuant to the Agreement, except for a loss resulting from willful misfeasance,
bad faith or gross negligence in the performance of its duties or from reckless
disregard of its obligations and duties under the Agreement.
Each Advisory Agreement is effective from its date of execution, and
continues in effect for an initial two-year term and will continue from year to
year thereafter so long as its continuance is approved annually by (a) the Board
of Trustees or (b) a vote of a majority of the relevant Fund's outstanding
voting securities, provided that in either event the continuance also is
approved by the vote of a majority of the Trustees who are not parties to the
Agreement or interested persons, as such term is defined in the 1940 Act, of any
party to the Agreement by a vote cast in person at meeting called for the
purpose of voting on such approval. Each Advisory Agreement is not assignable
and may be terminated without penalty by either the Trust or GEIM upon no more
than 60 days' nor less than 30 days' written notice to the other or by vote of
holders of a majority of the relevant Fund's outstanding voting securities.
48
<PAGE>
Investment Advisory Fees
The Funds pay GEIM fees for advisory and administration
services provided under the Advisory Agreements that are accrued daily and paid
monthly at the following annual rates based upon the value of the Funds' average
daily net assets: the Premier Fund -- 0.60%, the U.S. Equity Fund -- 0.40%, the
Small-Cap Value Fund -- 0.70%, the Mid-Cap Growth Fund -- 0.60%, the Mid-Cap
Value Equity Fund -- 0.__%, the Value Equity Fund -- 0.55%, the Global Fund --
0.75%, the International Fund -- 0.80%, the Europe Growth Fund -- 0.__%, the
Emerging Markets Fund -- 0.__%, the Strategic Fund -- 0.35%, the Tax-Exempt Fund
- -- 0.35%, the High Yield Fund -- __%, the Income Fund -- 0.35%, the Government
Securities Fund -- 0.40%, the Short-Term Government Fund -- 0.30% and the Money
Market Fund -- 0.25%.
For the fiscal period ended [September 30, 1998], the
International Fund, the Premier Fund, the Mid-Cap Growth Fund, the Value Equity
Fund, the Global Fund, the U.S. Equity Fund, the Strategic Fund, the Tax-Exempt
Fund, the Income Fund, the Government Securities Fund, the Short-Term Government
Fund and the Money Market Fund paid $ , $ , $ , $ ,
$ , $ , $ and $ , respectively, for investment advisory
and administration services. For the fiscal period ended September 30, 1997, the
International Fund, the Premier Fund, the Mid-Cap Growth Fund, the Value Equity
Fund, the Global Fund, the U.S. Equity Fund, the Strategic Fund, the Tax-Exempt
Fund, the Income Fund, the Government Securities Fund, the Short-Term Government
Fund and the Money Market Fund paid to GEIM $682,857, $43,759, $2,854, $4,434,
$382,192, $1,218,687, $368,324, $1,453, $227,295, $24,158, $33,016 and $252,319,
respectively, for investment advisory and administration services. For the
fiscal year ended September 30, 1996, the International Fund, the Global Fund,
the U.S. Equity Fund, the Strategic Fund, the Tax-Exempt Fund, the Income Fund,
the Short-Term Government Fund and the Money Market Fund paid $464,327,
$287,004, $836,061, $243,374, $42,029, $192,880, $34,453 and $205,219,
respectively, for investment advisory and administration services.
During the fiscal year ended [September 30, 1998], GEIM waived
a total of $ , $ , $ , $ , $ , $ , $ and
$ of expenses of the International Fund, the Premier Fund, the Mid-Cap
Growth Fund, the Value Equity Fund, the Global Fund, the U.S. Equity Fund, the
Strategic Fund, the Tax-Exempt Fund, the Income Fund, the Government Securities
Fund, the Short-Term Government Fund and the Money Market Fund, respectively.
During the fiscal period ended September 30, 1997, GEIM waived a total of
$18,715, $46,849, $0, $0, $54,856, $246,852, $25,481, $126, $55,467, $0, $50,448
and $91,356 of expenses of the International Fund, the Premier Fund, the Mid-Cap
Growth Fund, the Value Equity Fund, the Global Fund, the U.S. Equity Fund, the
Strategic Fund, the Tax-Exempt Fund, the Income Fund, the Government Securities
Fund, the Short-Term Government Fund and the Money Market Fund, respectively.
During the fiscal year ended September 30, 1996, GEIM waived a total of $24,972,
$85,533, $309,241, $53,026, $74,915, $56,349, $66,598 and $169,636 of expenses
of the International Fund, the Global Fund, the U.S. Equity Fund, the Strategic
Fund, the Tax-Exempt Fund, the Income Fund, the Short-Term Government Fund and
the Money Market Fund, respectively.
GNA Capital Management, Inc. ("GNA Capital"), a wholly-owned
subsidiary of
49
<PAGE>
GNA Corporation, located at Suite 5600, Two Union Square, 601 Union Street,
Seattle, Washington 98101, was, prior to September 26, 1997, the investment
adviser to the IT Growth Fund, the IT Value Fund, the IT Government Fund and the
IT Tax Free Fund (the predecessor funds to the Mid-Cap Growth Fund, the Value
Equity Fund, the Government Securities Fund and the Tax-Exempt Fund,
respectively.. For the period from November 1, 1996 to September 26, 1997, the
IT Growth Fund, the IT Value Fund, the IT Government Fund and the IT Tax Free
Fund paid to GNA Capital $281,759, $351,339, $3,792,436 and $132,688,
respectively, for investment advisory services. For the fiscal year ended
October 31, 1996, the IT Growth Fund, the IT Value Fund, the IT Government Fund
and the IT Tax Free Fund paid to GNA Capital $226,411, $219,848, $5,871,824 and
$29,290, respectively, for investment advisory services. For the period from
November 1, 1996 to September 26, 1997, GNA Capital reimbursed a total of
$53,838, $10,220, $0 and $328,817 of expenses of the IT Growth Fund, the IT
Value Fund, the Government Securities Fund and the IT Tax Free Fund,
respectively. During the fiscal year ended October 31, 1996, GNA Capital
reimbursed a total of $90,565, $86,354, $0 and $442,198 of expenses of the IT
Growth Fund, the IT Value Fund, the Government Securities Fund and the IT Tax
Free Fund, respectively.
Sub-Investment Advisers
Each Advisory Agreement permits GEIM, subject to the approval
of the Board of Trustees and other applicable legal requirements, to enter into
any advisory or sub-advisory agreement with affiliated or unaffiliated entities
whereby such entity would perform some or all of GEIM's responsibilities under
the Advisory Agreement. In this event, GEIM remains responsible for ensuring
that these entities perform the services that each undertakes pursuant to a
sub-advisory agreement. GEIM has engaged the following sub-advisers to manage
certain of the Funds.
Tax-Exempt Fund. Brown Brothers Harriman & Co. ("Brown
Brothers"), located at 59 Wall Street, New York, New York 10005, has been
retained by GEIM to act as sub-investment adviser of the Tax-Exempt Fund.
Pursuant to the sub-investment advisory agreement between Brown Brothers and
GEIM, Brown Brothers bears all expenses in connection with the performance of
its services as the Tax-Exempt Fund's sub-investment adviser.
Small-Cap Value Fund. Palisade Capital Management, L.L.C.
("Palisade"), located at One Bridge Plaza, Fort Lee, New Jersey 07024, has been
retained by GEIM to act as sub-investment adviser of the Small-Cap Value Fund.
Pursuant to the sub-investment advisory agreement between Palisade and GEIM,
Palisade bears all expenses in connection with the performance of its services
as the Small-Cap Value Fund's sub-investment adviser. Although Palisade has no
previous experience managing mutual fund portfolios, Palisade has managed
various institutional and private accounts.
High Yield Fund. Miller Anderson & Sherrerd, LLP ("MAS"),
located at One Tower Bridge, West Conshohocken, PA 19428, has been retained to
act as sub-investment adviser of the High Yield Fund. MAS is wholly-owned by
indirect subsidiaries of Morgan Stanley Dean Witter & Co. Pursuant to the
sub-investment advisory agreement between MAS and GEIM, MAS bears all expenses
in connection with the performance of its services as the High Yield Fund's
sub-investment adviser.
50
<PAGE>
Mid-Cap Value Equity Fund. NWQ, located at 2049 Century Park
East, Los Angeles, CA 90067, has been retained to act as sub-investment adviser
of the Mid-Cap Value Equity Fund. NWQ is a wholly-owned subsidiary of United
Asset Management Corporation, a company whose principal business is managing
investments for institutional clients. Pursuant to the sub-investment advisory
agreement between NWQ and GEIM, NWQ bears all expenses in connection with the
performance of its services as the Mid-Cap Value Equity Fund's sub-investment
adviser.
Sub-Advisory Agreements
Palisade, MAS and NWQ serve as sub-advisers to the Small-Cap
Value Equity Fund, the High Yield Fund and the Mid-Cap Value Equity Fund
respectively, pursuant to sub-advisory agreements with GE Investment Management
(the "Sub-Advisory Agreements"). Each of the Sub-Advisory Agreements is not
assignable and may be terminated without penalty by either the sub-adviser or GE
Investment Management upon 60 days' written notice to the other or by the Board
of Trustees, or by the vote of a majority of the outstanding voting securities
of a Fund, on 60 days' written notice to the sub-adviser. The Sub-Advisory
Agreements provide that the sub-adviser may render similar sub-advisory services
to other clients so long as the services that it provides under the Agreement
are not impaired thereby. The Sub-Advisory Agreements also provide that the
investment sub-adviser shall not be liable for any error of judgment or mistake
of law or for any loss incurred by the Fund except for a loss resulting from
willful misfeasance, bad faith or gross negligence in the performance of its
duties or from reckless disregard of its obligations and duties under the
Sub-Advisory Agreement.
Securities Activities of the Investment Manager
Securities held by the Funds also may be held by other funds or
separate accounts for which the Investment Manager or GEIC acts as an adviser.
Because of different investment objectives or other factors, a particular
security may be bought by the Investment Manager or GEIC for one or more of
their clients, when one or more other clients are selling the same security. If
purchases or sales of securities for a Fund or other client of the Investment
Manager or GEIC arise for consideration at or about the same time, transactions
in such securities will be made, insofar as feasible, for the Fund and other
clients in a manner deemed equitable to all. To the extent that transactions on
behalf of more than one client of the Investment Manager 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 the Investment Manager (under the supervision of the
Board of Trustees) deems the purchase or sale of a security to be in the best
interests of the Trust as well as other funds or accounts it may, to the extent
permitted by applicable laws and regulations, but will not be obligated to,
aggregate the securities to be sold or purchased for the Trust with those to be
sold or purchased for other funds or accounts in order to obtain favorable
execution and low brokerage commissions. In that event, allocation of the
securities purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Investment Manager in the manner it considers
to be most equitable and consistent with its fiduciary obligations to the Trust
and to such other funds or accounts. In some cases this procedure may adversely
affect the size the position obtainable for a Fund.
51
<PAGE>
Distribution and Service Plans
The Trust has adopted Shareholder Servicing and Distribution
Plans (the "Plans") pursuant to Rule 12b-1 under the 1940 Act with respect to
each Fund other than the Money Market Fund ("Participant Funds").
The annual fees payable with respect to each Class of a
Participant Fund are intended to compensate GEIM or enable GEIM to compensate
other persons ("Service Providers") for providing ongoing servicing and/or
maintenance of the accounts of shareholders of the Participant Fund
("Shareholder Services") and to compensate GEIM, or enable GEIM to compensate
Service Providers, including any distributor of shares of the Participant Fund,
for providing services that are primarily intended to result in, or that are
primarily attributable to, the sale of shares of the Participant Fund ("Selling
Services"). Shareholder Services means all forms of shareholder liaison
services, including, among other things, one or more of the following: providing
Class A, Class B or Class C shareholders of a Participant Fund with (i)
information on their investments; (ii) general information regarding investing
in mutual funds; (iii) periodic newsletters containing materials relating to the
Participant Fund or to investments in general in mutual funds; (iv) periodic
financial seminars designed to assist in the education of shareholders with
respect to mutual funds generally and the Participant Fund specifically; (v)
access to a telephone inquiry center relating to the Participant Fund; and other
similar services not otherwise required to be provided by the Trust's custodian
or transfer agent. Selling Services include, but are not limited to: the
printing and distribution to prospective investors in the Participant Fund of
prospectuses and statements of additional information that are used in
connection with sales of Class A and Class B shares of the Participant Fund; the
preparation, including printing, and distribution of sales literature and media
advertisements relating to the Class A or Class B shares of the Participant
Fund; and distributing Class A or Class B shares of the Participant Fund. In
providing compensation for Selling Services in accordance with the Plans, GEIM
is expressly authorized (1) to make, or cause to be made, payments reflecting an
allocation of overhead and other office expenses related to the distribution of
the Class A or Class B shares of a Participant Fund; (2) to make, or cause to be
made, payments to, or to provide for the reimbursement of expenses of, persons
who provide support services in connection with the distribution of the Class A
or Class B shares of the Participant Fund; and (3) to make, or cause to be made,
payments to broker-dealers who have sold Class A or Class B shares of the
Participant Fund.
