<PAGE>
Prospectus
January 30, 1999
--------------
GE Funds
- -------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------
Asset Allocation Funds
GE Strategic Investment Fund
- -------------------------------------------------------------------------------
Money Market Funds
GE Money Market Fund
- -------------------------------------------------------------------------------
Like all mutual funds, the Funds' shares have not been approved or disapproved
by the Securities and Exchange Commission, nor has the Securities and Exchange
Commission passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
[GE LOGO]
<PAGE>
-------------------------------------
Contents
- -------------------------------------------------------------------------------
GE Funds
Prospectus
<TABLE>
<CAPTION>
<S> <C>
Equity Funds 2
GE U.S. Equity Fund 4
GE Premier Growth Equity Fund 6
GE Value Equity Fund 8
GE Mid-Cap Growth Fund 10
GE Mid-Cap Value Equity Fund 12
GE Small-Cap Value Equity Fund 13
GE Global Equity Fund 14
GE International Equity Fund 16
GE Europe Equity Fund 18
GE Emerging Markets Fund 19
Income Funds 20
GE Fixed Income Fund 22
GE Government Securities Fund 24
GE Short-Term Government Fund 26
GE Tax-Exempt Fund 28
GE High Yield Fund 30
Asset Allocation Funds 32
GE Strategic Investment Fund 34
Money Market Funds 36
GE Money Market Fund 38
Fund Expenses 40
More on Strategies and Risks 46
More on Risks 46
Other Risk Considerations 50
More on Investment Strategies 50
About the Investment Adviser 56
Investment Adviser and
Administrator 56
About the Funds' Portfolio
Managers 57
About the Sub-Advisers 58
Prior Performance Information 60
How to Invest 64
How to Buy Shares 64
Choosing a Share Class 66
How to Redeem Shares 70
How to Exchange Shares 72
Distribution and Shareholder
Service Fees 73
Dividends, Capital Gains and
Other Tax Information 74
Calculating Share Value 76
Appendix: Financial Highlights 78
</TABLE>
Additional information regarding the Funds is contained in the Statement of
Additional Information dated January 30, 1999, which is incorporated by
reference into (legally forms a part of) this Prospectus.
<PAGE>
- --------------------------------------------------
2 GE Funds Equity Funds
Prospectus
- --------------------------------------------------------------------------------
An investment in a GE Equity Fund is not a deposit of any bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. Investment in the Equity Funds is subject to risk,
including possible loss of principal invested.
Who may want to invest in a GE Equity Fund?
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
GE Equity Funds may not be 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, and rights and warrants of U.S. and foreign companies. Stocks represent
an ownership interest in a corporation. Equity funds have more potential for
capital growth than other funds, but they have greater risk.
<PAGE>
----------
3
- --------------------------------------------------------------------------------
The following are important definitions that may be unfamiliar to an investor
reading about 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.
Depositary receipts represent interests in an account at
a bank or trust company which holds equity securities. These interests may
include American Depositary Receipts (held at U.S. banks and traded in the
United States), European Depositary Receipts, Global Depositary Receipts or
other similar instruments.
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.
Types of investment styles the Equity Funds may use
Growth investing involves buying stocks with above-average growth rates.
Typically, growth stocks are the stocks of faster growing companies in more
rapidly growing sectors of the economy. Generally, growth stock valuation
levels will be higher than 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.
The above definitions should be read together with the fund summaries on the
following pages to the extent applicable.
<PAGE>
- ---------------------
4 GE Funds
Prospectus
Equity Funds
- --------------------------------------------------------------------------------
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(R) investment strategy that combines
growth and value investment management styles. As a result, the portfolio has
characteristics similar to the Standard & Poor's 500 Composite Stock Index,
including capital appreciation and income. Stock selection is key to the
performance of the Fund.
Through fundamental company research, the portfolio managers seek to identify
securities of large companies with characteristics such as:
o attractive valuations
o financial strength
o high quality management focused on generating shareholder value
The Fund also may invest to a lesser extent in foreign securities and debt
securities. The 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 and risks, please refer to "More on Strategies and Risks" later in
this Prospectus.
<PAGE>
----------
5
- --------------------------------------------------------------------------------
Fund Performance
The bar chart and table opposite illustrate the short-term variability in
the Fund's performance and the Fund's returns relative to a common measure
of performance. The bar chart illustrates how the Fund's performance varies
from year to year over the periods shown. 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, Class A's highest return for a
quarter was 19.77% for the quarter ended December 31, 1998. The lowest return
for a quarter was -10.18% for the quarter ended September 30, 1998.
The table opposite illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of the Standard & Poor's 500
Composite Stock Index (S&P 500 Index(R)). The table reflects the impact of the
Fund's expenses and sales charges for each share class. It assumes that you sold
your shares at the end of each period.
Calendar Year Total Returns
Class A Shares
[BAR CHART]
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
23% 32% 22% 35.5% 2%
Average Annual Total Return
(as of December 31, 1998)
<TABLE>
<CAPTION>
Since
1 Year 5 Years Inception*
------ ------- ----------
<S> <C> <C> <C>
GE U.S. Equity Fund
Class A 15.95% 19.75% 19.75%
Class B 18.40% 20.52% 20.72%
Class C 23.32% 21.45% 20.38%
Class D 23.67% 21.75% 21.70%
S&P 500 Index 28.70% 24.08% 24.08%**
</TABLE>
Both the bar chart and table assume reinvestment of dividends and
distributions. If GE Investment Management had not reduced certain expenses
during the periods shown, the Fund's total returns would have been lower. As
with all mutual funds, past performance is not an indication of future
performance.
* Inception date (commencement of investment operations):
Class A - January 1, 1994
Class B - December 22, 1993
Class C - February 22, 1993
Class D - November 29, 1993
** Since January 1, 1994
All mutual funds use a standard formula to calculate total return. Total
return measures the price change in a share assuming the reinvestment of all
dividend income and capital gain distributions.
<PAGE>
- ---------------------
6 GE Funds
Prospectus
Equity Funds
- --------------------------------------------------------------------------------
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/or growth potential. The portfolio manager chooses equity
securities from a number of industries based on the merits of individual
companies. Stock selection is key to the performance of the Fund.
The portfolio manager seeks to identify stocks of growth companies with
characteristics such as:
o above-average annual growth rates
o financial strength
o leadership in their respective industries
o high quality management focused on generating shareholder value
The Fund also may invest to a lesser extent in foreign securities and debt
securities. The 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 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.
<PAGE>
----------
7
- --------------------------------------------------------------------------------
Fund Performance
The bar chart and table opposite illustrate the short-term variability in
the Fund's performance and the Fund's returns relative to a common measure
of performance. The bar chart illustrates how the Fund's performance varies
from year to year over the periods shown. 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, Class A's highest return for a
quarter was 23.40% for the quarter ended December 31, 1998 The lowest
return for a quarter was -6.73% for the quarter ended September 30, 1998.
The table opposite illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of the Standard & Poor's 500
Composite Stock Index (S&P 500 Index(R)), 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.
Calendar Year Total Returns
Class A Shares
[BAR CHART]
1998 1997
---- ----
35% 26%
Average Annual Total Return
(as of December 31, 1998)
<TABLE>
<CAPTION>
Since
1 Year Inception*
------ ----------
<S> <C> <C>
GE Premier Growth
Equity Fund
Class A 27.27% 26.69%
Class B 30.37% 29.10%
Class C 35.39% 30.85%
Class D 35.75% 31.18%
S&P 500 Index 28.70% 30.98%**
</TABLE>
Both the bar chart and table assume reinvestment of dividends and
distributions. If GE Investment Management had not reduced certain expenses
during the periods shown, the Fund's total returns would have been lower. As
with all mutual funds, past performance is not an indication of future
performance.
* Inception date (commencement of investment operations):
All classes - December 31, 1996
** Since December 31, 1996
All mutual funds use a standard formula to calculate total return. Total
return measures the price change in a share assuming the reinvestment of all
dividend income and capital gain distributions.
<PAGE>
- ---------------------
8 GE Funds
Prospectus
Equity Funds
- --------------------------------------------------------------------------------
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 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.
<PAGE>
----------
9
- --------------------------------------------------------------------------------
Fund Performance
The bar chart and table opposite illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to a common measure of
performance. The bar chart illustrates how the Fund's performance varies from
year to year over the periods shown. 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, Class A's highest return for a
quarter was 20.39% for the quarter ended June 30, 1997. The lowest return for
a quarter was -10.22% for the quarter ended September 30, 1998.
The table opposite illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of the Standard & Poor's
500/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.
Calendar Year Total Returns
Class A Shares
[BAR CHART]
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
24% 33% 23% 30% 2%
Average Annual Total Return
(as of December 31, 1998)
<TABLE>
<CAPTION>
Since
1 Year 5 Years Inception*
------ ------- ----------
<S> <C> <C> <C>
GE Value Equity Fund
Class A 17.20% 19.50% 18.54%
Class B 19.59% 20.05% 19.09%
Class C 24.69% - 20.47%
Class D - - 24.48%
S&P Value Index 14.68% 19.87% 18.60%**
</TABLE>
Both the bar chart and table assume reinvestment of dividends and
distributions. If GE Investment Management had not reduced certain expenses
during the periods shown, the Fund's total returns would have been lower. As
with all mutual funds, past performance is not an indication of future
performance.
* Inception date (commencement of investment operations):
Class A - September 8, 1993
Class B - September 8, 1993
Class C - October 2, 1997
Class D - January 5, 1998
** Since September 1, 1993
All mutual funds use a standard formula to calculate total return. Total
return measures the price change in a share assuming the reinvestment of all
dividend income and capital gain distributions.
<PAGE>
- ---------------------
10 GE Funds
Prospectus
Equity Funds
- -------------------------------------------------------------------------------
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 January 6, 1999, the market
capitalization of companies in the index ranged from $271 million to $11.4
billion. The portfolio manager will not sell a stock merely because the market
capitalization of a company in the portfolio moves above or below the maximum
or minimum capitalization of the index. Stock selection is key to the
performance of the Fund.
The portfolio manager seeks to identify securities of growth companies with
characteristics such as:
o above-average revenue and earnings growth
o reasonable valuation
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.
<PAGE>
----------
11
- --------------------------------------------------------------------------------
Fund Performance
The bar chart and table opposite illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to a common measure of
performance. The bar chart illustrates how the Fund's performance varies from
year to year over the periods shown. 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, Class A's highest return for a
quarter was 19.55% for the quarter ended June 30, 1997 The lowest return for
a quarter was -18.52% for the quarter ended September 30, 1998.
The table opposite illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of the Standard & Poor's
MidCap 400 Stock Index (S&P MidCap Index). The table reflects the impact of
the Fund's expenses and sales charges for each share class. It assumes that
you sold your shares at the end of each period.
Calendar Year Total Returns
Class A Shares
[BAR CHART]
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
3% 26% 18% 32% -1%
Average Annual Total Return
(as of December 31, 1998)
<TABLE>
<CAPTION>
Since
1 Year 5 Years Inception*
------ ------- ----------
<S> <C> <C> <C>
GE Mid-Cap Growth Fund
Class A -2.48% 13.55% 13.60%
Class B -1.12% 14.12% 14.12%
Class C 3.79% - -.48%
Class D - - 4.00%
S&P MidCap Index 18.66% 18.63% 18.09%**
</TABLE>
Both the bar chart and table assume reinvestment of dividends and
distributions. If GE Investment Management had not reduced certain expenses
during the periods shown, the Fund's total returns would have been lower. As
with all mutual funds, past performance is not an indication of future
performance.
* Inception date (commencement of investment operations):
Class A - September 8, 1993
Class B - September 8, 1993
Class C - October 2, 1997
Class D - January 5, 1998
** Since September 1, 1993
All mutual funds use a standard formula to calculate total return. Total
return measures the price change in a share assuming the reinvestment of all
dividend income and capital gain distributions.
<PAGE>
- ---------------------
12 GE Funds
Prospectus
Equity Funds
- --------------------------------------------------------------------------------
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, between
$1.3 and $8.4 billion as of December 31, 1998. 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.
Fund Background
Because the Fund is new, it does not have any performance history. Performance
information will be included in the Fund's next available annual or
semi-annual report.
Prior performance information of Jon Bosse, the Fund's portfolio manager, can
be found under "Prior Performance Information" beginning on page 60.
<PAGE>
----------
13
- --------------------------------------------------------------------------------
GE Funds Prospectus Equity Funds
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 December 31, 1998, the
market capitalization of companies in the index ranged from $4.4 million to
$3.21 billion. The portfolio managers will not sell a stock merely because the
market capitalization of a company in the portfolio moves above or below the
maximum or minimum capitalization of the index. Stock selection is key to the
performance of the Fund.
The portfolio managers seek to identify securities of companies with
characteristics such as:
o high quality management
o attractive products or services
o appropriate capital structure
o strong competitive positions in their industries
o management focused on generating shareholder value
The Fund also may invest to a lesser extent in securities with capitalizations
outside the small-cap range, debt securities and foreign securities. The 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.
Fund Background
Because the Fund is new, it does not have any performance history. Performance
information will be included in the Fund's next available annual or
semi-annual report.
Prior performance information of the Senior Investment Commitee of Palisade
Capital Management, L.L.C., the Fund's sub-adviser, can be found under "Prior
Performance Information" beginning on page 60.
<PAGE>
- ---------------------
14 GE Funds
Prospectus
Equity Funds
- --------------------------------------------------------------------------------
GE Global
Equity Fund
Investment Objective: Seeks long-term growth of capital.
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 will 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.
<PAGE>
----------
15
- --------------------------------------------------------------------------------
Fund Performance
The bar chart and table opposite illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to a common measure of
performance. The bar chart illustrates how the Fund's performance varies from
year to year over the periods shown. 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, Class A's highest return for a
quarter was 21.86% for the quarter ended December 31, 1998. The lowest return
for a quarter was -18.87% for the quarter ended September 30, 1998.
The table opposite illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of the Morgan Stanley
Capital International 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.
Calendar Year Total Returns
Class A Shares
[BAR CHART]
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
16% 7% 14% 14% -2%
Average Annual Total Return
(as of December 31, 1998)
Since
1 year 5 years Inception*
------ ------- ----------
GE Global Equity Fund
Class A 9.36% 8.27% 8.27%
Class B 11.42% 9.06% 9.58%
Class C 16.31% 9.84% 12.72%
Class D 16.57% 10.13% 11.73%
MSCIW Index 24.34% 15.68% 15.68%**
Both the bar chart and table assume reinvestment of dividends and
distributions. If GE Investment Management had not reduced certain expenses
during the periods shown, the Fund's total returns would have been lower. As
with all mutual funds, past performance is not an indication of future
performance.
* Inception date (commencement of investment operations):
Class A - January 1, 1994
Class B - December 22, 1993
Class C - February 22, 1993
Class D - November 29,1993
** Since January 1, 1994
All mutual funds use a standard formula to calculate total return. Total
return measures the price change in a share assuming the reinvestment of all
dividend income and capital gain distributions.
<PAGE>
- ---------------------
16 GE Funds
Prospectus
Equity Funds
- --------------------------------------------------------------------------------
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 will grow faster
than relevant markets and whose security price does not fully reflect their
potential growth. Under normal circumstances, the Fund's assets are invested
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 investment strategies
and risks associated with this Fund, please refer to "More on Strategies and
Risks" later in this Prospectus.
<PAGE>
----------
17
- --------------------------------------------------------------------------------
Fund Performance
The bar chart and table opposite illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to a common measure of
performance. The bar chart illustrates how the Fund's performance varies from
year to year over the periods shown. 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, Class A's highest return for a
quarter was 17.55% for the quarter ended March 31, 1998. The lowest return for
a quarter was -18.10% for the quarter ended September 30, 1998.
The table opposite illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of the Morgan Stanley
Capital International Europe Australasia Far East Index (MSCI EAFE Index). The
table reflects the impact of the Fund's expenses and sales charges for each
share class. It assumes that you sold your shares at the end of each period.
Calendar Year Total Returns
Class A Shares
[BAR CHART]
1998 1997 1996 1995
---- ---- ---- ----
14% 6% 12% 14%
Average Annual Total Return
(as of December 31, 1998)
<TABLE>
<CAPTION>
Since
1 year Inception*
------ ----------
<S> <C> <C>
GE International
Equity Fund
Class A 7.37% 7.21%
Class B 9.67% 7.98%
Class C 14.17% 8.79%
Class D 14.60% 9.15%
MSCI EAFE Index 20.00% 7.76%**
</TABLE>
Both the bar chart and table assume reinvestment of dividends and
distributions. If GE Investment Management had not reduced certain expenses
during the periods shown, the Fund's total returns would have been lower. As
with all mutual funds, past performance is not an indication of future
performance.
* Inception date (commencement of investment operations): All classes -
March 2, 1994
** Since March 1, 1994
All mutual funds use a standard formula to calculate total return. Total
return measures the price change in a share assuming the reinvestment of all
dividend income and capital gain distributions.
<PAGE>
- ---------------------
18 GE Funds
Prospectus
Equity Funds
- --------------------------------------------------------------------------------
GE Europe Equity Fund
Investment Objective: Seeks long-term growth of capital.
Developed European countries
currently include:
Austria
Belgium
Denmark
Finland
France
Germany
Greece
Ireland
Italy
Luxembourg
the Netherlands
Norway
Portugal
Spain
Sweden
Switzerland
United Kingdom
The Strategy
The GE Europe Equity Fund invests primarily in equity securities of issuers
located in developed European countries. The portfolio managers focus on
companies that are expected to grow faster than relevant markets and whose
security price does not fully reflect their potential growth. Under normal
circumstances, the Fund's assets are invested 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.
The portfolio managers seek to identify securities of growth companies with
characteristics such as:
o low prices relative to their long-term cash earnings potential
o potential for significant improvement in the company's business
o financial strength
o sufficient liquidity
The Fund may also invest to a lesser extent in securities of companies
representing European emerging market countries, developed or emerging
countries outside of Europe (including the United States) and debt securities.
European emerging market countries include the Czech Republic, Poland,
Hungary, Turkey, Russia and other former republics of the Soviet Union. The
portfolio managers may use various investment techniques to adjust the Fund's
investment exposure, but there is no guarantee that these techniques will
work.
The Risks
The principal risks of investing in this Fund are stock market risk, foreign
exposure risk and style 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.
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.
<PAGE>
----------
19
- --------------------------------------------------------------------------------
GE Emerging
Markets
Fund
Investment Objective: Seeks long-term growth of capital.
The Strategy
The Emerging Markets Fund invests primarily in equity securities of issuers
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 an issuer is located in an emerging market
country: country of organization, primary securities trading market, location
of assets, or country where the issuer derives at least half of its revenues
and profits.
An emerging market country is any country having an economy and market that
are (or would be) considered by the World Bank to be emerging or developing,
or listed in the Morgan Stanley Capital International Emerging Markets Index.
Emerging market countries are located in regions such as Asia, Latin America,
the Middle East, Southern Europe, Eastern Europe (including the former
republics of the Soviet Union and the Eastern Bloc) and Africa.
The portfolio managers seek to identify securities of growth companies with
characteristics such as:
o low prices relative to their long-term cash earnings potential
o potential for significant improvement in the company's business
o financial strength
o sufficient liquidity
The Fund may also invest to a lesser extent in securities of companies located
in countries other than emerging market countries (including the United
States) and debt securities. The portfolio managers may use various investment
techniques to adjust the Fund's investment exposure, but there is no guarantee
that these techniques will work.
The Risks
The principal risks of investing in this Fund are stock market risk, foreign
exposure risk, emerging markets risk and style 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.
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.
<PAGE>
- ---------------------------------------------------
20 GE Funds Income
Prospectus Funds
- --------------------------------------------------------------------------------
An investment in a GE Income Fund is not a deposit of any bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. Investment in the Income Funds is subject to risk,
including possible loss of principal invested.
Who may want to invest in a GE Income Fund?
GE Income Funds may be appropriate for your investment portfolio if you:
o seek regular income
o seek lower potential 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
GE Income Funds may not be 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 that may be unfamiliar to an investor
reading 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
<PAGE>
----------
21
- --------------------------------------------------------------------------------
High yield securities are debt securities of corporations, preferred stock and
convertible bonds and convertible preferred stock rated Ba through C by
Moody's or BB through D by S&P (or comparably rated by another nationally
recognized statistical rating organization) or, if not rated by Moody's or
S&P, are considered by portfolio management to be of equivalent quality. High
yield securities include bonds rated below investment grade, sometimes called
"junk bonds," and are considered speculative by the major credit rating
agencies.
Investment-grade securities are rated Baa or better by Moody's and BBB or
better by S&P, or are comparably rated by another nationally recognized
statistical rating organization, or, if not rated, are of similar quality to
such securities. Securities rated in the fourth highest grade have some
speculative elements.
Mortgage-backed securities include securities issued by the Government
National Mortgage Association (Ginnie Mae), the Federal National Mortgage
Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie
Mac) and other government agencies and private issuers. They may also include
collateralized mortgage obligations ("CMOs") which are derivative securities
that are fully collateralized by a portfolio of mortgages.
Money market securities are short-term debt securities of the U.S. government,
banks and corporations. The Funds may invest in money market securities through
investments in the GEI Short-Term Investment Fund (Investment Fund), The
Investment Fund is advised by GE Investment Management, which charges no
advisory fee for such services.
Municipal securities are debt obligations of local, state or regional
governments. Municipal securities generally include both municipal bonds
(securities with maturities of more than one year) and municipal notes
(securities with maturities of less than one year). 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.
U.S. Government securities are issued or guaranteed by the U.S. Government or
one of its agencies or instrumentalities. Some U.S. Government Securities are
backed by the full faith and credit of the federal government. Other U.S
Government Securities are backed by the issuer's right to borrow from the U.S.
Treasury and some are backed only by the credit of the issuing organization. All
U.S. Government Securities are considered highly creditworthy.
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, interest-only and principal-only debt securities, mortgage-backed
securities like CMO's, and structured securities.
Maturity -- the date on which a debt security matures or when the issuer must
pay back the principal amount of the security.
Weighted average 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.
Duration -- a mathematical calculation of the average life of a bond (or
portfolio of bonds) that serves as a useful measure of the security's
sensitivity to changes in interest rates. Each year of duration approximates
an expected one percent change in the bond's price for every one percent
change in the interest rate.
The above definitions should be read together with the fund summaries on the
following pages to the extent applicable.
<PAGE>
- ---------------------
22 GE Funds
Prospectus
Income Funds
- -------------------------------------------------------------------------------
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 a weighted average
maturity of approximately five to ten years.
The portfolio managers seek to identify debt securities with characteristics
such as:
o attractive yields and prices
o the potential for capital appreciation
o reasonable credit quality
The Fund also may invest to a lesser extent in asset-backed securities and
foreign securities. The portfolio managers may use various investment
techniques to adjust the Fund's investment exposure, but there is no guarantee
that these techniques will work.
The Fund's investment strategy may result in a high portfolio turnover rate,
which may cause the Fund to experience increased transaction costs and
shareholders to incur increased taxes on their investment in the Fund.
The Risks
The principal risks of investing in 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.
Certain portfolio securities are derivative securities that carry derivatives
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.
<PAGE>
----------
23
- --------------------------------------------------------------------------------
Fund Performance
The bar chart and table opposite illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to a common measure of
performance. The bar chart illustrates how the Fund's performance varies from
year to year over the periods shown. 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, Class A's highest return for a
quarter was 5.77% for the quarter ended June 30, 1995. The lowest return for
a quarter was -2.53% for the quarter ended March 31, 1994.
The table opposite illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of the Lehman Brothers
Aggregate Bond Index (LB Aggregate Bond Index). The table reflects the impact
of the Fund's expenses and sales charges for each share class. It assumes that
you sold your shares at the end of each period.
Calendar Year Total Returns
Class A Shares
[BAR CHART]
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
8% 8% 3% 17% -3%
Average Annual Total Return
(as of December 31, 1998)
<TABLE>
<CAPTION>
Since
1 year 5 years Inception*
------ ------- ----------
<S> <C> <C> <C>
GE Fixed Income Fund
Class A 2.98% 5.44% 5.44%
Class B 4.02% 5.84% 5.85%
Class C 7.91% 6.62% 6.54%
Class D 8.09% 6.88% 6.85%
LB Aggregate Bond Index 8.67% 7.27% 7.27%**
</TABLE>
Both the bar chart and table assume reinvestment of dividends and
distributions. If GE Investment Management had not reduced certain expenses
during the periods shown, the Fund's total returns would have been lower. As
with all mutual funds, past performance is not an indication of future
performance.
* Inception date (commencement of investment operations):
Class A - January 1, 1994
Class B - December 22, 1993
Class C - February 22, 1993
Class D - November 29, 1993
** Since January 1, 1994
All mutual funds use a standard formula to calculate total return. Total
return measures the price change in a share the assuming the reinvestment of
all dividend income and capital gain distributions.
<PAGE>
- ----------------------
24 GE Funds
Prospectus
Income Funds
- --------------------------------------------------------------------------------
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,
including mortgage-backed 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
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 or comparably rated by another nationally
recognized statistical rating organization, 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 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.
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.
Certain portfolio securities are derivative securities that carry derivative
securities 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.
<PAGE>
----------
25
- --------------------------------------------------------------------------------
Fund Performance
The bar chart and table opposite illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to a common measure of
performance. The bar chart illustrates how the Fund's performance varies from
year to year over the periods shown. 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, Class B's highest return for a
quarter was 6.87% for the quarter ended June 30, 1989. The lowest return for
a quarter was -4.85% for the quarter ended June 30, 1994.
The table opposite 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 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.
Calendar Year Total Returns
Class B Shares
[BAR CHART]
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
8% 9% 2% 14% -9% 8% 8% 14% 9% 13%
Average Annual Total Return
(as of December 31, 1998)
<TABLE>
<CAPTION>
Since
1 year 5 years 10 years Inception*
------ ------- -------- ----------
<S> <C> <C> <C> <C>
GE Government
Securities Fund
Class A 4.18% 4.11% - 3.68%
Class B 5.32% 4.35% 7.19% -
Class C 8.75% - - 8.64%
LB Government
Bond Index 9.85% 7.18% 9.17%
</TABLE>
Both the bar chart and table assume reinvestment of dividends and
distributions. If GE Investment Management had not reduced certain expenses
during the periods shown, the Fund's total returns would have been lower. As
with all mutual funds, past performance is not an indication of future
performance.
* Inception date (commencement of investment operations):
Class A - September 8, 1993
Class B - April 22, 1987
Class C - October 28, 1997
All mutual funds use a standard formula to calculate total return. Total
return measures the price change in a share assuming the reinvestment of all
dividend income and capital gain distributions.
<PAGE>
- ---------------------
26 GE Funds
Prospectus
Income Funds
- --------------------------------------------------------------------------------
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 a weighted 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 Fund's investment strategy may result in a high portfolio turnover rate,
which may cause the Fund to experience increased transaction costs and
shareholders to incur increased taxes on their investment in the Fund.
The Risks
The principal risks of investing in this Fund are interest rate risk, credit
risk and prepayment risk. Certain portfolio securities are derivative
securities that carry derivative securities 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.
