As high a level of income exempt from federal income taxation as is consistent with preservation of capital.
GE Tax-Exempt Fund invests primarily in investment-grade municipal obligations. Under normal conditions, the portfolio manager manages the Fund so that at least 80% of the Fund's income is exempt from both regular federal income taxes 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 (LB 10-Year Muni Index). As of December 31, 2005, the effective duration of the LB 10-Year Muni Index was 5.97 years.
The portfolio manager seeks to identify municipal obligations with characteristics such as:
- Attractive yields and prices
- The potential for income generation
- The potential for capital appreciation
- Reasonable credit quality
The Fund also may invest to a lesser extent in tax-free or taxable money market instruments and may hold cash and cash equivalents. 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 Fund's policy that at least 80% of its income be exempt from both regular federal income taxes and the federal alternative minimum tax may be changed only by shareholder vote.
GEAM employs a team-oriented approach to managing tax-exempt portfolios. The focus is on client objectives, structure, security selection, and research. Our approach:
- Utilizes a research- and risk-based process while limiting downside risk
- Targets high credit quality with an emphasis on liquidity and structure.
- Focuses on relative value opportunities in an effort to maximize performance.
- Leverages our market presence.
The investment process begins by analyzing the supply fundamentals prevalent in the market. This includes reviewing the new issue calendar and the secondary market for trading opportunities. Demand analysis is also a part of the investment process. This will include examining seasonal redemption and coupon payments to assess retail market demand, reviewing mutual fund flows, determining GEAM's demand based on an after-tax analysis and dealer communication, and analyzing the non-traditional investor activity. Yield curve and relative value analysis also plays a critical roll in our investment process. The team's outlook on interest rates and the slope of the yield curve is factored into every investment decision. Relative value analysis will include an examination of pricing in the swap and cash markets to determine if a security is rich or cheap. The team will also perform an after-tax comparison to determine the yield pickup versus taxable securities. Fundamental analysis emphasizes deep dive sector reviews, tax legislation, and bond insurer reviews.
1The investment process is fluid and may change from time to time without prior public notice as market conditions and portfolio managers change.