Payments under the Plans are not tied exclusively to the
expenses for shareholder servicing and distribution expenses actually incurred
by GEIM or any Service Provider, and the payments may exceed expenses actually
incurred by GEIM and/or a Service Provider. The Board evaluates the
appropriateness of the Plans and its payment terms on a continuing basis and in
doing so considers all relevant factors, including the types and extent of
Shareholder Services and Selling Services provided by GEIM and/or Service
Providers and amounts GEIM and/or Service Providers receive under the Plans.
Under the Plans, the Trust pays GEIM, with respect to each
Participant Fund, (1) for shareholder services provided to the Class A, Class B
and Class C shares of the Participant Fund, an annual fee of 0.25% of the value
of the average daily net assets attributed to the Class A, Class B and Class C
shares of the Participant Fund, respectively and (2) for distribution services
provided to the Class A and Class B shares of each Participant Fund other than
the
52
<PAGE>
Short-Term Government Fund, an annual fee of 0.25% and 0.75% of the value of the
average daily net assets of the Participant Fund, respectively; or in the case
of the Short-Term Government Fund, an annual fee of 0.25% and 0.60% of the value
of the average daily net assets of the Short-Term Government Fund, respectively.
Under their terms, the Plans continue from year to year,
provided their continuance is approved annually by vote of the Trust's full
Board, as well as by a majority of the Trustees who are not interested persons
of the Trust and who have no direct or indirect financial interest in the
operation of the Plans or in any agreements related to them (the "Independent
Trustees"). The Plans may not be amended to increase materially the amount of
the fees paid under the Plans with respect to a Fund without approval of
shareholders of the Fund. In addition, all material amendments of the Plans must
be approved by the Trustees and Independent Trustees in the manner described
above. The Plans may be terminated with respect to a Fund at any time, without
penalty, by vote of a majority of the Independent Trustees or by a vote of a
majority of the outstanding voting securities of a Fund (as defined in the 1940
Act).
[During the fiscal period ended September 30, 1998, $[] was
paid to GE Investment Management for compensation of sales personnel, and $[]
was paid to GE Investment Management to compensate Service Providers.]
Custodian and Transfer Agent
State Street Bank and Trust Company ("State Street"), located
at 225 Franklin Street, Boston, Massachusetts 02101, serves as custodian and
transfer agent of the Funds' investments. Under its custodian contract with the
Trust, State Street is authorized to appoint one or more banking institutions as
subcustodians of assets owned by each Fund. For its custody services, State
Street receives monthly fees charged to the Funds based upon the month-end,
aggregate net asset value of the Funds, plus certain charges for securities
transactions. The assets of the Trust are held under bank custodianship in
accordance with the 1940 Act. As transfer agent, State Street is responsible for
processing redemption requests and crediting dividends to the accounts of
shareholders of the Funds.
Distributor
GE Investment Distributors, Inc. ("GEID"), located at 777 Long
Ridge Road, Building B, Stamford, Connecticut 06927, serves as the distributor
of Fund shares on a continuing best efforts basis. Michael J. Cosgrove, a member
of the Trust's board of trustees, is the Chairman of the board, Chief Executive
Officer and President of GEID.
PURCHASE, REDEMPTION AND EXCHANGE OF SHARES
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Purchases
Shares are offered to investors at the offering price, based
on the NAV next determined after receipt of an investment in good order by State
Street Bank and Trust Company, the Trust's custodian and transfer agent. The
offering price is equal to NAV plus any applicable initial sales charge imposed
at the time of purchase, as described below.
GEID other persons remunerated on the basis of sales of shares
may receive different levels of compensation for selling one Class of shares
over another. In addition, trail commissions of up to 0.25% may be paid to
authorized broker-dealers, financial institutions or investment advisers which
have entered into sales agreements with the GEID ("Authorized Firms") for
providing on-going services with respect to Class A and Class B shares.
Class A Shares. Class A shares are sold at NAV per share plus
a maximum initial sales charge imposed at the time of purchase as discussed in
the Prospectus. The sales charge is retained by GEID, although a portion of the
sales charge may be paid to registered representatives or other dealers that
enter into selected No sales charge is imposed on Class A shares purchased
through reinvestment of dividends or capital gains distributions. In addition,
Class A shares are offered without any sales charge with respect to:
(1) purchases of $1 million or more of Class A shares by an
investor, including an investment by a Class D eligible employee retirement plan
that seeks the additional services provided to Class A Shareholders ("Class A
Retirement Plans"), (2) all purchases by Class A Retirement Plans which have 250
or more eligible employees, (3) all purchases by Class A Retirement Plans,
including Plans purchasing less than $1 million of Class A shares of the Funds
and which have less than 250 employees if such Plans purchase Class A shares
exclusively through GEID and not through an Authorized Firm, (4) all purchases
directly by individuals who are not Class C eligible who may otherwise invest in
the Funds through defined contribution plans currently invested in the Funds,
and who purchase shares exclusively through GEID and not through an Authorized
Firm, (5) all purchases by officers, directors, employees and registered
representatives of Authorized Firms which have entered into sales agreements
with GEID or financial institutions through which shares of the Funds are being
offered or made available for sale, (6) all purchases made through certain
broker-dealers, financial institutions, recordkeepers and other financial
intermediaries who charge a management, consulting or other fee for their
services (each, a "Financial Intermediary," collectively, the "Financial
Intermediaries") and who have an agreement with or among the Trust, GEIM or
GEID, requiring the Trust, GEIM or GEID to compensate the Financial Intermediary
for administrative, subaccounting, transfer agency and/or other services, (7)
all purchases resulting from offerings made to selected customers of certain
subsidiaries and divisions of GE and to employees (and their family members) of
certain vendors of GE's employee retirement plan, including any subsequent
purchases by persons who invest through such offerings, provided that any such
person maintains an account with the Trust in its, his or her name at the time
of the subsequent purchase and the investment is made in that name, or as
custodian for a minor or in an IRA for the customer, (8) all purchases by
certain customers of GE who previously purchased Class A shares during a special
limited offering of such shares by GEID, provided that the customer maintains an
account with the Trust in its, his
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or her name at the time of the current purchase and the investment is made in
that name, or as custodian for a minor or in an IRA for the customer, (9) all
purchases by certain of the GE LifeStyle Funds, a "fund of funds" vehicle
designed to invest in certain classes of the Funds and (10) all purchases made
through certain broker-dealers that have entered into an agreement with GEID for
sales to supplemental savings plans at a single employer with 750 or more
eligible investors when such purchases are made through the Payroll Savings Plan
or other systematic investment plan.
Reduced sales charges are available under a combined right of
accumulation under which an investor may combine (1) the value of Class A shares
held in the Participant Fund, (2) the value of Class A shares held in another
Participant Fund with respect to which the investor has previously paid, or is
subject to the payment of, a sales charge, and (3) the value of Class A shares
being purchased. For example, if an investor owns shares of the Global Fund and
the Strategic Fund that have an aggregate value of $92,000, and makes an
additional investment in Class A shares of the Global Fund of $15,000, the sales
charge applicable to the additional investment would be 3.25% rather than the
5.75% normally charged on a $15,000 purchase. In addition, Class A Retirement
Plans may include, as part of the calculation of accumulation benefits,
purchases of shares of the Money Market Fund and interests in other pooled
investment vehicles, which are made available to such investors and specified by
GEID as eligible for accumulation benefits in sales agreements with Authorized
Firms.
By completing the appropriate section of the account
application and by fulfilling a Letter of Intent ("LOI"), an investor becomes
eligible for the reduced sales load applicable to the total number of
Participant Fund Class A shares purchased in a 13-month period (beginning up to
90 days prior to the date of execution of the LOI). By marking the LOI section
on the account application and by signing the account application, the investor
indicates that he or she understands and agrees to the terms of the LOI and is
bound by the provisions described below.
Each purchase of shares of a Participant Fund made during the
13-month period will be made subject to the sales charge applicable to a single
transaction of the total dollar amount indicated by the LOI, as described in the
tables set out above. It is the investor's responsibility at the time of
purchase to specify the account numbers that should be considered in determining
the appropriate sales charge and to indicate that the purchase is pursuant to an
LOI. The applicable sales charge may be further reduced pursuant to the "right
of accumulation" described above provided State Street is advised of all other
accounts at the time of the investment. Shares acquired through reinvestment of
dividends and capital gains distributions will not be applied to the LOI. At any
time during the 13-month period after meeting the original obligation, an
investor may revise his or her intended investment amount upward by submitting a
written and signed request. In such event, all subsequent purchases will be
treated as a new LOI (including escrow of additional Fund shares) except that
the original expiration date of the LOI will remain unchanged. Purchases made
within 90 days before signing an LOI may be applied toward completion of the LOI
provided State Street is advised of the date of the first purchase to be applied
toward the completion of the LOI. The LOI effective date will be the date of the
first purchase within the 90-day period. Purchases made more than 90 days before
signing an LOI will be applied toward completion of the LOI based on the value
of the shares purchased calculated at the offering price on the effective date
of the LOI.
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Out of the initial purchase (or subsequent purchases, if
necessary), State Street will hold in escrow 5.75% of the amount specified in
the LOI in the form of Fund shares. All dividends and capital gains on the
escrowed shares will be credited to the investor's account. All shares
purchased, including those escrowed, will be registered in the investor's name.
If the total investment specified under the LOI is completed within the 13-month
period, the escrowed shares will be promptly released. Assuming completion of
the minimum investment under the LOI, an adjustment will be made to reflect any
reduced sales charge applicable to shares purchased during the 90-day period
prior to the submission of the LOI. Additionally, if the total number of shares
purchased within the period exceeds the amount specified in the LOI, an
adjustment will be made to reflect further reduced sales charges applicable to
such purchases. All such adjustments will be made in the form of additional
shares credited to the shareholder's account at the then current offering price.
If the intended investment is not completed, an investor will be requested to
remit an amount equal to the difference between the sales load actually paid and
the sales load applicable to the aggregate purchases actually made. If GEID does
not receive such unpaid sales charge within 20 days, the investor, by marking
the LOI section on the account application, irrevocably constitutes and appoints
State Street as his or her attorney-in-fact to redeem any and all escrowed
shares sufficient to cover the unpaid sales charge. Full shares and any cash
proceeds for a fractional share remaining after such redemptions will be
released from escrow.
If at any time before completing the LOI, an investor wishes
to cancel the agreement, an investor must give written notice to GEID. GEID may
withdraw an investor's LOI privilege for future purchases if an investor
requests State Street to liquidate or transfer beneficial ownership of Fund
shares. An LOI does not bind an investor to purchase, or the Trust to sell, the
full amount indicated at the sales load in effect at the time of signing, but an
investor must complete the intended purchase to obtain the reduced sales load.
Class B Shares. Investors are able to purchase Class B shares
at their net asset value per share next determined after a purchase order is
received, without imposition of any sales charge. Class B shares are sold at net
asset value per share subject to a maximum 4.00% CDSC as disclosed in the
Prospectus. For each year of investment, the applicable CDSC declines in
accordance with the tables set out in the Prospectus.
Six years after the date of purchase (eight years in the case
of shares acquired or exchanged from shares of Investors Trust), Class B shares
will convert automatically to Class A shares, based on the relative net asset
values of shares of each Class, and will at that time be subject to a
distribution fee of 0.25% of the Participant Fund's net assets attributable to
the Class (as well as the service fee of 0.25% of the value of the Participant
Fund's average daily net assets attributable to the Class). The conversion of
Class B shares into Class A shares is subject to the continuing availability of
an opinion of counsel to the effect that the conversions will not constitute
taxable events for Federal tax purposes.
GEID has adopted guidelines, in view of the relative sales
charges, service fees and distribution fees, directing its representatives and
all selling agents that all purchases of shares should be for Class A shares
when the purchase is $250,000 or more by an investor not eligible to purchase
Class C or Class D shares. GEID reserves the right to vary these guidelines at
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<PAGE>
any time. In addition, a dealer reallowance of up to 4% of the net amount
invested is paid to Authorized Firms selling Class B shares.