<PAGE>
----------
27
- --------------------------------------------------------------------------------
Fund Performance
The bar chart and table opposite illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to a common measure of
performance. The bar chart illustrates how the Fund's performance varies from
year to year over the periods shown. 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, Class A's highest return for a
quarter was 3.08% for the quarter ended June 30, 1995. The lowest return for
a quarter was 0.21% for the quarter ended March 31, 1996.
The table opposite 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.
Calendar Year Total Returns
Class A Shares
[BAR CHART]
Average Annual Total Return
(as of December 31, 1998)
<TABLE>
<CAPTION>
Since
1 year Inception*
------ ----------
<S> <C> <C>
GE Short-Term
Government Fund
Class A 3.40% 4.86%
Class B 2.75% 5.05%
Class C 6.28% 5.69%
Class D 6.56% 5.94%
LB 1-3 Year
Government Bond
Index 6.97% 6.16%**
</TABLE>
Both the bar chart and table assume reinvestment of dividends and
distributions. If GE Investment Management had not reduced certain expenses
during the periods shown, the Fund's total returns would have been lower. As
with all mutual funds, past performance is not an indication of future
performance.
* Inception date (commencement of investment operations):
All Classes - March 2, 1994
** Since March 1, 1994
All mutual funds use a standard formula to calculate total return. Total
return measures the price change in a share assuming the reinvestment of all
dividend income and capital gain distributions.
<PAGE>
- ---------------------
28 GE Funds
Prospectus
Income Funds
- --------------------------------------------------------------------------------
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.
The Fund generally will have an effective duration of 75% to 125% of the
duration of the Lehman Brothers 10-Year Municipal Index (Lehman Index). As of
December 31, 1998, the duration of the Lehman Index was 6.83 years.
The portfolio manager seeks to identify debt securities with characteristics
such as:
o attractive yields and prices
o the potential for income generation
o the potential for capital appreciation
o reasonable credit quality
The Fund also may invest to a lesser extent in 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.
<PAGE>
----------
29
- --------------------------------------------------------------------------------
Fund Performance
The bar chart and table opposite illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to a common measure of
performance. The bar chart illustrates how the Fund's performance varies from
year to year over the periods shown. 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, Class A's highest return for a
quarter was 6.47% for the quarter ended May 31, 1995. The lowest return for
a quarter was -4.30% for the quarter ended March 31, 1994.
The table opposite 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.
Calendar Year Total Returns
Class A Shares
[BAR CHART]
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
5% 7% 4% 15% -4%
Average Annual Total Return
(as of December 31, 1998)
<TABLE>
<CAPTION>
Since
1 Year 5 Years Inception*
------ ------- ----------
<S> <C> <C> <C>
GE Tax-Exempt Fund
Class A .58% 4.50% 4.54%
Class B 1.41% 5.11% 5.09%
Class C 5.26% - 5.53%
Class D 5.98% - 6.15%
LB 10-Year Muni Index 6.76% 6.35% 6.47%**
</TABLE>
Both the bar chart and table assume reinvestment of dividends and distributions.
If GE Investment Management had not reduced certain expenses during the periods
shown, the Fund's total returns would have been lower. As with all mutual funds,
past performance is not an indication of future performance.
* Inception date (commencement of investment operations):
Class A - September 8, 1993
Class B - September 8, 1993
Class C - September 26, 1997
Class D - September 26, 1997
** Since September 1, 1993
Tax-Exempt Investing/Tax-exempt investing usually benefits investors in higher
tax brackets.
All mutual funds use a standard formula to calculate total return. Total return
measures the price change in a share assuming the reinvestment of all dividend
income and capital gain distributions.
<PAGE>
- ---------------------
30 GE Funds
Prospectus
Income Funds
- --------------------------------------------------------------------------------
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 Fund
expects to achieve its objective by earning a high rate of current income,
although the Fund may seek capital growth opportunities when consistent with
its objective. The Fund's average weighted maturity will ordinarily be greater
than five years.
The portfolio managers use equity and fixed income valuation techniques,
analyses of economic and industry trends and maturity and duration management
to determine the portfolio's 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 debt securities,
including high yield securities of foreign issuers. The Fund also may use
derivatives to pursue its portfolio strategy. 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 high yield securities risk.
The Fund is also subject to interest rate risk, credit risk, prepayment risk
and style risk. To the extent that the portfolio managers invest in foreign
securities and derivatives, the Fund would be subject to foreign exposure
risk, emerging markets risk and derivative securities risk.
Because the Fund invests primarily in high yield securities that are
considered speculative, investment in the Fund may not be suitable for all
investors.
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.
Fund Background
Because the Fund is new, it does not have any performance history. Performance
information will be included in the Fund's next available annual or semi-annual
report
Prior performance information of Miller Anderson & Sherrerd. LLP. the Fund's
sub-adviser, can be found under "Prior Performance Information" beginning on
page 60.
<PAGE>
----------
31
- --------------------------------------------------------------------------------
[This Page Intentionally Left Blank]
<PAGE>
- --------------------------------------------------
32 GE Funds Asset Allocation
Prospectus Funds
- --------------------------------------------------------------------------------
An investment in a GE Asset Allocation Fund is not a deposit of any bank and
is not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other agency. Investment in a GE Asset Allocation Funds is subject to
risk, including possible loss of principal invested.
Who may want to invest in a GE Asset Allocation Fund?
An Asset Allocation 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 typically 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.
<PAGE>
----------
33
- --------------------------------------------------------------------------------
The following are important definitions that may be unfamiliar to an investor
reading 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.
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.
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 interests in an account at a bank or trust company
which holds equity securities. These interests may include American Depositary
Receipts (held at U.S. banks and traded in the United States), European
Depositary Receipts, Global Depositary Receipts or other similar instruments.
The above definitions should be read together with the fund summary on the
following pages.
<PAGE>
- ---------------------
34 GE Funds
Prospectus
Asset Allocation
Funds
- --------------------------------------------------------------------------------
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
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 principally for their capital appreciation
potential and debt securities principally for their income potential. Within
each asset class, the portfolio managers use active security selection to
choose securities based on the merits of individual issuers.
The portfolio managers seek to identify equity securities of companies with
characteristics such as:
o strong earnings growth
o attractive prices
o a presence in successful industries
o high quality management
The portfolio managers seek to identify debt securities with characteristics
such as:
o attractive yields and prices
o the potential for capital appreciation
o reasonable credit quality
The portfolio managers may use various investment techniques to adjust the
Fund's investment exposure, but there is no guarantee that these techniques will
work.
The Fund's asset allocation process may result in a high portfolio turnover
rate, which may cause the Fund to experience increased transaction costs and
shareholders to incur increased taxes on their investment in the Fund.
The Risks
The principal risks of investing in this Fund are stock market risk, foreign
exposure risk, interest rate risk, credit risk and prepayment risk. Certain
portfolio securities are derivative securities that carry derivative
securities risk.
If you would like additional information regarding the Fund's investment
strategies and risks, please refer to "More on Strategies and Risks" later in
this Prospectus.
<PAGE>
----------
35
- --------------------------------------------------------------------------------
Fund Performance
The bar chart and table opposite 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, Class A's highest return for a
quarter was 11.67% for the quarter ended December 31, 1998. The lowest return
for a quarter was -5.88% for the quarter ended September 30, 1998.
The table opposite 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.
Calendar Year Total Returns
Class A Shares
[BAR CHART]
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
16% 18% 13% 27% -2%
Average Annual Total Return
(as of December 31, 1998)
<TABLE>
<CAPTION>
Since
1 Year 5 Years Inception*
------ ------- ----------
<S> <C> <C> <C>
GE Strategic
Investment Fund
Class A 9.48% 12.77% 12.77%
Class B 11.60% 13.45% 13.53%
Class C 16.46% 14.32% 13.82%
Class D 16.75% 14.62% 14.68%
S&P 500 Index 28.70% 24.08% 24.08%***
LB Aggregate Bond Index 8.67% 7.27% 7.27%***
S&P 500 Index &
LB Aggregate Bond Index** 21.05% 17.33% 17.33%***
</TABLE>
Both the bar chart and table assume reinvestment of dividends and
distributions. If GE Investment Management had not reduced certain expenses
during the periods shown, the Fund's total returns would have been lower. As
with all mutual funds, past performance is not an indication of future
performance.
* Inception date (commencement of investment operations):
Class A - January 1, 1994
Class B - December 22, 1993
Class C - February 22, 1993
Class D - November 29, 1993
** 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.
*** Since January 1, 1994
All mutual funds must use the same formula to calculate total return. Total
return measures the price change in a share assuming the reinvestment of all
dividend income and capital gain distributions.
<PAGE>
- --------------------------------------------------
36 GE Funds Money
Prospectus Market Funds
- --------------------------------------------------------------------------------
Who may want to invest in a GE Money Market Fund?
A 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
A Money Market Fund may not be 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.
<PAGE>
----------
37
- --------------------------------------------------------------------------------
The following are important definitions that may be unfamiliar to an investor
reading about the GE Money Market Fund:
U.S. Government Securities are issued or guaranteed by the U.S. Government or
one of its agencies or instrumentalities. Some U.S. Government Securities are
backed by the full faith and credit of the federal government. Other U.S
Government Securities are backed by the issuer's right to borrow from the U.S.
Treasury and some are backed only by the credit of the issuing organization. All
U.S. Government Securities are considered highly creditworthy.
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.
The above definitions should be read together with the fund summary on the
following pages.
<PAGE>
- ---------------------
38 GE Funds
Prospectus
Money Market
Funds
- --------------------------------------------------------------------------------
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 instruments. 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 Fund invests consistent with regulatory standards governing security
quality, maturity and portfolio diversification. The Fund may invest more than
25% of its total assets in the banking industry. Changes in banking
regulations or the economy can have a significant negative impact on the
banking industry.
All of the Fund's assets are rated in the two highest short-term rating
categories (or their unrated equivalents), and 95% of its assets are rated in
the highest rating category (or its unrated equivalent), by a nationally
recognized statistical rating organization. Additional information about the
money market securities in which the Fund may invest, including rating
categories, is contained in the statement of additional information.
The 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 a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency. Although the Fund seeks to 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.
<PAGE>
----------
39
- --------------------------------------------------------------------------------
Fund Performance
The bar chart and table opposite illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to a common measure of
performance. The bar chart illustrates how the Fund's performance varies from
year to year over the periods shown.
During the periods presented in the bar chart, the Fund's highest return for a
quarter was 1.42% for the quarter ended March 31, 1995. The Fund's lowest return
for a quarter was 0.69% for the quarter ended March 31, 1994. The Fund's seven
day yield was 4.68% and the seven day effective yield was 4.79% as of December
31, 1998.
The table opposite illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of the 90 Day Treasury Bill
Rate (90 Day T-Bill). The table reflects the impact of the Fund's expenses. It
assumes that you sold your shares at the end of each period.
Calendar Year Total Returns
[BAR CHART]
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
5% 5% 5% 6% 4%
Average Annual Total Return
(as of December 31, 1998)
<TABLE>
<CAPTION>
Since
1 Year 5 Years Inception*
------ ------- ----------
<S> <C> <C> <C>
GE Money Market Fund 5.13% 4.98% 4.65%
90 Day T-Bill 4.88% 5.05% 4.76%**
</TABLE>
Both the bar chart and table assume reinvestment of dividends and
distributions. If GE Investment Management had not reduced certain expenses
during the periods shown, the Fund's total returns would have been lower. As
with all mutual funds, past performance is not an indication of future
performance.
* Inception date (commencement of investment operations): February 22, 1993
** Since March 1, 1993
All mutual funds use a standard formula to calculate total return. Total return
measures the price change in a share assuming the reinvestment of all dividend
income and capital gain distributions.
<PAGE>
- --------------------------------------------------
40 GE Funds Fund Expenses
Prospectus
- --------------------------------------------------------------------------------
The following tables show what it will cost you directly or indirectly to
invest in a Fund.
Shareholder transaction expenses, if any, are paid directly from your account
and are not reflected in the share price.
<TABLE>
<CAPTION>
GE
GE GE Small- GE
GE Premier GE GE Mid-Cap Cap GE Interna-
U.S. Growth Value Mid-Cap Value Value Global tional
Equity Equity Equity Growth Equity Equity Equity Equity
Shareholder Transaction Expenses* Fund Fund Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <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%
Classes B, C and D 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
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%
Class B 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
Redemption Fee: All Classes None None None None None None None None
Exchange Fee: All Classes None None None None None None None None
</TABLE>
<PAGE>
----------
41
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GE
GE Short- GE
GE GE GE Govern- term GE GE Strategic GE
Europe Emerging Fixed ment Govern- Tax- High Invest- Money
Equity Markets Income Securities ment Exempt Yield ment Market
Shareholder Transaction Expenses* 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% 4.25% 4.25% 2.50% 4.25% 4.25% 5.75% N/A
Classes B, C and D None 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 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% 1.0% N/A
Class B 4.0% 4.0% 3.0% 3.0% 3.0% 3.0% 3.0% 4.0% N/A
Classes C and D None None None None None None None None N/A
Redemption Fee: All Classes None None None None None None None None N/A
Exchange Fee: All Classes None 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. 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 maximum CDSC of 5% will be imposed on Class B shares issued or
exchanged in connection with the combination of certain GE Funds and Investors
Trust. Investors Trust is a family of mutual funds formerly distributed by GNA
Distributors, Inc., an affiliate of GE Investment Management, the Trust's
investment adviser and administrator. See "How To Invest: How to Redeem
Shares."
*** Expenses shown above would be increased by the imposition of the 1% CDSC for
redemption of shares that were not subject to a front-end sales charge by virtue
of being part of a purchase of $1 million or more. This CDSC does not apply to
redemptions under a systematic withdrawal plan.
+ GE Money Market Fund does not currently offer multiple classes of shares.
No sales charges, redemption fees or exchange fees are assessed by the Trust
with respect to shares of GE Money Market Fund.
<PAGE>
- ---------------------
42 GE Funds
Prospectus
Fund Expenses
- --------------------------------------------------------------------------------
Annual fund operating expenses come out of a Fund's assets and are reflected
in the Fund's share price and dividends.
The figures below are based upon operating expenses anticipated to be
incurred during the current fiscal year. Accordingly, these figures may not
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Annual Fund
Operating
Expenses
(as a percentage of
average net assets)
GE GE GE
GE Premier GE GE Mid-Cap Small-Cap GE GE
U.S. Growth Value Mid-Cap Value Value Global International
Equity Equity Equity Growth Equity Equity Equity Equity
Fund Fund* Fund Fund* Fund** Fund** Fund Fund*
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advisory and Administration Fees:***
All Classes .40% .60% .55% .60% .80% .70% .75% .80%
Distribution and Service (12b-1) fees:
Class A .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%
Class C .25% .25% .25% .25% .25% .25% .25% .25%
Class D None None None None None None None None
Other Expenses:****
All Classes .22% .35% .29% .40% .39% .49% .47% .47%
Total Operating Expenses:
Class A 1.12% 1.45% 1.34% 1.50% 1.69% 1.69% 1.72% 1.77%
Class B 1.62% 1.95% 1.84% 2.00% 2.19% 2.19% 2.22% 2.27%
Class C .87% 1.20% 1.09% 1.25% 1.44% 1.44% 1.47% 1.52%
Class D .62% .95% .84% 1.00% 1.19% 1.19% 1.22% 1.27%
Waiver and/or Reimbursement: ++ .05% .00% .10% .29% .29% .12% .17%
Net Operating Expenses: +
Class A ++ 1.40% 1.34% 1.40% 1.40% 1.40% 1.60% 1.60%
Class B ++ 1.90% 1.84% 1.90% 1.90% 1.90% 2.10% 2.10%
Class C ++ 1.15% 1.09% 1.15% 1.15% 1.25% 1.35% 1.35%
Class D ++ .90% .84% .90% .90% 1.00% 1.10% 1.10%
</TABLE>
<PAGE>
----------
43
- --------------------------------------------------------------------------------
be the same as figures that appear in the Annual Report dated September 30,
1998.
<TABLE>
<CAPTION>
Annual Fund GE
Operating GE GE GE GE Short- GE GE GE GE
Expenses Europe Emerging Fixed Government Term Tax- High Strategic Money
(as a percentage of Equity Markets Income Securities Government Exempt Yield Investment Market
average net assets) 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 1.05% 1.20% .35% .40% .30% .35% .60% .35% .25%
Distribution and Service
(12b-1) fees: None
Class A .50% .50% .50% .50% .50% .50% .50% .50%
Class B 1.00% 1.00% 1.00% 1.00% .85% 1.00% 1.00% 1.00%
Class C .25% .25% .25% .25% .25% .25% .25% .25%
Class D None None None None None None None None
Other Expenses:****
All Classes .39% .39% .32% .23% .46% .46% .27% .30% .32%
Total Operating Expenses: .57%
Class A 1.94% 2.09% 1.17% 1.13% 1.26% 1.31% 1.37% 1.15%
Class B 2.44% 2.59% 1.67% 1.63% 1.61% 1.81% 1.87% 1.65%
Class C 1.69% 1.84% .92% .88% 1.01% 1.06% 1.12% .90%
Class D 1.44% 1.59% .67% .63% .76% .81% .87% .65%
Waiver and/or Reimbursement: .24% .24% .12% .03% .31% .21% .17% .00% .07%
Net Operating Expenses: + .50%
Class A 1.70% 1.85% 1.05% 1.10% .95% 1.10% 1.20% 1.15%
Class B 2.20% 2.35% 1.55% 1.60% 1.30% 1.60% 1.70% 1.65%
Class C 1.45% 1.60% .80% .85% .70% .85% .95% .90%
Class D 1.20% 1.35% .55% .60% .45% .60% .70% .65%
</TABLE>
* With respect to GE Premier Growth Equity Fund, GE Mid-Cap Growth Fund, GE
International Equity Fund and GE Short-Term Government 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, GE Europe Equity Fund, GEEmerging Markets Fund and GEHigh 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 GE Funds). Such fees include 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 GE Funds' legal existence and the costs involved in
communicating with shareholders of the Funds.
+ The fee table reflects contractual arrangements with GE Investment Management
to limit "Other Expenses" and/or reduce "Advisory and Administration Fees" of
each class of certain funds on an annualized basis through the fiscal year ended
September 30, 1999.
++ GE Investment Management has voluntarily agreed to limit "Total Operating
Expenses" of the GE U.S. Equity Fund so that expenses of the Fund's Class A,
Class B, Class C and Class D shares do not exceed 1.00%, 1.50%, .75% and .50%,
respectively. This agreement may be discontinued at any time.
<PAGE>
- ---------------------
44 GE Funds
Prospectus
Fund Expenses
- --------------------------------------------------------------------------------
The Impact These examples are intended to help you compare the cost of
of Fund investing in a Fund with the cost of investing in other mutual
Expenses 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. The examples also assume that you either
redeemed all of your shares at the end of
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Examples+
You would pay the following You would pay the following
expenses on a $10,000 investment, expenses on a $10,000 investment,
assuming redemption: assuming no redemption:
1 Year 3 Years 5 Years 10 Years** 1 Year 3 Years 5 Years 10 Years**
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GE U.S. Equity Fund:
Class A $671 $ 899 $ 1,145 $1,848 $671 $ 899 $1,145 $1,848
Class B $553 $ 699 $ 869 $1,649 $153 $ 499 $ 869 $1,649
Class C $ 77 $ 265 $ 470 $1,060 $ 77 $ 265 $ 470 $1,060
Class D $ 51 $ 186 $ 334 $ 762 $ 51 $ 186 $ 334 $ 762
GE Premier Growth Equity Fund:
Class A $709 $1,002 $ 1,317 $2,206 $709 $1,002 $1,317 $2,206
Class B $593 $ 807 $ 1,047 $2,015 $193 $ 607 $1,047 $2,015
Class C $117 $ 376 $ 655 $1,449 $117 $ 376 $ 655 $1,449
Class D $ 92 $ 298 $ 520 $1,161 $ 92 $ 298 $ 520 $1,161
GE Value Equity Fund:
Class A $705 $ 978 $ 1,272 $2,105 $705 $ 978 $1,272 $2,105
Class B $588 $ 782 $ 1,001 $1,913 $188 $ 582 $1,001 $1,913
Class C $112 $ 350 $ 606 $1,340 $112 $ 350 $ 606 $1,340
Class D $ 87 $ 271 $ 471 $1,049 $ 87 $ 271 $ 471 $1,049
GE Mid-Cap Growth Fund:
Class A $709 $1,012 $ 1,337 $2,253 $709 $1,012 $1,337 $2,253
Class B $593 $ 817 $ 1,068 $2,063 $193 $ 617 $1,068 $2,063
Class C $117 $ 388 $ 676 $1,501 $117 $ 388 $ 676 $1,501
Class D $ 92 $ 308 $ 542 $1,214 $ 92 $ 308 $ 542 $1,214
GE Mid-Cap Value Equity Fund:
Class A $709 $1,049 $ 1,412 $2,430 $709 $1,049 $1,412 $2,430
Class B $593 $ 856 $ 1,145 $2,245 $193 $ 856 $1,145 $2,245
Class C $117 $ 426 $ 757 $1,695 $117 $ 426 $ 757 $1,695
Class D $ 92 $ 348 $ 625 $1,414 $ 92 $ 348 $ 625 $1,414
GE Small-Cap Value Equity Fund:
Class A $709 $1,049 $ 1,412 $2,430 $709 $1,049 $1,412 $2,430
Class B $593 $ 856 $ 1,145 $2,245 $193 $ 856 $1,145 $2,245
Class C $117 $ 426 $ 757 $1,695 $117 $ 426 $ 757 $1,695
Class D $ 92 $ 348 $ 625 $1,414 $ 92 $ 348 $ 625 $1,414
GE Global Equity Fund:
Class A $728 $1,074 $ 1,443 $2,477 $728 $1,074 $1,443 $2,477
Class B $613 $ 882 $ 1,178 $2,293 $213 $ 682 $1,178 $2,293
Class C $137 $ 453 $ 790 $1,745 $137 $ 453 $ 790 $1,745
Class D $112 $ 375 $ 658 $1,465 $112 $ 375 $ 658 $1,465
GE International Equity Fund:
Class A $728 $1,084 $ 1,463 $2,523 $728 $1,084 $1,463 $2,523
Class B $613 $ 892 $ 1,198 $2,340 $213 $ 692 $1,198 $2,340
Class C $137 $ 463 $ 812 $1,795 $137 $ 463 $ 812 $1,795
Class D $112 $ 385 $ 680 $1,517 $112 $ 385 $ 680 $1,517
</TABLE>
<PAGE>
----------
45
- --------------------------------------------------------------------------------
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 investment,
assuming redemption: assuming no redemption:
1 Year 3 Years 5 Years 10 Years** 1 Year 3 Years 5 Years 10 Years**
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GE Europe Equity Fund:
Class A $738 $1,126 $ 1,539 $2,686 $738 $1,126 $1,539 $2,686
Class B $623 $ 936 $ 1,276 $2,507 $223 $ 736 $1,276 $2,507
Class C $147 $ 508 $ 893 $1,973 $147 $ 508 $ 893 $1,973
Class D $122 $ 431 $ 762 $1,700 $122 $ 431 $ 762 $1,700
GE Emerging Markets Fund:
Class A $752 $1,169 $ 1,611 $2,834 $752 $1,169 $1,611 $2,834
Class B $638 $ 981 $ 1,351 $2,658 $238 $ 781 $1,351 $2,658
Class C $163 $ 554 $ 971 $2,134 $163 $ 554 $ 971 $2,134
Class D $137 $ 477 $ 841 $1,865 $137 $ 477 $ 841 $1,865
GE Fixed Income Fund:
Class A $528 $ 769 $ 1,030 $1,773 $528 $ 769 $1,030 $1,773
Class B $458 $ 714 $ 895 $1,704 $158 $ 514 $ 895 $1,704
Class C $ 82 $ 281 $ 497 $1,119 $ 82 $ 281 $ 497 $1,119
Class D $ 56 $ 202 $ 361 $ 822 $ 56 $ 202 $ 361 $ 822
GE Government Securities Fund:
Class A $532 $ 766 $ 1,018 $1,738 $532 $ 766 $1,018 $1,738
Class B $463 $ 711 $ 883 $1,669 $163 $ 511 $ 883 $1,669
Class C $ 87 $ 278 $ 485 $1,081 $ 87 $ 278 $ 485 $1,081
Class D $ 61 $ 199 $ 348 $ 783 $ 61 $ 199 $ 348 $ 783
GE Short-Term Government Fund:
Class A $345 $ 609 $ 894 $1,704 $345 $ 609 $ 894 $1,704
Class B $432 $ 677 $ 845 $1,694 $132 $ 477 $ 845 $1,694
Class C $ 72 $ 290 $ 526 $1,205 $ 72 $ 290 $ 526 $1,205
Class D $ 46 $ 211 $ 391 $ 911 $ 46 $ 211 $ 391 $ 911
GE Tax-Exempt Fund:
Class A $532 $ 802 $ 1,092 $1,916 $532 $ 802 $1,092 $1,916
Class B $463 $ 748 $ 959 $1,848 $163 $ 548 $ 959 $1,848
Class C $ 87 $ 316 $ 563 $1,273 $ 87 $ 316 $ 563 $1,273
Class D $ 61 $ 237 $ 428 $ 980 $ 61 $ 237 $ 428 $ 980
GE High Yield Fund:
Class A $542 $ 825 $ 1,130 $1,998 $542 $ 825 $1,130 $1,998
Class B $473 $ 672 $ 998 $1,933 $173 $ 572 $ 998 $1,933
Class C $ 97 $ 340 $ 602 $1,358 $ 97 $ 340 $ 602 $1,358
Class D $ 72 $ 261 $ 467 $1,065 $ 72 $ 261 $ 467 $1,065
GE Strategic Investment Fund:
Class A $685 $ 919 $ 1,172 $1,892 $685 $ 919 $1,172 $1,892
Class B $568 $ 720 $ 897 $1,694 $168 $ 520 $ 897 $1,694
Class C $ 92 $ 287 $ 498 $1,108 $ 92 $ 287 $ 498 $1,108
Class D $ 66 $ 208 $ 362 $ 810 $ 66 $ 208 $ 362 $ 810
GE Money Market Fund $ 51 $ 175 $ 311 $ 706 $ 51 $ 175 $ 311 $ 706
</TABLE>
+ The expenses shown above for each Fund, other than the GE U.S. Equity Fund,
reflect GE Investment Management's agreement to reduce or otherwise limit the
Fund's expenses for the first year of each period noted.
* 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 originally purchased
through the Investors Trust Funds will convert to Class A shares after eight
years.
<PAGE>
- -------------------------------------
46 GE Funds More on
Prospectus Strategies
and Risks
- -------------------------------------------------------------------------------
More on 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. The share value of the Equity Funds, Income Funds and Asset
Allocation Funds will rise and fall. Although the GE Money Market Fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the Fund.
One of your most important investment considerations should be balancing risk
and return. Different types of investments tend to respond differently to
shifts in the economic and financial environment. So, diversifying your
investments among different asset classes -- such as stocks, bonds and cash --
and within an asset class -- such as small-cap and large-cap stocks -- can
help you manage risk and achieve the results you need to comfortably reach
your financial goals.