Class C Shares. Class C shares will be offered at their net
asset value per share next determined after a purchase order is received,
without imposition of any sales charge or CDSC. Class C shares are available
exclusively to (1) holders of shares of a Participant Fund or of the Money
Market Fund that were issued and outstanding on November 29, 1993 -- the date
the Multiple Distribution System was implemented ("Existing Shares") who are not
eligible to be holders of Class D shares, (2) any family member of a holder of
Existing Shares, (3) employees, retirees, officers or directors of GE or an
affiliate of GE or any family member of any of those employees, retirees,
officers or directors, in each case, whether investing directly or indirectly
through their IRA and (4) certain other persons who previously purchased Class C
shares during a special limited offering of such shares by the GEID, provided
that the person maintains an account with the Trust in its, his or her name at
the time of such additional purchase or exchange and the investment is made in
that name, or as custodian for a minor or in an individual retirement account
for such person. For purposes of this SAI, the term "family member" includes
spouses and by reason of blood or marriage, parents, children, siblings,
grandparents and grandchildren. Also, for purposes of this GEID, the term
"employees, retirees, officers or directors of GE or an affiliate of GE"
includes (i) persons who are currently employed by GE or an affiliate of (GE and
its affiliates are hereinafter referred to as "GE"), (ii) persons who have
retired or will retire from GE, or (iii) persons who are no longer employed by
GE, but who have either retained a balance in the GE S&S Program or a defined
contribution plan sponsored by GE or an affiliate of GE or were employed by GE
for at least 20 consecutive years. Any holder of Existing Shares falling within
subcategory (1) above, who fully redeems his or her Class C shares or whose
shares are redeemed in accordance with the involuntary redemption procedure set
out below, will not have the right to reinvest in Class C shares. Eligible
investors may purchase Class C shares directly from GEID. Class C shares may not
be available to persons investing through an asset management program sponsored
by certain Financial Intermediaries. Such investors may be required to purchase
Class A or Class B shares. Class A and Class B shares bear higher 12b-1 fees and
carry a sales charge. Consult your Financial Intermediary for details.
Class D Shares. Class D shares will be offered without
imposition of a sales charge, CDSC, service fee or distribution fee exclusively
to: banks, insurance companies and industrial corporations each purchasing
shares for their own account; financial institutions investing in their
fiduciary capacity on behalf of clients or customers; tax-exempt investors,
including defined benefit or contribution plans (including plans meeting the
requirements of Section 401(k) of the Code), plans established under Section
403(b) of the Code, trusts established under Section 501(c)(9) of the Code to
fund the payment of certain welfare benefits, charitable, religious and
educational institutions, and foundations and endowments of those investors;
investment companies not managed or sponsored by GEIM or any affiliate of GEIM;
and Financial Intermediaries that have an agreement with the Trust, GEIM or GEID
which does not require the Trust, GEIM or GEID to compensate the Financial
Intermediary for its services for initial purchases by their clients or
customers equal to or exceeding $250,000 per Participant Fund (the "Minimum
Purchase Requirement") and any subsequent purchases by such clients or customers
who have already met the Minimum Purchase Requirement ("Institutional
Investors"). The Minimum Purchase Requirement for clients or customers of
Financial Intermediaries is
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waived for purchases by certain non-qualified deferred compensation plans (such
as supplemental employee retirement plans) and tax-exempt customers, including,
but not limited to, defined benefit or defined contribution plans meeting the
requirements of Section 401(a) of the Code (including 401(k) plans), retirement
plans for self-employed individuals, plans established under Section 403(b) of
the Code and plans meeting the requirements of Section 457(b) of the Code. IRAs,
simplified employee pension IRAs ("SEP-IRAs"), salary reduction SEP-IRAs and
Keogh plans are only eligible to purchase Class D shares through Financial
Intermediaries. For purposes of this SAI, the term "industrial corporation" is
intended to mean any corporate entity employing 100 or more persons but does not
include professional corporations or corporations established under Subchapter S
of the Code. Investors eligible to purchase Class D shares may not purchase any
other Class of shares, except as noted above under "Class A Shares." In
addition, a dealer reallowance of up to .32% of the net amount invested is paid
to Authorized Firms selling Class D shares.
Redemptions
Shares of the Money Market Fund, as well as shares of a Class
of a Participant Fund, may be redeemed on any day on which the Fund's net asset
value is calculated as described below under "Net Asset Value." Redemption
requests received in proper form prior to the close of regular trading on the
NYSE will be effected at the net asset value per share determined on that day.
Redemption requests received after the close of regular trading on the NYSE will
be effected at the net asset value as next determined. The Trust normally
transmits redemption proceeds within seven days after receipt of a redemption
request. If a shareholder holds shares in more than one Class of a Participant
Fund, any request for redemption must specify the Class being redeemed. In the
event of a failure to specify which Class or if the investor owns fewer shares
of the Class than specified, the redemption request will be delayed until the
Trust receives further instructions. Redemption proceeds will be subject to no
charge, except for certain redemptions of Class A and Class B shares of a
Participant Fund. In addition, if the shareholder has checkwriting privileges,
redemption of $100 or more may be made by writing a check either to the
shareholder or to a third party. A shareholder who pays for shares of a Fund by
personal check will receive the proceeds of a redemption of those shares when
the purchase check has been collected, which may take up to 15 days or more.
Shareholders who anticipate the need for more immediate access to their
investment should purchase shares with Federal funds or bank wire or by a
certified or cashier's check.
The right of redemption of shares of a Fund may be suspended
or the date of payment postponed (1) for any periods during which the NYSE is
closed (other than for customary weekend and holiday closings), (2) when trading
in the markets the Fund normally utilizes is restricted, or an emergency, as
defined by the rules and regulations of the SEC, exists, making disposal of a
Fund's investments or determination of its net asset value not reasonably
practicable or (3) for such other periods as the SEC by order may permit for the
protection of the Fund's shareholders. A shareholder who pays for Fund shares by
personal check will receive the proceeds of a redemption of those shares when
the purchase check has been collected, which may take up to 15 days or more.
Shareholders who anticipate the need for more immediate access to their
investment should purchase shares with Federal funds or bank wire or by a
certified or cashier's check.
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The Trust requires that a shareholder of a Fund maintain a
minimum investment in a Fund of $500, so care should be exercised to ensure that
redemptions do not reduce the shareholder's investment below this minimum. Two
exceptions exist to this minimum investment requirement for (1) an account
established by a Qualified Plan, and (2) new accounts established with the
Direct Deposit Privilege, Payroll Savings Plan or Automatic Investment Plan. If
the shareholder's account balance is less than $500 (except in the circumstances
described above), the Trust may automatically redeem the shares of the Fund in
the account and remit the proceeds to the shareholder so long as the shareholder
is given 30 days prior written notice of the action.
A holder of Existing Shares who would not otherwise be
eligible to invest in Class C shares by virtue of being an employee, retiree,
officer or director of GE or an affiliate of GE or a family member of any of
those employees, retirees, officers or directors, who fully redeems his account
or whose account balance is involuntarily redeemed by the Trust in the manner
set out below, will not remain eligible to thereafter invest in Class C shares;
the holder will instead be eligible to invest in either Class A or Class B
shares only.
A CDSC payable to the Distributor is imposed on certain
redemptions of Class A and Class B shares of a Participant Fund, however
effected. Class A and Class B shares that are redeemed will not be subject to a
CDSC to the extent that the value of such shares represents (1) shares that were
purchased more than a fixed number of years prior to the redemptions, (2)
reinvestment of dividends or capital gains distributions or (3) capital
appreciation of shares redeemed. The amount of any applicable CDSC will be
calculated by multiplying the applicable percentage charge by the lesser of (1)
the net asset value of the Class A or Class B shares at the time of purchase or
(2) the net asset value of the Class A or Class B shares at the time of
redemption. In circumstances in which the CDSC is imposed, the amount of the
charge will depend on the number of years since the shareholder made the
purchase payment from which the amount is being redeemed.
The CDSC on Class A shares is payable on the same terms and
conditions as would be applicable to Class B shares, except that the CDSC on
Class A shares is at a lower rate and for a shorter period than that imposed on
Class B shares (1% for redemptions only during the first year after purchase)
and except that Class A shares have no automatic conversion feature. The CDSC
applicable to Class A shares is calculated in the same manner as the CDSC with
respect to Class B shares and is waived in the same situations as with respect
to Class B shares.
The following table sets forth the CDSC rates applicable to
redemptions of Class B shares of the U.S. Equity Fund, the Premier Fund, the
Value Equity Fund, the Small-Cap Value Fund, the Mid-Cap Growth Fund, the
Mid-Cap Value Equity Fund, the Global Fund, the International Fund, the Europe
Fund, the Emerging Markets Fund, the High Yield Fund and the Strategic Fund:
CDSC as a %
Year Since Purchase of Amount
Payment was Made Redeemed
- --------------------------------------------------------------------------------
Within First Year 4.00%
Within Second Year 3.00%
Within Third Year 2.00%
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Within Fourth Year 1.00%
Within Fifth Year 0.00%
Within Sixth Year 0.00%
- --------------------------------------------------------------------------------
The following table sets forth the CDSC rates applicable to
redemptions of Class B shares of the Tax-Exempt Fund, the Income Fund, the
Government Securities Fund and the Short-Term Government Fund:
CDSC as a %
Year Since Purchase of Amount
Payment was Made Redeemed
- --------------------------------------------------------------------------------
Within First Year 3.00%
Within Second Year 3.00%
Within Third Year 2.00%
Within Fourth Year 1.00%
Within Fifth Year 0.00%
Within Sixth Year 0.00%
- --------------------------------------------------------------------------------
The following table sets forth the CDSC rates applicable to
redemptions of any Fund's Class B shares acquired, either by purchase or
exchange, as a result of the combination of the Investors Trust Funds with
certain Funds:
CDSC as a %
Year Since Purchase of Amount
Payment was Made Redeemed
- --------------------------------------------------------------------------------
Within First Year 5.00%
Within Second Year 4.00%
Within Third Year 3.00%
Within Fourth Year 2.00%
Within Fifth Year 1.00%
Within Sixth Year 0.00%
Within Seventh Year 0.00%
Within Eighth Year 0.00%
- --------------------------------------------------------------------------------
Class B shares will automatically convert to Class A shares
six years (eight years in the case of Class B shares acquired, either by
purchase or exchange, as a result of the combination of the Investors Trust
Funds with certain Funds) after the date on which they were purchased and
thereafter will no longer be subject to the higher distribution fee applicable
to such Class B shares, but will be subject to the 0.25% distribution fee
applicable with respect to Class A shares. See "Exchange Privilege" for the
effect of exchanges on the CDSC applicable to exchanged shares.
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In determining the applicability and rate of any CDSC to a
redemption of shares of a Fund, the Distributor will assume that a redemption is
made first of shares representing reinvestment of dividends and capital gain
distributions and then of other shares held by the shareholder for the longest
period of time. This assumption will result in the CDSC, if any, being imposed
at the lowest possible rate.
The Trust will waive the CDSC on redemptions of Class A or
Class B shares of the Funds upon the death or disability of a shareholder if the
redemption is made within one year of death or disability of a shareholder. The
CDSC would be waived when the decedent or disabled person is either an
individual shareholder or, in the case of death, owns the shares with his or her
spouse as a joint tenant with right of survivorship, and when the redemption is
made within one year of the death or initial determination of disability. This
waiver of the CDSC would apply to a total or partial redemption but only to
redemptions of Class A or Class B shares held at the time of the death or
initial determination of disability. The Trust will also waive the CDSC (1) on
redemptions of Class A or Class B shares of the Funds representing a minimum
required distribution from an IRA effected pursuant to a systematic withdrawal
plan (see "Systematic Withdrawal Plan" below) and (2) on redemptions of Class A
shares being redeemed within one year of purchase that were subject to no
front-end sales load upon purchase by virtue of being part of a purchase of $1
million or more provided the redemption is pursuant to a Systematic Withdrawal
Plan.
Signature guarantees are required for all redemptions over
$50,000. In addition, signature guarantees are required for requests to have
redemption proceeds (1) mailed to an address other than the address of record,
(2) paid to other than the shareholder, (3) wired to a bank other than the bank
of record, or (4) mailed to an address that has been changed within 30 days of
the redemption request. All signature guarantees must be guaranteed by a
commercial bank, trust company, broker, dealer, credit union, national
securities exchange or registered association, clearing agency or savings
association or by Managers of Personnel Accounting of GE or their designated
alternates. The Trust may require additional supporting documents for
redemptions made by corporations, executors, administrators, trustees, guardians
or persons utilizing a power of attorney. A request for redemption will not be
deemed to have been submitted until the Trust receives all documents in proper
order typically required to assure the safety of a particular account. The Trust
may waive the signature guarantee on a redemption of $50,000 or less if it is
able to verify the signatures of all registered owners from its accounts.
Redemption by Telephone
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Shares of a Fund may be redeemed by telephone, unless the
investor has declined this option on the applicable section of the account
application form. Proceeds from a telephonic wire redemption request placed
through a customer service representative will be transferred by wire to the
shareholder's bank account (which has previously been identified in writing to
the Trust). A fee of $10 will be charged for wire transfers of funds by the
Trust. Wire transfers will be made directly to the account specified by the
shareholder if that bank is a member of the Federal Reserve System or to a
correspondent bank if the bank holding the account is not a member. Fees on wire
transfers may also be imposed by the bank and will be the responsibility of the
shareholder. Proceeds from a telephonic check redemption request placed through
the automated system will be sent by check to the shareholder's address of
record. The minimum telephonic wire redemption request is $1,000; the minimum
telephonic check redemption request is $500 and the maximum telephonic check
redemption request is $50,000. If the account is registered jointly in the name
of more than one shareholder, only one shareholder will be required to authorize
redemption of shares by telephone, and the Trust will be entitled to act upon
telephonic instructions of any shareholder of a joint account. Redemptions of
shares of a Fund by a Qualified Plan may not be effected by telephone. Wire
transfer of funds will be made within two business days following the telephonic
request. Dividends will be earned through and including the date of receipt of
the redemption request.
Telephone redemption requests may be difficult to implement in
times of drastic economic or market changes. In the event shareholders of the
Funds are unable to contact the Trust by telephone, shareholders should write to
the Trust at:
GE Funds
P.O. Box 419631
Kansas City, MO 64141-6631
For overnight package delivery:
GE Funds
c/o National Financial Data Services Inc.
1004 Baltimore
Kansas City, MO 64105
By making a telephonic redemption request, a shareholder
authorizes the Trust to act on the telephonic redemption instructions by any
person representing himself or herself to be the shareholder and believed by the
Trust to be genuine. The Trust will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine and the Trust's records of
such instructions will be binding. If the procedures, which include the use of a
personal identification number ("PIN") system and the provision of written
confirmation of transactions effected by telephone, were not employed by the
Trust, the Trust could be subject to liability for any loss resulting from
unauthorized or fraudulent instructions. As a result of compliance with this
policy, if the Trust follows the procedures outlined above and has a good faith
belief that the instructions it received were genuine, the shareholder will bear
the risk of loss in the event of a fraudulent redemption transaction.
Systematic Withdrawal Plan
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The Trust's Systematic Withdrawal Plan permits investors in a
Fund to request withdrawal of a specified dollar amount (minimum of $50) on
either a monthly or quarterly basis if they have a $10,000 minimum account in a
Class of a Participant Fund or in the Money Market Fund. The maximum amount
which may be withdrawn under the Systematic Withdrawal Plan is 10% of the value
of a Shareholder's account on an annual basis. An application for the Systematic
Withdrawal Plan can be obtained from the Trust. The Systematic Withdrawal Plan
may be terminated at any time by the investor or the Trust.
Involuntary Redemptions
An account of a shareholder of a Fund with respect to a Class
of shares (if applicable) that is reduced by redemptions, and not by reason of
market fluctuations to a value of $500 or less may be redeemed by the Trust, but
only after the shareholder has been given notice of at least 30 days in which to
increase the balance in the account to more than $500. An account established
through a Qualified Plan or an account that has not yet reached the $500 minimum
through the Direct Deposit Privilege, Payroll Savings Plan or Automatic
Investment Plan will not be involuntarily redeemed.
Distributions In-Kind
If the Board determines that it would be detrimental to the
best interests of a Fund's shareholders to make a redemption payment wholly in
cash, the Trust may pay, in accordance with rules adopted by the SEC, any
portion of a redemption in excess of the lesser of $250,000 or 1% of the Trust's
net assets by a distribution in kind of portfolio securities in lieu of cash.
Redemptions failing to meet this threshold must be made in cash. Portfolio
securities issued in a distribution in kind will be deemed by GEIM to be readily
marketable. Shareholders receiving distributions in kind of portfolio securities
may incur brokerage commissions when subsequently disposing of those securities.
Checkwriting Privileges
A shareholder of the Money Market Fund may request in an
application form or by letter sent to the Trust that he or she would like
checkwriting privileges, which are provided at no cost to the shareholder. The
Trust will provide redemption checks ("Checks") drawn on the shareholder's
account. Checks will be sent only to the shareholder of the account and only to
the address of record. The application or written request must be manually
signed by the shareholder. Checks may be made payable to the order of any person
in an amount of $100 or more. Dividends are earned until the Check clears. When
a Check is presented to State Street for payment, State Street, as agent, will
cause the Money Market Fund to redeem a sufficient number of shares in the
shareholder's account to cover the amount of the Check. Checks will generally
not be returned to the shareholder after clearance, unless such return is
requested in writing by the shareholder. Shareholders generally will be subject
to the same rules and regulations that State Street applies to checking
accounts. Unless otherwise specified in writing to the Trust, only the signature
of one shareholder of a joint account is required on Checks.
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Checks may not be written to redeem shares purchased by check
until the earlier of (1) the date that good funds are credited to State Street
by its correspondent bank or (2) 15 days from the date of receipt of the check
utilized to purchase shares. If the amount of the Check is greater than the
value of the shares in a shareholder's account, the Check will be returned
marked "insufficient funds." Checks should not be used to close an account.
Checks written on amounts subject to the hold described above will be returned
marked "uncollected." If the Check does not clear, the shareholder will be
responsible for any loss that the Money Market Fund or State Street incurs.
The Trust may modify or terminate the checkwriting privilege
at any time on 30 days' notice to participating shareholders. The checkwriting
privilege is subject to State Street's rules and regulations and is governed by
the Massachusetts Uniform Commercial Code. All notices with respect to Checks
drawn on State Street must be given to State Street. Stop payment instructions
may be given by calling the applicable toll free number listed on the back cover
of the Prospectus.
Exchange Privilege
The exchange privilege described in the Prospectus enables a
shareholder of a Fund to acquire shares in a Fund having a different investment
objective and policies when the shareholder believes that a shift between Funds
is an appropriate investment decision. Upon receipt of proper instructions and
all necessary supporting documents, shares submitted for exchange are redeemed
at the then-current net asset value and the proceeds are immediately invested in
shares of the Fund being acquired. The Trust reserves the right to reject any
exchange request.
Shares of each Class of a Participant Fund may be exchanged
for shares of the same Class of any other Participant Fund at their respective
net asset values. A holder of Existing Shares of the Money Market Fund (other
than an Institutional Investor or a Class D eligible retirement plan) can
exchange those Money Market Fund shares for Class C shares of a Participant
Fund. An Institutional Investor (other than a Class D eligible retirement plan)
can exchange shares of the Money Market Fund for Class D shares of a Participant
Fund. A Class D eligible retirement plan can exchange shares of the Money Market
Fund for Class A or Class D shares of a Participant Fund, as selected by the
plan sponsor, depending upon whether the plan sponsor desires the additional
services provided to Class A shareholders. All other Money Market Fund
shareholders will be given the choice of receiving either Class A or Class B
shares of a Participant Fund upon the completion of an exchange. The privilege
is available to shareholders residing in any state in which shares of the Fund
being acquired may legally be sold. An exchange of shares is treated for Federal
income tax purposes as a redemption (that is, a sale) of shares given in
exchange by the shareholder, and an exchanging shareholder may, therefore,
realize a taxable gain or loss in connection with the exchange. An exchange of
shares may be made by calling or by writing the Trust. The Trust may, upon 60
days' prior written notice to the shareholders of a Fund, materially modify or
terminate the exchange privilege with respect to the Fund or impose a charge of
up to $5 for exchanges of shares of the Fund.
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<PAGE>
Shareholders who exchange their Class A or Class B shares for
Money Market Fund shares will be subject to the CDSC applicable to Class A or
Class B shares at the time the shareholder redeems such Money Market Fund
shares. Upon an exchange of Class A or Class B shares for Class A or Class B
shares (as applicable) of another Participant Fund, the new Class A or Class B
shares will be deemed to have been purchased on the same date as the Class A or
Class B shares of the Participant Fund which have been exchanged for CDSC
calculation purposes. However, a shareholder who exchanges his Class A or Class
B shares for shares of the Money Market Fund and then exchanges those Money
Market Fund shares for Class A or Class B shares will be subject to having the
period of time in which his shares were invested in the Money Market Fund tolled
when computing the applicable CDSC. Likewise, shareholders who exchange their
Class A or Class B shares of a Participant Fund with Class A or Class B shares
of another Participant Fund will be subject to the CDSC of the original Fund at
the time of redemption from the second Fund.
Class B shares of any Participant Fund acquired either by
purchase or exchange, as a result of the combination of the Investors Trust
Funds with certain Funds, will be charged the CDSC applicable to the Class B
shares that had been applicable to the relevant Investors Trust Fund before the
combination. Shareholders of the Money Market Fund who acquired their shares by
exchange from an Investors Trust Fund will be charged the CDSC that had been
applicable to the Class B shares of the relevant Investors Trust Fund upon
redemption from the Money Market Fund. Shares of the Funds purchased through a
Financial Intermediary may only be exchanged for shares of another Fund which is
offered by that Financial Intermediary.
Shareholders exercising the exchange privilege should review
the prospectus disclosure for the Fund they are considering investing in
carefully prior to making an exchange.
NET ASSET VALUE
The Trust will not calculate net asset value on days that
the NYSE is closed. On those days, securities held by a Fund may nevertheless be
actively traded, and the value of the Fund's shares could be significantly
affected.
Because of the need to obtain prices as of the close of
trading on various exchanges throughout the world, the calculation of the net
asset value of the Money Market Fund or a Class of certain Participant Funds may
not take place contemporaneously with the determination of the prices of many of
their portfolio securities used in the calculation. A security that is listed or
traded on more than one exchange is valued at the quotation on the exchange
determined to be the primary market for the security. All assets and liabilities
of the Funds initially expressed in foreign currency values will be converted
into U.S. dollar values at the mean between the bid and offered quotations of
the currencies against U.S. dollars as last quoted by any recognized dealer. If
these quotations are not available, the rate of exchange will be determined in
good faith by the Board. In carrying out the Board's valuation policies, GEIM
may consult with one or more independent pricing services ("Pricing Service")
retained by the Trust.
Debt securities of U.S. issuers (other than Government
Securities and short-term investments), including Municipal Obligations, are
valued by a dealer or by a pricing service
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<PAGE>
based upon a computerized matrix system, which considers market transactions and
dealer supplied valuations. Valuations for municipal bonds are obtained from a
qualified municipal bond pricing service; prices represent the mean of the
secondary market. When, in the judgment of the Pricing Service, quoted bid
prices for investments of the Tax-Exempt Fund are readily available and are
representative of the bid side of the market, these investments are valued at
the mean between the quoted bid prices and asked prices. Investments of the
Tax-Exempt Fund that are not regularly quoted are carried at fair value as
determined by the Board, which may rely on the assistance of the Pricing
Service. The procedures of the Pricing Service are reviewed periodically by GEIM
under the general supervision and responsibility of the Board .
The valuation of the portfolio securities of the Money Market
Fund is based upon amortized cost, which does not take into account unrealized
capital gains or losses. Amortized cost valuation involves initially valuing an
instrument at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the effect of fluctuating
interest rates on the market value of the instrument. Although this method
provides certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price the Money Market
Fund would receive if it sold the instrument.
The use of the amortized cost method of valuing the portfolio
securities of the Money Market Fund is permitted by a rule adopted by the SEC.
Under this rule, the Money Market Fund must maintain a dollar-weighted average
portfolio maturity of 90 days or less, purchase only instruments having
remaining maturities of 397 calendar days or less, and invest only in "eligible
securities" as defined in the rule, which are determined by GEIM to present
minimal credit risks. Pursuant to the rule, GEIM has established procedures
designed to stabilize, to the extent reasonably possible, the Fund's price per
share as computed for the purpose of sales and redemptions at $1.00. These
procedures include review of the Money Market Fund's portfolio holdings at such
intervals as GEIM may deem appropriate, to determine whether the Fund's net
asset value calculated by using available market quotations or market
equivalents deviates from $1.00 per share based on amortized cost.
The rule regarding amortized cost valuation provides that the
extent of certain significant deviations between the Money Market Fund's net
asset value based upon available market quotations or market equivalents and the
$1.00 per share net asset value based on amortized cost must be examined by the
Board. In the event the Board determines that a deviation exists that may result
in material dilution or other unfair results to investors or existing
shareholders of the Money Market Fund, the Board must, in accordance with the
rule, cause the Fund to take such corrective action as the Board regards as
necessary and appropriate, including: selling portfolio instruments of the Fund
prior to maturity to realize capital gains or losses or to shorten average
portfolio maturity; withholding dividends or paying distributions from capital
or capital gains; redeeming shares in kind; or establishing a net asset value
per share by using available market quotations.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Set forth below is a summary of certain Federal income tax
considerations generally affecting the Funds and their shareholders. The summary
is not intended as a substitute
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<PAGE>
for individual tax planning, and shareholders are urged to consult their tax
advisors regarding the application of Federal, state, local and foreign tax laws
to their specific tax situations.
Tax Status of the Funds and their Shareholders
Each Fund is treated as a separate entity for Federal income
tax purposes. Each Fund's net investment income and capital gains distributions
are determined separately from any other series that the Trust may designate.