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.
Credit Risk: The price of a bond is affected by the issuer's or counterparty's
credit quality. Changes in financial condition and general economic conditions
can affect the ability to honor financial obligations and therefore credit
quality. Lower quality bonds are generally more sensitive to these changes
than higher quality bonds. Even within securities considered investment grade,
differences exist in credit quality and some investment grade debt securities
may have speculative characteristics. A security's price may be adversely
affected by the market's opinion of the security's credit quality level even
if the issuer or counterparty has suffered no degradation in ability to honor
the obligation.
High Yield Securities Risk: Below investment-grade securities, sometimes
called "junk bonds," are considered speculative. These securities have greater
risk of default than higher rated securities. The market value of below
investment-grade securities is more sensitive to individual corporate
developments and economic changes than higher rated securities. The market for
below investment-grade securities may be less active than for higher rated
securities, which can adversely affect the price at which these securities may
be sold. Less active markets may diminish a Fund's ability to obtain accurate
market quotations when valuing the portfolio securities and calculating a
Fund's net asset value. In addition, a Fund may incur additional expenses if a
holding defaults and a Fund has to seek recovery of its principal investment.
Below investment-grade securities may also present risks based on payment
expectations. For example, these securities may contain redemption or call
provisions. If an issuer exercises these provisions in a declining interest
rate market the Fund would have to replace the security with a lower yielding
security resulting in a decreased return for investors.
<PAGE>
----------
47
- --------------------------------------------------------------------------------
Emerging Markets Risk: Emerging markets securities bear most foreign exposure
risks discussed below. In addition, there are greater risks involved in
investing in emerging markets than in developed foreign markets. Specifically,
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:
o Currency Risk: The values of foreign investments may be affected by changes
in currency rates or exchange control regulations. If the local currency gains
strength against the U.S. dollar, the value of the foreign security increases in
U.S. dollar terms. Conversely, if the local currency weakens against the U.S.
dollar, the value of the foreign security declines in U.S. dollar terms. U.S.
dollar-denominated securities of foreign issuers, including Depositary Receipts,
also are subject to currency risk based on their related investments.
o Political/Economic Risk: Changes in economic, tax or foreign investment
policies, government stability, war or other political or economic actions may
have an adverse effect on a Fund's foreign investments.
o Regulatory Risk: Foreign companies often are not subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements common to U.S. companies.
<PAGE>
- -------------------------------------
48 GE Funds More on
Prospectus Strategies
and Risks
- --------------------------------------------------------------------------------
Style Risk: Securities with different characteristics tend to shift in and out
of favor depending upon market and economic conditions as well as investor
sentiment. A Fund may underperform other funds that employ a different style.
A Fund also may employ a combination of styles that impact its risk
characteristics. Examples of different styles include growth and value
investing, as well as those focusing on large, medium, or small company
securities.
o Growth Investing Risk: Growth Stocks may be more volatile than other stocks
because they are more sensitive to investor perceptions of the issuing company's
growth potential. Growth oriented funds will typically underperform when value
investing is in favor.
o Value Investing Risk: Undervalued stocks may not realize their perceived
value for extended periods of time. Value stocks may respond differently to
market and other developments than other types of stocks. Value oriented funds
will typically underperform when growth investing is in favor.
o High Yield Value Investing Risk: The GE High Yield Fund is subject to the
risk that the Fund will not benefit from the price appreciation (and may be
harmed by price depreciation) of individual securities.
o Mid-Cap Company Risk: Investments in securities of mid-cap companies entail
greater risks than investments in larger, more established companies. Mid-cap
companies tend to have more narrow product lines, more limited financial
resources and a more limited trading market for their stocks, as compared with
larger companies. As a result, their stock prices may decline significantly as
market conditions change.
o Small-Cap Company Risk: Investing in securities of small-cap companies may
involve greater risks than investing in larger, more established issuers.
Smaller companies may have limited product lines, markets or financial
resources. Their securities may trade less frequently and in more limited volume
than 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
portfolio manager's judgment of market conditions proves incorrect or the
strategy does not correlate well with a Fund's investments, the use of
derivatives could result in a loss regardless of whether the intent was to
reduce risk or increase return and may increase a Fund's volatility. In
addition, in the event that non-exchange traded derivatives are used, these
derivatives could result in a loss if the counterparty to the transaction does
not perform as promised.
Illiquid Securities Risk: Illiquid securities may be difficult to resell at
approximately the price they are valued in the ordinary course of business in
seven days or less. When investments cannot be sold readily at the desired
time or price, a Fund may have to accept a lower price or may not be able to
sell the security at all, or forego other investment opportunities, all of
which may have an impact on the Fund.
Interest Rate Risk: Bond prices 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.
<PAGE>
----------
49
- --------------------------------------------------------------------------------
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 Risk.
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.
Restricted Securities Risk: Restricted securities may be subject to legal
restraints and, therefore, are typically less liquid than other securities.
The prices received from reselling restricted securities in privately
negotiated transactions may be less than those originally paid by a Fund.
Companies whose securities are restricted are not subject to the same investor
protection requirements as publicly traded securities.
<PAGE>
- -------------------------------------
50 GE Funds More on
Prospectus Strategies
and Risks
- -------------------------------------------------------------------------------
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 has addressed 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 have 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.
- -------------------------------------------------------------------------------
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. No Fund is under any obligation to use any of the
techniques or strategies at any given time or under any particular economic
condition. Certain instruments and investment strategies may expose the Funds
to other risks and considerations, which are discussed in the Funds' SAI.
<PAGE>
- ----------
51
- --------------------------------------------------------------------------------
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)
without limit hold cash and/or invest in money market instruments, or (ii)
restrict the securities markets in which a Fund's assets are invested by
investing those assets in securities markets deemed to be conservative in
light of the Fund's investment objective and strategies. The Funds, other than
the Money Market Fund, may invest in money market instruments directly or
indirectly through investment in the GEI Short-Term Investment Fund
("Investment Fund"). The Investment Fund is advised by GE Investment
Management, which charges no advisory fee to the Fund.
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.
Various investment techniques are utilized by a Fund to increase or decrease
its exposure to changing security prices, interest rates, currency exchange
rates, commodity prices or other factors that affect security values. For
certain Funds, these techniques may involve derivative securities and
transactions such as buying and selling options and futures contracts,
entering into currency exchange contracts or swap agreements and purchasing
indexed securities. These techniques are designed to adjust the risk and
return characteristics of a Fund's portfolio of investments and are not used
for leverage. To the extent that a Fund employs these techniques, the Fund
would be subject to derivative securities risk.
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.
<PAGE>
- -----------------------------
52 GE Funds Prospectus
More on Strategies
and Risks
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Reverse Non-Publicly Structured Purchasing and Purchasing and
Repurchase Repurchase Traded and Illiquid and Indexed Writing Securities Writing Securities
Agreements Agreements 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
Fund Yes Yes Yes No Yes Yes
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>
<PAGE>
----------
53
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Maximum
Maximum Investment in Maximum When-Issued
Futures on Forward Options on Investment Below-Investment Investment and Delayed
Options on Currency Foreign in Debt Grade Debt in Foreign Delivery
Futures Transactions Currencies Securities 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
Equity Fund Yes Yes No 35% 5% 25%* Yes
GE Value Equity Fund Yes Yes Yes 35% 5% 25%* Yes
GE Mid-Cap Growth Fund Yes Yes Yes 35% (maximum of 10% in BB or B by 35%* Yes
25% in BBB by S&P or Ba or B
S&P, Baa by by Moody's or
Moody's or equivalent
equivalent
GE Mid-Cap Value Equity
Fund Yes Yes Yes 35% 15% in securities 15%* Yes
rated BBB or below
by S&P or Baa or
below by Moody's
or equivalent
GE Small-Cap Value Equity
Fund No No No 35% 10% 10%* Yes
GE Global Equity Fund Yes Yes Yes 35% 5% 100% Yes
GE International Equity
Fund Yes Yes Yes 35% 5% 100% Yes
GE Europe Equity Fund Yes Yes Yes 35% 15% 100% Yes
GE Emerging Markets Fund Yes Yes Yes 35% 10% in BB or B by 100% Yes
S&P or Ba or B by
Moody's or
equivalent
GE Fixed Income Fund Yes Yes Yes 100% (maximum 10% in BB or B by 35%* Yes
of 25% BBB by S&P or Ba or B by
S&P or Baa by Moody's or
Moody's or equivalent
equivalent)
GE Government Securities
Fund Yes Yes Yes 100% (maximum None 35%* Yes
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 Government
Fund Yes Yes Yes 100% None 35%* Yes
GE Tax-Exempt Fund Yes No No 100% (maximum 5% in debt None Yes
of 10% in BBB downgraded below
by S&P or Baa investment grade
by Moody's or subsequent to
equivalent) purchase
GE High Yield Fund Yes Yes Yes 100% 100% 35%* Yes
GE Strategic Investment
Fund Yes Yes Yes 100% (maximum 10% in BB or B 30%* Yes
of 25% BBB by S&P by S&P or Ba or
or Baa by Moody's B by Moody's
or equivalent) or equivalent
GE Money Market Fund No No No 100% None 25%* Yes
</TABLE>
* This limitation excludes ADRs and securities of a foreign issuer with a class
of securities registered with the Securities and Exchange Commission and
listed on a U.S. national securities exchange or traded on the Nasdaq National
Market or the Nasdaq Small Cap Market.
<PAGE>
- -----------------------------
54 GE Funds Prospectus
More on Strategies
and Risks
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Debt
Lending Rule Obligations of
Portfolio 144A Supranational Depositary
Securities Securities Agencies Receipts
----------- ----------- -------------- -----------
<S> <C> <C> <C> <C>
GE U.S. Equity Fund Yes Yes Yes Yes
GE Premier Growth Equity Fund Yes Yes Yes Yes
GE Value Equity Fund Yes Yes Yes Yes
GE Mid-Cap Growth Fund Yes Yes Yes Yes
GE Mid-Cap Value Equity Fund Yes Yes Yes Yes
GE Small-Cap Value Equity Fund Yes Yes Yes Yes
GE Global Equity Fund Yes Yes Yes Yes
GE International Equity Fund Yes Yes Yes Yes
GE Europe Equity Fund Yes Yes Yes Yes
GE Emerging Markets Fund Yes Yes Yes Yes
GE Fixed Income Fund Yes Yes Yes Yes
GE Government Securities Fund Yes Yes Yes Yes
GE Short-Term Government Fund Yes Yes Yes Yes
GE Tax-Exempt Fund Yes Yes Yes No
GE High Yield Fund Yes Yes Yes Yes
GE Strategic Investment Fund Yes Yes Yes Yes
GE Money Market Fund Yes Yes Yes No
</TABLE>
* Excludes commercial paper and notes with variable and floating rates of
interest
<TABLE>
<CAPTION>
Securities of Floating Participation
Other and Variable Interests in
Investment Municipal Rate Municipal
Funds Leases Instruments Obligations
-------------- --------- ------------ ---------------
<S> <C> <C> <C> <C>
GE U.S. Equity Fund No No No* No
GE Premier Growth Equity Fund Yes No No* No
GE Value Equity Fund Yes No No* No
GE Mid-Cap Growth Fund Yes No No* No
GE Mid-Cap Value Equity Fund Yes No No* No
GE Small-Cap Value Equity Fund Yes No No* No
GE Global Equity Fund Yes No No* No
GE International Equity Fund Yes No No* No
GE Europe Equity Fund Yes No Yes No
GE Emerging Markets Fund Yes No No* No
GE Fixed Income Fund Yes No Yes No
GE Government Securities Fund Yes No Yes No
GE Short-Term Government Fund Yes No Yes No
GE Tax-Exempt Fund Yes Yes Yes Yes
GE High Yield Fund Yes No Yes No
GE Strategic Investment Fund Yes Yes Yes Yes
GE Money Market Fund No No Yes No
</TABLE>
<PAGE>
----------
55
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Custodial
Municipal Receipts on Mortgage Related
Zero Coupon Obligations Municipal Securities,
Obligation Components Obligations including CMOs
----------- ------------ ----------- ----------------
<S> <C> <C> <C> <C>
GE U.S. Equity Fund Yes No No No
GE Premier Growth Equity Fund No No No No
GE Value Equity Fund No No No No
GE Mid-Cap Growth Fund No No No No
GE Mid-Cap Value Equity Fund Yes No No No
GE Small-Cap Value Equity Fund No No No No
GE Global Equity Fund No No No No
GE International Equity Fund No No No No
GE Europe Equity Fund No No No No
GE Emerging Markets Fund No No No No
GE Fixed Income Fund Yes No No Yes
GE Government Securities Fund Yes No No Yes
GE Short-Term Government Fund Yes No No Yes
GE Tax-Exempt Fund Yes Yes Yes No
GE High Yield Fund Yes No No Yes
GE Strategic Investment Fund Yes Yes Yes Yes
GE Money Market Fund No No No No
</TABLE>
<TABLE>
<CAPTION>
Asset Backed
Government Securities and
Stripped Mortgage Receivable-Backed Mortgage Short Sales Against
Related Securities Securities Dollar Rolls the Box
------------------ ----------------- ------------ -------------------
<S> <C> <C> <C> <C>
GE U.S. Equity Fund No No No No
GE Premier Growth Equity Fund No No No No
GE Value Equity Fund No No No Yes
GE Mid-Cap Growth Fund No No No Yes
GE Mid-Cap Value Equity Fund No No No Yes
GE Small-Cap Value Equity Fund No No No Yes
GE Global Equity Fund No No No Yes
GE International Equity Fund No No No Yes
GE Europe Equity Fund No No No Yes
GE Emerging Markets Fund No No No Yes
GE Fixed Income Fund Yes Yes Yes No
GE Government Securities Fund Yes Yes Yes Yes
GE Short-Term Government Fund Yes Yes Yes No
GE Tax-Exempt Fund No No No Yes
GE High Yield Fund Yes Yes Yes Yes
GE Strategic Investment Fund Yes Yes Yes No
GE Money Market Fund No No No No
</TABLE>
<PAGE>
- --------------------------------------------
56 GE Funds About the
Prospectus 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. GE Investment Management is a wholly-owned subsidiary of General
Electric Company (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.
For many years, GE's tradition of ingenuity and customer focus has included
financial services. In the late 1920s, through a desire to promote the
financial well-being of its employees, GE began managing assets for its
employee pension plan. By the mid-1930s, GE pioneered some of the nation's
earliest mutual funds, the Elfun Funds -- to be followed years later by the GE
Savings and Security Program Funds. The success of these Funds spurred growth;
eventually GE expanded its mutual fund offerings to include a wide variety of
investment products called the GE Family of Funds, created specifically for
the general public. As of December 31, 1998, GE's investment advisers manage
$78 billion in individual and institutional assets with over $15 billion in
mutual funds alone.
GE Investment Management 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.
Each Fund pays GE Investment Management up to the following maximum annual
fee for investment management services:
<TABLE>
<S> <C>
GE U.S. Equity Fund 0.40%
GE Premier Growth Equity Fund 0.60%
GE Value Equity Fund 0.55%
GE Mid-Cap Growth Fund 0.60%
GE Mid-Cap Value Equity Fund* 0.80%
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 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 Strategic Investment Fund 0.35%
GE Money Market Fund 0.25%
</TABLE>
*These figures do not reflect (i) a .15% reduction of investment management
fees for the GE Mid-Cap Value Equity Fund, GE Europe 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.
<PAGE>
----------
57
- --------------------------------------------------------------------------------
About The Funds' Portfolio
Managers
Eugene Bolton is a 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. He
has served in this capacity since commencement. Mr. Bolton joined GE Investment
Management in 1984 as Chief Financial Officer and has been a portfolio manager
since 1986.
David B. Carlson is a 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 commencement. Since joining GE Investment
Management in 1982, Mr. Carlson has held several positions.
Peter J. Hathaway is a 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 commencement and has over 36 years of investment
experience. He has held several positions since joining GE Investment
Management in 1985.
Ralph R. Layman is a 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 and serves as co-portfolio manager for
GE Global Equity Fund since each Fund's commencement. Mr. Layman has also
managed foreign investments for GE Strategic Investment Fund since September
1997. Mr. Layman joined GE Investment Management in 1991 as Executive Vice
President for International Investments.
Robert A. MacDougall is a 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
commencement. Mr. MacDougall joined GE Investment Management in 1986 as Vice
President.
Ralph E. Whitman is a Vice President of GE Investment Management and Portfolio
Manager of the GE Mid-Cap Growth Fund. He has served in that capacity since
December 1998. Mr Whitman has more than 11 years of investment experience and
has held positions with GE Investments since 1987.
Michael J. Solecki is a Vice President of GE Investment Management, and
portfolio manager of GE Europe Equity Fund. He has served in that capacity
since commencement. Mr. Solecki also serves as co-portfolio manager of GE
Global Equity Fund and has served in that capacity since September 1997. He
has held several positions since joining GE Investment Management in 1990.
<PAGE>
- -----------------
58 GE Funds
Prospectus
About the
Investment
Adviser
- --------------------------------------------------------------------------------
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). 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 has a history of managing small-cap equity portfolios and for several
years has provided pension fund services to GE. The company has managed
various institutional and private accounts with total assets in excess of $2.7
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 (Senior Investment
Committee) composed of the following members: Jack Feiler, Martin L. Berman,
Steven E. Berman and Richard Meisenberg. Mr. Feiler, Chief Investment Officer at
Palisade, has day-to-day responsibility for managing the Fund and works with the
Senior Investment Committee in developing and executing the Fund's investment
program. Mr. Feiler has more than 30 years of investment experience and has
served as the principal small-cap portfolio manager at Palisade since the
commencement of Palisade's operations in April 1995. Prior to joining Palisade,
Mr. Feiler was a Senior Vice President-Investments at Smith Barney from 1990 to
1995.
- -------------------------------------------------------------------------------
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 December 31,1998, BBH had $33.4 billion of
assets under management.
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.
<PAGE>
----------
59
- --------------------------------------------------------------------------------
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
wholly-owned by subsidiaries of Morgan Stanley Dean Witter & Co. As of
December 31, 1998, MAS had $63 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 Dean Witter Investment 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 $8.13 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 portfolio. Previous to this, he spent
four years in the corporate finance department of ARCO. Mr. Bosse is a
Chartered Financial Analyst and a member of the Association for Investment
Management and Research and the Los Angeles Society of Financial Analysts.
<PAGE>
- ----------
60 GE Funds
Prospectus
About the
Investment
Adviser
- -------------------------------------------------------------------------------
Prior Performance Information
Senior Investment Committee
of Palisade Capital
Management, L.L.C.
(Sub-adviser to the GE Small-
Cap Value Equity Fund)
The performance information provided opposite includes a composite of the
performance of certain private accounts ("Accounts") managed by the Senior
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
Senior Investment Committee while at Palisade and during its previous
employment with Smith Barney, Inc.
The Senior Investment Committee, which has operated together since July 1,
1993, consists of Jack Feiler, Martin L. Berman, Steven E. Berman and Richard
Meisenberg. As is the case with the GE Small-Cap Value Equity Fund, Mr. Feiler
was primarily responsible for management of the Accounts and worked with the
Senior Investment Committee in developing and executing the Accounts'
investment programs. No person other than the members of the Senior Investment
Committee had a significant role in achieving the performance described
opposite.
Unlike management of the Accounts, the Senior Investment Committee's
management of the GE Small-Cap Value Equity Fund will be subject to certain
regulatory restrictions (e.g., limits on percentage of assets invested in a
single issuer and industry and requirements on distributing income to
shareholders) that did not apply to the 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 opposite.
<PAGE>
----------
61
- --------------------------------------------------------------------------------
Calendar Year Total Returns
Investment Committee Performance Composite
[BAR CHART]
1998 1997 1996 1995 1994 1993*
Composite -5% 26% 23% 32% 4% 10%
Russell 2000 Index -3% 22% 16% 28% -2% 12%
* Represents performance from 7/1/93 through 12/31/93
Average Annual Total Return
(as of December 31, 1998)
<TABLE>
<CAPTION>
Russell
Period Composite 2000 Index
<S> <C> <C>
1 Year -4.96% -2.55%
3 Years 13.91% 11.58%
5 Years 15.12% 11.86%
Since 7/1/93 15.65% 12.96%
</TABLE>
Note A -- Performance Results. Performance results provided above for the period
from July 1, 1993 to April 1, 1995 (commencement of Palisade's operations)
reflect the performance of the Accounts while the Senior 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
Senior 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 $4.4 million and $3.21 billion as of December 31, 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.
The Senior Investment Committee Performance Composite represents the
performance of the Accounts net of fees and other expenses, not the
performance of the GE Small-Cap Value Equity Fund, and should not be
considered an indication of future performance of the Fund.
<PAGE>
- ----------
62 GE Funds
Prospectus
About the
Investment
Adviser
- --------------------------------------------------------------------------------
Jon Bosse
(Portfolio Manager of the GE Mid-
Cap Value Equity Fund)
This performance information 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 Investment Management Company (NWQ), the sub-adviser of the
Fund, since October 1996 and during his previous employment with ARCO
Investment Management Company ("ARCO") since January 1990. As is the case with
the Fund, Mr. Bosse was primarily responsible for management of the Accounts
and no other person had a significant role in achieving the performance
described.
Unlike management of the private accounts included in the composite, Mr.
Bosse's management of the GE Mid-Cap Value Equity Fund will be subject to
certain regulatory restrictions (e.g., limits on percentage of assets invested
in a single issuer and industry and requirements on distributing income to
shareholders) that did not apply to the private accounts. 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
Calendar Year Total Returns
Portfolio Manager Performance Composite
[BAR CHART]
1998 1997 1996 1995 1994 1993 1992 1991 1990
Composite 9% 35% 30% 39% 9% 20% 30% 54% 1%
S&P Midcap 400 Index 19% 32% 19% 31% -4% 14% 12% 50% -5%
Average Annual Total Returns
(as of December 31, 1998)
<TABLE>
<CAPTION>
S&P MidCap
Period Composite 400 Index
<S> <C> <C>
1 Year 8.34% 19.1%
3 Years 24.43% 23.4%
5 Years 23.12% 18.8%
Since 1/1/90 23.79% 17.6%
</TABLE>
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
managing the ARCO Account), assuming that no changes in the portfolio were
made through the end of the month and dividend income from the portfolio
securities was received. Because no actual portfolio of securities was managed
during this one month period, performance results for September 1996 should be
considered hypothetical. Performance results from October 1, 1996 (when Mr.
Bosse commenced employment at NWQ and purchased for an NWQ private account
substantially the same portfolio of securities held in the ARCO Account at
August 31, 1996), reflect the performance of Accounts managed by Mr.
Bosse while employed with NWQ.
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.
different from those of the private accounts. All of these factors may
adversely affect the performance of the Fund and cause it to differ from that
of the composite described opposite.
The Portfolio Manager Performance Composite represents the performance of the
Accounts net of fees and other expenses, not the performance of the GE Mid-Cap
Value Equity Fund, and should not be considered an indication of future
performance of the Fund.
<PAGE>
----------
63
- --------------------------------------------------------------------------------
Miller Anderson & Sherrerd, LLP
(Sub-adviser to the
GE High Yield Fund)
This performance information 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.
Calendar Year Total Returns
Sub-Adviser Performance Composite
[BAR GRAPH]
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989*
Composite 3% 16% 15% 24% -7% 25% 19% 44% -11% -6%
Salomon Brothers High
Yield Market Index 4% 13% 11% 20% -1% 17% 18% 40% -7% -1%
* Represents performance from February 28, 1989, the date the initial MAS
Managed Fund commenced operations, through December 31, 1989.
Average Annual Total Return
(as of December 31, 1998)
<TABLE>
<CAPTION>
Salomon Brothers
High Yield Market
Period Composite Index
<S> <C> <C>
1 Year 3.22% 3.61%
3 Years 11.33% 9.20%
5 Years 9.71% 9.06%
Since 2/28/89 11.21% 11.00%
</TABLE>
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 be higher than those of the MAS Managed Funds and may
adversely affect the performance of the Fund and cause it to differ from that of
the composite.
The Sub-Adviser Performance Composite represents the performance of the MAS
Managed Funds net of fees and other expenses, not the performance of the GE
High Yield Fund, and should not be considered an indication of future
performance of the Fund and may adversely affect the performance of the Fund and
cause it to differ from that of the composite.
<PAGE>
- ------------------------------------------
64 GE Funds How to Invest
Prospectus
- ------------------------------------------------------------------------------
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.
<PAGE>
----------
65
- --------------------------------------------------------------------------------
Investing Through an Authorized Firm
If you invest through an authorized firm with an investment professional, they
can help you set up your new account and make subsequent investments for you.
- -------------------------------------------
Investing By Mail
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.
o If a check used to open or add to an account does not clear, you may be
assessed an additional charge.
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
Once You Have Opened an Account (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.
o If an automatic monthly investment transaction fails due to insufficient
funds in your account, you may be assessed an additional charge.
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.
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.
<PAGE>
- --------------------
66 GE Funds
Prospectus
How to Invest
- --------------------------------------------------------------------------------
Choosing a Share Class
Each GE Fund offers four share classes to investors, with the exception of the
GE Money Market Fund. You should select the share class that best suits your
needs. Sales charges and expenses are determined by the share class you
purchase.
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.
<PAGE>
----------
67
- --------------------------------------------------------------------------------
Purchasing Class A Shares
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.
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:
- --------------------------------------------------------------------------------
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 and GE Strategic Investment Fund
<TABLE>
<CAPTION>
Maximum Dealers'
Your Investment** Front-End Sales Charge* Reallowance*
- ---------------------------------- ------------------------------------------------------------ -------------------------------
(As a % of Offering Price) (As a % of Your Net Investment) (As a % of Offering Price)
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.25%
$50,000 but less than $100,000 4.25% 4.44% 3.75%
$100,000 but less than $250,000 3.25% 3.36% 2.75%
$250,000 but less than $500,000 2.50% 2.56% 2.00%
$500,000 but less than $1,000,000 2.00% 2.04% 1.55%
$1,000,000 or more*** 0 0 +
</TABLE>
GE Fixed Income Fund, GE Government Securities Fund, GE Tax-Exempt Fund and GE
High Yield Fund
<TABLE>
<CAPTION>
Maximum Dealers'
Your Investment** Front-End Sales Charge Reallowance*
- ---------------------------------- ------------------------------------------------------------ -------------------------------
(As a % of Offering Price) (As a % of Your Net Investment) (As a % of Offering Price)
<S> <C> <C> <C>
Less than $100,000 4.25% 4.44% 3.75%
$100,000 but less than $250,000 3.25% 3.36% 2.75%
$250,000 but less than $500,000 2.50% 2.56% 2.00%
$500,000 but less than $1,000,000 2.00% 2.04% 1.55%
$1,000,000 or more*** 0 0 +
</TABLE>
GE Short-Term Government Fund
<TABLE>
<CAPTION>
Maximum Dealers'
Your Investment** Front-End Sales Charge Reallowance*
- ---------------------------------- ------------------------------------------------------------ -------------------------------
(As a % of Offering Price) (As a % of Your Net Investment) (As a % of Offering Price)
<S> <C> <C> <C>
Less than $100,000 2.50% 2.56% 2.25%
$100,000 but less than $250,000 2.25% 2.30% 2.00%
$250,000 but less than $500,000 1.75% 1.78% 1.50%
$500,000 but less than $1,000,000 1.25% 1.27% 1.00%
$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.