The Trust intends for each Fund to continue to qualify each
year as a "regulated investment company" under the Code. If a Fund (1) is a
regulated investment company and (2) distributes to its shareholders at least
90% of its net investment income (including for this purpose its net realized
short-term capital gains) and 90% of its tax-exempt interest income (reduced by
certain expenses), the Fund will not be liable for Federal income taxes to the
extent that its net investment income and its net realized long-term and
short-term capital gains, if any, are distributed to its shareholders. In
addition, in order to avoid a 4% excise tax, a Fund must declare, no later than
December 31 and distribute no later than the following January 31, at least 98%
of its taxable ordinary income earned during the calendar year and 98% of its
capital gain net income for the 1-year period ending generally on October 31 of
such calendar year. One requirement for qualification as a regulated investment
company is that each Fund must diversify its holdings so that, at the end of
each quarter, (i) at least 50% of the market value of the Fund's assets is
represented by cash and cash items, securities of other regulated investment
companies, U.S. government securities and other securities, with such other
securities limited for purposes of this calculation in respect of any one issuer
to an amount not greater than 5% of the value of the Fund's assets and not
greater than 10% of the outstanding voting securities of such issuer, and (ii)
not more than 25% of the value of its total assets is invested in the securities
of any one issuer or of two or more issuers that are controlled by the Fund
(within the meaning of Section 851(b)(3)(B) of the Code) that are engaged in the
same or similar trades or businesses or related trades or businesses (other than
U.S. government securities or the securities of other regulated investment
companies).
Another requirement for qualification as a regulated
investment company is that each Fund must earn at least 90% of its gross income
from dividends, interest, payments with respect to securities loans, gains from
the disposition of stock or securities (including gains from related investments
in foreign currencies) and income (including gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stocks, securities or currencies (the "90% Test").
If for any taxable year a Fund does not qualify for the
special Federal income tax treatment afforded regulated investment companies,
all of its taxable income will be subject to Federal income tax at regular
corporate rates (without any deduction for distributions to its shareholders).
In such event, dividend distributions, including amounts derived from interest
on tax-exempt obligations, would be taxable to shareholders to the extent of
current and accumulated earnings and profits, and would be eligible for the
dividends received deduction for corporations in the case of corporate
shareholders.
As of September 30, 1997, certain series of Investors Trust
Funds acquired by GE
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Funds pursuant to the Reorganization had net tax basis capital loss
carryforwards which may be applied against taxable gains until their expiration
date. The following table illustrates the carryforwards that apply to these
Investors Trust Funds:
<TABLE>
<CAPTION>
Acquiring Expiration Dates:
Investors Trust Fund Amount September 30,
-------------------- ------ -------------
GE Fund
-------
<S> <C> <C> <C>
Adjustable Rate Fund Short-Term $44,539 2001
Government 114,498 2002
Fund 14,856 2003
Government Fund Government $87,336,523 2002
Securities Fund 107,525,597 2003
1,748,819 2004
Tax Free Fund Tax-Exempt $176,173 2002
Fund
</TABLE>
As a result of the Reorganization, each of Investors Trust
Adjustable Rate Fund and Investors Trust Tax Free Fund had a taxable year ending
on the date of the Reorganization, and the taxable year of each respective
acquiring GE Fund in which the Reorganization occurs will be a separate taxable
year for purposes of determining the taxable years in which carryforwards of
these two Investors Trust Funds may be applied. Accordingly, the Reorganization
has the effect of reducing the carryforward periods of Investors Trust
Adjustable Rate Fund and Investors Trust Tax Free Fund. Such reduced periods are
reflected in the foregoing table of expiration dates.
Net investment income or capital gains earned by a Fund
investing in foreign securities may be subject to foreign income taxes withheld
at the source. The United States has entered into tax treaties with many foreign
countries that entitle the Funds to a reduced rate of tax or exemption from tax
on this related income and gains. The effective rate of foreign tax cannot be
determined at this time since the amount of these Funds' assets to be invested
within various countries is not now known. The Trust intends that the Funds seek
to operate so as to qualify for treaty-reduced rates of tax when applicable. In
addition, if a Fund qualifies as a regulated investment company under the Code,
if certain distribution requirements are satisfied, and if more than 50% of the
value of the Fund's assets at the close of the taxable year consists of stocks
or securities of foreign corporations, the Trust may elect, for U.S. Federal
income tax purposes, to treat foreign income taxes paid by the Fund that can be
treated as income taxes under U.S. income tax principles as paid by its
shareholders. The Global Fund, the International Fund, the Europe Fund and the
Emerging Markets Fund each anticipates that it may qualify for and make this
election in most, but not necessarily all, of its taxable years. If a Fund were
to make an election an amount equal to the foreign income taxes paid by the Fund
would be included in the income of its shareholders and the shareholders would
be entitled to credit their portions of this amount against their U.S. tax
liabilities, if any, or to deduct those portions from their U.S. taxable income,
if any. Shortly after any year for which it makes an election, the Trust will
report to the shareholders of the Fund, in writing, the amount per share of
foreign tax that must be included in each shareholder's
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gross income and the amount that will be available as a deduction or credit. No
deduction for foreign taxes may be claimed by a shareholder who does not itemize
deductions. Certain limitations will be imposed on the extent to which the
credit (but not the deduction) for foreign taxes may be claimed.
A Fund's transactions in options and futures contracts are
subject to special provisions of the Code that, among other things, may affect
the character of gains and losses realized by the Fund (that is, may affect
whether gains or losses are ordinary or capital), accelerate recognition of
income to the Fund and defer losses of the Fund. These rules (1) could affect
the character, amount and timing of distributions to shareholders of a Fund, (2)
will require the Fund to "mark to market" certain types of the positions in its
portfolio (that is, treat them as if they were closed out) and (3) may cause the
Fund to recognize income without receiving cash with which to make distributions
in amounts necessary to satisfy the distribution requirements for avoiding
income and excise taxes described above and in the Prospectus. The Trust seeks
to monitor transactions of each Fund, will seek to make the appropriate tax
elections on behalf of the Fund and seeks to make the appropriate entries in the
Fund's books and records when the Fund acquires any option, futures contract or
hedged investment, to mitigate the effect of these rules and prevent
disqualification of the Fund as a regulated investment company.
In order for the Tax-Exempt Fund to pay exempt-interest
dividends for any taxable year, at the close of each taxable quarter, at least
50% of the aggregate value of the Fund's portfolio must consist of
exempt-interest obligations. Within 60 days after the close of the taxable year
of the Tax-Exempt Fund, the Trust will notify the Fund's shareholders of the
portion of the dividends paid that constitutes an exempt-interest dividend with
respect to that taxable year. The percentage of total dividends paid by the
Tax-Exempt Fund with respect to any taxable year that qualifies as Federal
exempt-interest dividends will be the same for all shareholders receiving
dividends from the Fund for that year.
Interest on indebtedness incurred by a shareholder to purchase
or carry shares of the Tax-Exempt Fund is not deductible for income tax purposes
if the Fund distributes exempt-interest dividends during the shareholder's
taxable year. In addition, if a shareholder of the Tax-Exempt Fund holds shares
for six months or less, any loss on the sale or exchange of those shares will be
disallowed to the extent of the amount of exempt-interest dividends received
with respect to the shares.
As a general rule, a shareholder's gain or loss on a sale or
redemption of shares of a Fund will be a long-term capital gain or loss if the
shareholder has held the shares for more than one year. The gain or loss will be
a short-term capital gain or loss if the shareholder has held the shares for one
year or less.
The Fund's net realized long-term capital gains are
distributed as described in the Prospectus. The distributions ("capital gain
dividends"), if any, are taxable to a shareholder of a Fund as long-term capital
gains, regardless of how long a shareholder has held the shares, and will be
designated as capital gain dividends in a written notice mailed by the Trust to
the shareholders of the Fund after the close of the Fund's prior taxable year.
If a shareholder receives a capital gain dividend with respect to any share of a
Fund, and if the share is sold before it has
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been held by the shareholder for six months or less, then any loss on the sale
or exchange of the share, to the extent of the capital gain dividend, will be
treated as a long-term capital loss. This rule will apply to a sale of shares of
the Tax-Exempt Fund only to the extent the loss is not disallowed under the
provision described above. Investors considering buying shares of a Fund on or
just prior to the record date for a taxable dividend or capital gain
distribution should be aware that the amount of the dividend or distribution
payment will be a taxable dividend or distribution payment.
Special rules contained in the Code apply when a shareholder
of a Fund disposes of shares of the Fund through a redemption or exchange within
90 days of purchase and subsequently acquires shares of a Fund on which a sales
charge normally is imposed without paying a sales charge in accordance with the
exchange privilege described in the Prospectus. In these cases, any gain on the
disposition of the shares of the Fund will be increased, or loss decreased, by
the amount of the sales charge paid when the shares were acquired, and that
amount will increase the adjusted basis of the shares of the Fund subsequently
acquired. In addition, if shares of a Fund are purchased within 30 days of
redeeming shares at a loss, the loss will not be deductible and instead will
increase the basis of the newly purchased shares.
If a shareholder of a Fund fails to furnish the Trust with a
correct taxpayer identification number, fails to report fully dividend or
interest income, or fails to certify that he or she has provided a correct
taxpayer identification number and that he or she is not subject to "backup
withholding," then the shareholder may be subject to a 31% "backup withholding"
tax with respect to (1) taxable dividends and distributions from the Fund and
(2) the proceeds of any redemptions of shares of the Fund (other than the Money
Market Fund). An individual's taxpayer identification number is his or her
social security number. The 31% backup withholding tax is not an additional tax
and may be credited against a taxpayer's regular Federal income tax liability.
THE FUNDS' PERFORMANCE
The Trust, from time to time, may quote a Fund's performance,
in terms of the Money Market Fund's or a Class' yield and/or total return, in
reports or other communications to shareholders of a Fund or in advertising
material. Additional information regarding the manner in which performance
figures are calculated is provided below.
Yield for the Money Market Fund
The Trust may, from time to time, include the yield and
effective yield of the Money Market Fund in advertisements or reports to
shareholders or prospective investors. "Current yield" will be based upon the
income that a hypothetical investment in the Fund would earn over a states
seven-day period. This amount would then be "annualized," which means the amount
of income generated over that week is assumed to be generated each week over a
52-week period and is shown as a percentage of the investment. The Money Market
Fund's "effective yield" will be calculated similarly, but, when annualized, the
income earned by an investment in the Fund is assumed to be reinvested. The
effective yield would be slightly higher than the current yield because of the
compounding effect of this presumed reinvestment.
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The yield for the Money Market Fund is computed by (1)
determining the net change in the value of a hypothetical pre-existing account
in the Fund having a balance of one share at the beginning of a
seven-calendar-day period for which yield is to be quoted, (2) dividing the net
change by the value of the account at the beginning of the period to obtain the
base period return, and (3) annualizing the results (that is, multiplying the
base period return by 365/7). The net change in the value of the account
reflects the value of additional shares purchased with dividends declared on the
original share and any such additional shares less a hypothetical charge
reflecting deductions from shareholder accounts, but does not include realized
gains and losses or unrealized appreciation and depreciation. In addition, the
Trust may calculate a compound effective annualized yield by adding one to the
base period return (calculated as described above), raising the sum to a power
equal to 365/7 and subtracting one. The seven-day current yield and effective
seven-day yield as of September 30, 1998 were []% and []%, respectively. Had
GEIM not absorbed a portion of the Money Market Fund's expenses, the Fund's
seven-day yield and effective seven-day yield as of September 30, 1998 would
have been lower.
The 30-day yield figures are calculated for a Class or Fund
according to a formula prescribed by the SEC. The formula can be expressed as
follows:
Yield = 2[(a-b + 1)6-1]
---
cd
Where:
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursement).
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends.
d = the maximum offering price per share on the last day of
the period.
For the purpose of determining the interest earned (variable
"a" in the formula) on debt obligations that were purchased by a Fund at a
discount or premium, the formula generally calls for amortization of the
discount or premium; the amortization schedule will be adjusted monthly to
reflect changes in the market values of the debt obligations.
Investors should recognize that, in periods of declining
interest rates, the yield will tend to be somewhat higher than prevailing market
rates, and in periods of rising interest rates the yield will tend to be
somewhat lower. In addition, when interest rates are falling, moneys received by
a Fund from the continuous sale of its shares will likely be invested in
portfolio instruments producing lower yields than the balance of the Fund's
portfolio, thereby reducing the current yield of the Fund. In periods of rising
interest rates, the opposite result can be expected to occur.
Yield information is useful in reviewing the performance of a
Fund, but because yields fluctuate, this information cannot necessarily be used
to compare an investment in shares of the Fund with bank deposits, savings
accounts and similar investment alternatives
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<PAGE>
that often provide an agreed or guaranteed fixed yield for a stated period of
time. Shareholders of a Fund should remember that yield is a function of the
kind and quality of the instruments in the Fund's portfolio, portfolio maturity,
operating expenses and market conditions.
The 30-day yield for the period ended September 30, 1998 for
Class A, Class B, Class C and Class D shares, respectively, of each Fund was as
follows:
[Chart]
Had the Funds' investment adviser not absorbed a portion of
the Tax-Exempt Fund's, the Government Securities Fund's, the Short-Term
Government Fund's and the Income Fund's expenses, these Funds' 30-day yield for
the period ended September 30, 1998 class of shares would have been lower.