<PAGE>
- -----------------------
68 GE Funds
Prospectus
How to Invest
- -------------------------------------------------------------------------------
Choosing a Share Class
Reduced Sales Charges for Class A Shares
Purchases of 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 satisfy 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 satisfied. 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 Class D eligible employee retirement plans that
seek the additional services provided or paid by GE Investment Management
("Class A Retirement Plans"), investment companies not managed or sponsored by
GE Investment Management or any of its affiliates, or certain customers of
financial intermediaries
o is made by a Class A Retirement Plan with at least 250 eligible employees
o is made through GE Investment Distributors by employees whose defined
contribution plan is invested in GE Funds
o is made by officers, directors, employees and registered representatives of
authorized firms that have agreements with GE Investment 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.
For more information on Class A sales charge waivers, please contact your
investment professional.
<PAGE>
--------
69
- -------------------------------------------------------------------------------
Purchasing Class B Shares
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.
Class B shares have no initial sales charge but may be subject to a contingent
deferred sales charge (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 at right
will have a CDSC. Shares purchased initially through Investors Trust Funds are
subject to a longer CDSC period.
CDSCs on Class B shares decline based on the amount of time you hold 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.
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 and are being redeemed
within one year pursuant to a Systematic Withdrawal Plan
Contingent Deferred Sales Charges
- -------------------------------------------------------------------------------
If you initially purchased through GE Funds:
Funds Contingent Deferred Sales Charge
- -------------------------------------------------------------------------------
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 year
GE Mid-Cap Value Equity Fund o 0% thereafter
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 3% in the first and second years
GE Government Securities Fund o 2% in the third year
GE Short-Term Government Fund o 1% in the fourth year
GE Tax-Exempt Fund o 0% thereafter
GE High Yield Fund
- -------------------------------------------------------------------------------
If you initially purchased through Investor Trust Funds:
Funds Contingent Deferred Sales Charge
- -------------------------------------------------------------------------------
Any Fund's Class B shares acquired as o 5% in the first year
a result of combining Investors Trust o 4% in the second year
Funds with certain GE Funds. o 3% in the third year
o 2% in the fourth year
o 1% in the fifth year
o 0% thereafter
<PAGE>
- ----------------------
70 GE Funds
Prospectus
How to Invest
- --------------------------------------------------------------------------------
Purchasing Class C Shares
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 directly from GE Investment
Distributors without paying the sales charge typically associated with buying
a Fund from a broker. 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.
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
Purchasing Class D Shares
(Institutional Investors)
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 including defined contribution plans that do not
seek additional services provided or paid by GE Investment Management
o investment companies not managed by GE Investment Management
o clients of certain financial intermediaries who invest at least $250,000
Investors eligible to purchase Class D shares may not purchase any other class
of shares, except as described under Class A shares.
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 your 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
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
<PAGE>
----------
71
- --------------------------------------------------------------------------------
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
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. If the amount of the check is greater than the value of
the shares in your account, the check will be returned marked "insufficient
funds" and you may be assessed an additional charge. Please contact the
Distributor at the number listed on the back cover for additional details.
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.
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.
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.
<PAGE>
- ----------
72 GE Funds
Prospectus
How to Invest
- --------------------------------------------------------------------------------
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) 242-0134. (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.
- -------------------------------------------------------------------------------
When We Receive Your Order to Purchase or Redeem 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.
- -------------------------------------------------------------------------------
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".
<PAGE>
----------
73
- --------------------------------------------------------------------------------
Distribution and Shareholder Service Fees
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.
Distribution and Shareholder Service Fees
All GE Funds except
GE Short-Term Government Fund
and GE Money Market Fund* GE Short-Term Government Fund
----------------------------------- --------------------------------
Distribution Fee Service Fee Distribution Fee Service Fee
- --------------------------------------------------------------------------------
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.
<PAGE>
- ---------------------------------------------------------------
74 GE Funds Dividends, Capital Gains
Prospectus 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.
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.
<TABLE>
<CAPTION>
Fund Distribution Schedule
- ----------------------------------------------------------------------------------------------------
<S> <C>
GE U.S. Equity Fund o Dividends are declared and paid annually.
GE Premier Growth Equity Fund o Short-term and long-term capital gains, if
any, are declared and paid annually.
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 Strategic Investment Fund
<CAPTION>
- ----------------------------------------------------------------------------------------------------
<S> <C>
GE Fixed Income Fund o Dividends are declared daily and paid
monthly.
GE Government Securities Fund*
GE Short-Term Government Fund o Short-term and long-term capital gains, if
any, are declared and paid 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.
<PAGE>
----------------------------------------------
75
- --------------------------------------------------------------------------------
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.
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.
<PAGE>
- -----------------------------------------------------------------------
76 GE Funds Calculating Share Value
Prospectus
- --------------------------------------------------------------------------------
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".
<PAGE>
---------------------------------
GE Funds Financial 77
Prospectus Highlights
Appendix
- --------------------------------------------------------------------------------
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 PricewaterhouseCoopers
LLP, whose report, along with the Funds' financial statements, are included in
the Funds' Annual Report, which is available on request.
<PAGE>
- ---------------------------------------------------
78 GE Funds Financial
Prospectus Highlights
Appendix
- --------------------------------------------------------------------------------
GE U.S.Equity
Fund
<TABLE>
<CAPTION>
CLASS A
------------------------------------------
1998(b) 1997(b) 1996(b) 1995(b) 1994(c)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Inception date -- -- -- -- 12/22/93
Net Asset Value,
Beginning of Period $29.43 $23.34 $20.28 $16.12 $16.48
Income (Loss) from
Investment Operations:
Net Investment Income (Loss) 0.20 0.23 0.31 0.34 3.23
Net Gains (Losses)
on Investments (both
realized and unrealized) 1.25 8.33 3.34 3.91 (3.22)
Total Income (Loss)
From Investment Operations 1.45 8.56 3.65 4.25 0.01
Less Distributions
Dividends (from net
investment income) 0.21 0.28 0.32 0.00 0.20
Distributions (from
capital gains) 2.43 2.19 0.27 0.09 0.17
Total Distributions 2.64 2.47 0.59 0.09 0.37
Net Asset Value,
End of Period $28.24 $29.43 $23.34 $20.28 $16.12
Total Return (a) 5.38% 39.44% 18.36% 26.52% (0.86%)
Ratios/Supplemental Data
Net Assets, End of
Period (in thousands) $85,907 $65,535 $34,523 $15,148 $1,214
Ratio of Net Expenses
to Average Net Assets* 1.00% 1.00% 1.00% 1.00% 1.00%
Ratio of Net Investment
Income (Loss) to Average
Net Assets* 0.67% 0.93% 1.40% 1.85% 1.87%
Ratio of Gross Expenses
to Average Net Assets* 1.07% 1.11% 1.15% 1.25% 1.46%
Portfolio Turnover Rate 29% 38% 49% 43% 51%
</TABLE>
- -------------------------------------------------------------------------------
GE Premier
Growth Equity
Fund
<TABLE>
<CAPTION>
CLASS A
-------------------
1998(b) 1997(b,f)
------- ---------
<S> <C> <C>
Inception date -- 12/31/96
Net Asset Value,
Beginning of Period $18.31 $15.00
Income (Loss) from
Investment Operations
Net Investment Income (Loss) 0.00 (0.04)
Net Gains (Losses)
Investments (both
realized and unrealized) 2.36 3.35
Total Income (Loss)
From Investment Operations 2.36 3.31
Less Distributions
Dividends (from net
investment income) 0.00 0.00
Distributions (from
capital gains) 0.29 0.00
Total Distributions 0.29 0.00
Net Asset Value,
End of Period $20.38 $18.31
Total Return (a) 13.09% 22.07%
Ratios/Supplemental Data
Net Assets, End of
Period $6,059 $1,395
Ratio of Net Expenses
to Average Net Assets 1.37% 1.40%
Ratio of Net Investment
Income (Loss) to Average
Net Assets (0.01%) (0.34%)
Ratio of Gross Expenses
to Average Net Assets* 1.42% 4.09%
Portfolio Turnover Rate 35% 17%
</TABLE>
<PAGE>
----------
79
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GE U.S.
Equity Fund
CLASS B
---------------------------------------------
1998(b) 1997(b) 1996(b) 1995(b) 1994
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Inception date -- -- -- -- 12/22/93
Net Asset Value,
Beginning of Period $28.35 $22.57 $19.71 $16.03 $16.41
Income (Loss) from
Investment Operations:
Net Investment Income (Loss) 0.05 0.11 0.19 0.21 0.24
Net Gains (Losses)
on Investments (both
realized and unrealized) 1.20 8.03 3.25 3.84 (0.25)
Total Income (Loss)
From Investment Operations 1.25 8.14 3.44 4.05 (0.01)
Less Distributions
Dividends (from net
investment income) 0.06 0.17 0.31 0.28 0.20
Distributions (from
capital gains) 2.43 2.19 0.27 0.09 0.17
Total Distributions 2.49 2.36 0.58 0.37 0.37
Net Asset Value,
End of Period $27.11 $28.35 $22.57 $19.71 $16.03
Total Return (a) 4.80% 38.75% 17.78% 25.92% (0.09%)
Ratios/Supplemental Data
Net Assets, End of
Period (in thousands) $21,407 $14,380 $7,194 $1,563 $91
Ratio of Net Expenses
to Average Net Assets* 1.50% 1.50% 1.50% 1.50% 1.50%
Ratio of Net Investment
Income (Loss) to Average
Net Assets* 0.17% 0.44% 0.90% 1.29% 1.28%
Ratio of Gross Expenses
to Average Net Assets* 1.63% 1.88% 2.08% 3.50% 1.96%
Portfolio Turnover Rate 29% 38% 49% 43% 51%
</TABLE>
<TABLE>
<CAPTION>
GE U.S.
Equity Fund
CLASS C
---------------------------------------------
1998(b) 1997(b) 1996(b) 1995(b) 1994
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Inception date -- -- -- -- 1/5/93
Net Asset Value,
Beginning of Period $29.00 $23.02 $19.98 $16.13 $16.35
Income (Loss) from
Investment Operations:
Net Investment Income (Loss) 0.27 0.30 0.36 0.37 1.00
Net Gains (Losses)
on Investments (both
realized and unrealized) 1.22 8.19 3.30 3.86 (0.85)
Total Income (Loss)
From Investment Operations 1.49 8.49 3.66 4.23 0.15
Less Distributions
Dividends (from net
investment income) 0.24 0.32 0.35 0.29 0.20
Distributions (from
capital gains) 2.43 2.19 0.27 0.09 0.17
Total Distributions 2.67 2.51 0.?? 0.38 0.37
Net Asset Value,
End of Period $27.82 $29.00 $23.02 $19.98 $16.13
Total Return (a) 5.62% 39.76% 18.70% 26.86% 0.88%
Ratios/Supplemental Data
Net Assets, End of
Period (in thousands) $124,714 $97,886 $50,035 $26,007 $16,382
Ratio of Net Expenses
to Average Net Assets* 0.75% 0.75% 0.75% 0.75% 0.62%
Ratio of Net Investment
Income (Loss) to Average
Net Assets* 0.92% 1.18% 1.66% 2.12% 2.11%
Ratio of Gross Expenses
to Average Net Assets* 0.84% 0.93% 1.06% 1.19% 1.21%
Portfolio Turnover Rate 29% 38% 49% 43% 51%
</TABLE>
<TABLE>
<CAPTION>
GE U.S.
Equity Fund
CLASS D
---------------------------------------------
1998(b) 1997(b) 1996(b) 1995 1994
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Inception date -- -- -- -- 11/29/93
Net Asset Value,
Beginning of Period $28.99 $23.03 $19.98 $16.16 $16.37
Income (Loss) from
Investment Operations:
Net Investment Income (Loss) 0.34 0.37 0.40 0.38 0.32
Net Gains (Losses)
on Investments (both
realized and unrealized) 1.21 8.19 3.31 3.88 (0.16)
Total Income (Loss)
From Investment Operations 1.55 8.56 3.71 4.26 0.16
Less Distributions
Dividends (from net
investment income) 0.33 0.41 0.39 0.35 0.20
Distributions (from
capital gains) 2.43 2.19 0.27 0.09 0.17
Total Distributions 2.76 2.60 0.66 0.44 0.37
Net Asset Value,
End of Period $27.78 $28.99 $23.03 $19.98 $16.16
Total Return (a) 5.86% 40.16% 18.97% 27.14% 0.96%
Ratios/Supplemental Data
Net Assets, End of
Period (in thousands) $281,071 $212,957 $144,470 $128,247 $114,885
Ratio of Net Expenses
to Average Net Assets* 0.50% 0.50% 0.50% 0.50% 0.50%
Ratio of Net Investment
Income (Loss) to Average
Net Assets* 1.16% 1.45% 1.90% 2.36% 2.27%
Ratio of Gross Expenses
to Average Net Assets* 0.56% 0.52% 0.59% 0.71% 0.96%
Portfolio Turnover Rate 29% 38% 49% 43% 51%
</TABLE>
<TABLE>
<CAPTION>
GE Premier
Growth Equity Fund
CLASS B
-------------------
1998(b) 1997(b,f)
------- ---------
<S> <C> <C>
Inception date 12/31/96
Net Asset Value,
Beginning of Period $18.25 $15.00
Income (Loss) from
Investment Operations
Net Investment Income (Loss) (0.12) (0.09)
Net Gains (Losses)
Investments (both
realized and unrealized) 2.36 3.34
Total Income (Loss)
From Investment Operations 2.24 3.25
Less Distributions
Dividends (from net
investment income) 0.00 0.00
Distributions (from
capital gains) 0.29 0.00
Total Distributions 0.29 0.00
Net Asset Value,
End of Period $20.20 $18.25
Total Return (a) 12.47% 21.67%
Ratios/Supplemental Data
Net Assets, End of
Period $2,076 $447
Ratio of Net Expenses
to Average Net Assets 1.90% 1.90%
Ratio of Net Investment
Income (Loss) to Average
Net Assets (0.62%) (0.76%)
Ratio of Gross Expenses
to Average Net Assets* 2.27% 9.30%
Portfolio Turnover Rate 35% 17%
</TABLE>
<TABLE>
<CAPTION>
GE Premier
Growth Equity Fund
CLASS C
-------------------
1998(b) 1997(b,f)
------- ---------
<S> <C> <C>
Inception date 12/31/96
Net Asset Value,
Beginning of Period $18.35 $15.00
Income (Loss) from
Investment Operations:
Net Investment Income (Loss) 0.03 0.00
Net Gains (Losses)
Investments (both
realized and unrealized) 2.38 3.35
Total Income (Loss)
From Investment Operations 2.41 3.35
Less Distributions
Dividends (from net
investment income) 0.03 0.00
Distributions (from
capital gains) 0.29 0.00
Total Distributions 0.32 0.00
Net Asset Value,
End of Period $20.44 $18.35
Total Return (a) 13.35% 22.33%
Ratios/Supplemental Data
Net Assets, End of
Period $15,044 $7,287
Ratio of Net Expenses
to Average Net Assets 1.12% 1.15%
Ratio of Net Investment
Income (Loss) to Average
Net Assets 0.17% (0.03%)
Ratio of Gross Expenses
to Average Net Assets* 1.16% 1.62%
Portfolio Turnover Rate 35% 17%
</TABLE>
<TABLE>
<CAPTION>
GE Premier
Growth Equity Fund
CLASS D
-------------------
1998(b) 1997(b,f)
------- ---------
<S> <C> <C>
Inception date 12/31/96
Net Asset Value,
Beginning of Period $18.38 $15.00
Income (Loss) from
Investment Operations:
Net Investment Income (Loss) 0.09 0.04
Net Gains (Losses)
Investments (both
realized and unrealized) 2.37 3.34
Total Income (Loss)
From Investment Operations 2.46 3.38
Less Distributions
Dividends (from net
investment income) 0.05 0.00
Distributions (from
capital gains) 0.29 0.00
Total Distributions 0.34 0.00
Net Asset Value,
End of Period $20.50 $18.38
Total Return (a) 13.65% 22.53%
Ratios/Supplemental Data
Net Assets, End of
Period $7,580 $5,770
Ratio of Net Expenses
to Average Net Assets 0.88% 0.90%
Ratio of Net Investment
Income (Loss) to Average
Net Assets 0.47% 0.31%
Ratio of Gross Expenses
to Average Net Assets* 0.89% 1.17%
Portfolio Turnover Rate 35% 17%
</TABLE>
<PAGE>
- ---------------------
80 GE Funds
Prospectus
Appendix
Financial
Highlights
GE Value Equity
Fund
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------
1998(b) 1997(d) 10/31/96 10/31/95 10/31/94
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Inception date -- -- -- -- 9/8/93
Net Asset Value,
Beginning of Period $13.58 $10.83 $8.95 $7.51 $7.63
Income (Loss) from
Investment Operations
Net Investment Income (Loss) 0.05 0.07 0.05 0.14 0.13
Net Gains (Losses)
on Securities (both
realized and unrealized) 0.46 3.59 1.99 1.45 (0.16)
Total Income (Loss)
From Investment Operations 0.51 3.66 2.04 1.59 (0.03)
Less Distributions
Dividends (from net
investment income) 0.00 0.04 0.09 0.15 0.09
Distributions (from
capital gains) 4.16 0.87 0.07 0.00 0.00
Total Distributions 4.16 0.91 0.16 0.15 0.09
Net Asset Value,
End of Period $9.93 $13.58 $10.83 $8.95 $7.51
Total Return (a) 5.86% 36.18% 23.10% 21.45% (0.32%)
Ratios/Supplemental Data
Net Assets, End of
Period (in thousands) $14.276 $8,236 $5,833 $4,083 $3,267
Ratio of Net Expenses
to Average Net Assets* 1.31% 1.30% 1.35% 1.35% 1.35%
Ratio of Net Investment
Income (Loss) to Average
Net Assets* 0.50% 0.63% 1.03% 1.71% 1.92%
Ratio of Gross Expenses
to Average Net Assets* 1.33% 1.33% 1.73% 2.43% 3.55%
Portfolio Turnover Rate 40% 1.31% 100% 27% 15%
</TABLE>
<TABLE>
<CAPTION>
GE Mid-Cap
Growth Fund
CLASS A
----------------------------------------------
1998(b) 1997(d) 10/31/96 10/31/95 10/31/94
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Inception date -- -- -- -- 9/8/93
Net Asset Value,
Beginning of Period $17.61 $13.16 $11.38 $8.81 $8.69
Income (Loss) from
Investment Operations
Net Investment Income (Loss) (0.04) (0.07) 0.00 0.01 (0.01)
Net Gains (Losses)
on Securities (both
realized and unrealized) (1.86) 4.52 1.78 2.56 0.21
Total Income (Loss)
From Investment Operations (1.90) 4.45 1.78 2.57 0.20
Less Distributions
Dividends (from net
investment income) 0.00 0.00 0.00 0.00 0.00
Distributions (from
capital gains) 7.37 0.00 0.00 0.00 0.08
Returns of Capital 0.07 0.00 0.00 0.00 0.00
Total Distributions 7.44 0.00 0.00 0.00 0.08
Net Asset Value,
End of Period $8.27 $17.61 $13.16 $11.38 $8.81
Total Return (a) (16.11%) 33.81% 15.64% 29.17% 2.48%
Ratios/Supplemental Data
Net Assets, End of
period (in thousands) $10,134 $10,885 $8,222 $5,986 $4,182
Ratio of Net Expenses
to Average Net Assets* 1.40% 1.31% 1.35% 1.35% 1.34%
Ratio of Net Investment
Income (Loss) to Average
Net Assets* (0.35%) (0.51%) 0.03% 0.10% (0.11%)
Ratio of Gross Expenses
to Average Net Assets* 1.45% 1.46% 1.70% 2.44% 3.53%
Portfolio Turnover Rate 13% 139% 41% 74% 100%
</TABLE>
<PAGE>
----------
81
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B CLASS C CLASS D
--------------------------------------------- ----------- --------
1998(b) 1997(d) 10/31/96 10/31/95 10/31/94 1998(b,g,j) 1998(b,h)
<S> <C> <C> <C> <C> <C> <C> <C>
Inception date -- -- -- -- 9/8/93 10/2/97 1/5/98
Net Asset Value,
Beginning of Period $13.48 $10.79 $8.93 $7.50 $7.64 $16.76 10.00
Income (Loss) from
Investment Operations
Net Investment Income (Loss) 0.00 (0.01) 0.04 0.07 0.08 0.08 0.08
Net Gains (Losses)
on Securities (both
realized and unrealized) 0.45 3.57 1.93 1.45 (0.17) 0.29 0.30
Total Income (Loss)
From Investment Operations 0.45 3.56 1.97 1.52 (0.09) 0.37 0.38
Less Distributions
Dividends (from net
investment income) 0.00 0.00 0.04 0.09 0.05 0.00 0.00
Distributions (from
capital gains) 4.16 0.87 0.07 0.00 0.00 6.97 0.00
Total Distributions 4.16 0.87 0.11 0.09 0.05 6.97 0.00
Net Asset Value,
End of Period $9.77 $13.48 $10.79 $8.93 $7.50 $10.16 $10.38
Total Return (a) 5.32% 35.23% 22.30% 20.50% (1.10%) 5.21% 3.80%
Ratios/Supplemental Data
Net Assets, End of
Period (in thousands) $44,655 $46,035 $33,318 $14,450 $7,970 $2,366 $1,580
Ratio of Net Expenses
to Average Net Assets* 1.81% 2.05% 2.10% 2.10% 2.10% 1.06% 0.81%
Ratio of Net Investment
Income (Loss) to Average
Net Assets* 0.00% (0.12%) 0.23% 0.94% 1.09% 0.75% 0.98%
Ratio of Gross Expenses
to Average Net Assets* 1.81% 2.07% 2.40% 3.18% 4.02% 1.23% 0.81%
Portfolio Turnover Rate 40% 131% 100% 27% 15% 40% 40%
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C CLASS D
--------------------------------------------- ----------- ---------
1998(b) 1997(d) 10/31/96 10/31/95 10/31/94 1998(b,g,j) 1998(b,h)
<S> <C> <C> <C> <C> <C> <C> <C>
Inception date -- -- -- -- 9/8/93 10/2/97 1/5/98
Net Asset Value,
Beginning of Period $17.11 $12.87 $11.21 $8.74 $8.70 $47.12 $10.00
Income (Loss) from
Investment Operations
Net Investment Income
(Loss) (0.08) (0.18) (0.09) (0.05) (0.04) 0.00 0.01
Net Gains (Losses)
on Securities (both
realized and unrealized) (1.79) 4.42 1.75 2.52 0.16 (3.58) (1.30)
Total Income (Loss)
From Investment Operations (1.87) 4.24 1.66 2.47 0.12 (3.58) (1.29)
Less Distributions
Dividends (from net
investment income) 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Distributions (from
capital gains) 7.40 0.00 0.00 0.00 0.08 34.86 0.00
Returns of Capital 0.04 0.00 0.00 0.00 0.00 0.19 0.00
Total Distributions 7.44 0.00 0.00 0.00 0.08 35.05 0.00
Net Asset Value,
End of Period $7.80 $17.11 $12.87 $11.21 $8.74 $8.49 $8.71
Total Return (a) (16.62%) 33.02% 14.81% 28.26% 1.67% (16.69%) (12.90%)
Ratios/Supplemental Data
Net Assets, End of
period (in thousands) $22,038 $32,280 $27,616 $14,311 $5,857 $1,705 $471
Ratio of Net Expenses
to Average Net Assets* 1.90% 2.06% 2.10% 2.10% 2.09% 1.15% 0.89%
Ratio of Net Investment
Income (Loss) to Average
Net Assets* (0.86%) (1.26%) (0.73%) (0.66%) (0.82%) (0.06) 0.21%
Ratio of Gross Expenses
to Average Net Assets* 1.93% 2.21% 2.41% 3.19% 4.06% 1.32% 0.89%
Portfolio Turnover Rate 13% 139% 41% 74% 100% 13% 13%
</TABLE>
<PAGE>
- --------------------------------------------------
82 GE Funds
Prospectus
Appendix
Financial
Highlights
- --------------------------------------------------------------------------------
GE Global
Equity Fund
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------
1998(b) 1997 1996(b) 1995 1994(c)
<S> <C> <C> <C> <C> <C>
Inception date -- -- -- -- 12/22/93
Net Asset Value, Beginning of Period $24.61 $22.01 $20.18 $19.34 $18.61
Income (Loss) from Investment Operations
Net Investment Income (Loss) (0.01) 0.00 0.02 0.10 0.03
Net Gains (Losses) on Investments
(both realized and unrealized) (2.61) 3.89 2.20 1.22 0.91
Total Income (Loss) From Investment
Operations (2.62) 3.89 2.22 1.32 0.94
Less Distributions
Dividends (from net investment income) 0.00 0.00 0.02 0.09 0.01
Distributions (from capital gains) 2.47 1.29 0.37 0.39 0.20
Total Distributions 2.47 1.29 0.39 0.48 0.21
Net Asset Value, End of Period $19.52 $24.61 $22.01 $20.18 $19.34
Total Return (a) (11.03%) 18.51% 11.18% 7.16% 3.09%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands) $ 1,414 $ 1,524 $ 4,054 $ 2,811 $ 694
Ratio of Net Expenses to Average Net Assets* 1.60% 1.60% 1.60% 1.60% 1.60%
Ratio of Net Investment Income (Loss) to Average Net Assets* (0.03%) (0.09%) 0.12% 0.47% 0.44%
Ratio of Gross Expenses to Average Net Assets* 1.98% 3.10% 1.90% 2.17% 2.02%
Portfolio Turnover Rate 71% 70% 46% 46% 26%
</TABLE>
<TABLE>
<CAPTION>
GE International
Equity Fund
CLASS A
--------------------------------------------
1998(b) 1997 1996(b) 1995 1994
<S> <C> <C> <C> <C> <C>
Inception date -- -- -- -- 3/2/94
Net Asset Value, Beginning of Period $20.26 $17.65 $15.87 $15.18 $15.00
Income (Loss) from Investment Operations
Net Investment Income (Loss) 0.04 0.01 0.07 0.09 0.06
Net Gains (Losses) on Investments (both realized and unrealized) (1.58) 3.16 1.74 0.64 0.12
Total Income (Loss) From Investment Operations (1.54) 3.17 1.81 0.73 0.18
Less Distributions
Dividends (from net investment income) 0.00 0.06 0.03 0.04 0.00
Distributions (from capital gains) 3.74 0.50 0.00 0.00 0.00
Total Distributions 3.74 0.56 0.03 0.04 0.00
Net Asset Value, End of Period $14.98 $20.26 $17.65 $15.87 $15.18
Total Return (a) (8.93%) 18.41% 11.39% 4.87% 1.20%
Ratios/Supplemental Data
Net Assets, End of Period (in thousands) $16,805 $17,270 $8,462 $3,948 $ 25
Ratio of Net Expenses to Average Net Assets* 1.60% 1.60% 1.59% 1.60% 1.60%