The equivalent taxable yield of the Tax-Exempt Fund
demonstrates the yield on a taxable investment necessary to produce an after-tax
yield equal to the Fund's tax-exempt yield. The Tax-Exempt Fund's tax equivalent
yield is computed for a Class by dividing that portion of the Fund's yield that
is tax-exempt by one minus a stated income tax rate and adding the product to
that portion, if any, of the Fund's yield that is not tax-exempt. Thus, the
equivalent taxable yield of a Class of the Tax-Exempt Fund will always exceed
the Class' yield. Assuming an effective tax rate of 39.6%, for the 30-day period
ended September 30, 1998, the equivalent taxable yield of the Tax-Exempt Fund
for Class A, Class B, Class C and Class D shares, respectively, was []%, []%,
[]% and []%. Had the Tax-Exempt Fund's investment adviser not absorbed a portion
of the Fund's expenses, assuming an effective tax rate of 39.6%, the equivalent
taxable yield of the Tax-Exempt Fund for the indicated 30-day period for the
relevant Class of shares would have been lower.
Average Annual Total Return
From time to time, the Trust may advertise an "average annual
total return," which represents the average annual compounded rates of return
over one-, five- and ten-year periods, or over the life of the Fund (as stated
in the advertisement) for each class of shares of a Fund. This total return
figure shows an average percentage change in value of an investment in the Class
from the beginning date of the measuring period to the ending date of the
period. The figure reflects changes in the price of a class of shares and
assumes that any income, dividends and/or capital gains distributions made by
the Fund during the period are reinvested in shares of the same Class. When
considering average annual total return figures for periods longer than one
year, investors should note that a Fund's annual total return for any one year
in the periods might have been greater or less than the average for the entire
period.
The "average annual total return" figures for the Funds
described below are computed for a Class according to a formula prescribed by
the SEC. The formula can be expressed as follows:
P(1 + T) n = ERV
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<PAGE>
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 the maximum applicable sales load is deducted
from the initial investment or redemption amount, in the case of CDSC, complete
redemption of the hypothetical investment at the end of the measuring period.
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The aggregate total return for the periods ended September 30,
1998 for Class A, Class B, Class C and Class D shares, respectively, of each
Fund was as follows:
Load Adjusted
Fund One Three Five Ten Since One Three Five Ten Since
Year Year Year Year Inception Year Year Year Year Inception
- --------------------------------------------------------------------------------
Notes to Performance
For periods prior to September 26, 1997, the performance data relating to Class
A and B shares of GE Mid-Cap Growth Fund, GE Value Equity Fund, GE Tax-Exempt
Fund and GE Government Securities Fund reflect the prior performance and expense
ratios of Investors Trust Growth Fund, Investors Trust Value Fund, Investors
Trust Tax Free Fund and Investors Trust Government Fund, respectively, each a
series of Investors Trust, the assets of which were acquired by the
corresponding GE Fund. GE Government Securities Fund has not offered Class D
shares since the Fund's inception, therefore no performance data is shown for
Class D shares of this Fund. Because the performance data relating to Class C
and D shares of GE Tax-Exempt Fund is limited to the period from September 26,
1997 to March 31, 1998, such data reflects the "Aggregate Total Return" rather
than the "Average Annual Total Return" for the period.
The performance data has been calculated to assume the current maximum sales
charges imposed by GE Funds, which are generally higher than the sales charges
formerly imposed by GE Funds.
The mutual fund results are net of fees and expenses and assume changes in share
price, reinvestment of dividends and capital gains, and, if applicable, the
deduction of any sales charges as set forth under the "Load Adjusted" column.
GEIM has voluntarily agreed to reduce or otherwise limit certain expenses of the
GE Funds. Also, certain of the results for funds that were series of Investors
Trust were favorably affected by expense waivers or limitations. Absent these
limits, the GE Funds' and Investors Trust Funds' performance would have been
lower.
The Standard & Poor's ("S&P") Composite Index of 500 stocks (S&P 500 Index), the
S&P Composite Index of 400 mid-cap stocks (S&P Mid-Cap 400 Index), the S&P/Barra
Composite Index of 500 value stocks (S&P/Barra 500 Value Index), Morgan Stanley
Capital International World Index (MSCI World), Morgan Stanley Capital
International EAFE Index (MSCI EAFE), Lehman Brothers Aggregate Bond Index (LB
Aggregate), the Lehman Brothers Municipal Bond Index (LBMI), Lehman Brothers 1-3
Year Government Bond Index (LB 1-3), the Lehman Brothers 10-Year General
Obligation Municipal Bond Index and the Lehman Brothers Government Bond Index
are unmanaged indexes and do not reflect the actual cost of investing in the
instruments that comprise each index. The S&P 500 Index is a composite of the
prices of 500 widely held stocks recognized by investors to be representative of
the stock market in general. The S&P Mid-Cap 400 Index is a
capitalization-weighted index of 400 U.S. stocks with a median market
capitalization of approximately $700 million. The S&P/Barra 500 Value Index is a
capitalization-weighted index of all the stocks in the S&P 500 Index that have
low price-to-book ratios. MSCI World Index is a composite of 1,561 stocks in
companies from 22 countries representing the European, Pacific Basin and
American regions. MSCI EAFE Index is a composite of 1,103 stocks of companies
from 20 countries representing stock markets of Europe, Australasia, New Zealand
and Far East. LB Aggregate is a composite index of short-, medium-, and
long-term bond performance and is widely recognized as a barometer of the bond
market in general. LBMI is a composite of investment grade, fixed rate municipal
bonds and is considered to be representative of the municipal bond market. The
LB 1-3 is a composite of government and U.S. Treasury obligations with
maturities of 1-3 years. The Lehman Brothers 10-Year General Obligation
Municipal Bond Index is comprised of all municipal general obligation
investment-grade debt issues with maturities between 8 and 11 years and each
issue must be at least $50 million. The Lehman Brothers Government Bond Index is
comprised of all U.S. dollar fixed-rate U.S. agency and Treasury bond issues
(excluding stripped issues) with remaining maturities greater than one year and
with at least $100 million in outstanding issuance. S&P 500 Index & LB Aggregate
Bond Index simulates a blended return which is representative of the approximate
asset allocation mix of the GE Strategic Investment Fund for the periods
presented (composed of 60% S&P 500 Index, 40% LB Aggregate). The actual
allocation mix of this Fund may have varied from time to time. The results shown
for the foregoing indexes assume the reinvestment of net dividends.
Aggregate Total Return
The Trust may use "aggregate total return" figures in
advertisements, which represent the cumulative change in value of an investment
in a Class of shares of a Fund for a specific period, and which reflects changes
in the Fund's share price and reinvestment of dividends and distributions.
Aggregate total return may be shown by means of schedules,
74
<PAGE>
charts or graphs, and may indicate subtotals of the various components of total
return (that is, the change in value of initial investment, income dividends and
capital gains distributions). Because distribution and shareholder service fees
vary across Classes, the total returns for each Class will differ. Aggregate
total return data reflects compounding over a longer period of time than does
annual total return data, and therefore aggregate total return will be higher.
The Trust also may advertise the actual annual and annualized
total return performance data for various periods of time, which may be shown by
means of schedules, charts or graphs. Actual annual or annualized total return
data generally will be lower than average annual total return data because the
latter reflects compounding of return.
The "aggregate total return" figures described in the
Prospectus represent the cumulative change in the value of an investment in a
Class for the specified period are computed by the following formula:
Aggregate Total Return = ERV - P
-------
P
Where P = a hypothetical initial payment of $1,000; and
ERV = Ending Redeemable Value of a hypothetical
$1,000 investment made at the beginning of a
1-, 5- or 10-year period at the end of the 1-,
5- or 10-year period (or fractional portion
thereof), assuming reinvestment of all
dividends and distributions.
The Trust also may advertise the actual annual and annualized
total return performance data for various periods of time, which may be shown by
means of schedules, charts or graphs. Actual annual or annualized total return
data generally will be lower than average annual total return data because the
latter reflects compounding of return. Yield and total return figures are based
on historical earnings and are not intended to indicate future performance.
The aggregate total return for the periods ended September 30,
1998 for Class A, Class B, Class C and Class D shares, respectively, of each
Fund was as follows:
Load Adjusted
Fund One Three Five Ten Since One Three Five Ten Since
Year Year Year Year Inception Year Year Year Year Inception
75
<PAGE>
Distribution Rate
The Trust may advertise a Fund's distribution rate and/or
effective distribution rate. A Fund's distribution rate differs from yield and
total return and therefore is not intended to be a complete measure of
performance.
A Fund's distribution rate measures dividends distributed for
a specified period. A Fund's distribution rate is computed by dividing the most
recent monthly distribution per share annualized by the current net asset value
per share. A Fund's effective distribution rate is computed by dividing the
distribution rate by the ratio used to annualize the distribution and
reinvesting the resulting amount for a full year on the basis of such ratio. The
effective distribution rate will be higher than the distribution rate because of
the compounding effect of the assumed reinvestment. A Fund's yield is calculated
using the standardized formula described above. In contrast, the distribution
rate is based on the Fund's last monthly distribution, which tends to be
relatively stable and may be more or less than the amount of net investment
income and short-term capital gain actually earned by the Fund during the month.
Comparative Performance Information
In addition to the comparative performance information
included in the Prospectus and otherwise quoted in sales and advertising
materials, the Trust may compare the Fund's performance with (a) the performance
of other mutual funds as listed in the rankings prepared by Lipper Analytical
Services, Inc. or similar independent services that monitor the performance of
mutual funds, (b) various unmanaged indices, including the Russell Index, S&P
500 Index, and the Dow Jones Industrial Average or (c) other appropriate indices
of investment securities or with data developed by GEIM derived from those
indices.
Performance information also may include evaluations of a Fund
published by nationally recognized ranking services and by financial
publications that are nationally recognized, such as Barron's, Business Week,
Forbes, Fortune, Institutional Investor, Kiplinger's Personal Finance, Money,
Morningstar Mutual Fund Values, The New York Times, The Wall Street Journal and
USA Today. These ranking services or publications may compare a Fund's
performance to, or rank it within, a universe of mutual funds with investment
objectives and policies similar, but not necessarily identical to, the Funds'.
Such comparisons or rankings are made on the basis of several factors, including
the size of the Fund, objectives and policies, management style and strategy,
and portfolio composition, and may change over time if any of those factors
change.
76
<PAGE>
PRINCIPAL STOCKHOLDERS
The following persons are the only persons known by the Trust
to hold beneficially more than 5% of the outstanding shares of any class of the
Funds as of [], 1998.
Name and Address Amount of Percent
of Record Owner Ownership of Class
- --------------- --------- --------
Tax-Exempt Fund, Class A
- ------------------------
Tax-Exempt Fund, Class D
- ------------------------
Income Fund, Class A
- ------------------------
Income Fund, Class B
- ------------------------
Income Fund, Class D
- ------------------------
77
<PAGE>
Global Fund, Class A
- ------------------------
Global Fund, Class B
- ------------------------
Global Fund, Class D
- ------------------------
Strategic Fund, Class A
- ------------------------
Strategic Fund, Class D
- ------------------------
Equity Fund, Class A
- ------------------------
78
<PAGE>
Equity Fund, Class D
- --------------------
International Fund, Class A
- ---------------------------
International Fund, Class B
- ---------------------------
International Fund, Class C
- ---------------------------
79
<PAGE>
International Fund, Class D
- ---------------------------
Short-Term Government Fund, Class A
- -----------------------------------
Short-Term Government Fund, Class B
- -----------------------------------
Short-Term Government Fund, Class C
- -----------------------------------
Short-Term Government Fund, Class D
- -----------------------------------
Premier Fund, Class A
- ---------------------
Premier Fund, Class B
- ---------------------
80
<PAGE>
Premier Fund, Class D
- ---------------------
Government Securities Fund, Class C
- -----------------------------------
Value Equity Fund, Class A
- --------------------------
Value Equity Fund, Class C
- --------------------------
Value Equity Fund, Class D
- --------------------------
Mid-Cap Growth Fund, Class A
- ----------------------------
Mid-Cap Growth Fund, Class C
- ----------------------------
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<PAGE>
Mid-Cap Growth Fund, Class D
- ----------------------------
Money Market Fund
- -----------------
As of [], 1998: (i) except in the case of Class C shares of
the Short-Term Government Fund, the current Trustees and officers of the Trust,
as a group, beneficially owned less than 1% of each Fund's outstanding shares;
(ii) one of the Trustees owned []% of the Class C shares of the Short-Term
Government Fund; (iii) GEFA owned []% of the outstanding shares of the Premier
Fund; and (iv) GNA Corporation owned []% of the outstanding shares of the
Short-Term Government Fund. So long as GEFA and GNA Corporation own more than
25% of the outstanding shares of the Premier Fund and the Short-Term Government
Fund, respectively, they may be deemed to control these Funds.
FUND HISTORY AND ADDITIONAL INFORMATION
The Trust is an open-end management investment company
organized as an unincorporated business trust under the laws of the Commonwealth
of Massachusetts pursuant to a Declaration of Trust dated August 10, 1992, as
amended from time to time (the "Declaration").
Currently, there are nineteen funds in the Trust. The U.S.
Equity Fund was established as a series of the Trust on August 24, 1992. The
Global Fund, the Strategic Fund, the Tax-Exempt Fund, the Income Fund and the
Money Market Fund were added as series of the Trust on November 11, 1992. The
Short-Term Government Fund and the International Fund were added as series of
the Trust on March 1, 1994. The Mid-Cap Growth Fund and the International Income
Fund were added as series of the Trust on June 17, 1994. The Premier Fund was
added as a series of the Trust on July 22, 1996. The Value Equity Fund and the
Government Securities Fund were added as series of the Trust on June 2, 1997.
The Small-Cap Value Fund, the Small-Cap Growth Fund, the Mid-Cap Value Fund and
the High Yield Fund were added as series of the Trust on May 8, 1998. The Europe
Fund and the Emerging Markets Fund were added as series of the Trust on
___________.
On September 26, 1997, the Trust, on behalf of GE Mid-Cap
Growth Fund, GE Value Equity Fund, GE Tax-Exempt Fund, GE Government Securities
Fund and GE Short-Term Government Fund, acquired all or substantially all of the
assets of Investors Trust Growth Fund, Investors Trust Value Fund, Investors
Trust Tax Free Fund, Investors Trust Government Fund and Investors Trust
Adjustable Rate Fund, respectively (each a series of Investors Trust).
In the interest of economy and convenience, physical
certificates representing
82
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shares of a Fund are not issued. State Street maintains a record of each
shareholder's ownership of shares of a Fund.
Shareholder Liability. Massachusetts law provides that
shareholders of the Funds may, under certain circumstances, be held personally
liable for the obligations of the Trust. The Declaration disclaims shareholder
liability for acts or obligations of the Trust, however, and permits notice of
the disclaimer be given in each agreement, obligation or instrument entered into
or executed by the Trust or a Trustee of the Trust. The Declaration provides for
indemnification from the property of a Fund for all losses and expenses of any
shareholder of the Fund held personally liable for the obligations of the Fund.
Thus, the risk of a shareholder of a Fund incurring financial loss on account of
shareholder liability is limited to circumstances in which the Fund would be
unable to meet its obligations, a possibility that the Trust's management
believes is remote. Upon payment of any liability incurred by a Fund, the
shareholder paying the liability will be entitled to reimbursement from the
general assets of the Fund. The Trustees intend to conduct the operations of the
Trust and the Funds in such a way so as to avoid, as far as practicable,
ultimate liability of the shareholders for liabilities of the Funds.
Shareholder Rights and Voting. When issued, shares of a Fund
will be fully paid and non-assessable. Shares are freely transferable and have
no preemptive, subscription or conversion rights. Each Class represents an
identical interest in a Fund's investment portfolio. As a result, each Class has
the same rights, privileges and preferences, except with respect to: (1) the
designation of each Class; (2) the sales arrangement; (3) certain expenses
allocable exclusively to each Class; (4) voting rights on matters exclusively
affecting a single Class; and (5) the exchange privilege of each Class. The
Board does not anticipate that there will be any conflicts among the interests
of the holders of the different Classes. The Trustees, on an ongoing basis, will
consider whether any conflict exists and, if so, will take appropriate action.
Certain aspects of the shares may be changed, upon notice to Fund shareholders,
to satisfy certain tax regulatory requirements, if the change is deemed
necessary by the Board.
When matters are submitted for shareholder vote, each
shareholder of each Fund will have one vote for each full share held and
proportionate, fractional votes for fractional shares held. In general, shares
of all Funds vote as a single class on all matters except (1) matters affecting
the interests of one or more of the Funds or Classes of a Fund, in which case
only shares of the affected Funds or Classes would be entitled to vote or (2)
when the 1940 Act requires the vote of an individual Fund. Normally, no meetings
of shareholders of the Funds will be held for the purpose of electing Trustees
of the Trust unless and until such time as less than a majority of the Trustees
holding office have been elected by shareholders of the Trust, at which time the
Trustees then in office will call a shareholders' meeting for the election of
Trustees. Shareholders of record of no less than a majority of the outstanding
shares of the Trust may remove a Trustee for cause through a declaration in
writing or by vote cast in person or by proxy at a meeting called for that
purpose. A meeting will be called for the purpose of voting on the removal of a
Trustee at the written request of holders of 10% of the Trust's outstanding
shares. Shareholders who satisfy certain criteria will be assisted by the Trust
in communicating with other shareholders in seeking the holding of the meeting.
Counsel. Willkie Farr & Gallagher, 787 Seventh Avenue, New
York, New York
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10019-6099, serves as counsel for the Trust.
Independent Accountants. PricewaterhouseCoopers LLP, 160
Federal Street, Boston, Massachusetts 02110, serves as independent accountants
of the Trust. Coopers & Lybrand L.L.P. (one of the predecessor firms of
PricewaterhouseCoopers LLP), One Post Office Square, Boston, Massachusetts
02109, served as independent accountants to Investors Trust, all or
substantially all the assets of which were acquired by the Trust on September
26, 1997.
FINANCIAL STATEMENTS
The Annual Report dated September 30, 1998, which either
accompanies this SAI or has previously been provided to the person to whom this
SAI is being sent, is incorporated herein by reference with respect to all
information other than the information set forth in the Letter to Shareholders
included in the Annual Report. The Annual Report dated October 31, 1996 for
Investors Trust Growth Fund, Investors Trust Value Fund, Investors Trust Tax
Free Fund and Investors Trust Government Fund, which are the predecessor funds
to the Mid-Cap Growth Fund, the Value Equity Fund, the Tax-Exempt Fund and the
Government Securities Fund, respectively (collectively with the Annual Report
for GE Funds, the "Financial Reports"), are incorporated herein by reference.
The Mid-Cap Value Fund, High Yield Fund, Europe Fund, and Emerging Markets Fund
commenced operations as of the date of this SAI. The International Income Fund
and the Small-Cap Growth Equity Gund have not yet commenced operations and has
no assets as of the date of this SAI. The Trust will furnish, without charge, a
copy of the Financial Reports, upon request to the Trust at P.O. Box 120065,
Stamford, CT 06912-0065, (800) 242-0134.
84
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APPENDIX
DESCRIPTION OF RATINGS
----------------------
Commercial Paper Ratings
The rating A-1+ is the highest, and A-1 the second highest
commercial paper rating assigned by S&P. Paper rated A-1+ must have either the
direct credit support of an issuer or guarantor that possesses excellent
long-term operating and financial strength combined with strong liquidity
characteristics (typically, such issuers or guarantors would display credit
quality characteristics that would warrant a senior bond rating of AA or higher)
or the direct credit support of an issuer or guarantor that possesses above
average long-term fundamental operating and financing capabilities combined with
ongoing excellent liquidity characteristics. Paper rated A-1 must have the
following characteristics: liquidity ratios are adequate to meet cash
requirements; long-term senior debt is rated A or better; the issuer has access
to at least two additional channels of borrowing; basic earnings and cash flow
have an upward trend with allowance made for unusual circumstances; typically,
the issuer's industry is well established and the issuer has a strong position
within the industry; and the reliability and quality of management are
unquestioned. Capacity for timely payment on issues rated A-2 is satisfactory.
However, the relative degree of safety is not as high as issues designated
"A-1."
The rating Prime-1 is the highest commercial paper rating
assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: (a) evaluation of the management of the issuer; (b)
economic evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks that may be inherent in certain areas; (c) evaluation of
the issuer's products in relation to competition and customer acceptance; (d)
liquidity; (e) amount and quality of long-term debt; (f) trend of earnings over
a period of ten years; (g) financial strength of parent company and the
relationships that exist with the issue; and (h) recognition by the management
of obligations that may be present or may arise as a result of public interest
questions and preparations to meet the obligations.
Issuers rated Prime-2 (or supporting institutions) have a
strong ability for repayment of senior short-term debt obligations. This
normally will be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends and coverage ratios, while sound, may be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
Short-term obligations, including commercial paper, rated A-1+
by IBCA Limited or its affiliate IBCA Inc. are obligations supported by the
highest capacity for timely repayment. Obligations rated A-1 have a very strong
capacity for timely repayment. Obligations rated A-2 have a strong capacity for
timely repayment, although that capacity may be susceptible to adverse changes
in business, economic and financial conditions.
Fitch Investors Services, Inc. employs the rating F-1+ to
indicate issues regarded as having the strongest degree of assurance of timely
payment. The rating F-1 reflects an assurance of timely payment only slightly
less in degree than issues rated F-1+, while the rating
<PAGE>
F-2 indicates a satisfactory degree of assurance of timely payment although the
margin of safety is not as great as indicated by the F-1+ and F-1 categories.
Duff & Phelps Inc. employs the designation of Duff 1 with
respect to top grade commercial paper and bank money instruments. Duff 1+
indicates the highest certainty of timely payment: short-term liquidity is
clearly outstanding and safety is just below risk-free U.S. Treasury short-term
obligations. Duff 1- indicates high certainty of timely payment. Duff 2
indicates good certainty of timely payment; liquidity factors and company
fundamentals are sound.
Thomson BankWatch Inc. employs the rating TBW-1 to indicate
issues having a very high degree of likelihood of timely payment. TBW-2
indicates a strong degree of safety regarding timely payment, however, the
relative degree of safety is not as high as for issues rated TBW-1. While the
rating TBW-3 indicates issues that are more susceptible to adverse developments
than obligations with higher ratings, capacity to service principal and interest
in a timely fashion is considered adequate. The lowest rating category is TBW-4;
this rating is regarded as non-investment grade and, therefore, speculative.
Various NRSROs utilize rankings within ratings categories
indicated by a plus or minus sign. The Funds, in accordance with industry
practice, recognize such ratings within categories or gradations, viewing for
example S&P's ratings of A-1+ and A-1 as being in S&P's highest rating category.
Description of S&P Corporate Bond Ratings
AAA -- This is the highest rating assigned by S&P to a bond
and indicates an extremely strong capacity to pay interest and repay principal.
AA -- Bonds rated AA have a very strong capacity to pay
interest and repay principal and differ from AAA issues only in small degree.
A -- Bonds rated A have a strong capacity to pay interest and
repay principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt in higher
rated categories.
BBB -- Bonds rated BBB have an adequate capacity to pay
interest and repay principal. Adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal for bonds in this category (even though they normally exhibit
adequate protection parameters) than for bonds in higher rated categories.
BB, B and CCC -- Bonds rated BB and B are regarded, on
balance, as predominately speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB
represents a lower degree of speculation than B, and CCC the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
A-2
<PAGE>
To provide more detailed indications of credit quality, the
ratings from AA to B may be modified by the addition of a plus or minus sign to
show relative standing within this major rating category.
Description of Moody's Corporate Bond Ratings
Aaa -- Bonds that are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large or
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds that are rated Aa are judged to be of high quality
by all standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present that make the long-term risks appear somewhat larger than in Aaa
securities.
A -- Bonds that are rated A possess favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present that suggest a susceptibility to impairment sometime in the
future.
Baa -- Bonds that are rated Baa are considered as medium-grade
obligations, that is, they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba -- Bonds that are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and thereby
not well safeguarded during both good and bad times over the future. Uncertainty
of position characterizes bonds in this class.
B -- Bonds that are rated B generally lack characteristics of
desirable investments. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa -- Bonds that are rated Caa are of poor standing. These
issues may be in default, or present elements of danger may exist with respect
to principal or interest.
Moody's applies numerical modifiers (1, 2 and 3) with respect
to the bonds rated Aa through B, The modifier 1 indicates that the bond being
rated ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the bond ranks
in the lower end of its generic rating category.
Description of S&P Municipal Bond Ratings
A-3
<PAGE>
AAA -- Prime -- These are obligations of the highest quality.
They have the strongest capacity for timely payment of debt service.
General Obligation Bonds -- In a period of economic stress,
the issuers will suffer the smallest declines in income and will be least
susceptible to autonomous decline. Debt burden is moderate. A strong revenue
structure appears more than adequate to meet future expenditure requirements.
Quality of management appears superior.
Revenue Bonds -- Debt service coverage has been, and is
expected to remain, substantial. Stability of the pledged revenues is also
exceptionally strong due to the competitive position of the municipal enterprise
or to the nature of the revenues. Basic security provisions (including rate
covenant, earnings test for issuance of additional bonds, debt service reserve
requirements) are rigorous. There is evidence of superior management.
AA -- High Grade -- The investment characteristics of bonds in
this group are only slightly less marked than those of the prime quality issues.
Bonds rated AA have the second strongest capacity for payment of debt service.