Ratio of Net Investment Income (Loss) to Average Net Assets* 0.22% 0.20% 0.43% 1.28% 1.01%
Ratio of Gross Expenses to Average Net Assets* 1.61% 1.60% 1.66% 1.95% 1.93%
Portfolio Turnover Rate 93% 51% 36% 27% 6%
</TABLE>
<PAGE>
-----------------------
83
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
---------------------------------------------
1998(b) 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Inception date -- -- -- -- 12/22/93
Net Asset Value, Beginning of Period $24.32 $21.87 $20.14 $19.32 $18.48
Income (Loss) from Investment Operations
Net Investment Income (Loss) (0.11) (0.08) (0.04) 0.00 (0.01)
Net Gains (Losses) on Investments
(both realized and unrealized) (2.57) 3.82 2.14 1.23 1.06
Total Income (Loss) From Investment
Operations (2.68) 3.74 2.10 1.23 1.05
Less Distributions
Dividends (from net investment income) 0.00 0.00 0.00 0.02 0.01
Distributions (from capital gains) 2.47 1.29 0.37 0.39 0.20
Total Distributions 2.47 1.29 0.37 0.41 0.21
Net Asset Value, End of Period $19.17 $24.32 $21.87 $20.14 $19.32
Total Return (a) (11.44%) 17.92% 10.61% 6.62% 5.70%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands) $ 989 $ 877 $ 600 $ 356 $ 128
Ratio of Net Expenses to Average Net Assets* 2.10% 2.10% 2.10% 2.10% 2.10%
Ratio of Net Investment Income (Loss) to Average Net Assets* (0.48%) (0.52%) (0.34%) (0.11%) (0.08%)
Ratio of Gross Expenses to Average Net Assets* 2.45% 3.33% 3.50% 3.50% 2.52%
Portfolio Turnover Rate 71% 70% 46% 46% 26%
</TABLE>
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------
1998(b) 1997 1996(b) 1995 1994
<S> <C> <C> <C> <C> <C>
Inception date -- -- -- -- 3/2/94
Net Asset Value, Beginning of Period $20.02 $17.47 $15.77 $15.13 $15.00
Income (Loss) from Investment Operations
Net Investment Income (Loss) (0.05) (0.06) 0.05 0.01 0.00
Net Gains (Losses) on Investments (both realized and unrealized) (1.55) 3.11 1.65 0.64 0.13
Total Income (Loss) From Investment Operations (1.60) 3.05 1.70 0.65 0.13
Less Distributions
Dividends (from net investment income) 0.00 0.00 0.00 0.01 0.00
Distributions (from capital gains) 3.74 0.50 0.00 0.00 0.00
Total Distributions 3.74 0.50 0.00 0.01 0.00
Net Asset Value, End of Period $14.68 $20.02 $17.47 $15.77 $15.13
Total Return (a) (9.39%) 17.86% 10.78% 4.33% 0.87%
Ratios/Supplemental Data
Net Assets, End of Period (in thousands) $ 948 $ 455 $ 272 $ 57 $ 34
Ratio of Net Expenses to Average Net Assets* 2.10% 2.10% 2.10% 2.10% 2.10%
Ratio of Net Investment Income (Loss) to Average Net Assets* (0.26%) (0.30%) 0.28% 0.10% 0.47%
Ratio of Gross Expenses to Average Net Assets* 2.59% 4.12% 3.50% 3.50% 2.43%
Portfolio Turnover Rate 93% 51% 36% 27% 6%
</TABLE>
<TABLE>
<CAPTION>
GE International Equity Fund
CLASS C
--------------------------------------------
1998(b) 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Inception date -- -- -- -- 1/5/93
Net Asset Value, Beginning of Period $24.81 $22.18 $20.31 $19.40 $17.16
Income (Loss)from Investment Operations
Net Investment Income (Loss) 0.05 0.04 0.06 0.09 0.07
Net Gains (Losses) on Investments
(both realized and unrealized) (2.65) 3.94 2.22 1.30 2.37
Total Income (Loss) From Investment
Operations (2.60) 3.98 2.28 1.39 2.44
Less Distributions
Dividends (from net investment income) 0.02 0.06 0.04 0.09 0.00
Distributions (from capital gains) 2.47 1.29 0.37 0.39 0.20
Total Distributions 2.49 1.35 0.41 0.48 0.20
Net Asset Value, End of Period $19.72 $24.81 $22.18 $20.31 $19.40
Total Return (a) (10.86%) 18.82% 11.44% 7.47% 14.28%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands) $28,412 $35,120 $28,682 $23,683 $20,432
Ratio of Net Expenses to Average Net Assets* 1.34% 1.35% 1.35% 1.35% 1.31%
Ratio of Net Investment Income (Loss) to Average Net Assets* 0.22% 0.24% 0.33% 0.59% 0.52%
Ratio of Gross Expenses to Average Net Assets* 1.35% 1.45% 1.60% 1.42% 1.77%
Portfolio Turnover Rate 71% 70% 46% 46% 26%
</TABLE>
<TABLE>
<CAPTION>
GE Global
Equity Fund CLASS D
---------------------------------------------
1998(b) 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Inception date -- -- -- -- 11/29/93
Net Asset Value, Beginning of Period $24.83 $22.25 $20.37 $19.45 $17.49
Income (Loss) from Investment Operations
Net Investment Income (Loss) 0.09 0.10 0.13 0.13 0.11
Net Gains (Losses) on Investments
(both realized and unrealized) (2.63) 3.94 2.21 1.31 2.06
Total Income (Loss) From Investment
Operations (2.54) 4.04 2.34 1.44 2.17
Less Distributions
Dividends (from net investment income) 0.10 0.17 0.09 0.13 0.01
Distributions (from capital gains) 2.47 1.29 0.37 0.39 0.20
Total Distributions 2.57 1.46 0.46 0.52 0.21
Net Asset Value, End of Period $19.72 $24.83 $22.25 $20.37 $19.45
Total Return (a) (10.59%) 19.14% 11.71% 7.76% 12.43%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands) $15,039 $22,642 $10,123 $ 9,785 $10,504
Ratio of Net Expenses to Average Net Assets* 1.07% 1.10% 1.10% 1.10% 1.10%
Ratio of Net Investment Income (Loss) to Average Net Assets* 0.37% 0.48% 0.56% 0.84% 0.82%
Ratio of Gross Expenses to Average Net Assets* 1.07% 1.10% 1.12% 1.75% 1.52%
Portfolio Turnover Rate 71% 70% 46% 46% 26%
</TABLE>
<TABLE>
<CAPTION>
GE International Equity Fund
CLASS C
--------------------------------------------
1998(b) 1997 1996(b) 1995 1994
<S> <C> <C> <C> <C> <C>
Inception date -- -- -- -- 3/2/94
Net Asset Value, Beginning of Period $20.36 $17.65 $15.88 $15.19 $15.00
Income (Loss) from Investment Operations
Net Investment Income (Loss) 0.09 0.05 0.11 0.12 0.00
Net Gains (Losses) on Investments (both realized and unrealized) (1.60) 3.19 1.72 0.65 0.19
Total Income (Loss) From Investment Operations (1.51) 3.24 1.83 0.77 0.19
Less Distributions
Dividends (from net investment income) 0.00 0.03 0.06 0.08 0.00
Distributions (from capital gains) 3.74 0.50 0.00 0.00 0.00
Total Distributions 3.74 0.53 0.06 0.08 0.00
Net Asset Value, End of Period $15.11 $20.36 $17.65 $15.88 $15.19
Total Return (a) (8.71%) 18.79% 11.54% 5.16% 1.27%
Ratios/Supplemental Data
Net Assets, End of Period (in thousands) $ 6,114 $ 6,152 $ 3,230 $ 1,262 $ 481
Ratio of Net Expenses to Average Net Assets* 1.35% 1.35% 1.35% 1.35% 1.35%
Ratio of Net Investment Income (Loss) to Average Net Assets* 0.50% 0.45% 0.68% 0.83% 0.66%
Ratio of Gross Expenses to Average Net Assets* 1.42% 1.58% 1.96% 2.75% 1.68%
Portfolio Turnover Rate 93% 51% 36% 27% 6%
</TABLE>
<TABLE>
<CAPTION>
CLASS D
--------------------------------------------
1998(b) 1997 1996(b) 1995 1994
<S> <C> <C> <C> <C> <C>
Inception date -- -- -- -- 3/2/94
Net Asset Value, Beginning of Period $20.43 $17.76 $15.94 $15.22 $15.00
Income (Loss) from Investment Operations
Net Investment Income (Loss) 0.01 0.13 0.17 0.12 0.10
Net Gains (Losses) on Investments (both realized and unrealized) (1.46) 3.18 1.73 0.70 0.12
Total Income (Loss) From Investment Operations (1.45) 3.31 1.90 0.82 0.22
Less Distributions
Dividends (from net investment income) 0.06 0.14 0.08 0.10 0.00
Distributions (from capital gains) 3.74 0.50 0.00 0.00 0.00
Total Distributions 3.80 0.64 0.08 0.10 0.00
Net Asset Value, End of Period $15.18 $20.43 $17.76 $15.94 $15.22
Total Return (a) (8.34%) 19.16% 11.97% 5.45% 1.47%
Ratios/Supplemental Data
Net Assets, End of Period (in thousands) $15,367 $75,098 $63,225 $32,907 $26,460
Ratio of Net Expenses to Average Net Assets* 1.04% 1.01% 1.03% 1.07% 1.10%
Ratio of Net Investment Income (Loss) to Average Net Assets* 0.08% 0.76% 0.99% 0.97% 1.52%
Ratio of Gross Expenses to Average Net Assets* 1.06% 1.01% 1.03% 1.18% 1.43%
Portfolio Turnover Rate 93% 51% 36% 27% 6%
</TABLE>
<PAGE>
- ---------------------
84 GE Funds
Prospectus
Appendix
Financial
Highlights
- --------------------------------------------------------------------------------
GE Fixed
Income Fund
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------
1998(b) 1997 1996 1995 1994(c)
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Inception date -- -- -- -- 12/22/93
Net Asset Value,
Beginning of Period $12.05 $11.69 $11.91 $11.27 $12.19
Income (Loss) from
Investment Operations
Net Investment Income (Loss) 0.64 0.69 0.65 0.73 0.47
Net Gains (Losses)
on Securities (both
realized and unrealized) 0.50 0.35 (0.19) 0.63 (0.84)
Total Income (Loss)
From Investment Operations 1.14 1.04 0.46 1.36 (0.37)
Less Distributions
Dividends (from net
investment income) 0.64 0.68 0.68 0.72 0.47
Distributions (from
capital gains) 0.00 0.00 0.00 0.00 0.08
Returns of Capital 0.02 0.00 0.00 0.00 0.00
Total Distributions 0.66 0.68 0.68 0.72 0.55
Net Asset Value,
End of Period $12.53 $12.05 $11.69 $11.91 $11.27
Total Return (a) 9.70% 9.19% 3.91% 12.48% (3.02%)
Ratios/Supplemental Data
Net Assets, End of
Period (in thousands) $35,342 $18,617 $15,653 $5,400 $26,023
Ratio of Net Expenses
to Average Net Assets* 1.05% 1.09% 1.05% 1.08% 1.10%
Ratio of Net Investment
Income (Loss) to Average
Net Assets* 5.28% 5.81% 5.66% 6.22% 5.37%
Ratio of Gross Expenses
to Average Net Assets* 1.06% 1.14% 1.12% 1.18% 1.51%
Portfolio Turnover Rate 219% 258% 275% 315% 298%
</TABLE>
- --------------------------------------------------------------------------------
GE Government
Securities Fund
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------
1998(b) 1997(d) 10/31/96 10/31/95 10/31/94
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Inception date -- -- -- -- 9/8/93
Net Asset Value,
Beginning of Period $8.53 $8.48 $8.70 $8.43 $10.14
Income (Loss) from
Investment Operations
Net Investment Income (Loss) 0.56 0.53 0.62 0.58 0.70
Net Gains (Losses)
on Securities (both
realized and unrealized) 0.39 0.05 (0.22) 0.38 (1.60)
Total Income (Loss)
From Investment Operations 0.95 0.58 0.40 0.96 (0.90)
Less Distributions
Dividends (from net
investment income) 0.53 0.53 0.54 0.58 0.70
Distributions (from
capital gains) 0.00 0.00 0.00 0.00 0.03
In Excess of Net
Investment Income 0.05 0.00 0.00 0.00 0.00
Returns of Capital 0.00 0.00 0.08 0.11 0.08
Total Distributions 0.58 0.53 0.62 0.69 0.81
Net Asset Value,
End of Period $8.90 $8.53 $8.48 $8.70 $8.43
Total Return (a) 11.61% 7.13% 4.80% 11.77% (9.17%)
Ratios/Supplemental Data
Net Assets, End of
period (in thousands) $24,541 $24,027 $29,090 $26,889 $21,498
Ratio of Net Expenses
to Average Net Assets* 1.10% 0.88% 0.90% 1.01% 0.99%
Ratio of Net Investment
Income (Loss) to Average
Net Assets* 6.52% 6.91% 6.59% 6.78% 7.09%
Ratio of Gross Expenses
to Average Net Assets* 1.16% 0.88% 0.90% 1.07% 0.99%
Portfolio Turnover Rate 64% 110% 334% 316% 129%
</TABLE>
<PAGE>
-----------------------
85
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------
1998(b) 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Inception date -- -- -- -- 12/22/93
12/22/93
Net Asset Value,
Beginning of Period $12.06 $11.70 $11.91 $11.26 $12.15
Income (Loss) from
Investment Operations
Net Investment Income (Loss) 0.58 0.63 0.60 0.65 0.42
Net Gains (Losses)
on Securities (both
realized and unrealized) 0.50 0.36 (0.20) 0.66 (0.81)
Total Income (Loss)
From Investment Operations 1.08 0.99 0.40 1.31 (0.39)
Less Distributions
Dividends (from net
investment income) 0.57 0.63 0.61 0.66 0.42
Distributions (from
capital gains) 0.00 0.00 0.00 0.00 0.08
Returns of Capital 0.02 0.00 0.00 0.00 0.00
Total Distributions 0.59 0.63 0.61 0.66 0.50
Net Asset Value,
End of Period $12.55 $12.06 $11.70 $11.91 $11.26
Total Return (a) 9.24% 8.64% 3.41% 11.98% (3.31%)
Ratios/Supplemental Data
Net Assets, End of
period (in thousands) $1,855 $1,401 $1,673 $234 $65
Ratio of Net Expenses
to Average Net Assets* 1.55% 1.56% 1.60% 1.60% 1.58%
Ratio of Net Investment
Income (Loss) to Average
Net Assets* 4.79% 5.17% 5.19% 5.57% 4.83%
Ratio of Gross Expenses
to Average Net Assets* 1.85% 2.19% 2.44% 3.50% 2.01%
Portfolio Turnover Rate 219% 258% 275% 315% 298%
</TABLE>
<TABLE>
<CAPTION>
CLASS C
----------------------------------------------
1998(b) 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Inception date -- -- -- -- 1/5/93
Net Asset Value,
Beginning of Period $12.06 $11.70 $11.92 $11.27 $12.31
Income (Loss) from
Investment Operations
Net Investment Income (Loss) 0.68 0.72 0.69 0.73 0.61
Net Gains (Losses)
on Securities (both
realized and unrealized) 0.50 0.35 (0.21) 0.67 (0.96)
Total Income (Loss)
From Investment Operations 1.18 1.07 0.48 1.40 (0.35)
Less Distributions
Dividends (from net
investment income) 0.67 0.71 0.70 0.75 0.61
Distributions (from
capital gains) 0.00 0.00 0.00 0.00 0.08
Returns of Capital 0.02 0.00 0.00 0.00 0.00
Total Distributions 0.69 0.71 0.70 0.75 0.69
Net Asset Value,
End of Period $12.55 $12.06 $11.70 $11.92 $11.27
Total Return (a) 10.06% 9.45% 4.10% 12.81% (2.97%)
Ratios/Supplemental Data
Net Assets, End of
period (in thousands) $49,736 $35,097 $28,115 $21,401 $13,600
Ratio of Net Expenses
to Average Net Assets* 0.80% 0.85% 0.85% 0.85% 0.79%
Ratio of Net Investment
Income (Loss) to Average
Net Assets* 5.53% 6.17% 5.84% 6.37% 5.22%
Ratio of Gross Expenses
to Average Net Assets* 0.83% 0.96% 0.99% 0.95% 1.26%
Portfolio Turnover Rate 219% 258% 275% 315% 298%
</TABLE>
<TABLE>
<CAPTION>
CLASS D
----------------------------------------------
1998(b) 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Inception date -- -- -- -- 11/29/93
Net Asset Value,
Beginning of Period $12.05 $11.69 $11.92 $11.27 $12.17
Income (Loss) from
Investment Operations
Net Investment Income (Loss) 0.71 0.75 0.72 0.77 0.55
Net Gains (Losses)
on Securities (both
realized and unrealized) 0.50 0.35 (0.22) 0.65 (0.83)
Total Income (Loss)
From Investment Operations 1.21 1.01 0.50 1.42 (0.28)
Less Distributions
Dividends (from net
investment income) 0.70 0.74 0.73 0.77 0.54
Distributions (from
capital gains) 0.00 0.00 0.00 0.00 0.08
Returns of Capital 0.02 0.00 0.00 0.00 0.00
Total Distributions 0.72 0.74 0.73 0.77 0.62
Net Asset Value,
End of Period $12.54 $12.05 $11.69 $11.92 $11.27
Total Return (a) 10.33% 9.74% 4.32% 13.10% (2.34%)
Ratios/Supplemental Data
Net Assets, End of
period (in thousands) $30,067 $16,229 $19,098 $6,642 $2,732
Ratio of Net Expenses
to Average Net Assets* 0.55% 0.56% 0.55% 0.59% 0.58%
Ratio of Net Investment
Income (Loss) to Average
Net Assets* 5.58% 5.97% 6.14% 6.57% 5.40%
Ratio of Gross Expenses
to Average Net Assets* 0.57% 0.59% 0.57% 2.50% 1.01%
Portfolio Turnover Rate 219% 258% 275% 315% 298%
</TABLE>
<TABLE>
<CAPTION>
GE Government Securities Fund
CLASS B
----------------------------------------------
1998(b) 1997(d) 10/31/96 10/31/95 10/31/94
<S> <C> <C> <C> <C> <C>
Inception date -- -- -- -- 4/22/87
Net Asset Value,
Beginning of Period $8.54 $8.49 $8.71 $8.42 $10.14
Income (Loss) from
Investment Operations
Net Investment Income (Loss) 0.52 0.47 0.55 0.51 0.60
Net Gains (Losses)
on Securities (both
realized and unrealized) 0.39 0.05 (0.22) 0.41 (1.58)
Total Income (Loss)
From Investment Operations 0.91 0.52 0.33 0.92 (0.98)
Less Distributions
Dividends (from net
investment income) 0.48 0.47 0.48 0.52 0.60
Distributions (from
capital gains) 0.00 0.00 0.00 0.00 0.03
In Excess of Net
Investment Income 0.04 0.00 0.00 0.00 0.00
Returns of Capital 0.00 0.00 0.07 0.11 0.11
Total Distributions 0.52 0.47 0.55 0.63 0.74
Net Asset Value,
End of Period $8.93 $8.54 $8.49 $8.71 $8.42
Total Return (a) 10.99% 6.36% 4.00% 11.19% (9.98%)
Ratios/Supplemental Data
Net Assets, End of
period (in thousands) $399,675 $523,303 $767,216 $1,112,254 $1,252,348
Ratio of Net Expenses
to Average Net Assets* 1.60% 1.63% 1.69% 1.76% 1.76%
Ratio of Net Investment
Income (Loss) to Average
Net Assets* 6.00% 6.15% 5.77% 6.08% 6.45%
Ratio of Gross Expenses
to Average Net Assets* 1.61% 1.63% 1.69% 1.78% 1.76%
Portfolio Turnover Rate 64% 110% 334% 316% 129%
</TABLE>
<TABLE>
<CAPTION>
GE Government
Securities Fund
CLASS C
----------------------------------------------
1998(b,i)
<S> <C>
Inception date 10/28/97
Net Asset Value,
Beginning of Period $10.00
Income (Loss) from
Investment Operations
Net Investment Income (Loss) 0.61
Net Gains (Losses)
on Securities (both
realized and unrealized) 0.36
Total Income (Loss)
From Investment Operations 0.97
Less Distributions
Dividends (from net
investment income) 0.51
Distributions (from
capital gains) 0.00
In Excess of Net
Investment Income 0.05
Returns of Capital 0.00
Total Distributions 0.56
Net Asset Value,
End of Period $10.41
Total Return (a) 10.01%
Ratios/Supplemental Data
Net Assets, End of
period (in thousands) $972
Ratio of Net Expenses
to Average Net Assets* 0.78%
Ratio of Net Investment
Income (Loss) to Average
Net Assets* 6.01%
Ratio of Gross Expenses
to Average Net Assets* 1.46%
Portfolio Turnover Rate 64%
</TABLE>
<PAGE>
- ---------------------
86 GE Funds
Prospectus
Appendix
Financial
Highlights
- -------------------------------------------------------------------------------
GE Short-Term
Government
Fund
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------
1998(b) 1997 1996(b) 1995 1994
<S> <C> <C> <C> <C> <C>
Inception date -- -- -- -- 3/2/94
Net Asset Value, Beginning of Period $ 11.85 $11.78 $11.91 $11.72 $12.00
Income (Loss) from Investment Operations
Net Investment Income (Loss) 0.62 0.65 0.60 0.64 0.35
Net Gains (Losses) on Investments (both realized and unrealized) 0.19 0.07 (0.06) 0.21 (0.30)
Total Income (Loss) From Investment Operations 0.81 0.72 0.54 0.85 0.05
Less Distributions
Dividends (from net investment income) 0.63 0.64 0.61 0.66 0.33
Distributions (from capital gains) 0.02 0.01 0.06 0.00 0.00
Total Distributions 0.65 0.65 0.67 0.66 0.33
Net Asset Value, End of Period $12.01 $11.85 $11.78 $11.91 $11.72
Total Return (a) 7.10% 6.30% 4.63% 7.48% 0.40%
Ratios/Supplemental Data
Net Assets, End of Period (in thousands) $8,905 $7,298 $ 340 $ 285 $ 35
Ratio of Net Expenses to Average Net Assets* 0.95% 0.95% 0.95% 0.95% 0.95%
Ratio of Net Investment Income (Loss) to Average Net Assets* 5.21% 5.24% 5.04% 5.27% 4.75%
Ratio of Gross Expenses to Average Net Assets* 1.17% 2.19% 3.00% 3.00% 1.71%
Portfolio Turnover Rate 185% 265% 201% 415% 146%
</TABLE>
<TABLE>
<CAPTION>
GE Tax-Exempt
Fund
CLASS A
------------------------------------------
1998(b) 1997(d) 10/31/96 10/31/95 10/31/94
<S> <C> <C> <C> <C> <C>
Inception date -- -- -- -- 9/8/93
Net Asset Value, Beginning of Period $11.63 $11.42 $11.31 $10.59 $11.48
Income (Loss) from Investment Operations
Net Investment Income (Loss) 0.51 0.53 0.62 0.55 0.45
Net Gains (Losses) on Investments (both realized and unrealized) 0.20 0.22 0.05 0.73 (0.78)
Total (Loss) From Investment Operations 0.71 0.75 0.67 1.28 (0.33)
Less Distributions
Dividends (from net investment income) 0.51 0.54 0.56 0.56 0.56
Distributions (from capital gains) 0.00 0.00 0.00 0.00 0.00
Total Distributions 0.51 0.54 0.56 0.56 0.56
Net Asset Value, End of Period $11.83 $11.63 $11.42 $11.31 $10.59
Total Return (a) 6.33% 6.77% 6.13% 12.24% (2.99%)
Ratios/Supplemental Data
Net Assets, End of Period (in thousands) $5,730 $16,542 $16,169 $16,025 $14,283
Ratio of Net Expenses to Average Net Assets* 1.10% 0.35% 0.00% 0.00% 0.77%
Ratio of Net Investment Income (Loss) to Average Net Assets* 4.32% 5.01% 5.42% 5.01% 4.08%
Ratio of Gross Expenses to Average Net Assets* 1.23% 1.57% 1.52% 1.81% 1.62%
Portfolio Turnover Rate 74% 13% 6% 25% 0%
</TABLE>
<PAGE>
----------
87
GE Short-Term
Government
Fund
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------
1998(b) 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Inception date -- -- -- -- 3/2/94
Net Asset Value, Beginning of Period $11.84 $11.78 $11.90 $11.72 $12.00
Income (Loss) from Investment Operations
Net Investment Income (Loss) 0.58 0.61 0.56 0.59 0.33
Net Gains (Losses) on Investments (both realized and unrealized) 0.20 0.06 (0.05) 0.21 (0.31)
Total Income (Loss) From Investment Operations 0.78 0.67 0.51 0.80 0.02
Less Distributions
Dividends (from net investment income) 0.59 0.60 0.57 0.62 0.30
Distributions (from capital gains) 0.02 0.01 0.06 0.00 0.00
Total Distributions 0.61 0.61 0.63 0.62 0.30
Net Asset Value, End of Period $12.01 $11.84 $11.78 $11.90 $11.72
Total Return (a) 6.83% 5.84% 4.35% 7.01% 0.20%
Ratios/Supplemental Data
Net Assets, End of Period (in thousands) $895 $1,031 $145 $83 $25
Ratio of Net Expenses to Average Net Assets* 1.30% 1.30% 1.30% 1.30% 1.30%
Ratio of Net Investment Income (Loss) to Average Net Assets* 4.87% 4.84% 4.67% 5.07% 4.38%
Ratio of Gross Expenses to Average Net Assets* 1.88% 7.77% 3.35% 3.35% 2.06%
Portfolio Turnover Rate 185% 265% 201% 415% 146%
</TABLE>
<TABLE>
<CAPTION>
GE Short-Term
Government Fund
CLASS C
-----------------------------------------------
1998(b) 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Inception date -- -- -- -- 3/2/94
Net Asset Value, Beginning of Period $11.86 $11.79 $11.91 $11.72 $12.00
Income (Loss) from Investment Operations
Net Investment Income (Loss) 0.65 0.67 0.63 0.66 0.36
Net Gains (Losses) on Investments (both realized and unrealized) 0.19 0.08 (0.05) 0.22 (0.30)
Total Income (Loss) From Investment Operations 0.84 0.75 0.58 0.88 0.06
Less Distributions
Dividends (from net investment income) 0.66 0.67 0.64 0.69 0.34
Distributions (from capital gains) 0.02 0.01 0.06 0.00 0.00
Total Distributions 0.68 0.68 0.70 0.69 0.34
Net Asset Value, End of Period $12.02 $11.86 $11.79 $11.91 $11.72
Total Return (a) 7.36% 6.57% 4.98% 7.74% 0.53%
Ratios/Supplemental Data
Net Assets, End of Period (in thousands) $8,199 $5,319 $3,653 $2,437 $ 287
Ratio of Net Expenses to Average Net Assets* 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of Net Investment Income (Loss) to Average Net Assets* 5.47% 5.57% 5.28% 5.62% 5.18%
Ratio of Gross Expenses to Average Net Assets* 0.95% 1.07% 1.34% 1.84% 1.46%
Portfolio Turnover Rate 185% 265% 201% 415% 146%
</TABLE>
<TABLE>
<CAPTION>
GE Short-Term
Government Fund
CLASS D
-----------------------------------------------
1998(b) 1997 1996(b) 1995 1994
<S> <C> <C> <C> <C> <C>
Inception date -- -- -- -- 3/2/94
Net Asset Value, Beginning of Period $11.85 $11.78 $11.90 $11.72 $12.00
Income (Loss) from Investment Operations
Net Investment Income (Loss) 0.68 0.70 0.66 0.69 0.39
Net Gains (Losses) on Investments (both realized and unrealized) 0.19 0.08 (0.05) 0.21 (0.31)
Total Income (Loss) From Investment Operations 0.87 0.78 0.61 0.90 0.08
Less Distributions
Dividends (from net investment income) 0.69 0.70 0.67 0.72 0.36
Distributions (from capital gains) 0.02 0.01 0.06 0.00 0.00
Total Distributions 0.71 0.71 0.73 0.72 0.36
Net Asset Value, End of Period $12.01 $11.85 $11.78 $11.90 $11.72
Total Return (a) 7.65% 6.83% 5.24% 7.92% 0.69%
Ratios/Supplemental Data
Net Assets, End of Period (in thousands) $9,444 $7,717 $7,786 $8,048 $7,822
Ratio of Net Expenses to Average Net Assets* 0.45% 0.45% 0.45% 0.45% 0.45%
Ratio of Net Investment Income (Loss) to Average Net Assets* 5.74% 5.80% 5.54% 5.89% 5.32%
Ratio of Gross Expenses to Average Net Assets* 0.68% 0.68% 0.83% 0.98% 1.21%
Portfolio Turnover Rate 185% 265% 201% 415% 146%
</TABLE>
<TABLE>
<CAPTION>
CLASS B
---------------------------------------------
1998(b) 1997(d) 10/31/96 10/31/95 10/31/94
<S> <C> <C> <C> <C> <C>
Inception date -- -- -- -- 9/8/93
Net Asset Value, Beginning of Period $11.63 $11.44 $11.32 $10.60 $11.48
Income (Loss) from Investment Operations
Net Investment Income (Loss) 0.44 0.51 0.62 0.55 0.43
Net Gains (Losses) on Investments (both realized and unrealized) 0.21 0.21 0.06 0.73 (0.82)
Total Income (Loss) From Investment Operations 0.65 0.72 0.68 1.28 (0.39)
Less Distributions
Dividends (from net investment income) 0.45 0.53 0.56 0.56 0.49
Distributions (from capital gains) 0.00 0.00 0.00 0.00 0.00
Total Distributions 0.45 0.53 0.56 0.56 0.49
Net Asset Value, End of Period $11.83 $11.63 $11.44 $11.32 $10.60
Total Return (a) 5.68% 6.46% 6.12% 12.33% (3.45%)
Ratios/Supplemental Data
Net Assets, End of Period (in thousands) $8,905 $10,133 $9,184 $7,668 $4,990
Ratio of Net Expenses to Average Net Assets* 1.60% 0.57% 0.00% 0.00% 1.14%
Ratio of Net Investment Income (Loss) to Average Net Assets* 3.81% 4.79% 5.43% 5.01% 3.75%
Ratio of Gross Expenses to Average Net Assets* 1.71% 2.32% 2.26% 2.56% 2.30%
Portfolio Turnover Rate 74% 13% 6% 25% 0%
</TABLE>
<TABLE>
<CAPTION>
GE Tax-Exempt
Fund CLASS C
------------------
1998(b) 1997(e)
<S> <C> <C>
Inception date -- 9/26/97
Net Asset Value, Beginning of Period $12.09 $12.08
Income (Loss) from Investment Operations
Net Investment Income (Loss) 0.55 0.02
Net Gains (Losses) on Investments (both realized and unrealized) 0.21 0.00
Total Income (Loss) From Investment Operations 0.76 0.02
Less Distributions
Dividends (from net investment income) 0.55 0.01
Distributions (from capital gains) 0.00 0.00
Total Distributions 0.55 0.01
Net Asset Value, End of Period $12.30 $12.09
Total Return (a) 6.48% 0.11%
Ratios/Supplemental Data
Net Assets, End of Period (in thousands) $10,794 $8,032
Ratio of Net Expenses to Average Net Assets* 0.85% 0.74%
Ratio of Net Investment Income (Loss) to Average Net Assets* 4.57% 4.04%
Ratio of Gross Expenses to Average Net Assets* 0.98% 0.76%
Portfolio Turnover Rate 74% 13%
</TABLE>
<TABLE>
<CAPTION>
GE Tax-Exempt
Fund CLASS D
-------------------
1998(b) 1997(e)
<S> <C> <C>
Inception date -- 9/26/97
Net Asset Value, Beginning of Period $12.10 $12.09