A -- Good Grade -- Principal and interest payments on bonds in
this category are regarded as safe although the bonds are somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions than bonds in higher rated categories. This rating describes the
third strongest capacity for payment of debt service. The ratings differ from
the two higher ratings of municipal bonds, because:
General Obligations Bonds -- There is some weakness, either in
the local economic base, in debt burden, in the balance between revenues and
expenditures, or in quality of management. Under certain adverse circumstances,
any one such weakness might impair the ability of the issuer to meet debt
obligations at some future date.
Revenue Bonds -- Debt service coverage is good, but not
exceptional. Stability of the pledged revenues could show some variations
because of increased competition or economic influences on revenues. Basic
security provisions, while satisfactory, are less stringent. Management
performance appears adequate.
BBB -- Medium Grade -- Of the investment grade ratings, this
is the lowest. Bonds in this group are regarded as having an adequate capacity
to pay interest and repay principal. Adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal for bonds in this category (even though they normally exhibit
adequate protection parameters) than for bonds in higher rated categories.
General Obligation Bonds -- Under certain adverse conditions,
several of the above factors could contribute to a lesser capacity for payment
of debt service. The difference between A and BBB ratings is that the latter
shows more than one fundamental weakness, or one very substantial fundamental
weakness, whereas, the former shows only one deficiency among the factors
considered.
Revenue Bonds -- Debt coverage is only fair. Stability of the
pledged revenues
A-4
<PAGE>
could show substantial variations, with the revenue flow possibly being subject
to erosion over time. Basic security provisions are no more than adequate.
Management performance could be stronger.
BB, B, CCC and CC -- Bonds rated BB, B, CCC and CC are
regarded, on balance, as predominately speculative with respect to capacity to
pay interest and repay principal in accordance with the terms of the obligation.
BB includes the lowest degree of speculation and CC the highest degree of
speculation. While these bonds will likely have some quality and protective
characteristics, these characteristics are outweighed by large uncertainties or
major risk exposures to adverse conditions.
C -- The rating C is reserved for income bonds on which no
interest is being paid.
D -- Bonds rated D are in default, and payment of interest
and/or repayment of principal is in arrears.
S&P's letter ratings may be modified by the addition of a plus
or a minus sign, which is used to show relative standing within the major rating
categories, except in the AAA-Prime Grade category.
Description of S&P Municipal Note Ratings
Municipal notes with maturities of three years or less are
usually given note ratings (designated SP-1, -2 or -3) to distinguish more
clearly the credit quality of notes as compared to bonds. Notes rated SP-1 have
a very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics are given the
designation of SP-1+. Notes rated SP-2 have satisfactory capacity to pay
principal and interest.
Description of Moody's Municipal Bond Ratings
Aaa -- Bonds that are rated Aaa are judged to be the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds that are rated Aa are judged to be of high quality
by all standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities, or fluctuation
of protective elements may be of greater amplitude, or there may be other
elements present that make the long-term risks appear somewhat larger than in
Aaa securities.
A -- Bonds that are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present that suggest a susceptibility to impairment sometime in the
future.
A-5
<PAGE>
Baa -- Bonds that are rated Baa are considered as medium grade
obligations, that is, they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba -- Bonds that are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and thereby
not well safeguarded during both good and bad times over the future. Uncertainty
of position characterize bonds in this class.
B -- Bonds that are rated B generally lack characteristics of
the desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa -- Bonds that are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of danger with respect
to principal or interest.
Ca -- Bonds that are rated Ca represent obligations that are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C -- Bonds that are rated C are the lowest rated class of
bonds, and issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 in each
generic rating classification from Aa through B. The modifier 1 indicates that
the security ranks in the higher end of its generic ratings category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the
issue ranks in the lower end of its generic ratings category.
Description of Moody's Municipal Note Ratings
Moody's ratings for state and municipal notes and other
short-term loans are designated Moody's Investment Grade (MIG) and for variable
rate demand obligations are designated Variable Moody's Investment Grade (VMIG).
This distinction recognizes the differences between short-term credit risk and
long-term risk. Loans bearing the designation MIG 1/VMIG 1 are the best quality,
enjoying strong protection from established cash flows of funds for their
servicing or from established and broad-based access to the market for
refinancing, or both. Loans bearing the designation MIG 2/VMIG 2 are of high
quality, with margins of protection ample, although not as large as the
preceding group. Loans bearing the designation MIG 3/VMIG3 are of favorable
quality, with all security elements accounted for but lacking the undeniable
strength of the higher grades. Market access for refinancing, in particular, is
likely to be less well established. Loans bearing the designation MIG 4/VMIG 4
are of adequate quality. Protection commonly regarded as required of an
investment security is present and although not distinctly or predominantly
speculative, there is specific risk.
A-6
<PAGE>
PART C
OTHER INFORMATION
Item 23. Exhibits
Exhibit No. Description of Exhibit
(a)(1) Declaration of Trust*
(2) Certificate of Amendment of Declaration of Trust and Change of Series
Designation*
(3) Form of Amendment to Declaration of Trust to add GE Short-Term
Government Fund ("Short-Term Government Fund") and GE International
Equity Fund ("International Fund")*
(4) Form of Amendment to Declaration of Trust to add GE Mid-Cap Growth
Fund ("Mid-Cap Growth Fund") and GE International Fixed Income Fund
("International Income Fund")*
(5) Form of Amendment to Declaration of Trust to add GE Premier Growth
Equity Fund ("Premier Fund")*
(6) Form of Amendment to Declaration of Trust to add GE Value Equity Fund
("Value Equity Fund") and GE Government Securities Fund ("Government
Securities Fund")*
(7) Form of Amendment to Declaration of Trust to add GE Small-Cap Value
Equity Fund ("Small-Cap Value Fund"), GE Small-Cap Growth Equity Fund
("Small-Cap Growth Fund"), GE Mid-Cap Value Equity Fund ("Mid-Cap Value
Fund") and GE High Yield Fund ("High Yield Fund")*
(8) Form of Amendment to Declaration of Trust to add GE Europe Equity
Fund ("Europe Fund") and GE Emerging Markets Fund ("Emerging Markets
Fund")**
(b) By-Laws*
(c) Not applicable
(d)(1) Form of Investment Advisory and Administration Agreement*
(2) Form of Investment Advisory Agreement for Short-Term Government Fund
and International Fund*
(3) Form of Investment Advisory Agreement for Mid-Cap Growth Fund and
International Income Fund*
<PAGE>
(4) Form of Investment Advisory and Administration Agreement for Premier
Fund*
(5) Form of Investment Advisory and Administration Agreement for Value
Equity Fund and Government
Securities Fund*
(6) Form of Amended and Restated Investment Advisory and Administration
Agreement for Tax-Exempt Fund*
(7) Form of Investment Advisory and Administration Agreement for
Small-Cap Value Fund, Small-Cap Growth Fund, Mid-Cap Value Fund and
High Yield Fund*
(8) Form of Investment Advisory and Administration Agreement for Europe
Fund and Emerging Markets Fund**
(9) Form of Sub-Investment Advisory Agreement for Tax-Exempt Fund*
(10) Form of Sub-Investment Advisory Agreement for Small-Cap Value Fund*
(11) Form of Sub-Investment Advisory Agreement for Mid-Cap Value Fund and
High Yield Fund**
(e) Form of Distribution Agreement, as amended*
(f) Not applicable
(g) Form of Custodian Contract*
(h)(1) Form of Transfer Agency and Service Agreement*
(2) Form of Administration Agreement for Short-Term Government Fund and
International Fund*
(3) Form of Administration Agreement for Mid-Cap Growth Fund and
International Income Fund*
(i)(1) Opinion and Consent of Willkie Farr & Gallagher, counsel to
Registrant**
(2) Opinion and Consent of Bingham Dana LLP**
(j) Consent of PricewaterhouseCoopers LLP**
(k) Not applicable
(l)(1) Purchase Agreement*
C-2
<PAGE>
(2) Form of Purchase Agreement for Short-Term Government Fund and
International Fund*
(3) Form of Purchase Agreement for Mid-Cap Growth Fund and International
Income Fund*
(m)(1) Form of Amended and Restated Shareholder Servicing and Distribution
Plan*
(2) Form of Shareholder Servicing and Distribution Plan for Short-Term
Government Fund*
(3) Form of Amended and Restated Shareholder Servicing and Distribution
Agreement*
(4) Form of Shareholder Servicing and Distribution Agreement for
Short-Term Government Fund*
(n) Financial Data Schedules**
(o) Written Plan Adopted pursuant to Rule 18f-3 under the Investment
Company Act of 1940, as amended*
- ------------
* Previously filed.
** To be filed by amendment.
Item 24. Persons Controlled by or Under
Common Control with Registrant
See Item 26.
Item 25. Indemnification
Reference is made to Article IV of the Declaration of Trust of GE
Funds ("Registrant") filed as Exhibit (a) to this Registration Statement.
Insofar as indemnification for liability arising under the Securities Act,
may be permitted for Trustees, officers and controlling persons of
Registrant pursuant to provisions of Registrant's Declaration of Trust, or
otherwise, Registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by Registrant of expenses incurred or paid by a
Trustee, officer, or controlling person of Registrant in the successful
defense of any action, suit or proceeding) is asserted by such Trustee,
officer or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as
C-3
<PAGE>
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
Item 26. Business and Other Connections of Investment Advisers
Reference is made to "About the Investment Adviser" in the
Prospectus forming Part A, and "The Management of the Trust" in the
Statement of Additional Information forming Part B, of this Registration
Statement.
The list required by this Item 26 of officers and directors of GE
Investment Management Incorporated ("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 Form ADV filed by GEIM pursuant to the Investment
Advisers Act of 1940, as amended (the "Advisers Act") (SEC File No.
801-31947).
Brown Brothers Harriman & Co. ("Brown Brothers"), the Tax-Exempt
Fund's sub-adviser, is a New York limited partnership which conducts a
general banking business and is a member of the New York Stock Exchange,
Inc. To the knowledge of the Funds, none of the general partners or officers
of Brown Brothers is engaged in any other business, profession, vocation or
employment of a substantial nature.
The list required by this Item 26 of officers and directors of
Palisade Capital Management, L.L.C. ("Palisade"), the Small-Cap Value Fund's
sub-adviser, together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by those officers
and directors during the past two years, is incorporated by reference to
Schedules A and D of the Form ADV filed by Palisade pursuant to the Advisers
Act (SEC File No. 801-48401).
The list required by this Item 26 of officers and directors of NWQ,
the Mid-Cap Value Fund's sub-adviser, together with information as to any
other business, profession, vocation or employment of a substantial nature
engaged in by those officers and directors during the past two years, is
incorporated by reference to Schedules A and D of the Form ADV filed by NWQ
pursuant to the Advisers Act (SEC File No. 801-42159).
The list required by this Item 26 of partners and officers of
Miller Anderson & Sherrerd, LLP ("MAS"), the High Yield Fund's sub-adviser,
together with information as to any other business, profession, vocation or
employment of a substantial nature engaged in by those partners and officers
during the past two years, is incorporated by reference to Schedules B and D
of the Form ADV filed by MAS pursuant to the Advisers Act (SEC File No.
801-10437).
C-4
<PAGE>
Item 27. Principal Underwriters
(a) GE Investment Distributors, Inc. ("GEID") also serves as
distributor for GE Investments Funds, Inc., GE Institutional Funds, GE
LifeStyle Funds, 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 GEID is incorporated by reference to Schedule A of
Form BD filed by GEID pursuant to the Securities Exchange Act of 1934 (SEC
File No. 8-45710).
(c) Not applicable.
Item 28. Location of Accounts and Records
All accounts, books and other documents required to be maintained
by Registrant pursuant to Section 31(a) of the 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; 777 Long Ridge Road, Stamford, Connecticut 06927; 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., a subsidiary of State Street,
located at P.O. Box 419631, Kansas City, Missouri 64141-6631.
Item 29. Management Services
Not applicable.
Item 30. Undertakings
Not applicable.
C-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, Registrant has duly caused
this Amendment to the Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Stamford, State
of Connecticut, on this 12th day of November, 1998.
By: /s/ Michael J. Cosgrove
-----------------------
Michael J. Cosgrove
President and Chairman
of the Board
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment to Registrant's Registration Statement on Form N-1A has been
signed below by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Michael J. Cosgrove President and November 12, 1998
- ----------------------- Chairman of the board (Chief
Michael J. Cosgrove Executive Officer)
/s/ John R. Costantino Trustee November 12, 1998
- ----------------------
John R. Costantino
/s/ Alan M. Lewis Trustee November 12, 1998
- ---------------------------------------
Alan M. Lewis
/s/ William J. Lucas Trustee November 12, 1998
- ---------------------------------------
William J. Lucas
/s/ Robert P. Quinn Trustee November 12, 1998
- ---------------------------------------
Robert P. Quinn
/s/ Jeffrey A. Groh Treasurer November 12, 1998
- --------------------------------------- (Chief Financial and
Jeffrey A. Groh Accounting Officer)
</TABLE>