Income (Loss) from Investment Operations
Net Investment Income (Loss) 0.58 0.02
Net Gains (Losses) on Investments (both realized and unrealized) 0.27 0.00
Total Income (Loss) From Investment Operations 0.85 0.02
Less Distributions
Dividends (from net investment income) 0.65 0.01
Distributions (from capital gains) 0.00 0.00
Total Distributions 0.65 0.01
Net Asset Value, End of Period $12.30 $12.10
Total Return (a) 7.30% 0.11%
Ratios/Supplemental Data
Net Assets, End of Period (in thousands) $24 $3,216
Ratio of Net Expenses to Average Net Assets* 0.60% 0.54%
Ratio of Net Investment Income (Loss) to Average Net Assets* 4.74% 4.31%
Ratio of Gross Expenses to Average Net Assets* 1.25% 0.56%
Portfolio Turnover Rate 74% 13%
</TABLE>
<PAGE>
- ---------------------
88 GE Funds
Prospectus
Appendix
Financial
Highlights
- --------------------------------------------------------------------------------
GE Strategic
Investment Fund
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------
1998(b) 1997(b) 1996(b) 1995(b) 1994(c)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Inception date -- -- -- -- 12/22/93
Net Asset Value, Beginning of Period $24.01 $20.33 $18.43 $15.71 $16.21
Income (Loss) from Investment Operations
Net Investment Income (Loss) 0.53 0.53 0.51 0.52 0.48
Net Gains (Losses) on Investments (both realized and unrealized) 0.74 3.87 1.90 2.57 (0.65)
Total Income (Loss) From Investment Operations 1.27 4.40 2.41 3.09 (0.17)
Less Distributions
Dividends (from net investment income) 0.47 0.47 0.43 0.37 0.27
Distributions (from capital gains) 0.78 0.25 0.08 0.00 0.06
Total Distributions 1.25 0.72 0.51 0.37 0.33
Net Asset Value, End of Period $24.03 $24.01 $20.33 $18.43 $15.71
Total Return (a) 5.58% 22.16% 13.35% 20.12% (1.32%)
Ratios/Supplemental Data
Net Assets, End of Period (in thousands) $32,689 $39,731 $25,232 $8,778 $1,104
Ratio of Net Expenses to Average Net Assets* 1.14% 1.15% 1.12% 1.15% 1.15%
Ratio of Net Investment Income (Loss) to Average Net Assets* 2.18% 2.42% 2.60% 2.95% 2.59%
Ratio of Gross Expenses to Average Net Assets* 1.14% 1.15% 1.15% 1.19% 1.58%
Portfolio Turnover Rate 119% 106% 93% 98% 68%
</TABLE>
- --------------------------------------------------------------------------------
GE Money
Market Fund
<TABLE>
<CAPTION>
1998(b) 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Inception date -- -- -- -- 1/5/93
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
Income (Loss) from Investment Operations
Net Investment Income (Loss) 0.05 0.05 0.05 0.05 0.03
Net Gains (Losses) on Investments (both realized and unrealized) 0.00 0.00 0.00 0.00 0.00
Total Income (Loss) From Investment Operations 0.05 0.05 0.05 0.05 0.03
Less Distributions:
Dividends (from net investment income) 0.05 0.05 0.05 0.05 0.03
Distributions (from capital gains) 0.00 0.00 0.00 0.00 0.00
Total Distributions 0.05 0.05 0.05 0.05 0.03
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00
Total Return (a) 5.23% 5.14% 5.18% 5.52% 3.31%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands) $153,665 $114,030 $85,842 $71,664 $53,607
Ratio of Expenses to Average Net Assets* 0.50% 0.47% 0.45% 0.45% 0.45%
Ratio of Net Investment Income (Loss) to Average Net Assets* 5.11% 5.04% 5.06% 5.32% 3.41%
Ratio of Gross Expenses to Average Net Assets* 0.52% 0.56% 0.66% 0.70% 1.04%
</TABLE>
<PAGE>
----------
89
<TABLE>
<CAPTION>
GE Strategic
Investment Fund
CLASS B
-------------------------------------------
1998(b) 1997(b) 1996(b) 1995(b) 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Inception date -- -- -- -- 12/22/93
Net Asset Value, Beginning of Period $23.70 $20.04 $18.26 $15.62 $16.14
Income (Loss) from Investment Operations
Net Investment Income (Loss) 0.42 0.42 0.41 0.40 0.27
Net Gains (Losses) on Investments (both realized and unrealized) 0.69 3.82 1.87 2.58 (0.46)
Total Income (Loss) From Investment Operations 1.11 4.24 2.28 2.98 (0.19)
Less Distributions
Dividends (from net investment income) 0.38 0.33 0.42 0.34 0.27
Distributions (from capital gains) 0.78 0.25 0.08 0.00 0.06
Total Distributions 1.16 0.58 0.50 0.34 0.33
Net Asset Value, End of Period $23.65 $23.70 $20.04 $18.26 $15.62
Total Return (a) 4.91% 21.57% 12.73% 19.53% (1.25%)
Ratios/Supplemental Data
Net Assets, End of Period (in thousands) $11,158 $5,685 $3,701 $882 $150
Ratio of Net Expenses to Average Net Assets* 1.63% 1.65% 1.65% 1.65% 1.65%
Ratio of Net Investment Income (Loss) to Average Net Assets* 1.72% 1.92% 2.11% 2.46% 1.92%
Ratio of Gross Expenses to Average Net Assets* 1.63% 1.93% 2.10% 3.50% 2.08%
Portfolio Turnover Rate 119% 106% 93% 98% 68%
</TABLE>
<TABLE>
<CAPTION>
GE Strategic
Investment Fund
CLASS C
-------------------------------------------
1998(b) 1997(b) 1996(b) 1995(b) 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Inception date -- -- -- -- 1/5/93
Net Asset Value, Beginning of Period $24.11 $20.38 $18.46 $15.72 $16.08
Income (Loss) from Investment Operations
Net Investment Income (Loss) 0.61 0.59 0.54 0.53 0.44
Net Gains (Losses) on Investments (both realized and unrealized) 0.73 3.88 1.92 2.59 (0.48)
Total Income (Loss) From Investment Operations 1.34 4.47 2.46 3.12 (0.04)
Less Distributions
Dividends (from net investment income) 0.52 0.49 0.46 0.38 0.26
Distributions (from capital gains) 0.78 0.25 0.08 0.00 0.06
Total Distributions 1.30 0.74 0.54 0.38 0.32
Net Asset Value, End of Period $24.15 $24.11 $20.38 $18.46 $15.72
Total Return (a) 5.88% 22.45% 13.58% 20.35% (0.27%)
Ratios/Supplemental Data
Net Assets, End of Period (in thousands) $49,540 $40,516 $26,467 $17,821 $13,018
Ratio of Net Expenses to Average Net Assets* 0.85% 0.90% 0.90% 0.90% 0.85%
Ratio of Net Investment Income (Loss) to Average Net Assets* 2.49% 2.66% 2.81% 3.21% 2.62%
Ratio of Gross Expenses to Average Net Assets* 0.85% 0.94% 1.05% 1.03% 1.33%
Portfolio Turnover Rate 119% 106% 93% 98% 68%
</TABLE>
<TABLE>
<CAPTION>
GE Strategic
Investment Fund
CLASS D
-------------------------------------------
1998(b) 1997(b) 1996(b) 1995(b) 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Inception date -- -- -- -- 11/29/93
Net Asset Value, Beginning of Period $24.16 $20.44 $18.49 $15.74 $16.02
Income (Loss) from Investment Operations
Net Investment Income (Loss) 0.67 0.64 0.63 0.55 0.45
Net Gains (Losses) on Investments (both realized and unrealized) 0.72 3.89 1.90 2.62 (0.40)
Total Income (Loss) From Investment Operations 1.39 4.53 2.53 3.17 0.05
Less Distributions
Dividends (from net investment income) 0.57 0.56 0.50 0.42 0.27
Distributions (from capital gains) 0.78 0.25 0.08 0.00 0.06
Total Distributions 1.35 0.81 0.58 0.42 0.33
Net Asset Value, End of Period $24.20 $24.16 $20.44 $18.49 $15.74
Total Return (a) 6.10% 22.76% 13.95% 20.70% 0.25%
Ratios/Supplemental Data
Net Assets, End of Period (in thousands) $51,802 $37,924 $36,162 $18,665 $17,159
Ratio of Net Expenses to Average Net Assets* 0.64% 0.65% 0.58% 0.65% 0.65%
Ratio of Net Investment Income (Loss) to Average Net Assets* 2.70% 2.90% 3.16% 3.46% 2.93%
Ratio of Gross Expenses to Average Net Assets* 0.64% 0.65% 0.59% 0.97% 1.08%
Portfolio Turnover Rate 119% 106% 93% 98% 68%
</TABLE>
- -------------------------------------------------------------------------------
Notes to
Financial
Highlights
(a) Total returns are historical and assume changes in share price,
reinvestment of dividends and capital gains distributions, and assume no
sales charge. Had the Adviser not absorbed a portion of expenses, total
returns would have been lower. Periods less than one year are not
annualized.
(b) Per share data is based on average shares outstanding during the period.
(c) Per share information is for the period since inception through September
30, 1994, and the total return information is for the period January 1,
1994, commencement of investment operations, through September 30, 1994.
(d) For the period November 1, 1996, through September 30, 1997.
(e) For the period September 27, 1997, through September 30, 1997.
(f) For the period December 31, 1996 (commencement of operations), through
September 30, 1997.
(g) For the period October 2, 1997 (commencement of operations), through
September 30, 1998.
(h) For the period January 5, 1998 (commencement of operations), through
September 30, 1998.
(i) For the period October 28, 1997 (commencement of operations), through
September 30, 1998.
(j) The values shown for the per share information have been adjusted to
reflect the 1 share for 4.71 shares and the 1 share for 1.68 shares reverse
stock split in the GE Mid-Cap Growth and GE Value Equity Funds,
respectively, on November 6, 1998.
* Annualized for periods less than one year.
<PAGE>
GE Funds
Prospectus
Investment Adviser
GE Investment Management Incorporated
3003 Summer Street
P.O. Box 7900
Stamford, CT 06904
Transfer Agent and Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02101
Distributor
GE Investment Distributors, Inc.
777 Long Ridge Road, Building B
Stamford, CT 06927
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:
GE Investment Distributors, Inc.
777 Long Ridge Road, Building B
Stamford, CT 06927
Telephone 1-800-242-0134
Website http://www.ge.com/mutualfunds
Investment Company Act file number: 811-7142
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
January 30, 1999
GE FUNDS
3003 Summer Street, Stamford, Connecticut 06905
For information, call (800) 242-0134
<TABLE>
<S> <C>
* GE Premier Growth Equity Fund * GE International Fixed Income Fund
* GE U.S. Equity Fund * GE Strategic Investment Fund
* GE Small-Cap Growth Equity Fund * GE Tax-Exempt Fund
* GE Small-Cap Value Equity Fund * GE High Yield Fund
* GE Mid-Cap Growth Fund * GE Fixed Income Fund
* GE Mid-Cap Value Equity Fund * GE Government Securities Fund
* GE Value Equity Fund * GE Short-Term Government Fund
* GE Global Equity Fund * GE Money Market Fund
* GE International Equity Fund
* GE Europe Equity Fund
* GE Emerging Markets Fund
</TABLE>
Contents Page
Investment Strategies and Risks............................................ 2
Investment Restrictions.................................................... 35
Management of the Trust.................................................... 42
Purchase, Redemption and Exchange of Shares................................ 52
Net Asset Value............................................................ 64
Dividends, Distributions and Taxes......................................... 66
The Funds' Performance..................................................... 69
Principal Stockholders..................................................... 77
Fund History and Additional Information.................................... 92
Financial Statements....................................................... 94
Appendix................................................................... A-1
This Statement of Additional Information ("SAI") supplements
the information contained in the current Prospectus of GE Funds (the "Trust")
dated January 30, 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 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 Equity 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
2
<PAGE>
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 GE Investment Management
Incorporated ("GEIM"), the Fund's Investment Adviser, 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.
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, under normal conditions, at least 65% of its
total assets in equity securities of companies located in developed European
countries.
GE Emerging Markets Fund. The investment objective of the GE
Emerging Markets Fund is long-term growth of capital. In seeking its investment
objective, the Fund will invest, under normal conditions, at least 65% of its
total assets in equity securities of issuers that are located in emerging
markets countries.
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
3
<PAGE>
occur but is not an objective of the Fund.
GE Government 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. Government 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.
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 generally will invest at least 65% of its total assets in
high yield securities (including bonds rated below investment grade, sometimes
called "junk bonds").
The portfolio managers of the GE High Yield Fund seek to
identify undervalued sectors and securities through analysis of credit quality,
option characteristics and liquidity. Quantitative models are used in
conjunction with judgment and experience to evaluate and select securities with
imbedded put or call options which are attractive on a risk- and
option-adjusted basis. Successful value investing will permit the Fund to
benefit from the price appreciation of individual securities during periods
when interest rates are unchanged.
The maturity and duration structure of the Fund is actively
managed in anticipation of cyclical interest rate changes. Adjustments are not
made in an effort to capture short-term, day-to-day movements in the market,
but instead are implemented in anticipation of longer-term shifts in the levels
of interest rates. Adjustment made to shorten portfolio maturity and duration
are made to limit capital losses during periods when interest rates are
expected to rise. Conversely, adjustments made to lengthen maturity are
intended to produce capital appreciation in periods when interest rates are
expected to fall. The foundation for maturity and duration strategies lies in
analysis of the U.S. and global economies, focusing on levels of real interest
rates, monetary and fiscal policy actions, and cyclical indicators.
4
<PAGE>
The Fund may invest in foreign bonds and other fixed income
securities denominated in foreign currencies, where, in the opinion of the
portfolio managers, the combination of current yield and currency value offer
attractive expected returns. When the total return opportunities in a foreign
bond market appear attractive in local currency terms, but where in the
portfolio managers' judgment unacceptable currency risk exists, currency
futures and options, forwards and swaps may be used to hedge the currency risk.
In addition, the Fund may invest in securities of issuers located in emerging
markets based on the portfolio managers' evaluation of both short- and
long-term international economic trends and the individual emerging market
securities.
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.
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.
* * * * *
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.
5
<PAGE>
Money Market Fund Investments. The Money Market Fund limits
its portfolio investments to securities that the Trust's Board of Trustees
determines present minimal credit risk and that are "Eligible Securities" at
the time of acquisition by the Fund. "Eligible Securities" means securities
rated by the requisite nationally recognized statistical rating organizations
("NRSROs") in one of the two highest short-term rating categories, consisting
of issuers that have received these ratings with respect to other short-term
debt securities and comparable unrated securities. "Requisite NRSROs" means (1)
any two NRSROs that have issued ratings with respect to a security or class of
debt obligations of an issuer or (2) one NRSRO, if only one NRSRO has issued
such a rating at the time that the Fund acquires the security. Currently, five
organizations are NRSROs: S&P, Moody's Investors Service, Inc. ("Moody's"),
Fitch Investors Service, Inc., Duff and Phelps, Inc. and Thomson BankWatch Inc.
A discussion of the ratings categories is contained in the appendix to this
SAI. By limiting its investments to Eligible Securities, the Fund may not
achieve as high a level of current income as a fund investing in lower-rated
securities.
The Money Market Fund may not invest more than 5% of its
total assets in the securities of any one issuer, except for Government
Securities and except to the extent permitted under rules adopted by the
Securities and Exchange Commission ("SEC") under the Investment Company Act of
1940, as amended ("1940 Act"). In addition, the Fund may not invest more than
5% of its total assets in Eligible Securities that have not received the
highest short-term rating for debt obligations and comparable unrated
securities (collectively, "Second Tier Securities"), and may not invest more
than the greater of $1,000,000 or 1% of its total assets in the Second Tier
Securities of any one issuer. The Fund may invest more than 5% (but not more
than 25%) of the then-current value of the Fund's total assets in the
securities of a single issuer for a period of up to three business days, so
long as (1) the securities either are rated by the Requisite NRSROs in the
highest short-term rating category or are securities of issuers that have
received such ratings with respect to other short-term debt securities or are
comparable unrated securities and (2) the Fund does not make more than one such
investment at any one time. Determinations of comparable quality for purchases
of unrated securities are made by GEIM in accordance with procedures
established by the Board of Trustees. The Fund invests only in instruments that
have (or, pursuant to regulations adopted by the SEC, are deemed to have)
remaining maturities of 13 months or less at the date of purchase (except
securities subject to repurchase agreements), determined in accordance with a
rule promulgated by the SEC. Up to 25% of the Fund's total assets may be
invested in foreign securities, excluding, for purposes of this limitation,
ADRs, U.S., and securities of a foreign issuer with a class of securities
registered with the SEC and listed on a U.S. national securities exchange or
traded on the Nasdaq Small-Cap Market. The Fund will maintain a dollar-weighted
average portfolio maturity of 90 days or less. The assets of the Fund are
valued on the basis of amortized cost, as described below under "Net Asset
Value." The Fund also may hold liquid Rule 144a Securities (see "Non-Publicly
Traded and Illiquid Securities").
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
6
<PAGE>
agencies or instrumentalities ("Government Securities"), (ii) debt obligations
of banks, savings and loan institutions, insurance companies and mortgage
bankers, (iii) commercial paper and notes, including those with variable and
floating rates of interest, (iv) debt obligations of foreign branches of U.S.
banks, U.S. branches of foreign banks and foreign branches of foreign banks,
(v) debt obligations issued or guaranteed by one or more foreign governments or
any of their political subdivisions, agencies or instrumentalities, including
obligations of supranational entities, (vi) debt securities issued by foreign
issuers and (vii) repurchase agreements.
Each Fund, other than the Money Market Fund, may also invest
in the Investment Fund, an investment fund created specifically to serve as a
vehicle for the collective investment of cash balances of the Funds (other than
the Money Market Fund) and other accounts advised by 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.
- -------------
1 As used in this SAI, the term "Investment Manager" shall refer to GE
Investment Management Incorporated ("GEIM"), the Funds' investment adviser and
administrator, Brown Brothers Harriman & Co., Palisade Capital Management,
L.L.C., Miller Anderson & Sherrerd, LLP or NWQ Investment Management Company,
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>
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 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
8
<PAGE>
state. The deposits of State Branches may not necessarily be insured by the
FDIC. In addition, less information may be available to the public about a U.S.
branch of a foreign bank than about a U.S. bank.
Debt Instruments. A debt instrument held by a Fund will be
affected by general changes in interest rates that will in turn result in
increases or decreases in the market value of those obligations. The market
value of debt instruments in a Fund's portfolio can be expected to vary
inversely to changes in prevailing interest rates. In periods of declining
interest rates, the yield of a Fund holding a significant amount of debt
instruments will tend to be somewhat higher than prevailing market rates, and
in periods of rising interest rates, the Fund's yield will tend to be somewhat
lower. In addition, when interest rates are falling, money received by such a
Fund from the continuous sale of its shares will likely be invested in
portfolio instruments producing lower yields than the balance of its portfolio,
thereby reducing the Fund's current yield. In periods of rising interest rates,
the opposite result can be expected to occur.
Ratings as Investment Criteria. The ratings of 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.
9
<PAGE>
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 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 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.
10
<PAGE>
The Small-Cap Value Fund, the Value Equity Fund, the Europe
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.
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.
11
<PAGE>
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.
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
12
<PAGE>
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.
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
13
<PAGE>
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 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
14
<PAGE>
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.
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.
15
<PAGE>
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.
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
16
<PAGE>
the same "series" (that is, puts on the same underlying securities having the
same exercise prices and expiration dates as those written by the Fund), or an
equivalent number of puts of the same "class" (that is, puts on the same
underlying securities) with exercise prices greater than those that it has
written (or if the exercise prices of the puts it holds are less than the
exercise prices of those it has written, the difference is segregated with the
Trust's custodian or with a designated sub-custodian).
The principal reason for writing covered call options on a
securities portfolio is to attempt to realize, through the receipt of premiums,
a greater return than would be realized on the securities alone. In return for
a premium, the writer of a covered call option forfeits the right to any
appreciation in the value of the underlying security above the strike price for
the life of the option (or until a closing purchase transaction can be
effected). Nevertheless, the call writer retains the risk of a decline in the
price of the underlying security. Similarly, the principal reason for writing
covered put options is to realize income in the form of premiums. The writer of
a covered put option accepts the risk of a decline in the price of the
underlying security. The size of the premiums that a Fund may receive may be
adversely affected as new or existing institutions, including other investment
companies, engage in or increase their option-writing activities.
Options written by a Fund will normally have expiration dates
between one and nine months from the date written. The exercise price of the
options may be below, equal to or above the market values of the underlying
securities at the times the options are written. In the case of call options,
these exercise prices are referred to as "in-the-money," "at-the-money" and
"out-of-the-money," respectively.
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
17
<PAGE>
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 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
18
<PAGE>
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.
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.
19
<PAGE>
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, 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
20
<PAGE>
financial instrument, specified securities, or the cash value of a securities
index. A municipal bond index futures contract is based on an index of
long-term, tax-exempt municipal bonds and a corporate bond index futures
contract is based on an index of corporate bonds. Stock index futures contracts
are based on indices that reflect the market value of common stock of the
companies included in the indices. An index futures contract is an agreement
pursuant to which two parties agree to take or make delivery of an amount of
cash equal to the difference between the value of the index at the close of the
last trading day of the contract and the price at which the index contract was
originally written. An option on an interest rate or index futures contract
generally gives the purchaser the right, in return for the premium paid, to
assume a position in a futures contract at a specified exercise price at any
time prior to the expiration date of the option.
A Fund may not enter into futures and options contracts for
which aggregate initial margin deposits and premiums paid for unexpired options
exceed 5% of the fair market value of the Fund's total assets, after taking
into account unrealized losses or profits on futures contracts or options on
futures contracts into which it has entered. The current view of the staff of
the SEC is that a Fund's long and short positions in futures contracts as well
as put and call options on futures written by it must be collateralized with
cash or other liquid assets and segregated with the Trust's custodian or a
designated sub-custodian or "covered" in a manner similar to that for covered
options on securities.
No consideration is paid or received by a Fund upon trading a
futures contract. Upon entering into a futures contract, cash, short-term
Government Securities or other U.S. dollar-denominated, high-grade, short-term
money market instruments equal to approximately 1% to 10% of the contract
amount will be segregated with the Trust's custodian or a designated
sub-custodian. This amount, which is subject to change by the exchange on which
the contract is traded, is known as "initial margin" and is in the nature of a
performance bond or good faith deposit on the contract that is returned to the
Fund upon termination of the futures contract, so long as all contractual
obligations have been satisfied; the broker will have access to amounts in the
margin account if the Fund fails to meet its contractual obligations.
Subsequent payments, known as "variation margin," to and from the broker, will
be made daily as the price of the securities underlying the futures contract
fluctuates, making the long and short positions in the contract more or less
valuable, a process known as "marking-to-market." At any time prior to the
expiration of a futures contract, a Fund may elect to close a position by
taking an opposite position, which will operate to terminate the Fund's
existing position in the contract.
Although the Trust intends that the Funds enter into futures
contracts only if an active market exists for the contracts, no assurance can
be given that an active market will exist for the contracts at any particular
time. Most U.S. futures exchanges and boards of trade limit the amount of
fluctuation permitted in futures contract prices during a single trading day.
Once the daily limit has been reached in a particular contract, no trades may
be made on that day at a price beyond that limit. Futures contract prices may
move to the daily limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of futures positions and
subjecting some futures traders to substantial losses. In such a case, and in
the event of adverse price movements, a Fund would be required to make
21
<PAGE>
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 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
22
<PAGE>
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 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
23
<PAGE>
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 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
24
<PAGE>
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.
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
25
<PAGE>
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.
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
26
<PAGE>
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.
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.
27
<PAGE>
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.
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
28
<PAGE>
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.
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
29
<PAGE>
credit or an insurance policy issued by a bank or insurer deemed by the
Investment Manager to be of high quality and minimal credit risk, will not be
deemed to be illiquid solely because the underlying municipal lease is unrated,
if the Investment Manager determines that the lease is readily marketable
because it is backed by the letter of credit or insurance policy.
Municipal leases that a Fund may acquire will be both rated
and unrated. Rated leases that may be held by a Fund include those rated
investment grade at the time of investment or those issued by issuers whose
senior debt is rated investment grade at the time of investment. A Fund may
acquire unrated issues that the Investment Manager deems to be comparable in
quality to rated issues in which a Fund is authorized to invest. A
determination that an unrated lease obligation is comparable in quality to a
rated lease obligation and that there is a reasonable likelihood that the lease
will not be canceled will be subject to oversight and approval by the Board.
To limit the risks associated with municipal leases, a Fund
will invest no more than 5% of its total assets in those leases. In addition, a
Fund will purchase lease obligations that contain non-appropriation clauses
when the lease payments will commence amortization of principal at an early
date resulting in an average life of five years or less for the lease
obligation.
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 securities tend to be less sensitive
than fixed rate securities to interest rate changes and to have higher yields
when interest rates increase. However, during periods of rising interest rates,
changes in the interest rate of an adjustable rate security may lag changes in
market rates.
The amount by which the rates paid on an income security may
increase or decrease may be subject to periodic or lifetime caps. Fluctuations
in interest rates above these caps could cause adjustable rate securities to
behave more like fixed rate securities in response to extreme movements in
interest rates.
Floating and variable rate income securities include
securities whose rates vary inversely with changes in market rates of interest.
Such securities may also pay a rate of interest determined by applying a
multiple to the variable rate. The extent of increases and decreases in the
value of securities whose rates vary inversely with changes in market rates of
30
<PAGE>
interest generally will be larger than comparable changes in the value of an
equal principal amount of a fixed rate security having similar credit quality,
redemption provisions and maturity.
Certain Funds may purchase floating and variable rate demand
bonds and notes, which are Municipal Obligations ordinarily having stated
maturities in excess of one year but which permit their holder to demand
payment of principal at any time or at specified intervals. Variable rate
demand notes include master demand notes, which are obligations that permit a
Fund to invest fluctuating amounts, which may change daily without penalty,
pursuant to direct arrangements between the Fund, as lender, and the borrower.
These obligations have interest rates that fluctuate from time to time and
frequently are secured by letters of credit or other credit support
arrangements provided by banks. Use of letters of credit or other credit
support arrangements will not adversely affect the tax-exempt status of
variable rate demand notes. Because they are direct lending arrangements
between the lender and borrower, variable rate demand notes generally will not
be traded and no established secondary market generally exists for them,
although they are redeemable at face value. If variable rate demand notes are
not secured by letters of credit or other credit support arrangements, a Fund's
right to demand payment will be dependent on the ability of the borrower to pay
principal and interest on demand. Each obligation purchased by a Fund will meet
the quality criteria established by the Investment Manager for the purchase of
Municipal Obligations. The Investment Manager considers on an ongoing basis the
creditworthiness of the issuers of the floating and variable rate demand
obligations in the relevant Fund's portfolio.
Participation Interests. Certain Funds may purchase from
financial institutions participation interests in certain Municipal
Obligations. A participation interest gives the Fund an undivided interest in
the Municipal Obligation in the proportion that the Fund's participation
interest bears to the total principal amount of the Municipal Obligation. These
instruments may have fixed, floating or variable rates of interest. If the
participation interest is unrated, or has been given a rating below one that is
otherwise permissible for purchase by a Fund, the participation interest will
be backed by an irrevocable letter of credit or guarantee of a bank that the
Board has determined meets certain quality standards, or the payment obligation
otherwise will be collateralized by Government Securities. A Fund will have the
right, with respect to certain participation interests, to demand payment, on a
specified number of days' notice, for all or any part of the Fund's
participation interest in the Municipal Obligation, plus accrued interest. The
Trust intends that a Fund exercise its right to demand payment only upon a
default under the terms of the Municipal Obligation, or to maintain or improve
the quality of its investment portfolio. A Fund will invest no more than 5% of
the value of its total assets in participation interests.
Zero Coupon Obligations. Certain Funds may invest in zero
coupon obligations. Zero coupon securities generally pay no cash interest (or
dividends in the case of preferred stock) to their holders prior to maturity.
Accordingly, such securities usually are issued and traded at a deep discount
from their face or par value and generally are subject to greater fluctuations
of market value in response to changing interest rates than securities of
comparable maturities and credit quality that pay cash interest (or dividends
in the case of preferred stock) on a current basis. Although each of these
Funds will receive no payments on
31
<PAGE>
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.
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
32
<PAGE>
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.
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
33
<PAGE>
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.
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 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
34
<PAGE>
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 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, the Value Equity Fund, the Europe 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
35
<PAGE>
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 of 5% or more of a
Fund's total assets are outstanding, including reverse repurchase agreements,
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 (a) 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, and (b) the Money Market Fund
may invest more than 5% of its total assets in the securities of an issuer to
the extent permitted by Rule 2a-7 under the 1940 Act. All securities of a
foreign government and its agencies will be treated as a single issuer for
purposes of this restriction.
4. No Fund, 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 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").
36
<PAGE>
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 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.
37
<PAGE>
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).
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.
38
<PAGE>
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.
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.
39
<PAGE>
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 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
40
<PAGE>
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 and the Value Equity Fund paid
$261,481, $196,841, $347,560, $135,540, $45,824, $29,220 and $53,784,
respectively in commissions to broker-dealers for execution of portfolio
transactions. Of these amounts, $11,571, $12,065, $47,540, $7,742, $3,523,
$3,771 and $7,144 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 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 $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 Tax - Exempt Fund, the
Short-Term Government Fund and the Money Market Fund made no payments to
broker-dealers for
41
<PAGE>
execution of portfolio transactions during the 1998, 1997 or 1996 fiscal years.
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.
42
<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 Investment Services Group of GE
Board and President 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 1993; Chairman of the
Board and Chief Executive Officer of GE Investment
Retirement Services, Inc., since 1998.
*Alan M. Lewis Trustee and Age 52. Executive Vice President, General Counsel and
Executive Vice Secretary of GEIM since 1988 and of GEIC since October 1987.
President
</TABLE>
43
<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, Walden Partners, Ltd.,
150 East 58th Street consultants and investors, since August 1992; President,
New York, NY 10055 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 Treasurer of Fairfield
Fairfield University University since 1983.
North Benson Road
Fairfield, CT 06430
Robert P. Quinn Trustee Age 62. Retired since 1983 from Salomon Brothers Inc.;
45 Shinnecock Road Director, GP Financial Corp., a holding company, since
Quogue, NY 11959 1994; Director, The Greenpoint Savings Bank, a financial
institution, since 1987.
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 PricewaterhouseCoopers LLP.
</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>
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 Total Compensation from Investment
Name of Trustee From the Trust Companies Managed by GEIM or GEIC
--------------- -------------- ---------------------------------
<S> <C> <C>
Michael J. Cosgrove None None+
Alan M. Lewis None None+
John R. Costantino $17,000 $25,000++
William J. Lucas $17,000 $25,000++
Robert P. Quinn $17,000 $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.
45
<PAGE>
Investment Adviser and Administrator
GEIM serves as the Trust's investment adviser and
administrator. GEIM is registered as an investment adviser under the Investment
Advisers Act of 1940, as amended, and is located at 3003 Summer Street,
Stamford, Connecticut 06905. GEIM, which was formed under the laws of Delaware
in 1988, is a wholly owned subsidiary of GE. 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 $78 billion as of December 31, 1998, of which more than $15 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
46
<PAGE>
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.
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.
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 Fund -- 0.80%, the Value Equity Fund -- 0.55%, the Global
Fund -- 0.75%, the International Fund -- 0.80%, the Europe Equity Fund --
1.05%, the Emerging Markets Fund -- 1.20%, the Strategic Fund -- 0.35%, the
Tax-Exempt Fund -- 0.35%, the High Yield Fund -- 0.60%, 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%.
47
<PAGE>
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 $513,776, $143,798, $251,052,
$343,640, $405,430, $1,859,219, $478,553, $308,751, $91,406, $322,161,
$1,895,373 and $72,503, 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 $18,400, $11,424, $18,322, $3,378, $13,686, $305,619, $35,084,
$24,174, $68,899, $59,817 and $18,762 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 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 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,
48
<PAGE>
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. For its services
as sub-investment adviser to the Tax-Exempt Fund, GEIM (and not the Fund) pays
Brown Brothers a fee equal to an annual rate of .20% of the first $25 million of
the Fund's average daily net assets, .175% of the next $25 million, .15% of the
next $50 million and .125% of amounts in excess of $100 million.
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. For its services as sub-investment
adviser to the Small-Cap Value Fund, GEIM (and not the Fund) pays Palisade a fee
equal to an annual rate of .45% of the first $25 million of the Fund's average
daily net assets, .40% of the next $50 million, .375% of the next $100 million
and .35% of amounts in excess of $175 million.
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. For its services as sub-investment adviser to the High
Yield Fund, GEIM (and not the Fund) pays MAS a fee equal to an annual rate of
.375% of the Fund's average daily net assets.
Mid-Cap Value Fund. NWQ Investment Management Company ("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. For its services as sub-investment adviser
to the Mid-Cap Value Fund, GEIM (and not the Fund) pays NWQ a fee equal to an
annual rate of .45% of the first $50 million of the Fund's average daily net
assets and .375% of amount thereafter.
49
<PAGE>
Sub-Advisory Agreements
Palisade, MAS and NWQ serve as sub-advisers to the Small-Cap
Value Fund, the High Yield Fund and the Mid-Cap Value 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.
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
50
<PAGE>
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 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
51
<PAGE>
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,
$7,538,779 was paid to GE Investment Management for distribution and
shareholder servicing.
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 purchase and 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
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
52
<PAGE>
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 dealer agreements with the GEID. The initial sales charge
may be reduced or waived for certain purchases. 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 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
53
<PAGE>
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.
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
54
<PAGE>
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
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.
55
<PAGE>
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 waived for purchases by certain non-qualified
deferred
56
<PAGE>
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.
57
<PAGE>
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 Fund, the Global Fund, the International Fund, the Europe
Fund, the Emerging Markets Fund and the Strategic Fund:
58
<PAGE>
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%
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, the High Yield 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%
- -------------------------------------------------------------------------------
59
<PAGE>
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.
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.
60
<PAGE>
Redemption by Telephone
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.
61
<PAGE>
Systematic Withdrawal Plan
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.
62
<PAGE>
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.
63
<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.
64
<PAGE>
Debt securities of U.S. issuers (other than Government
Securities and short-term investments), including Municipal Obligations, are
valued by a dealer or by a pricing service based upon a computerized matrix
system, which considers market transactions and dealer supplied valuations.
Valuations for municipal bonds are obtained from a qualified municipal bond
pricing service; prices represent the mean of the secondary market. 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.
65
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
Set forth below is a summary of certain Federal income tax
considerations generally affecting the Funds and their shareholders. The
summary is not intended as a substitute for individual tax planning, and
shareholders are urged to consult their tax advisors regarding the application
of Federal, state, local and foreign tax laws to their specific tax situations.
Tax Status of the Funds and their Shareholders
Each Fund is treated as a separate entity for Federal income
tax purposes. Each Fund's net investment income and capital gains distributions
are determined separately from any other series that the Trust may designate.
The Trust intends for each Fund to continue to qualify each
year as a "regulated investment company" under the Code. If a Fund (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
66
<PAGE>
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, 1998, the following Funds have capital
loss carryforwards as indicated below. The capital loss carryforward of the
Tax-Exepmt Fund includes a capital loss carryforward of $42,651 acquired as a
result of the Reorganization with the Investors Trust Tax Fee Fund. The capital
loss carryforward is available to offset future realized capital gains to the
extent provided in the Code and regulations promulgated thereunder.
<TABLE>
<CAPTION>
Expiration Dates:
Fund Amount September 30,
---- ------ -------------
<S> <C> <C>
Tax-Exempt Fund $428,324 2004
Income Fund $684,519 2003
$38,636 2004
$445,270 2005
Government Securities Fund $80,657,745 2002
$107,525,597 2003
$1,748,819 2004
Money Market Fund $3,153 2003
$5,688 2005
</TABLE>
<TABLE>
<CAPTION>
Acquiring Expiration Dates:
Investors Trust Fund GE Fund Amount September 30,
-------------------- ------- ------ -------------
<S> <C> <C> <C>
Tax Free Fund Tax-Exempt Fund $428,324 2004
Government Fund Government $80,657,745 2002
Securities Fund 107,525,597 2003
1,748,819 2004
</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
67
<PAGE>
any, or to deduct those portions from their U.S. taxable income, if any.
Shortly after any year for which it makes an election, the Trust will report to
the shareholders of the Fund, in writing, the amount per share of foreign tax
that must be included in each shareholder's gross income and the amount that
will be available as a deduction or credit. No deduction for foreign taxes may
be claimed by a shareholder who does not itemize deductions. Certain
limitations will be imposed on the extent to which the credit (but not the
deduction) for foreign taxes may be claimed.
A Fund's transactions in options and futures contracts are
subject to special provisions of the Code that, among other things, may affect
the character of gains and losses realized by the Fund (that is, may affect
whether gains or losses are ordinary or capital), accelerate recognition of
income to the Fund and defer losses of the Fund. These rules (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
68
<PAGE>
shareholder of a Fund as long-term capital gains, regardless of how long a
shareholder has held the shares, and will be designated as capital gain
dividends in a written notice mailed by the Trust to the shareholders of the
Fund after the close of the Fund's prior taxable year. If a shareholder
receives a capital gain dividend with respect to any share of a Fund, and if
the share is sold before it has been held by the shareholder for six months or
less, then any loss on the sale or exchange of the share, to the extent of the
capital gain dividend, will be treated as a long-term capital loss. 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
69
<PAGE>
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.
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 5.05% and 5.18%, 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.
Yield for Other Funds
The Trust may, from time to time, advertise a 30-day "yield"
for each Class of a Participant Fund and an "equivalent taxable yield" for each
Class of the Tax-Exempt Fund. The 30-day yield figures are calculated for a
Class of a Fund according to a formula prescribed by the SEC. The formula can
be expressed as follows:
6
Yield = 2[(a-b + 1) -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
70
<PAGE>
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 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 the Tax-Exempt
Fund, Short-Term Government Fund, Government Securities Fund and Income Fund
were as follows:
<TABLE>
<CAPTION>
Fund Class A Class B Class C Class D
- ---- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Tax-Exempt Fund 3.87% 3.54% 4.29% 4.56%
Short-Term Government Fund 4.22% 3.98% 4.58% 4.83%
Government Securities Fund 4.85% 4.56% 5.32% N/A
Income Fund 4.63% 4.33% 5.09% 5.34%
</TABLE>
Had the Funds' investment adviser not absorbed a portion of
the above Funds' 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 6.41%, 5.86%, 7.10% and 7.55%. Had the Tax-Exempt Fund's investment adviser
not absorbed a portion of the
71
<PAGE>
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:
n
P(1 + T) = ERV
Where:
P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years; and
ERV = Ending Redeemable Value of a hypothetical
$1,000 investment made at the beginning of a
1-, 5- or 10-year period at the end of a 1-,
5- or 10-year period (or fractional portion
thereof), assuming reinvestment of all
dividends and distributions.
The ERV assumes 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.
The average annual total return for the periods ended
September 30, 1998 for Class A, Class B, Class C and Class D shares,
respectively, of each Participant Fund was as follows:
72
<PAGE>
<TABLE>
<CAPTION>
Load Adjusted
- ----------------- --------- --------- -------- -------- ---------- ---------- ---------- ------------------ ---------- ---------
One Year Three Five Ten Since One Year Three Five Ten Since Inception
Fund Years Years Years Inception Years Years Years Inception Date
- ----------------- --------- --------- -------- -------- ---------- ---------- ---------- ------------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Equity
Class A 5.38% 20.26% - - 17.85% -0.70% 17.90% - - 16.40% 01/01/94
Class B 4.80% 19.64% - - 17.44% 0.98% 19.18% - - 17.44% 12/22/93
Class C 5.62% 20.56% 17.53% - 17.54% 5.62% 20.56% 17.53% - 17.54% 02/22/93
Class D 5.86% 20.86% - - 18.42% 5.86% 20.86% - - 18.42% 11/29/93
Tax-Exempt
Class A 6.33% 6.83% 5.62% - 5.61% 1.78% 5.29% 4.71% - 4.71% 09/08/93
Class B 5.68% 6.51% 5.31% - 5.32% 2.68% 5.92% 5.31% - 5.32% 09/08/93
Class C 6.48% - - - 6.55% 6.48% - - - 6.55% 09/26/97
Class D 7.30% - - - 7.36% 7.30% - - - 7.36% 09/26/97
S-T Government
Class A 7.10% 6.01% - - 5.63% 4.46% 5.10% - - 5.04% 03/02/94
Class B 6.83% 5.67% - - 5.27% 3.83% 5.07% - - 5.27% 03/02/94
Class C 7.36% 6.30% - - 5.91% 7.36% 6.30% - - 5.91% 03/02/94
Class D 7.65% 6.57% - - 6.16% 7.65% 6.57% - - 6.16% 03/02/94
Income
Class A 9.70% 7.57% - - 6.65% 5.08% 6.02% - - 5.68% 01/01/94
Class B 9.24% 7.06% - - 6.13% 6.24% 6.48% - - 6.13% 12/22/93
Class C 10.06% 7.83% 6.54% - 6.78% 10.06% 7.83% 6.54% - 6.78% 02/22/93
Class D 10.33% 8.10% - - 7.12% 10.33% 8.10% - - 7.12% 11/29/93
Global
Class A -11.03% 5.44% - - 5.60% -16.14% 3.38% - - 4.29% 01/01/94
Class B -11.44% 4.92% - - 5.68% -14.59% 4.34% - - 5.68% 12/22/93
Class C -10.86% 5.68% 7.71% - 9.39% -10.86% 5.68% 7.71% - 9.39% 02/22/93
Class D -10.59% 5.97% - - 7.85% -10.59% 5.97% - - 7.85% 11/29/93
International
Class A -8.93% 6.30% - - 5.44% -14.18% 4.22% - - 4.08% 03/02/94
Class B -9.39% 5.76% - - 4.90% -12.32% 5.21% - - 4.90% 03/02/94
Class C -8.71% 6.55% - - 5.68% -8.71% 6.55% - - 5.68% 03/02/94
Class D -8.34% 6.94% - - 6.04% -8.34% 6.94% - - 6.04% 03/02/94
Strategic
Class A 5.58% 13.49% - - 12.28% -0.47% 11.28% - - 10.89% 01/01/94
Class B 4.91% 12.86% - - 11.71% 0.92% 12.34% - - 11.71% 12/22/93
Class C 5.88% 13.77% 12.06% - 12.24% 5.88% 13.77% 12.06% - 12.24% 02/22/93
Class D 6.10% 14.07% - - 12.87% 6.10% 14.07% - - 12.87% 11/29/93
Premier
Class A 13.09% - - - 20.25% 6.57% - - - 16.23% 12/31/96
Class B 12.47% - - - 19.65% 8.47% - - - 18.14% 12/31/96
Class C 13.35% - - - 20.57% 13.35% - - - 20.57% 12/31/96
Class D 13.65% - - - 20.86% 13.65% - - - 20.86% 12/31/96
Gov't Securities
Class A 11.61% 8.22% 5.01% - 4.75% 6.87% 6.66% 4.10% - 3.85% 09/08/93
Class B 10.99% 7.46% 4.29% 7.21% - 7.99% 6.88% 4.29% 7.21% - 04/22/87
Class C - - - - 10.01% - - - 10.01% 10/28/97
Mid-Cap Growth
Class A -16.11% 8.49% 11.03% - 11.75% -20.92% 6.35% 9.72% - 10.44% 09/08/93
Class B -16.62% 7.79% 10.25% - 10.99% -18.44% 7.39% 10.25% - 10.99% 09/08/93
Class C - - - - -16.69% - - - - -16.69% 10/02/97
Class D - - - - -12.90% - - - - -12.90% 01/05/98
Value Equity
Class A 5.86% 21.16% 16.84% - 16.70% -0.23% 18.81% 15.46% - 15.34% 09/08/93
Class B 5.32% 20.32% 16.00% - 15.94% 2.42% 19.86% 16.00% - 15.94% 09/08/93
Class C - - - - 5.21% - - - - 5.21% 10/02/97
Class D - - - - 3.80% - - - - 3.80% 01/05/98
Money Market 5.23% 5.19% 4.87% - 4.64% N/A N/A N/A N/A N/A 02/22/93
- ----------------- --------- --------- -------- -------- ---------- ---------- ---------- ------------------ ---------- ---------
</TABLE>
73
<PAGE>
Notes to Performance
For periods prior to September 26, 1997, the performance data relating to Class
A and B shares of the Mid-Cap Growth Fund, Value Equity Fund, Tax-Exempt Fund
and 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. The 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.
The performance data has been calculated to assume the current maximum sales
charges imposed by the Trust, which are generally higher than the sales charges
formerly imposed by the Trust.
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 Trust. 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 Funds may compare their average annual total returns to the returns of the
following securities market indicies. 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 Municipal 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 Municipal Index is
comprised of 8,987 bonds with a nominal maturity from eight years up to, but not
including, 12 years. 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.
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.
Aggregate Total Return
The Trust may use "aggregate total return" figures in
advertisements, which represent the cumulative change in value of an investment
in a class of shares of a Fund for a specific period, and which reflects
changes in the Fund's share price and reinvestment of dividends and
distributions. Aggregate total return may be shown by means of schedules,
charts or graphs, and may indicate subtotals of the various components of total
return (that is, the change in value of initial investment, income dividends
and capital gains distributions). Because 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.
"Aggregate total return" represents the cumulative change in
the value of an investment in a Class for the specified period are computed by
the following formula:
74
<PAGE>
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.
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.
75
<PAGE>
Performance information also may include evaluations of a
Fund published by nationally recognized ranking services and by financial
publications that are nationally recognized, such as Barron's, Business Week,
Forbes, Fortune, Institutional Investor, Kiplinger's Personal Finance, Money,
Morningstar Mutual Fund Values, The New York Times, The Wall Street Journal and
USA Today. These ranking services or publications may compare a Fund's
performance to, or rank it within, a universe of mutual funds with investment
objectives and policies similar, but not necessarily identical, to that of 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 December 31, 1998.
<TABLE>
<CAPTION>
Name and Address Amount of Percent
of Record Owner Ownership of Class
- --------------- --------- --------
<S> <C> <C>
Premier Fund, Class A
- ---------------------
State Street Bank & Trust Co., Trustee 79,186.530 20.45%
FBO Insulating Materials Inc. shares
Master Trust Client Ser - W6C
1 Enterprise Dr.
No. Quincy, MA 02171-2126
Moderate Strategy Lifestyle Fund 112,666.591 29.10%
GE Investment Services shares
3003 Summer Street
Stamford, CT 06905-4316
State Street Bank & Trust Co. 112,541.517 29.07%
FBO Aggregate Industries INC shares
1 Enterprise Dr.
N. Quincy, MA 02171-2126
Premier Fund, Class B
- ---------------------
GE Financial Assurance Co. 6,972.396 5.66%
Attn: Connie Wong Investment Accounting shares
Two Union Square
601 Union Street, Suite 1300
Seattle, WA 98101-2023
Premier Fund, Class D
- ---------------------
GE Financial Assurance Co. 324,880.750 85.68%
Attn: Connie Wong Investment Accounting shares
Two Union Square
601 Union Street, Suite 1300
Seattle, WA 98101-2327
State Street Bank & Trust Co., as Trustee 34,013.366 8.97%
GranitesBridge & Co. - Elano Aggressive shares
Master Trust Client Services - W6C
1 Enterprise Drive
No. Quincy, MA 02171-2126
</TABLE>
77
<PAGE>
<TABLE>
<S> <C> <C>
U.S. Equity Fund, Class A
- -------------------------
State Street Bank & Trust Company, as Trustee 217,359.139 6.06%
Granitecove & Co. - London Fog shares
Master Trust Client Service
1 Enterprise Drive
No. Quincy, MA 02171
State Street Bank & Trust Co. 251,919.073 7.03%
Granitefront & Co. - Service America shares
Master Trust Client Service
1 Enterprise Drive
No. Quincy, MA 02171-2126
State Street Bank & Trust Co. 195,436.415 5.45%
F/B/O Beamspeed & Co. shares
BG Automotive Motors Inc.
Master Trust Client Service
1 Enterprise Drive
No. Quincy, MA 02171-2126
State Street Bank and Trust Co., as Trustee 271,839.862 7.58%
Granitepass & Co. shares
FBO McClaren/Hart Envir. Eng.
Master Trust Client Service
1 Enterprise Drive.
No. Quincy, MA 02171
State Street Bank & Trust Co., as Trustee 722,447.147 20.15%
Beamsail & Co.-Doubletree shares
Master Trust Client Service
1 Enterprise Drive
No. Quincy, MA 02171-2126
State Street Bank & Trust Co., as Trustee 197,861.238 5.52%
FBO Wavetek US Inc. shares
Master Trust Client Service
1 Enterprise Drive
No. Quincy, MA 02171
State St. Bank & Trust Co. 572,346.086 15.96%
FBO Aggregate Industries INC shares
1 Enterprise Dr.
N. Quincy, MA 02171-2126
</TABLE>
78
<PAGE>
<TABLE>
<S> <C> <C>
U.S. Equity Fund, Class D
- -------------------------
State Street Bank & Trust Co., as Trustee 1,441,467.2510 13.84%
Eastmate & Co. shares
FBO GE Capital Fleet Services
Master Trust Client Services
1 Enterprise Drive
No. Quincy, MA 02171-2126
Bost & Co. 708,017.8030 6.80%
Mutual Fund Operations shares
P.O. Box 3198
Pittsburgh, PA 15230
State Street Bank & Trust Co., Trustee 2,014,225.538 19.34%
Benchside & Co. - GE Cap. Asset Maint. shares
Master Trust Client Service
One Enterprise Drive
No. Quincy, MA 02171-2126
Strafe & Co. 731,131.365 7.02%
FAO Mead Corp. Foundation shares
235 W. Shrock Road
Mutual Fund 0390
Westerville, OH 43081
State Street Bank & Trust Co., as Trustee 845,775.035 8.12%
Grampas & Co. Trust shares
FBO Ameridata Technology
Master Trust Client Service W6C
1 Enterprise Drive
No. Quincy, MA 02171
Saul & Co. 657,475.401 6.31%
FBO Stamford Hospital Ret. Inc. shares
c/o First Union National Bank
401 S. Tryon St.
NC1151
Charlotte, NC 28202
State Street Bank & Trust Co., as Trustee 1,700,854.621 16.33%
FBO Asset Management Plan for Affiliated GE Companies shares
Master Trust Client Service
1 Enterprise Drive
No. Quincy, MA 02171-2126
</TABLE>
79
<PAGE>
<TABLE>
<S> <C> <C>
Union Bank of California, as Trustee 819,955.959 7.81%
FBO Tanner Retirement & Saving shares
P.O. Box 109
San Diego, CA 92112-4103
Small Cap Value Equity Fund, Class A
- ------------------------------------
State Street Bank & Trust Co. 44,273.863 5.64%
IRA R/O shares
Martin L. Berman
390 Booth Ave.
Englewood, NJ 07631-2005
GE Capital Assurance 500,511.174 63.79%
2 Union Square STE 1400 shares
601 Union St.
Seattle, WA 98101-2327
Small Cap Value Equity Fund, Class B
- ------------------------------------
GE Capital Assurance 483,240.516 70.33%
2 Union Square STE 1400 shares
601 Union St.
Seattle, WA 98101-2327
Small Cap Value Equity Fund, Class C
- ------------------------------------
James A. Parke 9,513.487 10.43%
Shirley J. Parke Jt Wros shares
19 Walden Woods Lane
Weston, CT 06883-1327
Michael Desmond Fraizer 18,049.130 19.79%
Elizabeth M. Royer-Fraizer Jt Ten shares
8301 Paigley Pl.
Richmond, VA 23229-8429
GE Capital Assurance 10,066.837 11.03%
22 Union Square STE 1400 shares
601 Union St.
Seattle, WA 98101-2327
Small Cap Value Equity Fund, Class D
- ------------------------------------
GE Capital Assurance 10,070.032 99.89%
2 Union Square STE 1400
601 Union St.
Seattle, WA 98101-2327
</TABLE>
80
<PAGE>
<TABLE>
<S> <C> <C>
Mid-Cap Growth Fund, Class A
- ----------------------------
GNA Corporation 636,557.732 51.26%
Attn: Investments shares
601 Union Street, #5600
Seattle, WA 98101-2336
Moderate Strategy Lifestyle Fund 132,209.773 10.65%
GE Investment Services shares
3003 Summer Street
Stamford, CT 06905-4316
Mid-Cap Growth Fund, Class C
- ----------------------------
State Street Bank & Trust Co. 12,519.805 5.39%
C/F The Rollover IRA of shares
James E. Wolle
Oak Bluff Lane
Wilmington, NC 28409-2365
Mid-Cap Growth Fund, Class D
- ----------------------------
State Street Bank & Trust Co. 37,435.512 66.10%
GranitesBridge & Co. - Elano Aggressive shares
1 Enterprise Drive
No. Quincy, MA 02171-2126
State Street Bank & Trust Co. 12,651.697 22.34%
GranitesBridge & Co. - Elano Moderate shares
1 Enterprise Drive
No. Quincy, MA 02171-2126
State Street Bank & Trust Co. 5,092.036 8.99%
GranitesBridge & Co. - Elano Conservative shares
1 Enterprise Drive
No. Quincy, MA 02171-2126
Value Equity Fund, Class A
- --------------------------
GNA Corporation 450,422.633 29.20%
Attn: Investments shares
601 Union Street, #5600
Seattle, WA 98101-2336
</TABLE>
81
<PAGE>
<TABLE>
<S> <C> <C>
Moderate Strategy Lifestyle Fund 360,802.472 23.39%
GE Investment Services shares
3003 Summer Street
Stamford, CT 06905-4316
Value Equity Fund, Class D
- --------------------------
State Street Bank & Trust Co. 103,283.311 62.55%
GranitesBridge & Co. - Elano Aggressive shares
1 Enterprise Drive
No. Quincy, MA 02171-2126
State Street Bank & Trust Co. 42,548.027 25.77%
GranitesBridge & Co. - Elano Moderate shares
1 Enterprise Drive
No. Quincy, MA 02171-2126
State Street Bank & Trust Co. 15,585.526 9.44%
GranitesBridge & Co. - Elano Conservative shares
1 Enterprise Drive
No. Quincy, MA 02171-2126
Global Fund, Class A
- --------------------
Richard C. Ellzey 5,196.093 7.27%
Jean M. Ellzey JT Ten shares
1830 Popps Ferry Road
Biloxi, MS 39532-2104
State Street Bank & Trust Co., as Trustee 20,934.543 29.28%
FBO Insulating Materials Inc. shares
Master Trust Client Service - W6C
1 Enterprise Drive
No. Quincy, MA 02171
Global Fund, Class B
- --------------------
State Street Bank & Trust Company 3,092.078 6.25%
C/F The IRA of Sharon L. Giever shares
825 Boswell Lane
Kalamazoo, MI 49005
Greg Spaulding GDN 2,521.770 5.10%
Kelly Spaulding shares
7164 Beechmont Ave. Ste 101
Cincinnati, OH 45230-4128C
</TABLE>
82
<PAGE>
<TABLE>
<S> <C> <C>
Global Fund, Class D
- --------------------
State Street Bank & Trust Co., as Trustee 367,494.819 45.45%
Eastmate & Co. Trust shares
FBO GE Capital Fleet Services
Master Trust Client Service
1 Enterprise Drive
No. Quincy, MA 02171-2126
State Street Bank & Trust Co., as Trustee 360,963.760 44.64%
Grampas & Co. Trust shares
FBO Ameridata Technology
Master Trust Client Service
1 Enterprise Drive
No. Quincy, MA 02171-2126
International Fund, Class A
- ---------------------------
State Street Bank & Trust Co., as Trustee 107,618.803 8.07%
Granitepass & Co. shares
FBO McClaren/Hart Environ. Eng.
Master Trust Client Service
1 Enterprise Drive
No. Quincy, MA 02171
Moderate Strategy Lifestyle Fund 475,797.222 35.67%
GE Investment Services shares
3003 Summer Street
Stamford, CT 06905-4316
State Street Bank & Trust Co., Trustee 88,414.847 6.63%
FBO Southwestern Medical shares
Clinic PC
Master Trust Client Service
6418 Deans Hill Road
Berrien Center, MI 49102
State Street Bank & Trust Co. 182,189.350 13.66%
FBO Aggregate Industries INC shares
1 Enterprise Dr.
N. Quincy, MA 02171-2126
</TABLE>
83
<PAGE>
<TABLE>
<S> <C> <C>
International Fund, Class B
- ---------------------------
State Street Bank & Trust Co. 2,913 6.12%
C/F The IRA of Brenda J. Hetrick shares
3570 Freeman Ave.
Hamilton, OH 45015
State Street Bank & Trust Co., Custodian 3,591.504 12.06%
for IRA Rollover of Patricia A. Conley shares
24808 Riverview Drive
Columbia, OH 44028-9530
PaineWebber Cust. 8,426.426 12.06%
FBO House of Platzl Inc. shares
Herman Kahrs Trustee U/A Dtd. 6-1-85
Defined Benefit Pension Trust
Call Hollow Road
Pomona, NY 10970
Dorothy L. Sparkman TTEE 5,261.393 7.53%
Dorothy L. Sparkman Trust shares
2055 SW 11th CT Apt 311 Delray Beach, FL 33445-6038
International Fund, Class C
- ---------------------------
Ronald J. Felmus & Veta Felmus, Trustees 30,713.436 7.60%
Felmus Family Residual Trust shares
U/A/D 5/9/79
22 Pine Circle South
Belleair, FL 34616
International Fund, Class D
- ---------------------------
State Street Bank & Trust Co. 133,355.294 13.10%
GranitesBridge & Co. - Elano Aggressive shares
1 Enterprise Drive
No. Quincy, MA 02171-2126
State Street Bank & Trust Co. 53,505.380 5.26%
GranitesBridge & Co. - Elano Moderate shares
1 Enterprise Drive
No. Quincy, MA 02171-2126
</TABLE>
84
<PAGE>
<TABLE>
<S> <C> <C>
State Street Bank & Trust Co., Trustee 448,538.711 44.08%
Benchside & Co. - GE Cap. Asset Maint. shares
Master Trust Client Service
One Enterprise Drive
No. Quincy, MA 02171-2126
State Street Bank & Trust Co. TTEE 238,897.223 23.48%
FBO Asset MNGT Plan For shares
Affiliated GE Companies
Master Trust Client Ser-W6C
1 Enterprise Dr.
N. Quincy, MA 02171-2126
Strategic Fund, Class A
- -----------------------
State Street Bank & Trust Company, as Trustee 351,160.2110 24.51%
Granitepass & Co. shares
FBO McClaren/Hart Environmental Eng.
Master Trust Client Service
1 Enterprise Drive
No. Quincy, MA 02171
InvestCo Trust Co., Trustee 264,466.677 18.46%
Compass Group USA Inc.: 401(k) Plan shares
400 Colony Square, Suite 2200
1201 Peachtree Street, NE
Atlanta, GA 30361-3500
T. Rowe Price Tr. Co. Fiduciary Account 177,211.948 12.37%
Compass Group 401(k) Plan shares
c/o T. Rowe Price Tr. Co. Asset Recon.
PO Box 17215
Baltimore, MD 21297
State Street Bank & Trust Company, as Trustee 161,455.485 11.27%
Granitefront & Co. - Service America shares
Master Trust Client Services - W6C
1 Enterprise Drive
No. Quincy, MA 02171-2126
State Street Bank & Trust Co., as Trustee 100,853.266 7.04%
Atlantis Plastics Inc. shares
Master Client Trust Services - W6C
1 Enterprise Drive
No. Quincy, MA 02171-2126
</TABLE>
85
<PAGE>
<TABLE>
<S> <C> <C>
State Street Bank & Trust Co., as Trustee 84,940.376 5.93%
FBO Southwestern Medical Clinic PC shares
Master Trust Client Services - W6C
6416 Dean Hill Road
Berrien Center, MI 49102-9705
Strategic Fund, Class D
- -----------------------
State Street Bank & Trust Co., as Trustee 636,786.913 26.62%
Eastmate & Co. shares
FBO GE Capital Fleet Services
Master Trust Client Service
1 Enterprise Drive
No. Quincy, MA 02171-2126
State Street Bank & Trust Co., Trustee 836,951.037 34.98%
Benchside & Co., - GE Cap. Asset Maint. shares
Master Trust Client Service
One Enterprise Drive
No. Quincy, MA 02171-2126
Pension Plan for Employees of Insulating 144,595.532 6.04%
Materials Incorporated shares
Jurg Brunner Trustee
1 West Campbell Road
Schenectady, NY 12306-2442
State Street Bank & Trust Co., as Trustee 364,851.716 15.25%
Grampas & Co. Trust shares
FBO Ameridata Technology
Master Trust Client Service
1 Enterprise Drive
No. Quincy, MA 02171-2126
State Street Bank & Trust Co., as Trustee 131,955.766 5.52%
FBO Asset Management Plan for Affiliated GE Companies shares
Master Trust Client Service
1 Enterprise Drive
No. Quincy, MA 02171-2126
</TABLE>
86
<PAGE>
<TABLE>
<S> <C> <C>
Tax-Exempt Fund, Class A
- ------------------------
Employers Reinsurance Corporation 354,434.1820 71.91%
AFS Fund shares
Attn: Investment Department
5200 Metcalf
P.O. Box 2991
Overland Park, KS 66201-1391
Tax-Exempt Fund, Class C
- ------------------------
Richard M. Kelleher 59,024.448 6.42%
755 Crossover Lane shares
Memphis, TN 38177-4906
Tax-Exempt Fund, Class D
- ------------------------
GE Investment Management Incorporated 1,928.682 96.61%
3003 Summer Street shares
Stamford, CT 06905-4316
Income Fund, Class A
- --------------------
Moderate Strategy Lifestyle Fund 787,198.614 24.93%
GE Investment Services shares
3003 Summer Street
Stamford, CT 06905-4316
State Street Bank & Trust Co., as Trustee 468.523.909 14.84%
Beamsail & Co. - Doubletree shares
Master Trust Client Service
1 Enterprise Drive
No. Quincy, MA 02171-2126
Wells Fargo Bank, as Trustee 577,965.108 18.31%
FBO Hubbell Inc. 401(k) shares
507025 MF 9139-027
PO Box 9800
Calabasas, CA 91372-0800
</TABLE>
87
<PAGE>
<TABLE>
<S> <C> <C>
Income Fund, Class B
- --------------------
State Street Bank & Trust Co. 9,770.067 5.87%
C/F the IRA of Patricia L. Baldwin shares
61370 N. Main St.
Jones, MI 49061
Income Fund, Class D
- --------------------
State Street Bank & Trust Co., Trustee 864,944.227 31.19%
Benchside & Co. - GE Cap. Asset Maint. shares
Master Trust Client Service
One Enterprise Drive
No. Quincy, MA 02171-2126
State Street Bank & Trust Co., as Trustee 252,495.777 9.11%
Grampas & Co. Trust shares
FBO Ameridata Technology
Master Trust Client Service
1 Enterprise Drive
No. Quincy, MA 02171-2126
State Street Bank & Trust Co., as Trustee 378,044.841 13.63%
Eastmate & Co. Trust shares
FBO GE Capital Fleet Services
Master Trust Client Service
1 Enterprise Drive
No. Quincy, MA 02171-2126
Fixed Income Fund, Class A
- --------------------------
State Street Bank & Trust Co. 246,250.358 7.80%
FBO Aggregate Industries INC shares
1 Enterprise Dr.
N. Quincy, MA 02171-2126
Wells Fargo Bank NA as C/F 577,965.108 18.31%
Merrill Lynch Trust Company FSB shares
FBO Hubbell INC 401(k)
507025 MF 9139-027
PO Box 9800
Calabasas, CA 92371-0800
</TABLE>
88
<PAGE>
<TABLE>
<S> <C> <C>
Fixed Income Fund, Class B
- --------------------------
State Street Bank & Trust Co. 8,364.964 5.03%
C/F The IRA Rollover of shares
John V. Mashall
204 S. Nottawa
Sturgis, MI 49091-1739
Fixed Income Fund, Class D
- --------------------------
State Street Bank & Trust Co. TTEE 456,770.429 16.47%
FBO Asset Management Plan for shares
Affiliated GE Companies
Master Trust Client Ser-W6C
1 Enterprise Dr.
N. Quincy, MA 02171-2126
Government Securities Fund, Class C
- -----------------------------------
State Street Bank & Trust Co. 33,107.467 11.63%
C/F The IRA Rollover of shares
James J. Frawley
1 Orchard Grove
Loudonville, NY 12211-1713
State Street Bank & Trust Co. 23,273.483 8.17%
C/F The IRA Rollover of shares
Salvin Cognetti
416 Sharon Drive
Rotterdam Jct, NY 12150-9703
Andrew M. Gabriel 16,276.061 5.72%
Alice G. Gabriel Jt Ten shares
23 Fairview Ave.
Beverly, MA 01915-2940
Short-Term Government Fund, Class A
- -----------------------------------
GNA Corporation 547,193.345 69.74%
Attn: Investments shares
601 Union Street #5600
Seattle, WA 98101-2336
</TABLE>
89
<PAGE>
<TABLE>
<S> <C> <C>
Moderate Strategy Lifestyle Fund 128,600.279 16.39%
GE Investment Services shares
3003 Summer Street
Stamford, CT 06905-4316
Short-Term Government Fund, Class B
- -----------------------------------
Abel Rosario 4,590.401 6.45%
74 Post Avenue, Apt. 2F shares
New York, NY 10034-4707
Mary Marian Guidry Comeaux 7,775.082 10.90%
Krysten Comeaux UTMA shares
4797 Bridge Street Highway
St. Martinville, LA 70582-6103
Y Kendle 3,596.343 5.05%
545 Center St. shares
Watsonville, CA 95076-4409
Mildred H. Mooney 3,621.862 5.09%
93 Monroe Pkwy. shares
Rochester, NY 14618-3007
Kenneth J. Harris 8,477.774 11.91%
Laura J. Harris Jt Wros shares
1704 Haines Rd.
Lapeer, MI 48446-8605
Donald A. Faciana TTEE 4,226.012 5.94%
Faciana Irrev. Fam. Trust shares
10609 Raymond Ave.
Cleveland, OH 44125-2637
Short-Term Government Fund, Class C
- -----------------------------------
John R. Costantino and 43,441.280 5.43%
Barbara C. Costantino shares
2 Sutton Place South, Apt. 5c/d
NY, NY 10022
State Street Bank & Trust Co. 46,199.510 5.77%
C/F The Rollover IRA of Austin E. Koehler shares
1636 N. Rio Mayo
Green Valley, AZ 85614-3977
</TABLE>
90
<PAGE>
<TABLE>
<S> <C> <C>
Short-Term Government Fund, Class D
- -----------------------------------
GE Financial Assurance Co. 438,624.238 64.49%
Attn: Connie Wong Investment Accounting shares
Two Union Square
601 Union Street, Suite 1300
Seattle, WA 98101-2327
State Street Bank & Trust Co., Trustee 183,814.566 27.03%
Eastwall & Co. Trust shares
FBO GE Consulting
Master Trust Client Service
1 Enterprise Drive
No. Quincy, MA 02171-2126
Money Market Fund, Class A
- --------------------------
FTC & Co. 6,871,961.330 5.42%
Attn: DataLynx # T22 shares
P.O. Box 173736
Denver, CO 80217-3736
State Street Bank & Trust Co., Trustee 21,234,351.65 48.34%
Beamsail & Co. - Doubletree shares
Master Trust Client Service - W6C
1 Enterprise Drive
No. Quincy, MA 02171-2126
State Street Bank & Trust Co. 7,687,766.760 17.50%
FBO Aggregate Industries INC shares
1 Enterprise Dr.
N. Quincy, MA 02171-2126
Money Market Fund, Class B
- --------------------------
Lawrence Allen 1,463,978.740 32.87%
Elizabeth Allen Jt Wros shares
Stonewood Village Office
1903 Dartmouth
College Station, TX 77840-7043
</TABLE>
As of December 31, 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 5.43% of the Class C shares
of the Short-Term Government Fund; (iii) GE Capital Assurance ("GECA") owned
63.82% of the outstanding shares of the Small-Cap Value Fund;
91
<PAGE>
and (iv) GNA Corporation owned 42.20% of the outstanding shares of the
Short-Term Government Fund. So long as GECA and GNA Corporation own more than
25% of the outstanding shares of the Small-Cap Value 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 November 6, 1998.
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 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
92
<PAGE>
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 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.
93
<PAGE>
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 Fund have not yet commenced operations and have
no assets as of the date of this SAI and the Small-Cap Value Fund commenced
operations as of September 30, 1998. 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.
94
<PAGE>
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.
<PAGE>
Fitch Investors Services, Inc. employs the rating F-1+ to
indicate issues regarded as having the strongest degree of assurance of timely
payment. The rating F-1 reflects an assurance of timely payment only slightly
less in degree than issues rated F-1+, while the rating F-2 indicates a
satisfactory degree of assurance of timely payment although the margin of
safety is not as great as indicated by the F-1+ and F-1 categories.
Duff & Phelps Inc. employs the designation of Duff 1 with
respect to top grade commercial paper and bank money instruments. Duff 1+
indicates the highest certainty of timely payment: short-term liquidity is
clearly outstanding and safety is just below risk-free U.S. Treasury short-term
obligations. Duff 1- indicates high certainty of timely payment. Duff 2
indicates good certainty of timely payment; liquidity factors and company
fundamentals are sound.
Thomson BankWatch Inc. employs the rating 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
A-2
<PAGE>
accordance with the terms of the obligation. BB represents a lower degree of
speculation than B, and CCC the highest degree of speculation. While such bonds
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse
conditions.
To provide more detailed indications of credit quality, the
ratings from AA to B may be modified by the addition of a plus or minus sign to
show relative standing within this major rating category.
Description of Moody's Corporate Bond Ratings
Aaa -- Bonds that are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large or
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds that are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may be
other elements present that make the long-term risks appear somewhat larger
than in Aaa securities.
A -- Bonds that are rated A possess favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present that suggest a susceptibility to impairment sometime in the
future.
Baa -- Bonds that are rated Baa are considered as
medium-grade obligations, that is, they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well.
Ba -- Bonds that are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and thereby
not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B -- Bonds that are rated B generally lack characteristics of
desirable investments. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
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.
A-3
<PAGE>
Moody's applies numerical modifiers (1, 2 and 3) with respect
to the bonds rated Aa through B, The modifier 1 indicates that the bond being
rated ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the bond ranks
in the lower end of its generic rating category.
Description of S&P Municipal Bond Ratings
AAA -- Prime -- These are obligations of the highest quality.
They have the strongest capacity for timely payment of debt service.
General Obligation Bonds -- In a period of economic stress,
the issuers will suffer the smallest declines in income and will be least
susceptible to autonomous decline. Debt burden is moderate. A strong revenue
structure appears more than adequate to meet future expenditure requirements.
Quality of management appears superior.
Revenue Bonds -- Debt service coverage has been, and is
expected to remain, substantial. Stability of the pledged revenues is also
exceptionally strong due to the competitive position of the municipal
enterprise or to the nature of the revenues. Basic security provisions
(including rate covenant, earnings test for issuance of additional bonds, debt
service reserve requirements) are rigorous. There is evidence of superior
management.
AA -- High Grade -- The investment characteristics of bonds
in this group are only slightly less marked than those of the prime quality
issues. Bonds rated AA have the second strongest capacity for payment of debt
service.
A -- Good Grade -- Principal and interest payments on bonds
in this category are regarded as safe although the bonds are somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions than bonds in higher rated categories. This rating describes the
third strongest capacity for payment of debt service. The ratings differ from
the two higher ratings of municipal bonds, because:
General Obligations Bonds -- There is some weakness, either
in the local economic base, in debt burden, in the balance between revenues and
expenditures, or in quality of management. Under certain adverse circumstances,
any one such weakness might impair the ability of the issuer to meet debt
obligations at some future date.
Revenue Bonds -- Debt service coverage is good, but not
exceptional. Stability of the pledged revenues could show some variations
because of increased competition or economic influences on revenues. Basic
security provisions, while satisfactory, are less stringent. Management
performance appears adequate.
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
A-4
<PAGE>
categories.
General Obligation Bonds -- Under certain adverse conditions,
several of the above factors could contribute to a lesser capacity for payment
of debt service. The difference between A and BBB ratings is that the latter
shows more than one fundamental weakness, or one very substantial fundamental
weakness, whereas, the former shows only one deficiency among the factors
considered.
Revenue Bonds -- Debt coverage is only fair. Stability of the
pledged revenues could show substantial variations, with the revenue flow
possibly being subject to erosion over time. Basic security provisions are no
more than adequate. Management performance could be stronger.
BB, B, CCC and CC -- Bonds rated BB, B, CCC and CC are
regarded, on balance, as predominately speculative with respect to capacity to
pay interest and repay principal in accordance with the terms of the
obligation. BB includes the lowest degree of speculation and CC the highest
degree of speculation. While these bonds will likely have some quality and
protective characteristics, these characteristics are outweighed by large
uncertainties or major risk exposures to adverse conditions.
C -- The rating C is reserved for income bonds on which no
interest is being paid.
D -- Bonds rated D are in default, and payment of interest
and/or repayment of principal is in arrears.
S&P's letter ratings may be modified by the addition of a
plus or a minus sign, which is used to show relative standing within the major
rating categories, except in the AAA-Prime Grade category.
Description of S&P Municipal Note Ratings
Municipal notes with maturities of three years or less are
usually given note ratings (designated SP-1, -2 or -3) to distinguish more
clearly the credit quality of notes as compared to bonds. Notes rated SP-1 have
a very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics are given the
designation of SP-1+. Notes rated SP-2 have satisfactory capacity to pay
principal and interest.
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.
A-5
<PAGE>
Aa -- Bonds that are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities, or
fluctuation of protective elements may be of greater amplitude, or there may be
other elements present that make the long-term risks appear somewhat larger
than in Aaa securities.
A -- Bonds that are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present that suggest a susceptibility to impairment sometime in the
future.
Baa -- Bonds that are rated Baa are considered as medium
grade obligations, that is, they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well.
Ba -- Bonds that are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and thereby
not well safeguarded during both good and bad times over the future.
Uncertainty of position characterize bonds in this class.
B -- Bonds that are rated B generally lack characteristics of
the desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa -- Bonds that are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of danger with
respect to principal or interest.
Ca -- Bonds that are rated Ca represent obligations that are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C -- Bonds that are rated C are the lowest rated class of
bonds, and issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
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
A-6
<PAGE>
designated Variable Moody's Investment Grade (VMIG). This distinction
recognizes the differences between short-term credit risk and long-term risk.
Loans bearing the designation MIG 1/VMIG 1 are the best quality, enjoying
strong protection from established cash flows of funds for their servicing or
from established and broad-based access to the market for refinancing, or both.
Loans bearing the designation MIG 2/VMIG 2 are of high quality, with margins of
protection ample, although not as large as the preceding group. Loans bearing
the designation MIG 3/VMIG3 are of favorable quality, with all security
elements accounted for but lacking the undeniable strength of the higher
grades. Market access for refinancing, in particular, is likely to be less well
established. Loans bearing the designation MIG 4/VMIG 4 are of adequate
quality. Protection commonly regarded as required of an investment security is
present and although not distinctly or predominantly speculative, there is
specific risk.
A-7
